NOTE 2 – GOING CONCERN
AND MANAGEMENT’S LIQUIDITY PLANS
The accompanying financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the accompanying financial statements during the six months ended June 30, 2020, the
Company incurred net losses from operations of $2,305,121 and used cash in operations of $669,005. These factors among others may
indicate that the Company will be unable to continue as a going concern for a reasonable period of time.
The Company's primary source of
operating funds for the six months ended June 30, 2020 has been from revenue generated from proceeds from the issuance of convertible
and other debt. The Company has experienced net losses from operations since inception, but expects these conditions to improve
in 2020 and beyond as it continues to develop its business model. The Company has stockholders' deficiencies as of June 30, 2020
and requires additional financing to fund future operations.
The Company’s existence is
dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There can
be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s
liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to
continue as a going concern.
NOTE 3 –SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The unaudited condensed interim
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have
been included.
Revenue Recognition
For annual reporting periods after
December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from
Contracts with Customers,” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized
in accordance with FASB ASC Topic 606, Revenue Recognition. The objective of the guidance is to establish the principles that an
entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty
of revenue and cash flows arising from a contract with a customer. The core principal is to recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled
in exchange for those goods or services. Two options were made available for implementation of the standard: the full retrospective
approach or modified retrospective approach. The guidance became effective for annual reporting periods beginning after December
15, 2017, including interim periods within that reporting period, with early adoption permitted. We adopted FASB ASC Topic 606
for our reporting period as of the year ended December 31, 2017, which made our implementation of FASB ASC Topic 606 effective
in the first quarter of 2018. We decided to implement the modified retrospective transition method to implement FASB ASC Topic
606, with no restatement of the comparative periods presented. Using this transition method, we applied the new standards to all
new contracts initiated on/after the effective date. We also decided to apply this method to any incomplete contracts we determine
are subject to FASB ASC Topic 606 prospectively. For the quarter ended June 30, 2020, there were no incomplete contracts. As is
more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant financing
components that require revenue adjustment under FASB ASC Topic 606.
Identification
of Our Contracts with Our Customers.
Contracts included in our application
of FASB ASC Topic 606, for the quarter ended June 30, 2020, consisted solely of sales of our hempSMART™ products made by
our sales associates and by us directly through our web site. Regarding our offered financial accounting, bookkeeping and/or real
property management consulting services, to date no contracts have been entered into, and thus no reportable revenues have resulted
for the fiscal years ended 2017, 2018 and 2019, or for the quarter ended June 30, 2020.
In accordance with FASB ASC Topic
606, Revenue Recognition, we are of the opinion that none of our hempSMART™ product sales or offered consulting service,
as each are discussed below, have a significant financing component. Our opinion is based upon the transactional basis for our
product sales, with revenue recognized upon customer order, payment and shipment, which occurs concurrently. Our evaluation of
the length of time between the customer order, payment and shipping is not a significant financing component, because shipment
occurs the same day as the order is placed and payment made by the customer. Our evaluation of our consulting services is based
upon recognizing revenue as the services are performed for a determinable price per hour. We only recognize revenues as we incur
and charge billable hours. Because our hourly fees for services are fixed and determinable and are only earned and recognized as
revenue upon actual performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based
significant financing, that would materially change the amount of revenue we recognize under the contract or would otherwise contain
a significant financing component under FASB ASC Topic 606.
Determination
of the Price in Our Sales Contracts.
The
transaction prices in our sales contract is the amount of consideration we expect to be entitled to for transferring promised hempSMART™
products. The consideration amount is fixed and not variable. The transaction price is allocated to the identified performance
obligations in the contract. These allocated amounts are recognized as revenue when or as the performance obligations are fulfilled,
which is concurrently upon receipt of payment. There are no future options for a contract when considering and determining the
transaction price. We exclude amounts third parties will eventually collect, such as sales tax, when determining the transaction
price. Since the timing between receiving consideration and transferring goods or services is immediate, our sales contract do
not have a significant financing component, i.e., recognizing revenue at the amount that reflects the cash payment that the customer
would have made at the time the goods or services were transferred to them (cash selling price), rather than significantly before
or after the goods or services are provided.
Allocation
of the Transaction Price of Our Sales Contracts.
Our
sales contracts are not considered multi-element arrangements which require the fulfillment of multiple performance obligations.
Rather, our sales contracts include one performance obligation in each contract. As such, from the outset, we allocate the total
consideration to each performance obligation based on the fixed and determinable standalone selling price, which we believe is
an accurate representation of what the price is in each transaction.
Recognition
of Revenue when the Performance Obligation is Satisfied.
A
performance obligation is satisfied when or as control of the good or service is transferred to the customer. The standard defines
control as “the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.”
(ASC 606-10-20). For performance obligations that are fulfilled at a point in time, revenue is recognized at the fulfillment of
the performance obligation. As noted above, our single performance obligation sales contracts are singularly related to our promise
to provide the hempSMART™ products to the customer upon receipt of payment, which occurs concurrently and when, upon completion,
allows us under our revenue recognition policy to realize revenue.
Regarding
our offered financial accounting, bookkeeping and/or real property management consulting services, to date no contracts have
been entered into, and thus no reportable revenues have resulted for the fiscal years ended 2019 and 2018 or for the quarter
ended June 30, 2020.
Identifying
the Performance Obligations in Our Sales Contracts.
In
analyzing our sales contracts, our policy is to identify the distinct performance obligations in a sales contract arrangement.
In determining our performance obligations under our sales contracts, we consider that the terms and conditions of sales are explicitly
outlined in our sales contracts and are so distinct and identifiable within the context of each sales contract, and so are not
integrated with other goods, or constitute a modification or customization of other goods in our contracts, or are highly dependent
or highly integrated with other goods in our sales contracts. Thus, our performance obligations are singularly related to our
promise to provide the hempSMART™ products upon receipt of payment. We offer an assurance warranty on our hempSMART™
products that allows a customer to return any hempSMART™ products within thirty days if not satisfied for any reason. Assurance
warranties are not identifiable performance obligations, since they are electable at the whim of the customer for any reason.
However, we do account for returns of purchase prices if made.
Product Sales
Revenue from product sales, including
delivery fees, is recognized when (1) an order is placed by the customer; (2) the price is fixed and determinable when the order
is placed; (3) the customer is required to and concurrently pays for the product upon order; and, (4) the product is shipped. The
evaluation of our recognition of revenue after the adoption of FASB ASC 606 did not include any judgments or changes to judgments
that affected our reporting of revenues, since our product sales, both pre and post adoption of FASB ASC 606, were evaluated using
the same standards as noted above, reflecting revenue recognition upon order, payment and shipment, which all occurs concurrently
when the order is placed and paid for by the customer, and the product is shipped. Further, given the facts that (1) our customers
exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in our product
sales is fixed and determinable at the time the customer places the order, and there is no delay in shipment, we are of the opinion
that our product sales do not indicate or involve any significant customer financing that would materially change the amount of
revenue recognized under the sales transaction, or would otherwise contain a significant financing component for us or the customer
under FASB ASC Topic 606.
Consulting Services
The Company has also offered professional
services for financial accounting, bookkeeping or real property management consulting services based on consulting agreements.
As of the date of this filing, we have not entered into any contracts for any financial accounting, bookkeeping and/or real property
management consulting services that have generated reportable revenues as of the years ended 2017, 2018 and 2019 or the quarter
ended June 30, 2020. If and when the Company provides these professional services, we would intend and expect the arrangements
to be entered into on an hourly fixed fee basis.
For hourly based fixed fee service
contracts, we intend to utilize and rely upon the proportional performance method, which recognizes revenue as services are performed.
Under this method, in order to determine the amount of revenue to be recognized, we will calculate the amount of completed work
in comparison to the total services to be provided under the arrangement or deliverable. We only recognize revenues as we incur
and charge billable hours. Because our hourly fees for services are fixed and determinable and are only earned and recognized as
revenue upon actual performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based
significant financing, that would materially change the amount of revenue we recognize under the contract or would otherwise contain
a significant financing component under FASB ASC Topic 606.
The Company determined that upon
adoption of ASC 606 there were no adjustments converting from ASC 605 to ASC 606 because product sales revenue is recognized upon
customer order, payment and shipment, which occurs concurrently, and our consulting services offered are fixed and determinable
and are only earned and recognized as revenue upon actual performance.
Use of Estimates
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates include the fair value of the Company’s stock, stock-based compensation,
fair values relating to derivative liabilities, debt discounts and the valuation allowance related to deferred tax assets. Actual
results may differ from these estimates.
Cash
The Company considers cash to consist
of cash on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.
Concentrations of credit risk
The Company’s financial instruments
that are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s cash and
cash equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions
is periodically reviewed by senior management.
Accounts Receivable
Trade receivables are carried at
their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus, trade receivables do not bear
interest. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and
their current financial condition.
Allowance for Doubtful Accounts
Any charges to the allowance for
doubtful accounts on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible
accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance
based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against
the allowance when collectability is determined to be permanently impaired. As of June 30, 2020, and December 31, 2019, allowance
for doubtful accounts was $0 and $0 respectively.
Inventories
Inventories are stated at the lower
of cost or market with cost being determined on a first-in, first-out (FIFO) basis. The Company writes down its inventory for estimated
obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required. During the periods presented, there were no inventory write-downs.
Cost of sales
Cost of sales is comprised of cost
of product sold, packaging, and shipping costs.
Stock-Based
Compensation - Employees
The
Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions
under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting
Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which
goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value
of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
The
measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance
is complete or the date on which it is probable that performance will occur.
If
the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the
Company’s most recent private placement memorandum (based on sales to third parties) (“PPM”), or weekly or monthly
price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially
inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
The fair
value of share options and similar instruments is estimated on the date of grant using a Binomial Option Model option-pricing valuation
model. The ranges of assumptions for inputs are as follows:
•
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Expected
term of share options and similar instruments: The expected life of options and similar instruments represents the period of time
the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards
Codification the expected term of share options and similar instruments represents the period of time the options and similar
instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’
expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant
to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting
term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable
basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii)
A company significantly changes the terms of its share option grants or the types of employees that receive share option grants
such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii)
A company has or expects to have significant structural changes in its business such that its historical exercise data may no
longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected
term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable
basis upon which to estimate expected term.
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•
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Expected
volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii)
a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable
for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected,
the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The
Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options
or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly
price observations would generally be more appropriate than the use of daily price observations as the volatility calculation
using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes
and lack of consistent trading in the market.
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•
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Expected
annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual
term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected
dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods
within the expected term of the share options and similar instruments.
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•
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Risk-free
rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected
term of the share options and similar instruments.
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Generally, all
forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights
are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected
to vest.
The expense
resulting from share-based payments is recorded in general and administrative expense in the statements of operations.
Stock-Based
Compensation – Non Employees
Equity
Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services
In June 2018, the
FASB issued ASU No. 2018-07, Compensation – Stock Compensation: Improvement to Nonemployee Share-Based Payment Accounting
(Topic 718). The ASU supersedes ASC 505-50, Equity-Based Payment to Non-Employment and expends the scope of the Topic 718 to include
stock-based payments granted to non-employees. Under the new guidance, the measurement date and performance and vesting conditions
for stock-based payments to non-employees are aligned with those of employees, most notably aligning the award measurement date
with the grant date of an award. The new guidance is required to be adopted using the modified retrospective transition approach.
The Company adopted the new guidance effective January 1, 2019, with an immaterial impact on its financial statements and related
disclosures.
The fair value of share options and similar instruments is estimated on the date of grant using a Binomial option-pricing
valuation model. The ranges of assumptions for inputs are as follows:
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Expected
term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification
the expected term of share options and similar instruments represents the period of time the options and similar instruments are
expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise
behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate
holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are
thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options
and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which
to estimate expected term.
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•
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Expected
volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii)
a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable
for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected,
the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The
Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options
or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly
price observations would generally be more appropriate than the use of daily price observations as the volatility calculation
using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes
and lack of consistent trading in the market.
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•
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Expected
annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual
term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected
dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods
within the expected term of the share options and similar instruments.
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•
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Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.
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Earnings per Share
Basic earnings per share are calculated
by dividing net income (loss) by the weighted average number of shares of the Company’s common stock outstanding during the
period. “Diluted earnings per share” reflects the potential dilution that could occur if our share-based awards and
convertible securities were exercised or converted into common stock. The dilutive effect of our share-based awards is computed
using the treasury stock method, which assumes all share-based awards are exercised and the hypothetical proceeds from exercise
are used to purchase common stock at the average market price during the period. The incremental shares (difference between shares
assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted
EPS calculation. The dilutive effect of our convertible preferred stock and convertible debentures is computed using the if-converted
method, which assumes conversion at the beginning of the year.
Property and Equipment
Property and equipment are stated
at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective
accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes,
property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of
3 to 5 years.
Investments
The Company follows Accounting Standards
Codification subtopic 321-10, Investments-Equity Securities (“ASC 321-10) which requires the accounting for equity security
to be measured at fair value with changes in unrealized gains and losses are included in current period operations. Where an equity
security is without a readily determinable fair value, the Company may elect to estimate its fair value at cost minus impairment
plus or minus changes resulting from observable price changes (See Note 4).
Derivative Financial Instruments
The Company classifies as equity
any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash
settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed
to the Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement
(including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control)
or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
The Company assesses classification of its common stock purchase warrants and other free-standing derivatives at each reporting
date to determine whether a change in classification between equity and liabilities is required.
The Company’s free-standing
derivatives consisted of conversion options embedded within its issued convertible debt and warrants with anti-dilutive (reset)
provisions. The Company evaluated these derivatives to assess their proper classification in the balance sheet using the applicable
classification criteria enumerated under GAAP. The Company determined that certain conversion and exercise options do not
contain fixed settlement provisions. The convertible notes contain a conversion feature and warrants have a reset provision
such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.
As such, the Company was required
to record the conversion feature and the reset provision which does not have fixed settlement provisions as liabilities and mark
to market all such derivatives to fair value at the end of each reporting period.
The Company has adopted a sequencing
policy that reclassifies contracts (from equity to assets or liabilities) with the most recent inception date first. Thus, any
available shares are allocated first to contracts with the most recent inception dates.
Fair Value of Financial Instruments
Fair value estimates discussed herein
are based upon certain market assumptions and pertinent information available to management as of June 30, 2020 and December 31,
2019. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial
instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash, accounts payables
and short term notes because they are short term in nature.
Advertising
The Company follows the policy of
charging the costs of advertising to expense as incurred. The Company charged to operations $44,659 and $296,356 for the six months
ended June 30, 2020 and 2019, respectively, as advertising costs.
Segment Information
Accounting Standards
Codification subtopic Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding
operating segments in annual financial statements and requires selected information for those segments to be presented in interim
financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services
and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how
to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information
related to the Company's only material principal operating segment.
The following table represents
the Company’s hempSMART, Inc. business, which is its sole operating segment as of June 30, 2020 and 2019:
hempSMART
STATEMENT OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
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For the three months ended
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6 Months
Ended
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For the three months ended
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6 Months
Ended
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March 31, 2020
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June 30, 2020
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June 30, 2020
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March 31, 2019
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June 30, 2019
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June 30, 2019
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|
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|
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Revenues
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$
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81,819
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|
|
$
|
82,958
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|
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$
|
164,777
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|
|
$
|
114,810
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|
|
$
|
208,580
|
|
|
$
|
323,390
|
|
|
|
|
|
|
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|
|
|
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|
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|
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Cost of Goods Sold
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34,205
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|
|
|
39,187
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|
|
|
73,392
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|
|
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39,878
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|
|
|
29,139
|
|
|
|
69,017
|
|
|
|
|
|
|
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Gross Profit
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47,614
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|
|
|
43,771
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|
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91,385
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|
|
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74,932
|
|
|
|
179,441
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|
|
|
254,373
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|
|
|
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Expense
|
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|
|
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Stock Based Compensation
|
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0
|
|
|
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17,850
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|
|
|
17,850
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|
|
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0
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|
|
|
0
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|
|
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0
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Selling and Marketing
|
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101,897
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|
|
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74,356
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|
|
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176,253
|
|
|
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292,365
|
|
|
|
351,268
|
|
|
|
643,633
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Payroll and Related expenses
|
|
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18,749
|
|
|
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32,113
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|
|
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50,862
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|
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0
|
|
|
|
0
|
|
|
|
0
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Depreciation Expense
|
|
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1,746
|
|
|
|
1,582
|
|
|
|
3,328
|
|
|
|
1,696
|
|
|
|
1,696
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|
|
|
3,392
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General and Admin Expenses
|
|
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71,599
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|
|
|
53,911
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|
|
|
125,510
|
|
|
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288,023
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|
|
|
280,214
|
|
|
|
568,237
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Total Expense
|
|
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193,991
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|
|
|
179,812
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|
|
|
373,803
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|
|
|
582,084
|
|
|
|
633,178
|
|
|
|
1,215,262
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss from Operations
|
|
$
|
(146,377
|
)
|
|
$
|
(136,041
|
)
|
|
$
|
(282,418
|
)
|
|
$
|
(507,152
|
)
|
|
$
|
(453,737
|
)
|
|
$
|
(960,889
|
)
|
Income Taxes
Deferred income tax assets and liabilities
are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences
between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted
tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than
not that these deferred income tax assets will be realized.
The Company recognizes a tax benefit
from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing
authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements
from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate
settlement. As of June 30, 2020, and 2019, 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 U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December
15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06 will have on
its financial statements.
In February 2016, the FASB issued
ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability, on a discounted basis, and a right-of-use
asset for substantially all leases, as well as additional disclosures regarding leasing arrangements. In July 2018, the FASB issued
ASU 2018-11, Leases (Topic 842), which provides an optional transition method of applying the new lease standard. Topic 842 can
be applied using either a modified retrospective approach at the beginning of the earliest period presented, or as permitted by
ASU 2018-11, at the beginning of the period in which it is adopted.
We adopted this standard using a
modified retrospective approach on January 1, 2019. The modified retrospective approach includes a number of optional practical
expedients relating to the identification and classification of leases that commenced before the adoption date; initial direct
costs for leases that commenced before the adoption date; and, the ability to use hindsight in evaluating lessee options to extend
or terminate a lease or to purchase the underlying asset.
The Company elected the package
of practical expedients permitted under ASC 842 allowing it to account for its existing operating lease that commenced before the
adoption date as an operating lease under the new guidance without reassessing (i) whether the contract contains a lease; (ii)
the classification of the lease; or, (iii) the accounting for indirect costs as defined in ASC 842.
In considering its qualitative
disclosure obligations under ASC 842-20-50-3, the Company examined its one lease for office space that has a fixed monthly
rent with no variable lease payments and no options to extend. The lease is for an office space with no right of use assets.
The lease does not provide for terms and conditions granting residual value guarantees by the Company, or any restrictions or
covenants imposed by the lease for dividends or incurring additional financial obligations by the Company. The Company also
elected a short-term lease exception policy and an accounting policy to not separate non-lease components from lease
components for our facility lease, as we determined our right of use asset to be $15,334 for the period ended June 30,
2020.
Consistent with ASC 842-20-50-4,
for the Company's June 30, 2020, quarterly financial statements, the Company calculated its total lease cost based solely on its
monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or
variable lease costs. Our office lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback
transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for
amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash
information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease
term; or the weighted-average discount rate.
The adoption of this guidance resulted
in no significant impact to our results of operations or cash flows.
NOTE 4 – OPERATING LEASE
On July 1, 2019, the Company entered
into a lease extension agreement for its single operating lease, whereby the Company extended its office lease located in Escondido,
California, for one year. The extension period commenced on June 30, 2020 and will expire on June 30, 2021 at a base monthly
lease rate of $1,309 per month through June 30, 2020, and $1,348 to June 30, 2021.
To evaluate the impact on adoption
of ASC842 – Leases, on the accounting treatment for leasing of real office property referred to as the “Premises,”
the Company utilizes the incremental borrowing rate in determining the present value of lease payments, unless the implicit rate
is readily determinable. The Company used an estimated incremental borrowing rate of 10% to estimate the present value of the right
of use liability.
The Company has right-of-use assets
of $15,334 and operating lease liabilities of $18,819 as of June 30, 2020. Operating lease expense for the six months ended June
30, 2020 was $32,371.
The following table provides the
maturities of lease liabilities at June 30, 2020:
Maturity of Lease Liabilities at June 30, 2020
|
|
|
2020
|
|
$
|
12,015
|
|
2021
|
|
|
8,089
|
|
2021 and thereafter
|
|
|
—
|
|
|
|
|
—
|
|
Total future undiscounted lease payments
|
|
|
20,104
|
|
Less: Interest
|
|
|
(1,285
|
)
|
Present value of lease liabilities
|
|
$
|
18,819
|
|
Minimum lease payments under the
Company’s operating lease under ASC 840 as of for 2020 and 2021 are $12,015 and $8,089, respectively.
NOTE 5 – PROPERTY
AND EQUIPMENT
Property and equipment as of June
30, 2020 and December 31, 2019 is summarized as follows:
|
|
June 30,
2020
|
|
December 31,
2019
|
Computer equipment
|
|
$
|
17,629
|
|
|
$
|
16,358
|
|
Furniture and fixtures
|
|
|
5,140
|
|
|
|
5,140
|
|
Subtotal
|
|
|
22,769
|
|
|
|
21,498
|
|
Less accumulated depreciation
|
|
|
(17,314
|
)
|
|
|
(13,986
|
)
|
Property and equipment, net
|
|
$
|
5,455
|
|
|
$
|
7,512
|
|
Property and equipment are stated
at cost and depreciated using the straight-line method over their estimated useful lives of 3 years. When retired or otherwise
disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference
less any amount realized from disposition, is reflected in earnings.
Depreciation expense was $3,328
and $3,391 for the six months ended June 30, 2020 and 2019, respectively.
NOTE 6 – INVESTMENTS
MoneyTrac
We entered into a stock purchase
agreement on March 13, 2017 with MoneyTrac Technology, Inc., a California stock corporation (“MoneyTrac”) to purchase
a 15% equity position in MoneyTrac. On July 27, 2017, we completed tender of the purchase price of $250,000 pursuant to that stock
purchase agreement. On June 12th, 2018, Global Payout, Inc. (“Global”) entered into a reverse triangular merger business
combination (the “Merger”) with MoneyTrac and MTrac Tech Corporation, a Nevada corporation and wholly-owned subsidiary
of Global (“Merger Sub”), whereby MoneyTrac was successfully merged into Merger Sub, the surviving corporation of the
Merger. Thereafter, the separate existence of MoneyTrac ceased, and all rights, privileges, powers and property of MoneyTrac were
assumed by Merger Sub. Additionally, Merger Sub assumed all of the financial obligations and liabilities of MoneyTrac, except minute
books and stock records of MoneyTrac insofar as they relate solely to its organization and capitalization, and the rights of MoneyTrac
arising out of the executed Merger. Pursuant to the terms of the Merger, Global issued 1,100,000,000 (one billion, one hundred
million) shares of its common stock to MoneyTrac as consideration for the acquisition of MoneyTrac. Pursuant to the terms of the
Merger, a conversion of issued MoneyTrac stock was completed whereby each one (1) share of MoneyTrac stock, issued and outstanding
immediately prior to the effective date of the Merger, was canceled and extinguished and converted automatically into ten (10)
shares of Global common stock. As of the effective date of the Merger, all shares of Global Preferred Stock issued prior to the
effective date of the Merger were canceled and extinguished without any conversion thereof. We acquired 150,000,000 Global common
shares for our purchase price of $250,000, representing ownership of approximately fifteen percent (15%) of the post-Merger issued
and outstanding equity of Global. Global’s name changed in April, 2020 to Global Trac Solutions, Inc. Global’s common
stock is traded on the OTC Markets under the symbol “PYSC.” We realized $51,748.17 from the sales of all of our Global
securities, and as of June 30, 2020, have no remaining shares. We have a cash balance in the amount of $12,500 held in our brokerage
account, a receivable resulting from the proceeds of our sale of our Global shares, that we have not collected.
Benihemp
On July 19, 2017, we agreed to
lend $50,000 to Conveniant Hemp Mart, LLC (“Benihemp”) based on a promissory note. The note provided that in lieu
of receiving repayment, we could elect to exercise a right to convert the loaned amount into a payment towards the purchase
of a 25% interest in Benihemp, subject to our payment of an additional $50,000, equaling a total purchase price of $100,000.
The Company exercised this option on November 20, 2017 and made payment to Benihemp on November 21, 2017. On May 1, 2019, the
Company and Benihemp agreed to cancel the Company’s 25% interest in Benihemp. Benihemp issued to the Company a credit
memo equal to the Company’s $100,000 investment. The Company determined that as of December 31, 2019, approximately
$41,000 of this credit was impaired and not usable.
Global Hemp Group New Brunswick
Joint Venture
On September 5, 2017, we announced
our agreement to participate in a joint venture with Global Hemp Group, Inc., a Canadian corporation (“Global Hemp Group”),
in a multi-phase industrial hemp project on the Acadian peninsula of New Brunswick, Canada. Our participation included providing
one-half, or $10,775, of the funding for the phase one work of the multi-phase industrial hemp project. On January 10, 2018, phase
one of the project was completed by successfully cultivating industrial hemp during the 2017 growing season for research purposes.
The Company’s project-related costs incurred according to the Company’s interest in the industrial hemp project were
$0 and $10,775 for the years ended December 31, 2019 and 2018 respectively and was recorded as other income/expense in the Company’s
Statement of Operations in the appropriate periods. As of December 31, 2019, and June 30, 2020, the balance of the New Brunswick
industrial hemp joint venture investment reported on the balance sheet for the year ended December 31, 2019 was $0 as a result
of the investment being deemed fully impaired and the Company withdrawing from the joint venture as of September 30, 2019.
Global Hemp Group Oregon Joint
Venture
On May 8, 2018, the Company, Global
Hemp Group, and TTO Enterprises, Ltd., an Oregon corporation (“TTO”) entered into a joint venture agreement. The purpose
of the joint venture was to develop an Oregon-licensed industrial hemp project to commercialize the cultivation of industrial hemp
biomass on a 109-acre parcel of farmland owned by the Company and Global Hemp Group in Scio, Oregon. The joint venture operated
through the Oregon corporation Covered Bridges, Ltd. On May 30, 2018, the joint venture purchased TTO’s 15% interest in the
joint venture for $30,000. The Company and Global Hemp Group then had equal interests as co-owners of the joint venture. The joint
venture agreement committed the Company to a cash contribution of $600,000 payable on the following funding schedule: $200,000
upon execution of the joint venture agreement; $238,780 by July 31, 2018; $126,445 by October 31, 2018; and $34,775 by January
31, 2019. The Company performed these payment obligations pursuant to the joint venture agreement.
The 2018 crop of industrial hemp
grown on the joint venture’s farmland consisted of 33 acres of high-yield CBD industrial hemp biomass grown in an orchard-style
cultivation method on our farmland. The 33-acre 2018 harvest produced approximately 37,000 high CBD content industrial hemp plants,
yielding a total of 24 tons of wet harvested industrial hemp biomass that resulted in a saleable harvest of 48,000 pounds of cured
industrial hemp biomass. The joint venture partners prepared processing samples ranging in size from 100 to 2,000 lbs. for sample
offers to licensed industrial hemp handlers and CBD extraction companies. This industrial hemp biomass was processed into a CBD
crude oil concentrate with the option to refine it further into CBD isolate, or full spectrum oil, in order to increase its value
on the market.
As of December 31, 2019, the combined
balance of this joint venture investment and related farmland investment was $0, as the investment was written off as a loss as
a result of its failure to generate any cash flow for the Company for the period ended December 31, 2019. The debt obligation of
$262,414 related to this joint venture was also written off to $0 as of the year ended December 31, 2019. The debt obligation related
to the joint venture for the six months ended June 30, 2020 was $478,494.
BV-MCOA Joint Venture
On March 16, 2017, we entered
into a joint venture agreement with Bougainville Ventures, Inc., a Canadian corporation (“Bougainville”). The
purpose of this joint venture between the Company and Bougainville was for the Company and Bougainville to (i) jointly engage
in the development and promotion of products in the legalized cannabis industry in Washington State; (ii) utilize
Bougainville's high quality cannabis grow operations in the State of Washington, where it claimed to have an ownership
interest in real property for use within the legalized cannabis industry; (iii) leverage Bougainville’s agreement with
a Washington State legal cannabis industry production license holder to grow cannabis on the joint venture site; provide
technical and management services and resources including, but not limited to: sales and marketing, agricultural procedures,
operations, security and monitoring, processing and delivery, branding, capital resources and financial management; and, (iv)
optimize collaborative business opportunities. The Company and Bougainville agreed to operate through a Washington State
limited liability company, which was organized in the State of Washington on May 16, 2017 under the name BV-MCOA Management,
LLC (“BV-MCOA”).
As our contribution to the BV-MCOA
joint venture, the Company committed to raise not less than $1,000,000 to fund joint venture operations, based upon a funding schedule.
The Company also committed to providing branding and systems for the representation of state-licensed cannabis products and derivatives
comprised of management, marketing and various proprietary methodologies directly tailored to the state-licensed cannabis industry.
The Company and Bougainville's joint
venture agreement dictated that funding provided by the Company to the BV-MCOA joint venture would contribute towards the joint
venture’s ultimate purchase of a state-licensed cannabis cultivation site, consisting of a one-acre parcel located in Okanogan
County, Washington.
As disclosed on Form 8-K on December
11, 2017, the Company did not comply with the funding schedule for the BV-MCOA 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,
with a related compensatory element whereby the Company agreed 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 joint venture agreement provided that Bougainville
would deed the real property comprising the BV-MCOA joint venture’s state-licensed cannabis cultivation site within thirty
days of Bougainville’s receipt of payment.
Subsequently, the Company determined
that Bougainville had no ownership interest in the real property comprising the BV-MCOA joint venture’s state-licensed cannabis
cultivation site in Washington State, but rather was a party to a purchase agreement for real property that was in breach of contract
for non-payment. Additionally, the Company also determined that Bougainville did not possess an agreement with a Washington State
legal cannabis industry production license holder to grow cannabis on the BV-MCOA joint venture’s cannabis cultivation site,
contrary to what Bougainville had previously represented to the Company. Further, as a result of funding arranged for by the Company,
Bougainville and an unrelated third party, Green Ventures Capital Corp., purchased the cannabis cultivation site and did not then
deed the real property comprising the site to the BV-MCOA joint venture. As of the date of this filing, the real property comprising
the site has still not been deeded to the BV-MCOA joint venture.
To clarify the respective contributions
and roles of the parties, the Company offered to enter into good faith negotiations to further revise and restate the amended BV-MCOA
joint venture agreement with Bougainville. The Company diligently attempted to communicate with Bougainville to accomplish a revised
and restated joint venture agreement, and made diligent efforts towards satisfying the conditions to complete the subdivision of
the site required 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 of the site and the deeding
of the site’s real property to the BV-MCOA joint venture.
On August 10, 2018, the
Company advised its independent auditor that Bougainville failed to respond to the Company regarding the Company’s
requests to Bougainville for information concerning the audit of Bougainville’s receipt and expenditure of the $800,000
contributed by the Company to the BV-MCOA joint venture agreement, which was Bougainville’s material obligation
pursuant to the amended BV-MCOA joint venture agreement. The Company believes that some of the joint venture funds it paid
into the BV-MCOA joint venture were misappropriated by Bougainville’s management and that there was self-dealing with
respect to those funds. Additionally, the Company believes that Bougainville misrepresented material facts in both the
original and amended BV-MCOA joint venture agreements, 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 Washington State legal cannabis production license holder to grow cannabis on the BV-MCOA joint venture’s
cannabis cultivation site; and, (iii) that clear title to the real property associated with the BV-MCOA joint venture’s
cannabis cultivation site and the Washington State legal cannabis production license holder claimed by Bougainville would be
deeded to the BV- MCOA joint venture no later than thirty days after the Company made its final funding contribution pursuant
to the amended BV-MCOA joint venture agreement.
As a result, on September 20, 2018,
the Company filed suit against Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal and Richard Cindric, et al. in
the Okanogan County, Washington Superior Court, case number 18-2- 0045324. The Company’s complaint against the defendants
seeks legal and equitable relief for breach of contract, fraud, breach of fiduciary duty, civil theft and conversion, rescission
of the BV-MCOA joint venture agreement, a full accounting of the funds invested into BV-MCOA, quiet title to real property comprising
the joint venture cannabis cultivation site in the name of the Company, for the appointment of a receiver to BV-MCOA, the return
to treasury of the 15 million shares of the Company’s preferred common stock issued to Bougainville, and for treble damages
pursuant to the Consumer Protection Act in Washington State. The Company filed a lis pendens on the real property in question and
the case is currently in litigation.
In connection with the BV-MCOA joint
venture agreement, the Company recorded a cash investment of $1,188,500 to the BV-MCOA joint venture during 2017. This was comprised
of 49.5% ownership of BV-MCOA Management LLC and was accounted for using the equity method of accounting. The Company recorded
an annual impairment in 2017 of $792,500, reflecting the Company’s percentage of ownership of the net book value of the investment.
During 2018, the Company recorded equity losses of $37,673 and $11,043 for the first and second quarters respectively, and recorded
an annual impairment of $285,986 for the year ended December 31, 2018, at which time the Company determined the investment to be
fully impaired due to Bougainville’s breach of contract and resulting litigation, as discussed above.
GateC Joint Venture
On March 17, 2017, the Company and
GateC Research, Inc. (“GateC”) entered into a joint venture agreement whereby the Company committed to raise venture
capital operating funds of up to $1,500,000 over a six-month period, with a minimum commitment of five hundred thousand dollars
($500,000) within a three (3) month period. The Company’s non-cash contribution to the GateC joint venture was to provide
information establishing brands and systems for the representation of cannabis-related products and derivatives comprised of management,
marketing and various proprietary methodologies, including but not limited to its affiliate marketing program, directly tailored
to the cannabis industry. GateC agreed to contribute its management and control services and systems related to cannabis grow operations
in Adelanto County, California, and its permit to grow marijuana in an approved zone in Adelanto, California. GateC did not own
a physical site for its operation in Adelanto County, California, and GateC’s permit to grow cannabis did not contain a conditional
use permit.
On or about November 28, 2017, GateC
and the Company orally agreed to suspend the Company’s funding commitment, pending the finalization of California State regulations
governing the growth, cultivation and distribution of cannabis, which were expected to be completed in 2018. On March 19,
2018, the Company and GateC entered into a recession and mutual release agreement, by which they rescinded the GateC joint venture
agreement and concurrently each gave the other party a universal general release from all claims arising out of the agreement.
We incurred no termination penalties as the result of its entry into the recession and mutual release agreement.
In 2017, the Company recorded a
debt obligation of $1,500,000 to the GateC joint venture and a corresponding impairment charge of $1,500,000 during for the year
ended December 31, 2017. Upon termination of the GateC joint venture agreement on March 19, 2018, the Company realized a gain on
settlement of debt obligation of $1,500,000 for the year ended December 31, 2018.
Natural Plant Extract of California
On April 15, 2019, we entered
into a joint venture with Natural Plant Extract of California, Inc. (“NPE”) to operate a licensed psychoactive
cannabis distribution service in California to be named Viva Buds. California legalized psychoactive cannabis for medicinal
and recreational use on January 1, 2018. On February 3, 2020, we terminated the NPE joint venture and entered into a
Settlement and Release of All Claims Agreement with NPE. In exchange for that universal release, the Company and NPE (i)
agreed to reduce the Company’s interest in NPE from 20% to 5%; (ii) agreed the Company would pay NPE a total of $85,000
as follows: $35,000 concurrent with the execution of the universal release, and $25,000 no later than the 5th calendar day
for each of the two months following execution of Settlement and Release of All Claims Agreement; and, (iii) agreed to retire
the balance of our original valuation obligation from the material definitive agreement, representing a shortfall of
$56,085.15, in a convertible promissory note, with terms allowing NPE to convert the note into common stock of MCOA at a 50%
discount to the closing price of MCOA’s common stock as of the maturity date.
Of the total amount due and payable
by us with regards to the NPE joint venture agreement as of the date of this filing, we owe $75,000, and we are in breach of the
Settlement and Release of All Claims Agreement with NPE. On February 3, 2020, we executed a convertible promissory note in the
amount of $56,085.15 to NPE. Additionally, as a result of our settlement agreement with NPE, we became liable to pay NPE our 5%
portion equal to $25,902 of the regulatory charges to the City of Lynwood and the State of California to transfer the cannabis
licenses back to NPE. To date, we have not paid this amount and it is due and owing.
MARIJUANA COMPANY OF AMERICA, INC.
INVESTMENT ROLL-FORWARD
AS OF JUNE 30, 2020
|
|
INVESTMENTS
|
|
|
|
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
TOTAL
|
|
Global
|
|
|
|
|
|
Bougainville
|
|
Gate C
|
|
Natural
|
|
|
|
Short-
|
|
|
|
|
INVESTMENTS
|
|
Hemp
Group
|
|
Benihemp
|
|
MoneyTrac
|
|
Ventues, Inc.
|
|
Research Inc.
|
|
Plant
Extract
|
|
Vivabuds
|
|
Term
Investments
|
|
MoneyTrac
|
Beginning balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Investments made during 2017
|
|
|
3,049,275
|
|
|
|
10,775
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
1,188,500
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 equity method Loss
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 equity method accounting
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Investment in 2017
|
|
|
(2,292,500
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
(792,500
|
)
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
Balances as of 12/31/17
|
|
|
695,477
|
|
|
|
10,775
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
334,702
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during 2018
|
|
|
986,654
|
|
|
|
986,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 equity method Loss
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 equity method Loss
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 equity method Loss
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-18 equity method Loss
|
|
|
(31,721
|
)
|
|
|
(31,721
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moneytrac investment reclassified to Short-Term investments
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - 2018
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
560,000
|
|
|
|
560,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2018
|
|
|
(933,195
|
)
|
|
|
(557,631
|
)
|
|
|
(89,578
|
)
|
|
|
|
|
|
|
(285,986
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
Balance @12-31-18
|
|
$
|
408,077
|
|
|
$
|
408,077
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
810,000
|
|
|
$
|
810,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 03-31-19
|
|
|
129,040
|
|
|
|
129,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 equity method Loss
|
|
|
(59,541
|
)
|
|
|
(59,541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 03-31-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(135,000
|
)
|
|
$
|
(135,000
|
)
|
Balance @03-31-19
|
|
$
|
477,576
|
|
|
$
|
477,576
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
675,000
|
|
|
$
|
675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 06-30-19
|
|
$
|
3,157,234
|
|
|
$
|
83,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,000,000
|
|
|
$
|
73,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-19 equity method Income (Loss)
|
|
$
|
(171,284
|
)
|
|
$
|
141,870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(6,291
|
)
|
|
$
|
(23,123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 06-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150,000
|
)
|
|
$
|
(150,000
|
)
|
Balance @06-30-19
|
|
$
|
3,463,526
|
|
|
$
|
419,352
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,993,709
|
|
|
$
|
50,465
|
|
|
$
|
525,000
|
|
|
$
|
525,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 09-30-19
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 equity method Income (Loss)
|
|
$
|
122,863
|
|
|
$
|
262,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(94,987
|
)
|
|
$
|
(44,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of trading securities during quarter ended 09-30-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(41,667
|
)
|
|
$
|
(41,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 09-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(362,625
|
)
|
|
$
|
(362,625
|
)
|
Balance @09-30-19
|
|
$
|
3,772,652
|
|
|
$
|
682,141
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,898,722
|
|
|
$
|
191,789
|
|
|
$
|
120,708
|
|
|
$
|
120,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 12-31-19
|
|
$
|
392,226
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
129,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-19 equity method Income (Loss)
|
|
$
|
(178,164
|
)
|
|
$
|
(75,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(23,865
|
)
|
|
$
|
(79,079
|
)
|
|
|
|
|
|
|
|
|
Reversal of Equity method Loss for 2019
|
|
$
|
272,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125,143
|
|
|
$
|
147,142
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2019
|
|
$
|
(3,175,420
|
)
|
|
$
|
(869,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,306,085
|
)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
Loss on disposition of investment
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
Sale of trading securities during quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(17,760
|
)
|
|
$
|
(17,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,545
|
)
|
|
$
|
(75,545
|
)
|
Balance @12-31-19
|
|
$
|
693,915
|
|
|
$
|
0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
27,403
|
|
|
$
|
27,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Loss for Quarter ended 03-31-20
|
|
|
126,845
|
|
|
|
126,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognize Joint venture liabilities per JV agreement @03-31-20
|
|
|
394,848
|
|
|
|
394,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Equity Loss for Quarter ended 03-31-20
|
|
|
(521,692
|
)
|
|
|
(521,692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 03-31-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,945
|
)
|
|
$
|
(13,945
|
)
|
Balance @03-31-20
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
13,458
|
|
|
$
|
13,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Loss for Quarter ended 06-30-20
|
|
|
(7,048
|
)
|
|
|
(7,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Equity Loss for Quarter ended 06-30-20
|
|
|
7,048
|
|
|
|
7,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of of trading securities - quarter ended 06-30-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,458
|
)
|
|
$
|
(13,458
|
)
|
Balance @06-30-20
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Loan Payable
|
|
|
|
|
|
|
|
Global
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
|
|
|
|
|
|
|
|
General
|
|
|
|
|
TOTAL
|
|
|
|
Hemp
|
|
|
|
|
|
|
|
|
|
|
|
Bougainville
|
|
|
|
Gate
C
|
|
|
|
Plant
|
|
|
|
Robert
L
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
JV
Debt
|
|
|
|
Group
|
|
|
|
Benihemp
|
|
|
|
MoneyTrac
|
|
|
|
Ventues,
Inc.
|
|
|
|
Research
Inc.
|
|
|
|
Extract
|
|
|
|
Hymers
III
|
|
|
|
Vivabuds
|
|
|
|
Expense
|
|
Beginning balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 loan borrowings
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 loan activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 loan borrowings
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 loan repayments
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General operational expense
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172,856
|
|
Balances as of 12/31/17 (a)
|
|
|
2,067,411
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
1,500,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 loan borrowings (payments)
|
|
|
376,472
|
|
|
|
447,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 cancellation of JV debt obligation
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 loan repayments
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 loan activity
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-18 loan borrowings
|
|
|
580,425
|
|
|
|
580,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @12-31-18 (b)
|
|
|
1,422,410
|
|
|
|
1,027,855
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan borrowings
|
|
|
649,575
|
|
|
|
649,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 debt conversion to equity
|
|
|
(407,192
|
)
|
|
|
(407,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @03-31-19 ©
|
|
|
1,664,793
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan borrowings
|
|
|
3,836,220
|
|
|
$
|
161,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,000,000
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
1,675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 debt conversion to equity
|
|
|
(1,572,971
|
)
|
|
$
|
161,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
349,650
|
)
|
|
|
|
|
|
|
|
|
|
$
|
1,062,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @06-30-19 (d)
|
|
|
3,928,042
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
612,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 loan borrowings
|
|
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 debt conversion to equity
|
|
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @09-30-19 (e)
|
|
|
4,322,427
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,007,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-19 loan borrowings
|
|
|
2,989,378
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
596,784
|
|
|
$
|
4,221
|
|
|
|
|
|
|
$
|
2,125,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2019
|
|
|
(4,083,349
|
)
|
|
$
|
(1,532,652
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(394,555
|
)
|
|
|
|
|
|
$
|
(2,156,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of debt in 2019
|
|
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to reclassify amount to accrued liabilities
|
|
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @12-31-19 (f)
|
|
$
|
3,193,548
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
4,221
|
|
|
$
|
0
|
|
|
$
|
3,133,243
|
|
Quarter 03-31-20 loan borrowings
|
|
$
|
441,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
441,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-20 debt conversion to equity
|
|
$
|
(619,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(619,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognize Joint venture liabilities per JV agreement @03-31-20
|
|
$
|
394,848
|
|
|
$
|
394,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-20 Debt Discount adjustments
|
|
$
|
24,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @03-31-20 (g)
|
|
$
|
3,435,172
|
|
|
$
|
394,848
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
28,359
|
|
|
$
|
0
|
|
|
$
|
2,955,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 loan borrowings, net
|
|
$
|
65,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,091
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 debt conversion to equity
|
|
$
|
(727,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(727,118
|
)
|
Quarter 06-30-20 reclass of liability
|
|
$
|
83,647
|
|
|
$
|
83,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 Debt Discount adjustments
|
|
$
|
405,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(27,715
|
)
|
|
|
|
|
|
$
|
433,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @06-30-20 (h)
|
|
$
|
3,262,538
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
65,735
|
|
|
$
|
0
|
|
|
$
|
2,662,224
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
0
|
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
|
|
- Longterm debt
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
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, 2020, and December
31, 2019, the Company’s officers and directors have provided advances and incurred expenses on behalf of the Company. The
issued notes are unsecured, due on demand and bear 5% interest. The balance due to Notes Payable Related Party as of June 30, 2020
and December 31, 2019 was $40,000 and $40,000 respectively. These notes are payable to the estate of Charles Larsen, who passed
away on May 15, 2020.
NOTE 8 – CONVERTIBLE NOTES
PAYABLE
During the six months ended
June 30, 2020, the Company issued an aggregate of 291,931,964 shares of its common stock in settlement of the issued
convertible notes payable and accrued interest.
For the six months ended
June 30, 2020 and June 30, 2019, the Company recorded amortization of debt discounts of $1,028,931 and $1,308,550,
respectively, as a charge to interest expense.
Convertible notes payable are comprised
of the following:
|
|
June 30,
|
|
December 31,
|
|
|
2020
|
|
2019
|
Lender
|
|
(Unaudited)
|
|
(Audited)
|
Convertible note payable - Power Up Lending Group
|
|
$
|
209,000
|
|
|
$
|
294,000
|
|
Convertible note payable - Crown Bridge Partners
|
|
$
|
114,900
|
|
|
$
|
110,000
|
|
Convertible note payable - Odyssey Funding LLC
|
|
$
|
0
|
|
|
$
|
250,000
|
|
Convertible note payable - Paladin Advisors LLC
|
|
$
|
25,000
|
|
|
$
|
75,000
|
|
Convertible note payable - GS Capital Partners LLC
|
|
$
|
173,000
|
|
|
$
|
173,000
|
|
Convertible note payable - Natural Plant Extract
|
|
$
|
56,085
|
|
|
$
|
56,085
|
|
Convertible note payable - Robert L. Hymers III
|
|
$
|
161,644
|
|
|
$
|
96,553
|
|
Convertible note payable - LG Capital
|
|
$
|
50,000
|
|
|
$
|
—
|
|
Convertible note payable - BHP Capital
|
|
$
|
37,625
|
|
|
$
|
—
|
|
Convertible note payable - Jefferson Capital
|
|
$
|
37,625
|
|
|
$
|
—
|
|
Convertible note payable - GW Holdings
|
|
$
|
57,750
|
|
|
$
|
—
|
|
Convertible note payable - St. George
|
|
$
|
2,304,372
|
|
|
$
|
2,947,890
|
|
Total
|
|
$
|
3,227,001
|
|
|
$
|
4,002,528
|
|
Less debt discounts
|
|
$
|
(442,957
|
)
|
|
$
|
(808,980
|
)
|
Net
|
|
$
|
2,784,044
|
|
|
$
|
3,193,548
|
|
Less current portion
|
|
$
|
(2,784,044
|
)
|
|
$
|
(3,193,548
|
)
|
Long term portion
|
|
$
|
—
|
|
|
$
|
—
|
|
Convertible notes payable-Power
Up Lending
From July 1 through September 12,
2019, the Company issued four convertible promissory notes in the aggregate principal amount of $294,000 to Power Up Lending Group
Ltd. (“Power Up”). The promissory notes bear interest at 10% per annum, are due one year from the respective issuance
date and include an original issuance discount in the aggregate of $12,000. Interest on the notes accrues from the issuance date,
but interest will not become payable until the notes become payable. The notes are convertible at any time at a conversion rate
equal to 61% of the market price of the Company’s common stock, defined as the lowest trading price during the 15-trading-day
period prior to the conversion date. Upon the issuance of these convertible notes, the Company determined that the features associated
with the embedded conversion option embedded in the debentures should be accounted for at fair value, as a derivative liability,
as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.
As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility
of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to
the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount
of $169,202 is being amortized to interest expense over the respective terms of the notes.
The Company has the right to prepay
the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance (all principal and accrued interest) depending
on the prepayment period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion
of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially
own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to
the issuance of shares of common stock upon conversion of the note.
As of June 30, 2020, and December
31, 2019, the Company owed an aggregate of $209,000 and, $294,000 of principal, respectively on these convertible promissory notes.
As of June 30, 2020, the Company owed $7,929 of accrued interest.
Convertible notes payable-Crown
Bridge Partners
From October 1 through
December 31, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $225,000 to Crown
Bridge Partners LLC (“Crown Bridge”). The promissory notes bear interest at 10% per annum, are due one year from
the respective issuance date and include an original issuance discount (“OID”) in aggregate of $22,500. Interest
accrues from the issuance date, but interest shall not become payable until the notes becomes payable. The notes are
convertible at any time at a conversion rate equal to 60% of the market price of the Company’s common stock, defined as
the lowest trading price during the 15-trading-day period prior to the conversion date. Upon the issuance of these
convertible notes, the Company determined that the features associated with the embedded conversion option embedded in the
debentures should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient
number of shares would be available to settle all potential future conversion transactions. As of the funding date of each
note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The
fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value
of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of
$88,674 is being amortized to interest expense over the respective terms of the notes. The Company also issued a total of
519,230 warrants with an initial exercise price of $0.26, with reset provisions based on issuances of common stock subsequent
to the issuance date. Due to the reset provision, the conversion option of these warrants is also accounted for as a derivative liability.
See Note 10.
The Company has the right to prepay
the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance (all principal and accrued interest) depending
on the prepayment period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion
of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially
own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to
the issuance of shares of common stock upon conversion of the note.
As of June 30, 2020, and December
31, 2019, the Company owed an aggregate of $114,900, and $110,000 of principal respectively. As of June 30, 2020, the Company owed
of accrued interest of $1,250, on these convertible promissory notes.
Convertible notes payable-Odyssey
Funding LLC
On October 30, 2019, the Company
issued convertible promissory notes in the aggregate principal amount of $250,000 to Odyssey Funding LLC (“Odyssey”).
The promissory notes bear interest at 12% per annum, are due one year from the respective issuance date and include an original
issuance discount in an aggregate of $12,500. Interest accrues from the issuance date, but interest does not become payable until
the notes becomes payable. The notes are convertible at any time at a conversion rate equal to 55% the average of the two lowest
trading prices of the Company’s common stock as quoted on the National Quotations Bureau OTC market or exchange where the
Company's shares are traded or any exchange upon which the Common Stock may be traded in the future, for the twenty prior trading
days to the conversion date.
As of the funding date of each note,
the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value
of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with
any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $207,650 is being amortized
to interest expense over the respective terms of the notes. As of June 30, 2020, and December 31, 2019, the Company owed principal
of $0 and $250,000. As of June 30, 2020, the Company owed $0 in accrued interest.
Convertible notes payable - Paladin
Advisors LLC
On October 23, 2019, the Company
issued convertible promissory notes in the aggregate principal amount of $75,000 to Paladin Advisors, LLC (“Paladin”).
The promissory notes bear interest at 8% per annum and are due six months from the respective issuance date of each note along with
accrued and unpaid interest. Principal and interest is payable on the date six months from the date of issuance of the note. Pursuant
to the notes, Paladin has the option to convert all or any portion of the unpaid principal amount of the notes, plus accrued interest,
into shares of the Company’s common stock at a conversion price equal to a 45% discount to the lowest closing bid of the
previous 10 day trading period prior to the conversion.
The aggregate debt discount of $46,721
is being amortized to interest expense over the respective terms of the notes. As of June 30, 2020, and December 31, 2019, the
Company owed an aggregate of $25,000 and $75,000 of principal. As of June 30, 2020, the Company owed $1,000 in accrued interest.
Convertible notes payable-GS
Capital Partners LLC
On December 19, 2019, the Company
issued convertible promissory notes in the aggregate principal amount of $173,000 to GS Capital Partners LLC (“GS Capital”).
The promissory notes bear interest at 10% per annum, are due one year from the respective issuance date, and include an original
issuance discount in an aggregate of $15,000. Pursuant to the notes, GS Capital is entitled, at its option, at any time after cash
payment, to convert all or any amount of the principal face amount of the notes into shares of the Company's common stock at a
per-share conversion price equal to 62% of the lowest trading price of the Company's common stock as reported on the National Quotations
Bureau OTC Marketplace exchange on which the Company’s shares are quoted, or any exchange upon which the Company's common
stock may be traded in the future, for the twenty trading days prior to the conversion.
As of the funding date of each note,
the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value
of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with
any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $166,193 is being amortized
to interest expense over the respective terms of the notes. As of June 30, 2020, and December 31, 2019, the Company owed principal
of $173,000 and $173,000 respectively. As of June 30, 2020, the Company owed $9,219 in accrued interest.
Convertible notes payable-St
George Investments
On November 1, 2017, the Company
issued a secured convertible promissory note in the amount of $601,420 to St. George Investments LLC (“St George”).
The promissory note bears interest at 10% compounded daily, was due upon maturity on September 10, 2018 and includes an original
issue discount of $59,220. The promissory note was funded on November 11, 2017 for $542,200, net of the original issue discount
and transaction costs. As of September 30, 2019, the Company owed $417,890 of principal and $38,378 of accrued interest on this
convertible promissory note. As of September 30, 2019, this note was in default, but the lender has not enforced the default interest
rate. On December 20, 2017, the Company issued a secured convertible promissory note in aggregate of $1,655,000 to St George Investments
LLC (“St George”). The promissory note bears interest at 10% compounded daily, was due upon maturity on October 27,
2018 and includes an original issue discount of $155,000. In addition, the Company agreed to pay $5,000 for legal, accounting and
other transaction costs of the lender. The promissory note was funded in nine tranches of $300,000; $200,000; $200,000; $400,000;
$75,000; $150,000; $85,000; $120,000 and $70,000, resulting in aggregate net proceeds of $1,500,000. The Company received aggregate
net proceeds of $1,200,000 and $300,000 during the years ended December 31, 2018 and 2017, respectively. As an investment incentive,
the Company issued 1,100,000 five-year warrants, exercisable at $2.40 per share, with certain reset provisions. As of June 30,
2020, the warrants had an exercise price of $0.0085 for 5,274,146 total warrants.
The promissory notes are convertible,
at any time at the lender’s option, at $2.40 per share. However, in the event the Company’s market capitalization (as
defined) falls below $30,000,000, the conversion rate pursuant to the promissory notes will be 60% of the 3 lowest closing trade
prices from the 20 trading days immediately preceding the date of conversion. In addition, the promissory notes include certain
anti-dilution provisions should the Company subsequently issue any common stock or equivalents at an effective price less than
the lender conversion price. The Company has a right to prepayment of the note, subject to a 20% prepayment premium and is secured
by a trust deed of certain assets of the Company.
On November 5, 2018, $250,000 of
principal and accrued interest was assigned to John Fife as an individual with all the terms and conditions of the original note
issued to St George. On March 21, 2019, $150,959 of principal and $4,963 of accrued interest along with $160,454 of derivative
liabilities valued as of the respective conversion date were converted into 394,460 shares of common stock.
During the nine months ended
September 30, 2019, $550,000 of principal, $122,694 of accrued interest and $441,394 of derivative liabilities valued as of
the respective conversion dates were converted into 1,710,897 shares of common stock, resulting in a gain on debt settlement
of $21,586. As of September 30, 2019, the Company owed $0 of principal and $0 of accrued interest on this convertible
promissory note. Although this note was in default until it was repaid, the lender did not enforce the default interest
rate.
On August 28, 2018, the Company
issued a secured convertible promissory note in the amount of $1,128,518 (including overfunding of $23,518) to St. George Investments
LLC (“St. George”). The promissory note bears interest at 10% compounded daily, was due upon maturity on June 30, 2019,
and includes an original issue discount of $100,000. In addition, the Company agreed to pay $5,000 for legal, accounting and other
transaction costs of the lender. During the year ended December 31, 2018, the Company received aggregate net proceeds of $825,000.
During the nine months ended September 30, 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 to St. George 750,000 five-year warrants, exercisable at $2.40 per share, with certain reset provisions.
The aggregate fair value of the issued warrants was $1,588,493. The face value of the debt was then allocated, on a relative fair
value basis, between the debt and the warrants. The portion allocated to warrants has been added to the debt discount with a resulting
increase in additional paid-in capital. As of the funding date of each tranche of this note, the Company determined the fair value
of the embedded derivative associated with the convertibility of this note. The fair value of the embedded derivative has been
added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability
recognized as interest expense. As of the aggregate debt discount of $1,114,698 is being amortized to interest expense over the
respective term of each tranche. As of June 30, 2020, the warrants had an exercise price of $0.0085 for 3,750,000 total warrants.
The promissory notes are convertible,
at any time at St. George’s option, at $2.40 per share. However, in the event the Company’s market capitalization falls
below $30,000,000, the conversion rate will be 60% of the 3 lowest closing trade prices due the 20 trading days immediately preceding
date of conversion, subject to additional adjustments, as defined. In addition, the promissory notes include certain anti-dilution
provisions should the Company subsequently issue any common stock or equivalents at an effective price less than the lender conversion
price. The Company has a right to prepayment of the note, subject to a 15% prepayment premium and is secured by a trust deed of
certain assets of the Company.
During the nine months ended September
30, 2019, $1,000,859 of principal and $840,299 of derivative liabilities valued as of the respective conversion dates were converted
into 4,475,543 shares of common stock, resulting in a loss on debt settlement of $612,034. As of September 30, 2019, the Company
owed $828,518 of principal and $28,138 of accrued interest on this convertible promissory note. As of September 30, 2019, this
note was in default, but the lender has not enforced the default interest rate.
On January 29, 2019, the Company
issued a secured convertible promissory note in the amount of of $2,205,000 to St. George Investments LLC (“St. George”).
The promissory note bears interest at 10% compounded daily, is due upon maturity on December 5, 2019, and includes an original
issue discount of $200,000. In addition, the Company agreed to pay $5,000 for legal, accounting and other transaction costs of
the lender. During the nine months ended September 30, 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 1,500,000
5-year warrants, exercisable at $2.40 per share, with certain reset provisions. As of June 30, 2020, the warrants had an exercise
price of $0.0085 for 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 (as defined) falls below $30,000,000, the conversion rate will be 60% of the 3 lowest closing trade prices due
the 20 trading days immediately preceding date of conversion, subject to additional adjustments, as defined. In addition, the
promissory note includes certain anti-dilution provisions should the Company subsequently issue any common stock or
equivalents at an effective price less than the lender conversion price. The Company has a right to prepayment of the note,
subject to a 15% prepayment premium and is secured by a trust deed of certain assets of the Company.
On March 25, 2019, the Company issued
a secured convertible promissory note in the amount of $580,000 to St. George Investments LLC (“St. George”). The promissory
note bears interest at 10% compounded daily, is due upon maturity on January 24, 2020 and includes an original issue discount of
$75,000. In addition, the Company agreed to pay $5,000 for legal, accounting and other transaction costs of the lender. During
the nine months ended September 30, 2019, the promissory note was funded in the amount of $580,000 resulting in net proceeds of
$500,000. As an investment incentive, the Company issued 375,000 five-year warrants, exercisable at $2.40 per share, with certain
reset provisions. As of 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 (as
defined) falls below $30,000,000, the conversion rate will be 60% of the 3 lowest closing trade prices from the 20 trading days
immediately preceding the date of conversion, subject to additional adjustments. In addition, the promissory note includes certain
anti-dilution provisions should the Company subsequently issue any common stock or equivalents at an effective price less than
the lender conversion price. The Company has a right to prepayment of the note, subject to a 15% prepayment premium and is secured
by a trust deed of certain assets of the Company. As of June 30, 2020, and December 31, 2019, the Company owed principal of $2,304,372
and $2,947,890 of principal. As of June 30, 2020, the Company owed $304,597 of accrued interest.
Convertible notes payable - Robert
L. Hymers III
On December 23, 2019, the Company
issued convertible promissory notes in the aggregate principal amount of $96,552.70 to Robert L. Hymers III (“Hymers”)
in satisfaction of funds owed to Mr. Hymers from his consulting contract with the Company for past services rendered and completed.
The promissory notes bear interest at 10% per anum,and are due six months from the respective issuance date of the note along with
accrued and unpaid interest. Principal and interest are payable to Hymers six months after the date of issuance. Hymers has the
option to convert all or any portion of the unpaid principal amount of the note, plus accrued interest, into shares of the Company’s
common stock. The conversion price will be equal to a 50% discount to the lowest closing bid of the previous 15 day trading period.
The aggregate debt discount of $92,332 is being amortized to interest expense over the respective terms of the notes. As of June
30, 2020, and December 31, 2019, the Company owed an aggregate of $161,644 and $96,553 of principal respectively. As of June 30,
2020, the Company owed $5,040 in accrued interest.
Convertible notes payable –
Natural Plant Extract
On April 15, 2019, we 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, we terminated the joint venture.
The Original Material Definitive
Agreement
Pursuant to the original
material definitive agreement with NPE, we agreed to acquire twenty percent (equal to 200,000 shares) of NPE’s
authorized shares in exchange for our payment of $2,000,000 and $1,000,000 worth of our restricted common stock. We agreed to
form a joint venture with NPE incorporated in California under the name “Viva Buds, Inc.” (“Viva
Buds”) for the purpose of operating a California licensed cannabis distribution business pursuant to California law
legalizing THC psychoactive cannabis for recreational and medicinal use.
Our payment obligations were governed
by a stock purchase agreement which required us to make the following payments:
a. Deposit of $350,000 within
5 days of the execution of the material definitive agreement;
b. Deposit of $250,000 payable
within 30 days;
c. Deposit of $400,000 within
60 days;
d. Deposit of $500,000 within
75 days;
e. Deposit of $500,000 within
90 days
We made our initial payment pursuant
to this schedule, but otherwise failed to comply with the payment schedule and we were in breach of contract.
Settlement and Release of All Claims
Agreement
On February 3, 2020, the Company
and NPE entered into a Settlement and Release of All Claims Agreement. In exchange for a 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 material definitive
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 our common stock as of the maturity date.
Of the total amount due and payable
by us as of the date of this filing, we owe $50,000, and we are in breach of the Settlement and Release of All Claims Agreement.
On February 3, 2020, we executed a convertible promissory note in the amount of $56,085.15 to NPE. Additionally, as a result of
our settlement agreement with NPE, we became liable to pay NPE our 5% portion equal to $25,902 of the regulatory charges to the
City of Lynwood and the State of California to transfer the cannabis licenses back to NPE. To date, we have not paid this amount
and it is due and owing.
Convertible Note payable –
GW Holdings Group
On January 6, 2020, the Company
entered into a convertible promissory note in the amount of $57,750.00 with GW Holdings Group, LLC, a New York limited liability
company (“GW”). GW has the option, beginning on the 6 month anniversary of the date of execution, to convert all or
any amount of the principal face amount of the note then outstanding into shares of the Company's common stock equal to 40% discount
of the lowest trading price for the fifteen prior trading days. The note bears interest at a rate of 10% per annum and include
a $5,250.00 original issue discount such that the price of the note was $57,750.00 As of June 30, 2020, and December 31, 2019,
the Company owed principal of $57,750 and $0 respectively. As of June 30, 2020, the Company owed $2,888 in accrued interest.
Convertible Note payable –
Jefferson Capital
On January 20, 2020, the Company
issued a convertible promissory note to Jefferson Capital, LLC, a New Jersey limited liability company (“Jefferson”)
with a maturity date of January 20, 2021. Jefferson has the right to convert any or all of the debt into common stock of the Company,
calculated on 60% multiplied by 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 Common Stock
during the 20 trading day period ending on the latest complete trading tay prior to the conversion. As of June 30, 2020, and December
31, 2019, the Company owed principal of $37,625 and $0 respectively. As of June 30, 2020, the Company owed $1,568 in accrued interest.
Convertible Note payable –
BHP Capital
On January 21, 2021, the Company
issued a convertible promissory note in the principal sum of $37,625.00, plus accrued but unpaid interest thereon, to BHP Capital
NY, Inc. (“BHP”) The Company agreed to pay simple interest on the outstanding principal amount of the note at the annual
rate of ten percent (10%). 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, 2020, and December 31, 2019, the Company owed principal of
$37,625 and $0 respectively. As of June 30, 2020, the Company owed $1,568 in accrued interest.
Convertible Notes payable –
LG Capital
On March 2, 2020, the Company entered
into a convertible promissory note in the amount of $50,000 with LG Capital Funding, LLC (“LG Capital”), with a maturity
date of March 2, 2021. The Company agreed to pay interest 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 this note then outstanding into shares of the Company's
common stock at a price for each share of equal to 55% of the lowest trading price of the Company’s common stock as quoted
on the National Quotations Bureau OTC Markets for the twenty trading days prior to conversion. As of June 30, 2020, and December
31, 2019, the Company owed principal of $50,000 and $0, respectively. As of June 30, 2020, the Company owed $1,333 in accrued interest.
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, 2020, the Company determined
the aggregate fair value of embedded derivatives to be $3,219,398. 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 month period ended June
30, 2020, the Company recorded a gain on the change in fair value of derivative liabilities of $1,142,272 and 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.
During the six months ended June 30, 2020, derivative liabilities of $2,231,014 were reclassified to additional paid in capital
as a result of conversions of the underlying notes payable into common stock. For the six-month period ended June 30, 2019, the
Company recorded a loss on change in fair value of derivative liabilities of $480,150, and recorded amortization of debt discounts
of $1,308,550 as a charge to interest expense.
Paycheck Protection Program
(PPP) 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 the Paycheck Protection Program
(PPP) offered by the Small Business Administration (SBA).
The Company has elected to account
for the PPP loan pursuant to FASB Accounting Standards Codification (ASC) 470, Debt, or as a government grant by analogy
to International Accounting Standard (IAS) 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 won't 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
December 6, 2019, Donald Steinberg resigned as the president, CEO, director and principal executive officer of the Company. As
of the date of his resignation, he was owed $330,797.73 in unpaid accrued compensation pursuant to the terms of his executive
employment agreement. In exchange for a full release of compensation owed to Steinberg, the Company agreed to issue 6,615,954
common shares. These shares have not been issued as of the quarter ended June 30, 2020. As a result, the company owes a balance
of $327,383 after applying payments issued subsequent to his resignation. The Company intends to issue these shares before year
end in satisfaction of this debt.
NOTE 9 – STOCKHOLDERS’
DEFICIT
Preferred stock
The Company is authorized to issue
50,000,000 shares of $0.001 par value preferred stock as of June 30, 2020 and December 31, 2019. As of June 30, 2020, and December
31, 2019, the Company has designated and issued 10,000,000 shares of Class A Preferred Stock, and 5,000,000 of Class B Preferred
Stock.
Each share of Class A Preferred
Stock is entitled to 100 votes on all matters submitted to a vote to the stockholders of the Company, does not have conversion,
dividend or distribution upon liquidation rights.
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, 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, 2020. As of December 31, 2019, 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, respectively, common shares issued and outstanding. As of August 14, 2020, the date of this filing, there were
1,039,494,074 shares of registrant’s common stock outstanding.
During the six months ended June
30, 2020, the Company issued an aggregate of 8,333 shares of its common stock issued to settle amounts previous 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 rendered 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 $1,531,471.
During the six months ended June
30, 2020, the Company issued 21,384,103 of its common stock in 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 in exchange for 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 estimate fair value of
$956,251.
On January 17, 2020, the Company
entered into an amendment of an existing convertible promissory note issued to Paladin Advisors, LLC. The Company authorized the
issuance of a cashless warrant to purchase 5,750,000 common shares. This warrant was exercised during the three months ended June
30, 2020.
Options
As of June 30, 2020, the Company
has no stock options.
The following table summarizes the
stock option activity for the three months ended June 30, 2020 and the year ended December 31, 2019:
|
|
Shares
|
|
Weighted-Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Term
|
|
Aggregate
Intrinsic Value
|
Outstanding at December 31, 2019
|
|
|
0
|
(1)
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
0
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cancellations
|
|
|
(1,000,000,000
|
)(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Forfeitures or expirations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding at June 30, 2020
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Exercisable at June 30, 2020
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
(1) On February 27, 2019,
Donald Steinberg and Charles Larsen canceled all 1,000,000,000 stock options previously issued to them by the Company.
Warrants
The following table summarizes the
stock warrant activity for the three months ended June 30, 2020:
|
|
Shares
|
|
Weighted-Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Term
|
|
Aggregate
Intrinsic Value
|
Outstanding at January 1, 2020
|
|
|
4,011,111
|
|
|
$
|
2.15
|
|
|
|
3.60
|
|
|
$
|
—
|
|
Granted
|
|
|
5,846,154
|
|
|
$
|
0.0043
|
|
|
|
0.44
|
|
|
|
—
|
|
Increase due to reset provision
|
|
|
82,502,706
|
|
|
$
|
0.0031
|
|
|
|
2.53
|
|
|
|
—
|
|
Exercised
|
|
|
(40,843,463
|
)
|
|
|
0.90
|
|
|
|
1.82
|
|
|
|
—
|
|
Outstanding at June 30, 2020
|
|
|
51,516,508
|
|
|
$
|
0.0054
|
|
|
|
2.76
|
|
|
$
|
82,021
|
|
Exercisable at June 30, 2020
|
|
|
51,516,508
|
|
|
$
|
0.0054
|
|
|
|
2.76
|
|
|
$
|
82,021
|
|
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 $0.044 as of June 30, 2020, 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
The Company adopted the provisions
of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC
825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities
required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it
would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent
risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity
to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes
three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in
active markets for identical assets or liabilities.
Level 2 – Observable inputs
other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or
can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs
to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
All items required to be recorded
or measured on a recurring basis are based upon level 3 inputs.
To the extent that valuation is
based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more
judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In
such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed
and is determined based on the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there
was no cumulative effect adjustment to beginning retained earnings and no impact on the financial statements.
The carrying value of the Company’s
cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable),
and other current assets and liabilities approximate fair value because of their short-term maturity.
As of June 30, 2020, and December
31, 2019, the Company did not have any items that would be classified as level 1 or 2 disclosures.
The Company recognizes its derivative
liabilities as level 3 and values its derivatives using the methods discussed in Note 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, 2020, and December
31, 2019, the Company did not have any derivative instruments that were designated as hedges.
The derivative liability as of June
30, 2020 and December 31, 2019, in the amount of $3,219,398 and $5,693,071, 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, 2020:
|
|
|
Debt
Derivative
|
|
Balance, January 1, 2020
|
|
$
|
5,693,071
|
|
Increase resulting from initial issuance of additional convertible notes payable
|
|
|
|
|
Initial fair value of debt derivative at note issuance
|
|
|
899,613
|
|
Mark-to-market at June 30, 2020:
|
|
|
6,592,421
|
|
Transfers out of Level 3 upon conversion or payoff of notes payable
|
|
|
(2,231,014)
|
|
|
Net gain for the period included in earnings relating to the liabilities held during the period ended June 30, 2020
|
|
|
(1,142,272)
|
|
Balance, June 30, 2020
|
|
$
|
3,219,398
|
|
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, 2020, the Company’s stock price decreased significantly from initial valuations. As the stock price decreases for
each of the related derivative instruments, the value to the holder of the instrument generally decreases. Stock price is one of
the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.
NOTE 11 — RELATED PARTY
TRANSACTIONS
The Company’s current officers
and stockholders advanced funds to the Company for travel related and working capital purposes. As of June 30, 2020, and December
31, 2019, the balance due to officers for travel related and working capital purposes was $25,261 and $0, respectively.
As of June 30, 2020, and December
31, 2019, accrued compensation due officers and executives included as accrued compensation was $96,400 and $4,875, respectively.
Related
party sales contributed $5,131 and $6,809 to revenues for the three months ended June 30, 2020 and 2019, respectively, while related
party sales contributed $8,303 and 8,348 to revenues for the six months ended June 30, 2020 and 2019, 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.
NOTE 12 – 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.
On July 2, 2020, the Company
filed a general form for registration of securities under the Securities Act of 1933 on Form S-1, which was amended by the
Company by a Form S-1/A filed on August 11, 2020. The S-1 was filed in connection with the registration rights granted to
White Lion Capital, LLC, a Nevada limited liability company (“White Lion”) pursuant to an investment agreement
entered into between the Company and White Lion on June 17, 2020. Pursuant to the June 17, 2020 agreement, White Lion agreed
to invest up to ten million dollars to purchase the Company’s common stock. The original S-1 filed on July 2, 2020
related to the intended registration of up to 2,005,000,000 shares of the Company’s common stock, and was amended based
on the SEC’s comment that the total amount of shares to be issued and registered was disproportionate to the
Company’s then-current number of outstanding shares. The S-1/A filed on August 11, 2020 relates to the resale of
up to 122,012,847 shares of the Company’s common shares issuable to White Lion pursuant to a “put right”
under the investment agreement, which permits us to “put” up to ten million dollars ($10,000,000) in shares of
our common stock to White Lion, under certain circumstances, over a period of up to twenty-four (24) months or until
$10,000,000 of such shares have been “put.” White Lion may sell all or a portion of the shares being offered
pursuant to the registration statement at fixed prices, at prevailing market prices at the time of sale, at varying prices or
at negotiated prices. As of August 11, 2020 (the date of this filing), the Company had 1,246,166,689 shares of common stock in
the public float. The 122,012,847 shares being registered represent approximately 9.8% of the shares in the public float at
August 14, 2020. Assuming all of these shares are sold, the registrant’s total number of issued and
outstanding shares of common stock will be 1,414,540,702, calculated on the number of issued and outstanding shares at August
14, 2020 (the date of this filing) of 1,039,494,074. The total number of shares registered pursuant to this prospectus and
available to White Lion will then represent 8.6% of the Company’s issued and outstanding shares. We will not receive
any proceeds from the sale of shares of our common stock by White Lion. However, we will receive proceeds from the sale of
shares of our common stock pursuant to our exercise of the put right offered by White Lion. We will pay for expenses of this
offering, except that White Lion will pay any broker discounts or commissions or equivalent expenses and expenses of its
legal counsel applicable to the sale of its shares. On
August 13, 2020, the Securities and Exchange Commission made effective the Registrant's Form S-1 registration statement filed on
July 20, 2020, as amended.
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion
and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management’s
current views with respect to future events and financial performance. You can identify these statements by forward-looking words
such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate”
and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations
of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors
are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties,
and that actual results may differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully
review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange
Commission. Important factors currently known to Management could cause actual results to differ materially from those in forward-looking
statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence
of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable
data derived from and known about our business and operations. No assurances are made that actual results of operations or the
results of our future activities will not differ materially from our assumptions. Factors that could cause differences include,
but are not limited to, expected market demand for our products, fluctuations in pricing for materials, and competition.
Business Overview
Plan of Operations –
Marijuana Company of America Inc. and subsidiaries is a publicly listed company quoted on OTC Markets OTCQB Tier under the symbol
“MCOA”. We are based in Escondido, California. The Company operates two distinct and separate business divisions related
to its three wholly owned subsidiaries, H Smart, Inc., MCOA CA, Inc, and Hempsmart, Ltd., a corporation formed and operating in
the United Kingdom. Our business develops, manufactures, markets and sells non-psychoactive industrial hemp, and hemp-derived consumer
products containing cannabinoids (hereafter referred to as “CBD”), with a THC content of less than 0.03%. Our business
includes the research and development of (1) varieties of various species of hemp; (2) beneficial uses of hemp and hemp derivatives;
(3) indoor and outdoor cultivation methods for hemp; (4) technology used for cultivation and harvesting of different species of
hemp, including but not limited to lighting, venting, irrigation, hydroponics, nutrients and soil; (5) different species of industrial
hemp derived CBD, and the possible health benefits thereof; and, (6) new and improved methods of hemp CBD extraction omitting or
eliminating the delta-9 THC molecule. As part of our hemp related business, we entered into joint ventures to develop and grow,
cultivate and harvest hemp in Scio, Oregon and are joint venture partners in a hemp research and development project in New Brunswick,
Canada.
Our consumer products containing
hemp and CBD are sold through our wholly owned subsidiary H Smart, Inc. under the brand name hempSMART™. We market and sell
our hempSMART™ products directly through our web site, and through our affiliate marketing program, where qualified sales
affiliates use a secure multi-level-marketing sales software program that facilitates order placement over the internet via a web
site, and accounts for affiliate orders and sales; calculates referral benefits apportionable to specific sales associates and
calculates and accounts for loyalty and rewards benefits for returning customers. We also retained a full-service marketing company
that uses a multi-channel transactional marketing campaign focused on digital advertising, infographics, content marketing, customer
incentives and acquisition, a broad social media presence, as well as search engine marketing and optimization that includes comprehensive
research and analytics and order fulfillment in order to boost direct sales.
Our current hempSMART™ wellness
products offerings include the following:
|
•
|
HempSmart- Pure™
The existing products make up this line which has been repackaged for wholesale distribution. The Pure line has the highest
industry standards for premium CBD-based products. hempSMART – Pure™ ingredients are organically grown. It contains
Full Spectrum pure CBD, independently lab tested and certified.
|
|
•
|
SMART by HempSmart™
product line is directed at a younger audience. SMART products are “smart formulations” created through scientific
nano-technology which enables products to be absorbed by the body faster.
|
|
•
|
HempSmart- Luxe™
product line is focused on luxury Men’s and Women’s Beauty CBD products, applying creative branding and disruptive
marketing strategies across the US and abroad. This also includes a commercial Spa and Hotel line.
|
All product lines are sold
through the following Distribution Channels
|
•
|
hempSMART™ Network
Affiliate Program
|
This is a sales program that
provides an opportunity for those customers who are looking to earn additional income by selling hempSMART™ products to their
network of friends and family. In the current shut down market this model has proven to be efficient and growing both domestically
and internationally.
|
•
|
HempSmart Global™
Retail E - Commerce Program
|
Through diversification of product
lines and consumer audiences, a new platform is under construction to deliver sales revenue across all channels. HempSmart Global
will unveil over 80 products to over 100 countries by 2023.
|
•
|
HempSmart Global™
– Wholesale Direct
|
Our wholesale program will grow
through a separate website dedicated to domestic and international sales. It will allow our distributors to log into their account
and place orders directly. It will also include the required import/export documentation and will allow our clients to track their
current orders and past purchase history. Information of this site will be translated to the country language, and they will be
allowed to buy across all product lines.
|
·
|
hempSMART
Brain™ a proprietary patented and formulated personal care consumer product encapsulated with enriched non-psychoactive
industrial hemp derived CBD. This encapsulation is combined with other high quality, proprietary natural ingredients to compliment
CBD to support brain wellness.
|
|
·
|
hempSMART
Pain™ capsules formulated with 10mg of Full Spectrum, non-psychoactive CBD per serving, derived from industrial
hemp, which along with a proprietary blend of other natural ingredients, delivers an all-natural formulation for the temporary
relief of minor discomfort associated with physical activity.
|
|
·
|
hempSMART
Pain Cream™ each container formulated with 300mg of full spectrum non-psychoactive CBD derived from industrial hemp.
The newly developed product contains a synergistic combination of natural botanicals and full spectrum hemp extract featuring
CBD, CBG and a broad range of terpenes. The Company’s proprietary blend of Ayurvedic herbs along with Menthol, Cayenne
Pepper Extract, Rosemary Oil, Aloe Gel, White Willow Bark, Arnica, Wintergreen Extract and Tea Tree Oil, provides an immediate
cooling and soothing sensation. This topical wellness consumer product is formulated to help reduce minor discomfort and promote
muscle relaxation on areas that it is applied.
|
|
·
|
hempSMART
Drops™ full Spectrum Hemp CBD Oil Tincture Drops, available in 250mg and 500mg bottles, enriched with non-psychoactive
industrial hemp derived CBD, and available in four different flavors: lemon, mint, orange and strawberry that is free of the
THC isolate.
|
|
·
|
hempSMART
Pet Drops™ for cats and dogs, formulated with 250mg of full spectrum non-psychoactive CBD derived from industrial
hemp. This new specially formulated product contains naturally occurring CBD derived from hemp seed oil, full spectrum hemp
extract, fractionated coconut oil, and a rich bacon flavor.
|
|
·
|
hempSMART
Face™ a nourishing facial moisturizer combines full spectrum CBD from hemp, with a unique blend of Ayurvedic herbs
and botanicals. Designed to refresh, replenish and restore the skin providing long lasting hydration and balance.
|
We additionally offer consulting
services in accounting and real property management for licensed businesses in the cannabis industry in those states where cannabis
has been legalized for recreational and/or medicinal use.
Our business also includes making
selected investments in other related new businesses. Currently, we have made investments in startup ventures, including:
MoneyTrac Technology, Inc.;
MoneyTrac Technology, Inc. is a developer of an integrated and streamlined electronic payment processing system containing E-Wallet
and mobile applications, that allows for the management and processing of prepaid cards, debit cards, and credit card payments.
We entered into a stock purchase agreement with MoneyTrac on March 13, 2017 to purchase a 15% equity position in MoneyTrac. On
July 27, 2017 we completed tender of the purchase price of $250,000. MoneyTrac’s business and banking software solutions
offer firms the ability to deposit funds directly into a “MoneyTrac Merchant Wallet,” created and controlled by the
firm, from which the firm can manage and provide inventory management, payroll processing, and audit tracking; and, the creation
of “Customer Wallets,” by anyone who wants to engage in cashless transactions, by loading money into their “MoneyTrac
Customer Wallet” from a bank account or through a MoneyTrac kiosk, which also accepts debit and credit card transactions.
MoneyTrac’s kiosks are marketed to businesses that wish to offer cashless transactions to its customers, who can choose to
either have funds loaded directly into their “Customer Wallet” or onto a pre-paid debit card. MoneyTrac’s system
provides for a secure, managed and auditable record of cashless transactions that is designed to be marketed to firms who want
an alternative payment and management method for transacting business, including those firms in the legalized cannabis business
in those states where cannabis has been legalized for recreational and/or medicinal use. On June 12th, 2018 Global Payout, Inc.
("Global", "Parent") entered into a Reverse Triangular Merger (the "Merger") with MoneyTrac Technology,
Inc. ("MoneyTrac") a California Corporation and MTrac Tech Corporation (" Merger Sub") a Nevada corporation
and wholly-owned subsidiary of Global Payout, Inc. whereby MoneyTrac Technology was successfully merged into MTrac Tech, the surviving
corporation of the merger, and thereafter the separate existence of MoneyTrac ceased and all rights, privileges, powers and property,
including, without limitation, all rights, privileges, franchise, patents, trademarks, licenses, registrations, bank accounts,
contracts, patents, copyrights, and other assets of every kind and description of MoneyTrac were assumed by Merger Sub. Additionally,
Merger Sub assumed all of the obligations and liabilities of MoneyTrac, except minute books and stock records of MoneyTrac insofar
as they relate solely to its organization and capitalization, and the rights of MoneyTrac arising out of the executed Merger Agreement.
Pursuant to the terms of the Merger, Global issued 1,100,000,000 (one billion, one hundred million) shares of its common stock
to MoneyTrac as consideration for the purchase of MoneyTrac. Pursuant to the terms of the Merger, a conversion of issued MoneyTrac
stock was completed whereby each one (1) share of MoneyTrac stock, issued and outstanding immediately prior to the effective date
of the Merger, was canceled and extinguished and converted automatically into ten (10) shares of Global common stock. As of the
effective date of the Merger, all shares of Global Preferred Stock issued prior to the effective date of the Merger were canceled
and extinguished without any conversion thereof. We acquired 150,000,000 Global common shares for our original $250,000 representing
approximately 15% ownership. Global’s name changed in April, 2020 to Global Trac Solutions, Inc. Global’s common stock
is traded on the OTC Markets under the symbol “PYSC.” We realized $51,748.17 from sales of our Global securities.
Conveniant Hemp Mart, LLC;
Conveniant Hemp Mart, LLC (“Benihemp”) is a Wyoming limited liability company whose business plan includes the development,
manufacture and sale of consumer products containing CBD that are intended for marketing and sales at convenience stores, gas stations
and markets. On July 19, 2017, we agreed to lend fifty thousand dollars ($50,000) to Benihemp based on a promissory note. The note
provided that in lieu of receiving repayment, we could elect to exercise a right to convert the loaned amount into a payment towards
the purchase of a 25% interest in Benihemp, subject to our payment of an additional fifty thousand dollars [$50,000] equaling a
total purchase price of $100,000. The Company exercised this option on November 20, 2017 and made payment to Benihemp on November
21, 2017. Benihemp developed a line of consumer products containing industrial hemp derived CBD with no traceable THC content.
The product line includes tinctures that combine industrial hemp-derived CBD with hemp seed oil, coconut oil and other essential
natural oils; a muscle cream product that combines industrial hemp-derived CBD with natural oils; a hand lotion that combines industrial
hemp derived CBD with lavender oils; and a line of pet treats that combine industrial hemp-derived CBD with natural oils. On May
1, 2019, the Company and Benihemp agreed to cancel the Company’s 25% interest in Benihemp. Benihemp issued to the Company
a credit memo equal to the Company’s $100,000 investment. As of June 30, 2020, The Company determined that as of December
31, 2019, approximately $41,000 of this credit was impaired.
Global Hemp Group New
Brunswick Joint Venture; On September 5, 2017, we announced our agreement to participate in a joint venture with Global
Hemp Group Inc., a Canadian corporation (“Global Hemp Group”), in a multi-phase industrial hemp project on the
Acadian peninsula of New Brunswick, Canada. The joint venture’s goal was to develop a “Hemp Agro-Industrial
Zone”, a concept that promotes and engages farmers, processors and manufacturers to collaboratively produce and process
100% of the hemp plant into a number of wholesale materials that can be manufactured into healthy and sustainable products.
The “Hemp Agro-Industrial Zone” has a goal of producing social and environmental benefits to the communities
where they operate. These zones are envisioned to prospectively create jobs for farmers, foster rural development, provide
the opportunity to develop more sustainable products of superior quality and help support Global Hemp Group’s
commitment to creating a carbon free economy. The first phase of the project involved lab testing in support of the trials.
The Collège Communautaire du Nouveau Brunswick (CCNB) in Bathurst, New Brunswick (“CCNB”) intends to
assist Global Hemp Group in research on its ongoing industrial hemp trials in the region, and to perform laboratory tests in
support of these trials. These tests will provide information to validate agronomic and key yield data in preparation of a
large-scale industrial development project that will involve processing of the full plant: grain, straw, flowers and leaves,
scheduled to begin in 2018. The results of these tests will also be used in discussions with farmers of the region to refine
a hemp-based farming model, and to mobilize additional farmers for the next growing season. Our participation included
providing one-half, or $10,775 of the funding for the phase one work. On January 10, 2018, phase-one was completed by
successfully cultivating industrial hemp during the 2017 growing season for research purposes. The objective of phase one was
to re-introduce hemp into the area and ensure that it could be productive under New Brunswick growing conditions prior to
significantly increasing cultivation acreage and building a hemp processing facility in the region, in future phases of the
project. As a result of our participation in the joint venture, we will share in the ownership of research and development of
hemp and CBD related studies produced by the New Brunswick Project, and, in the event Canadian laws governing the growing,
harvesting, manufacturing and production of products containing hemp and CBD change (as expected, but not guaranteed) in
2018, we would benefit from possible preferred pricing and terms for the purchase of hemp and CBD that would enable us to
further conduct its business and research and development into hemp and CBD products. As of December 31, 2019, the balance of
the New Brunswick JV investment reported on the balance sheet for the year ended December 31, 2019 was $0 as a result of the
investment being deemed fully impaired and the Company withdrawing from the joint venture as of September 30, 2019.
Global Hemp Group Oregon Joint
Venture; On May 8, 2018, the Company, Global Hemp Group, Inc., a Canadian corporation (“Global Hemp Group”), and
TTO Enterprises, Ltd., an Oregon corporation (“TTO”) entered into a joint venture agreement. The purpose of the joint
venture was to develop a project to commercialize the cultivation of industrial hemp on a 109 acre parcel of real property owned
by the Company and Global Hemp Group in Scio, Oregon, and operating as a joint venture under the Oregon corporation Covered Bridges,
Ltd. On May 30, 2018, the joint venture purchased TTO’s 15% interest in the joint venture for $30,000, and subsequently the
Company and Global Hemp Group had equal interests in the joint venture. The joint venture agreement commits the Company to a cash
contribution of $600,000 payable on the following funding schedule: $200,000 upon execution of the joint venture agreement; $238,780
by July 31, 2018; $126,445 by October 31, 2018; and, $34,775 by January 31, 2019. The Company has complied with its payments. The
2018 crop of hemp grown on the joint venture’s real property consisted of 33 acres of high yielding CBD hemp grown in an
orchard style cultivation on the property. The 2018 harvest consisted of approximately 37,000 high yielding CBD hemp plants producing
24 tons of biomass that produced 48,000 pounds of dried biomass. The joint venture partners prepared processing samples ranging
in size from 100 lbs. to 2,000 lbs. for sample offers to extraction companies. The biomass is being processed into CBD crude oil
with the option to refine it further into isolate, or full spectrum oil, in order to increase its value on the market. As of December
31, 2019, the combined balance of the joint venture investment and related farmland investment was $0 as the investment was written
off as a loss for the period ended December 31, 2019.
Bougainville Ventures, Inc.
Joint Venture; On March 16, 2017, we entered into a joint venture agreement with Bougainville Ventures, Inc., a Canadian
corporation. The purpose of the joint venture was for the Company and Bougainville to (i) jointly engage in the development and
promotion of products in the legalized cannabis industry in Washington State; (ii) utilize Bougainville's high quality cannabis
grow operations in the State of Washington, where it claimed to have an ownership interest in real property for use within the
legalized cannabis industry; (iii) leverage Bougainville’s agreement with a I502 Tier 3 license holder to grow cannabis
on the site; provide technical and management services and resources including, but not limited to: sales and marketing, agricultural
procedures, operations, security and monitoring, processing and delivery, branding, capital resources and financial management;
and, (iv) optimize collaborative business opportunities. The Company and Bougainville agreed to operate through a Washington State
Limited Liability Company, and BV-MCOA Management, LLC was organized in the State of Washington on May 16, 2017.
As our contribution to the
joint venture, the Company committed to raise not less than $1,000,000 to fund joint venture operations, based upon a funding schedule.
The Company also committed to providing branding and systems for the representation of cannabis related products and derivatives
comprised of management, marketing and various proprietary methodologies directly tailored to the cannabis industry.
The Company and Bougainville's agreement
provided that funding provided by the Company would contribute towards the joint venture’s ultimate purchase of the land
consisting of a one-acre parcel located in Okanogan County, Washington, for joint venture operations.
As disclosed on Form 8-K on December
11, 2017, the Company did not comply with the funding schedule for the joint venture. On November 6, 2017, the Company and Bougainville
amended the joint venture agreement to reduce the amount of the Company's commitment from $1,000,000 to $800,000, and also required
the Company to issue Bougainville 15 million shares of the Company's restricted common stock. The Company completed its payments
pursuant to the amended agreement on November 7, 2017, and on November 9, 2017, issued to Bougainville 15 million shares of restricted
common stock. The amended agreement provided that Bougainville would deed the real property to the joint venture within thirty
days of its receipt of payment.
Thereafter, the Company determined
that Bougainville had no ownership interest in the property in Washington State, but rather was a party to a purchase agreement
for real property that was in breach of contract for non-payment. Bougainville also did not possess an agreement with a Tier 3
I502 license holder to grow Marijuana on the property. Nonetheless, as a result of funding arranged for by the Company, Bougainville
and an unrelated third party, Green Ventures Capital Corp., purchased the land, but did not deed the real property to the joint
venture. Bougainville failed to pay delinquent property taxes to Okanogan County and to date, the property has not been deeded
to the joint venture.
To clarify the respective contributions
and roles of the parties, the Company offered to enter into good faith negotiations to revise and restate the joint venture agreement
with Bougainville. The Company diligently attempted to communicate with Bougainville to accomplish a revised and restated joint
venture agreement, and efforts towards satisfying the conditions to complete the subdivision of the land by the Okanogan County
Assessor. However, Bougainville failed to cooperate or communicate with the Company in good faith, and failed to pay the delinquent
taxes on the real property that would allow for sub-division and the deeding of the real property to the joint venture.
On August 10, 2018, the Company
advised its independent auditor that Bougainville did not cooperate or communicate with the Company regarding its requests for
information concerning the audit of Bougainville’s receipt and expenditures of $800,000 contributed by the Company in the
joint venture agreement. Bougainville had a material obligation to do so under the joint venture agreement. The Company believes
that some of the funds it paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds.
Additionally, the Company believes that Bougainville misrepresented material facts in the joint venture agreement, as amended,
including, but not limited to, Bougainville’s representations that: (i) it had an ownership interest in real property that
was to be deeded to the joint venture; (ii) it had an agreement with a Tier 3 # I502 cannabis license holder to grow cannabis on
the real property; and, (iii) that clear title to the real property associated with the Tier 3 # I502 license would be deeded to
the joint venture thirty days after the Company made its final funding contribution. As a result, on September 20, 2018, the Company
filed suit against Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County
Washington Superior Court, case number 18-2- 0045324. The Company’s complaint seeks legal and equitable relief for breach
of contract, fraud, breach of fiduciary duty, conversion, recession of the joint venture agreement, an accounting, quiet title
to real property in the name of the Company, for the appointment of a receiver, the return to treasury of 15 million shares issued
to Bougainville, and, for treble damages pursuant to the Consumer Protection Act in Washington State. The registrant has filed
a lis pendens on the real property. The case is currently in litigation.
In connection with the
agreement, the Company recorded a cash investment of $1,188,500 to the Joint Venture during 2017. This was comprised of 49.5%
ownership of BV-MCOA Management LLC, and was accounted for using the equity method of accounting. The Company recorded an
annual impairment in 2017 of $792,500, reflecting the Company’s percentage of ownership of the net book value of the
investment. During 2018, the Company recorded equity losses of $37,673 and $11,043 for the first and second quarters
respectively, and recorded an annual impairment of $285,986 for the year ended December 31, 2018, at which time the Company
determined the investment to be fully impaired due to Bougainville’s breach of contract and resulting litigation, as
discussed above.
GateC Joint Venture;
On March 17, 2017, the Company and GateC Research, Inc. (“GateC”) entered into a Joint Venture Agreement (“Agreement”)
whereby the Company committed to raise up to one and one-half million dollars ($1,500,000) over a six-month period, with a minimum
commitment of five hundred thousand dollars ($500,000) within a three (3) month period; and, information establishing brands and
systems for the representation of cannabis related products and derivatives comprised of management, marketing and various proprietary
methodologies, including but not limited to its affiliate marketing program, directly tailored to the cannabis industry.
GateC agreed to contribute its management
and control services and systems related to cannabis grow operations in Adelanto County, California, and its permit to grow marijuana
in an approved zone in Adelanto, California. GateC did not own a physical site for its operation in Adelanto County, California,
and GateC’s permit to grow cannabis did not contain a conditional use permit.
On or about November 28, 2017, GateC
and the Company orally agreed to suspend the Company’s funding commitment, pending the finalization of California State regulations
governing the growth, cultivation and distribution of cannabis, which were expected to be completed in 2018.
On March 19, 2018, the Company and
GateC rescinded the Agreement and concurrently released each other from any all any and all losses, claims, debts, liabilities,
demands, obligations, promises, acts, omissions, agreements, costs and expenses, damages, injuries, suits, actions and causes of
action, of whatever kind or nature, whether known or unknown, suspected or unsuspected, contingent or fixed, that they may have
against each other and their Affiliates, arising out of the Agreement.
We incurred no termination penalties
as the result of its entry into the Recession and Mutual Release Agreement.
In 2017, the Company recorded a
debt obligation of $1,500,000 to the Joint Venture and a corresponding impairment charge of $1,500,000 during for year ended December
31, 2017. Upon termination of the material definitive agreement on March 19, 2018, the Company realized a gain on settlement of
debt obligation of $1,500,000 for the year ended December 31, 2018.
Natural Plant Extract; On
April 15, 2019, we entered into a joint venture with Natural Plant Extract of California, Inc., and subsidiaries, to operate a
licensed psychoactive cannabis distribution service in California. California legalized THC psychoactive cannabis for medicinal
and recreational use on January 1, 2018. On February 3, 2020, we terminated the joint venture and entered into a settlement and
release of all claims agreement. In exchange for a complete release of all claims, the Company and NPE (i) agreed to reduce our
interest in NPE from 20% to 5%; (ii) we agreed to pay NPE a total of $85,000 as follows: $35,000 concurrent with the execution
of the Settlement and Release of All Claims Agreement, and $25,000 no later than the 5th calendar day for each of the two months
following execution of Settlement and Release of All Claims Agreement; and, (iii) to retire the balance of our original valuation
obligation from the material definitive agreement, representing a shortfall of $56,085.15, in a convertible promissory note, with
terms allowing NPE to convert the note into common stock of MCOA at a 50% discount to the closing price of MCOA’s common
stock as of the maturity date.
Of the total amount due and payable
by us as of the date of this filing, we owe $75,000, and we are in breach of the settlement agreement. On February 3, 2020, we
executed a convertible promissory note in the amount of $56,085.15 to NPE. Additionally, as a result of our settlement agreement
with NPE, we became liable to pay NPE our 5% portion equal to $25,902 of the regulatory charges to the City of Lynwood and the
State of California to transfer the cannabis licenses back to NPE. To date, we have not paid this amount and it is due and owing.
The following table indicates the
amount of impairments recorded by the Company quarter to quarter for investment activity quarter to quarter related to its joint
venture investments:
MARIJUANA COMPANY OF AMERICA, INC.
INVESTMENT ROLL-FORWARD
AS OF JUNE 30, 2020
|
|
INVESTMENTS
|
|
|
|
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
Global
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
TOTAL
|
|
|
|
|
TOTAL
|
|
Hemp
|
|
|
|
|
|
Bougainville
|
|
Gate C
|
|
Plant
|
|
|
|
Short-Term
|
|
|
|
|
INVESTMENTS
|
|
Group
|
|
Benihemp
|
|
MoneyTrac
|
|
Ventues, Inc.
|
|
Research Inc.
|
|
Extract
|
|
Vivabuds
|
|
Investments
|
|
MoneyTrac
|
Beginning balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Investments made during 2017
|
|
|
3,049,275
|
|
|
|
10,775
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
1,188,500
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 equity method Loss
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 equity method accounting
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Investment in 2017
|
|
|
(2,292,500
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
(792,500
|
)
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
Balances as of 12/31/17
|
|
|
695,477
|
|
|
|
10,775
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
334,702
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during 2018
|
|
|
986,654
|
|
|
|
986,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 equity method Loss
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 equity method Loss
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 equity method Loss
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-18 equity method Loss
|
|
|
(31,721
|
)
|
|
|
(31,721
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moneytrac investment reclassified to Short-Term investments
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - 2018
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
560,000
|
|
|
|
560,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2018
|
|
|
(933,195
|
)
|
|
|
(557,631
|
)
|
|
|
(89,578
|
)
|
|
|
|
|
|
|
(285,986
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
Balance @12-31-18
|
|
$
|
408,077
|
|
|
$
|
408,077
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
810,000
|
|
|
$
|
810,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 03-31-19
|
|
|
129,040
|
|
|
|
129,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 equity method Loss
|
|
|
(59,541
|
)
|
|
|
(59,541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 03-31-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(135,000
|
)
|
|
$
|
135,000
|
)
|
Balance @03-31-19
|
|
$
|
477,576
|
|
|
$
|
477,576
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
675,000
|
|
|
$
|
675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 06-30-19
|
|
$
|
3,157,234
|
|
|
$
|
83,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,000,000
|
|
|
$
|
73,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-19 equity method Income (Loss)
|
|
$
|
(171,284
|
)
|
|
$
|
(141,870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(6,291
|
)
|
|
$
|
(23,123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 06-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150,000
|
)
|
|
$
|
(150,000
|
)
|
Balance @06-30-19
|
|
$
|
3,463,526
|
|
|
$
|
419,352
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,993,709
|
|
|
$
|
50,465
|
|
|
$
|
525,000
|
|
|
$
|
525,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 09-30-19
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 equity method Income (Loss)
|
|
$
|
122,863
|
|
|
$
|
262,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(94,987
|
)
|
|
$
|
(44,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of trading securities during quarter ended 09-30-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(41,667
|
)
|
|
$
|
(41,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 09-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(362,625
|
)
|
|
$
|
(362,625
|
)
|
Balance @09-30-19
|
|
$
|
3,772,652
|
|
|
$
|
682,141
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,898,722
|
|
|
$
|
191,789
|
|
|
$
|
120,708
|
|
|
$
|
120,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 12-31-19
|
|
$
|
392,226
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
129,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-19 equity method Income (Loss)
|
|
$
|
(178,164
|
)
|
|
$
|
(75,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(23,865
|
)
|
|
$
|
(79,079
|
)
|
|
|
|
|
|
|
|
|
Reversal of Equity method Loss for 2019
|
|
$
|
272,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125,143
|
|
|
$
|
147,142
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2019
|
|
$
|
(3,175,420
|
)
|
|
$
|
(869,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,306,085
|
)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
Loss on disposition of investment
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
Sale of trading securities during quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(17,760
|
)
|
|
$
|
(17,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,545
|
)
|
|
$
|
(75,545
|
)
|
Balance @12-31-19
|
|
$
|
693,915
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
27,403
|
|
|
$
|
27,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Loss for Quarter ended 03-31-20
|
|
|
126,845
|
|
|
|
126,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognize Joint venture liabilities per JV agreement @03-31-20
|
|
|
394,848
|
|
|
|
394,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Equity Loss for Quarter ended 03-31-20
|
|
|
(521,692
|
)
|
|
|
(521,692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 03-31-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,945
|
)
|
|
$
|
(13,945
|
)
|
Balance @03-31-20
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
13,458
|
|
|
$
|
13,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Loss for Quarter ended 06-30-20
|
|
|
(7,048
|
)
|
|
|
(7,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Equity Loss for Quarter ended 06-30-20
|
|
|
7,048
|
|
|
|
7,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of of trading securities - quarter ended 06-30-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,458
|
)
|
|
$
|
(13,458
|
)
|
Balance @06-30-20
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Loan Payable
|
|
|
|
|
|
|
|
Global
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
|
|
|
|
|
|
|
|
General
|
|
|
|
|
TOTAL
|
|
|
|
Hemp
|
|
|
|
|
|
|
|
|
|
|
|
Bougainville
|
|
|
|
Gate
C
|
|
|
|
Plant
|
|
|
|
Robert
L
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
JV
Debt
|
|
|
|
Group
|
|
|
|
Benihemp
|
|
|
|
MoneyTrac
|
|
|
|
Ventues,
Inc.
|
|
|
|
Research
Inc.
|
|
|
|
Extract
|
|
|
|
Hymers
III
|
|
|
|
Vivabuds
|
|
|
|
Expense
|
|
Beginning balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 loan borrowings
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 loan activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 loan borrowings
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 loan repayments
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General operational expense
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172,856
|
|
Balances as of 12/31/17 (a)
|
|
|
2,067,411
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
1,500,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 loan borrowings (payments)
|
|
|
376,472
|
|
|
|
447,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 cancellation of JV debt obligation
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 loan repayments
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 loan activity
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-18 loan borrowings
|
|
|
580,425
|
|
|
|
580,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @12-31-18 (b)
|
|
|
1,422,410
|
|
|
|
1,027,855
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan borrowings
|
|
|
649,575
|
|
|
|
649,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 debt conversion to equity
|
|
|
(407,192
|
)
|
|
|
(407,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @03-31-19 ©
|
|
|
1,664,793
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan borrowings
|
|
|
3,836,220
|
|
|
$
|
161,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,000,000
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
1,675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 debt conversion to equity
|
|
|
(1,572,971
|
)
|
|
$
|
(161,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(349,650
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(91,062,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @06-30-19 (d)
|
|
|
3,928,042
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
612,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 loan borrowings
|
|
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 debt conversion to equity
|
|
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @09-30-19 (e)
|
|
|
4,322,427
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,007,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-19 loan borrowings
|
|
|
2,989,378
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
596,784
|
|
|
$
|
4,221
|
|
|
|
|
|
|
$
|
2,125,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2019
|
|
|
(4,083,349
|
)
|
|
$
|
(1,532,652
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(394,555
|
)
|
|
|
|
|
|
$
|
(2,156,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of debt in 2019
|
|
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to reclassify amount to accrued liabilities
|
|
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @12-31-19 (f)
|
|
$
|
3,193,548
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
4,221
|
|
|
$
|
0
|
|
|
$
|
3,133,243
|
|
Quarter 03-31-20 loan borrowings
|
|
$
|
441,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
441,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-20 debt conversion to equity
|
|
$
|
(619,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(619,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognize Joint venture liabilities per JV agreement @03-31-20
|
|
$
|
394,848
|
|
|
$
|
394,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-20 Debt Discount adjustments
|
|
$
|
24,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @03-31-20 (g)
|
|
$
|
3,435,172
|
|
|
$
|
394,848
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
28,359
|
|
|
$
|
0
|
|
|
$
|
2,955,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 loan borrowings, net
|
|
$
|
65,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,091
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 debt conversion to equity
|
|
$
|
(727,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(727,118
|
)
|
Quarter 06-30-20 reclass of liability
|
|
$
|
83,647
|
|
|
$
|
83,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 Debt Discount adjustments
|
|
$
|
405,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(27,715
|
)
|
|
|
|
|
|
$
|
433,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @06-30-20 (h)
|
|
$
|
3,262,538
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
65,735
|
|
|
$
|
0
|
|
|
$
|
2,662,224
|
|
|
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
|
0
|
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
|
- Longterm debt
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
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
|
Results of Operations
We anticipate that our results of
operations will fluctuate for the foreseeable future due to several factors, such as the progress of our hempSMART™ product
sales and research and development efforts. Due to these uncertainties, accurate predictions of future operations are difficult
or impossible to make.
Three
Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019
Revenues
Total
revenues for the three months ended June 30, 2020 and 2019, were $82,958 and $208,580, respectively, a decrease of $125,622. This
decrease is attributable to the effects of the Company’s restructuring of its sales team and new sales strategies since the
first quarter 2020 as well as the slowing of the general market demand due to the COVID-19 pandemic during 2020. The changes to
the sales strategy implemented includes rebranding of hempSMART’s products. However, the Company continues to make progress
with its sales program as it continues to promote and support its affiliate marketing sales program and direct sales through its
website.
During
2020, the Company released two new industrial hemp based hempSMART product: hempSMART Body lotion, a cream formulated with organically
industrial hemp combining premium CBD oil with unique blend of synergistic herbs and botanicals, and hempSMART™ Drink Mix.
The following
table identifies a comparison of our sales of products during the three months ended June 30, 2020 and 2019, respectively:
|
|
3 months ended June 30, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
2020
|
|
|
|
2019
|
|
|
|
Body Lotion
|
|
|
1,297
|
|
|
|
0
|
|
|
New Product in 2nd Quarter 2020
|
Drink
|
|
|
2,052
|
|
|
|
0
|
|
|
New Product in 2nd Quarter 2020
|
Brain
|
|
|
9,558
|
|
|
|
24,086
|
|
|
|
Drops
|
|
|
38,908
|
|
|
|
85,503
|
|
|
|
Face Moisturizer
|
|
|
6,436
|
|
|
|
12,347
|
|
|
|
Pain Capsules
|
|
|
2,548
|
|
|
|
22,907
|
|
|
|
Pain Cream
|
|
|
17,058
|
|
|
|
48,191
|
|
|
|
Pet Drops
|
|
|
5,101
|
|
|
|
15,545
|
|
|
|
Totals
|
|
|
82,958
|
|
|
|
208,580
|
|
|
|
Related Party Sales
Related
party sales contributed $5,131 and $6,809 to revenues for the three months ended June 30, 2020 and 2019, 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, 2020 and 2019, our total costs of sales were $39,187 and $29,139, respectively. The
high costs reflects product discounts and cost incentive on products sold due to the COVID-19 pandemic.
Gross Profit
For the three months ended June 30, 2020 and
2019, gross profit was $43,771 and $179,441, respectively. This decrease was primarily attributed to new pricing and promotions
associated with the company’s new sales restructuring and strategies, along with the effects of the COVID-19 pandemic during
the three months ended June 30, 2020. As a result, the gross margins were 53.0% and 86.0% for the three months ended June 30, 2020
and 2019, respectively. However, the Company will continue to market its products aggressively as it continues to support its affiliate
sales program in the near future.
Selling and marketing expenses
For the three months ended June
30, 2020 and 2019, selling and marketing expenses was $74,212 and $656,751, respectively. This decrease of $582,539 is due primarily
to the effects of the Company’s restructuring of its sales team and new sales strategies during the three months ended June
30, 2020. The changes to the sales strategy implemented during the quarter included rebranding of hempSMART’s products.
Payroll and related expenses
For the three months ended June
30, 2020 and 2019, payroll and related expenses was $95,644 and $90,000, respectively. This increase of $5,644 is attributed to
new headcounts during the period.
Stock-based compensation
The Company accounts for
employee and non-employee compensation in accordance wiht ASC 718-10-30 of the FASB Accounting Standards Codification. See
Note 3 - “Summary of Significant Accounting Policies.” For the three months ended June 30, 2020 and 2019, stock-based compensation was $536,452 and $395,400, respectively.
This increase of $141,052 is due to shares issued to the Company officers and vendors due to the Company’s low cash
positions during the three months ended June 30, 2020 and 2019, respectively.
General and administrative
expenses
Other general and administrative
expenses decreased to $211,116 for the three months ended June 30, 2020 compared to $335,264 for the three months ended June 30,
2019. General and administrative expenses include research and development, building rent, utilities, legal fees, office supplies,
subscriptions, and office equipment. The decrease of $124,148 is attributed cost saving measures to eliminate redundancy such as
a reduction of $38,000 in bank fees due to less wire transfers fees incurred during the three months ended June 30, 2020; also
a decrease of $70,000 in Consulting fees during the three months ended June 30, 2020 as the company utilized internal resources
instead of outside services. These costs were higher during the three months ended June 30, 2019.
Gain/Loss on change in fair
value of derivative liabilities
During 2020 and 2019, we issued
convertible promissory notes and warrants with an embedded derivative, all requiring us to fair value the derivatives each reporting
period, and mark to market as a non-cash adjustment to our current period operations. This resulted in gains of $1,572,964 and
$2,207,299 change in fair value of derivative liabilities for the three months ended June 30, 2020 and 2019, respectively.
Loss on equity investment
During the three months ended June
30, 2020 and 2019, we adjusted the carry value of our investment for our pro rata share of equity investment of $7,048 and $171,284,
respectively.
Gain on settlement of debt
During the three months ended June
30, 2020 and 2019, the company realized a gain on settlement of debt of $0 and $0, respectively.
Interest Expense
Interest expense during the three
months ended June 30, 2020 was $881,945 compared to $1,005,970 for the three months ended June 30, 2019. Interest expense primarily
consists of interest incurred on our convertible and other debt. The debt discounts amortization and non-cash interest incurred
during the three months ended June 30, 2020 and 2019 was $592,338 and $813,112, respectively. In addition, we incurred a non-cash
interest of $0 and $1,442,252 non-cash interest in connection with convertible notes for the three months ended June 30, 2020 and
2019, respectively.
Net Loss
The Company’s net loss for
the three months ended June 30, 2020 and 2019 was $186,819 and $419,624, respectively, a decrease of $232,805. The net loss of
$186,819 for the three months ended June 30, 2020, represents 225.2% of total revenues for the period. The net loss of $419,624
for the three months ended June 30, 2019 represents 201% of the total revenues for the period.
Six
Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019
Revenues/Cost
of sales
Total revenues for the six months ended June
30, 2020 and 2019 were $164,777 and $323,390, respectively, a decrease of $158,613. The decrease in total revenues of hempSMART™ products
was due to the volume of sales, being impacted by COVID-19 pandemic.
During the 2020, the Company released two new
industrial hemp based hempSMART™ products: (i) hempSMART Body lotion, a cream formulated
with organically industrial hemp combining premium CBD oil with unique blend of synergistic herbs and botanicals, and (ii)
hempSMART.™ Drink Mix.
The following table identifies our product
offerings and the revenues related to these products for the six months ended June 30, 2020 and 2019, respectively:
Products
|
|
2020
|
|
2019
|
|
|
Body Lotion
|
|
|
2,452
|
|
|
|
0
|
|
|
New Product during 2020
|
Drink
|
|
|
2,052
|
|
|
|
0
|
|
|
New Product during 2020
|
Brain
|
|
|
19,674
|
|
|
|
38,459
|
|
|
|
Drops
|
|
|
86,132
|
|
|
|
124,675
|
|
|
|
Face Moisturizer
|
|
|
7,309
|
|
|
|
20,625
|
|
|
|
Pain Capsules
|
|
|
3,646
|
|
|
|
33,390
|
|
|
|
Pain Cream
|
|
|
31,906
|
|
|
|
78,255
|
|
|
|
Pet Drops
|
|
|
11,606
|
|
|
|
27,985
|
|
|
|
Totals
|
|
|
164,777
|
|
|
|
323,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and Expenses - Costs of sales, include the costs of product development, manufacturing, testing, packaging, storage, and sale.
For the six months ended June 30, 2020, costs of sales were $73,392 as compared to $69,017 for the six months ended June 30, 2019.
The reported costs of sales for each period reflect the Company’s increased effort and growth in the marketing and selling
its hempSMART™ products.
Gross Profit
For the six months ended June 30, 2020 and
2019, gross profit was $91,385 and $254,373, respectively. This decrease was primarily attributed to new pricing and promotions
associated with the company’s new sales restructuring and strategies, along with the effects of the COVID-19 pandemic during
the six months ended June 30, 2020. As a result, the gross margins were 55.5% and 78.7% for the six months ended June 30, 2020
and 2019, respectively. However, the Company will continue to market its products aggressively as it continues to support its affiliate
sales program in the near future.
Selling and marketing expenses
For the six months ended June 30,
2020 and 2019, selling and marketing expenses was $200,667 and $1,085,762, respectively. This decrease of $885,095 is due primarily
to the effects of the Company’s restructuring of its sales team, new cost reduction measures and, accordingly, new sales
strategies during the six months ended June 30, 2020. The changes to the sales strategy implemented during the quarter included
rebranding of hempSMART’s products.
Payroll and related expenses
For the six months ended June 30,
2020 and 2019, payroll and related expenses was $196,843 and $220,000, respectively. This decrease of $23,157 is attributed to
elimination of redundant positions within the company during the six months ended June 30, 2020 as compared to the six months ended
June 30, 2019.
Stock-based compensation
The Company accounts for
employee and non-employee compensation in accordance wiht ASC 718-10-30 of the FASB Accounting Standards Codification. See
Note 3 - “Summary of Significant Accounting Policies.” For the six months ended June 30, 2020, stock-based
compensation was $542,767 and $549,250 respectively. This variance of $6,483 is reasonable as the Company continues to offer
equity to officers and vendors due to the Company’s low cash positions during the six months ended June 30, 2020 and
2019.
General and administrative
expenses
Other general and administrative
expenses decreased to $415,172 for the six months ended June 30, 2020 compared to $609,744 for the six months ended June 30,
2019. General and administrative expenses include research and development, building rent, utilities, legal fees, office supplies,
subscriptions, and office equipment. The decrease of $124,148 is attributed cost saving measures to eliminate redundancy such as
a reduction of$ $70,000 in bank fees due to less wire transfers fees incurred during the six months ended June 30, 2020; also a
decrease in Consulting fees during the six months ended June 30, 2020 as the company utilized internal resources instead
of outside services. These costs were higher during the six months ended June 30, 2019.
Loss on change in fair value
of derivative liabilities
During 2020 and 2019, we issued
convertible promissory notes and warrants with an embedded derivative, all requiring us to fair value the derivatives each reporting
period, and mark to market as a non-cash adjustment to our current period operations. This resulted in gain of $1,142,272 and a
loss of $480,150 change in fair value of derivative liabilities for the six months ended June 30, 2020 and 2019, respectively.
Loss on equity investment
During the six months ended June
30, 2020 and 2019, we adjusted the carry value of our investment for our pro rata share of equity investment of $133,893 and $230,825,
respectively.
Gain on settlement of debt
During the six months ended June
30, 2020 and 2019, the company realized a gain on settlement of debt of $3,409 and $0, respectively. This was related to the payoff
of a settlement agreement. Made in the ordinary course of its business during the six months ended June 30, 2020.
Interest Expense
Interest expense during the six
months ended June 30, 2020 was $1,772,096 as compared to $1,442,252 for the six months ended June 30, 2019. Interest expense primarily
consists of interest incurred on our convertible and other debt. The debt discounts amortization and non-cash interest incurred
during the six months ended June 30, 2020 and 2019 was $1,028,931 and $1,308,550, respectively. In addition, we incurred a non-cash
interest of $0 and $1,442,252 non-cash interest in connection with convertible notes for the six months ended June 30, 2020 and
2019, respectively.
Net Loss
The Company’s net loss for
the six months ended June 30, 2020 and 2019 was $2,305,121 and $4,652,001, respectively, a decrease of $2,369,487. The net loss
of $2,282,514 for the six months ended June 30, 2020, represents 1,385 % of total revenues for the period. The net loss of $4,652,001
for the six months ended June 30, 2019 represents 1,439% of the total revenues for the period.
Liquidity and Capital
Resources – The Company has generated a net loss from continuing operations for the six months ended June 30, 2020
of $1,267,392 and used $669,005 cash for operations. As of June 30, 2020, the Company had total assets of $1,009,641, which
included inventory of $158,465 and other current assets of $106,418. The other current assets of $106,418 includes directors
and officers liability insurance premiums in the amount of $88,838, a $12,500 non-trade receivable due from a brokerage firm
and advance payments to vendors.
During the six months ended
June 30, 2020 and 2019, the Company has met its capital requirements through a combination of loans and convertible debt
instruments. The Company will need to secure additional external funding in order to continue its operations. Our primary
internal sources of liquidity were provided by 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 June 30, 2020, as compared to $1,675,000 for June 30, 2019. During the six
months ended June 30, 2019, we entered into several separate financing arrangements with St. George Investments, LLC, a Utah
limited liability company, in which we borrowed an aggregate of $1,536,271, the principal of which is convertible into shares
of our common stock (see Note 6, Convertible Note Payable). 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.
Operating Activities - For the six
months ended June 30, 2020, the Company used cash in operating activities of $669,005. For the six months ended June 30, 2019,
the Company used cash in operating activities of $1,430,589. This decrease 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.
Investing Activities - During the
six months ended June 30, 2020, the Company spent cash of $1,271 in investing activities related to its purchase of investment
and equipment. During the six months ended June 30, 2019, we spent $501,361, primarily on equipment purchases and $498,658 in purchase
of investments.
Financing Activities - During the
six months ended June 30, 2020, the Company, primarily through its receipt of funds from the issuance of notes payable resulted
in financing activity of $442,000 and a government loan due to COVID-19 of $35,500. For the six months ended June 30, 2019 the
Company received proceeds of $1,675,000 from the issuance of notes payable.
The Company’s 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 its needs for cash. The Company's primary source of operating funds in 2020 and 2019 have been from revenue generated from
proceeds from the sale of common stock and the issuance of convertible and other debt. The Company has experienced net losses from
operations since inception, but expects these conditions to improve in the second half of 2020 and beyond as it develops its affiliate
marketing program and other direct sales and marketing programs. The Company has stockholders' deficiencies at June 30, 2020 and
requires additional financing to fund future operations. As of the date of this filing, and due to the early stages of operations,
the Company has 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. 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
As of June 30, 2020, and December
31, 2019, 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, changes in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.
Government Regulations of Cannabis
Recent Government Decriminalization
and Legalization of Hemp
On December 20, 2018, President
Donald J. Trump signed into law the Agriculture Improvement Act of 2018, otherwise known as the “Farm Bill.” Prior
to its passage, hemp, a member of the cannabis family, and hemp derived CBD, were classified as Schedule 1 controlled substances,
and so illegal under the Controlled Substances Act, 21 U.S.C. § 811 (hereafter referred to as the “CSA”).
With the passage of the Farm Bill,
hemp cultivation is now broadly permitted. The Farm Bill explicitly allows the transfer of hemp-derived products across state lines
for commercial or other purposes. It also puts no restrictions on the sale, transport, or possession of hemp-derived products,
so long as those items are produced in a manner consistent with the law.
Under Section 10113 of the Farm
Bill, hemp cannot contain more than 0.3 percent THC, the chemical compound found in cannabis that produces the psychoactive “high”
associated with cannabis. Any cannabis plant that contains more than 0.3 percent THC would be considered non-hemp cannabis—or
marijuana—illegal under the CSA.
Additionally, there will be significant,
shared state-federal regulatory power over hemp cultivation and production. Under Section 10113 of the Farm Bill, state departments
of agriculture must consult with the state’s governor and chief law enforcement officer to devise a plan that must be submitted
to the Secretary of the United States Department of Agriculture (hereafter referred to as the “USDA”). A state’s
plan to license and regulate hemp can only commence once the Secretary of USDA approves that state’s plan. In states opting
not to devise a hemp regulatory program, USDA will construct a regulatory program under which hemp cultivators in those states
must apply for licenses and comply with a federally-run program. This system of shared regulatory programming is similar to options
states had in other policy areas such as health insurance marketplaces under Affordable Care Act, or workplace safety plans under
Occupational Health and Safety Act—both of which had federally-run systems for states opting not to set up their own systems.
The Farm Bill outlines actions that
are considered violations of federal hemp law (including such activities as cultivating without a license or producing cannabis
with more than 0.3 percent THC). The Farm Bill details possible punishments for such violations, pathways for violators to become
compliant, and even which activities qualify as felonies under the law, such as repeated offenses.
One of the goals of the previous
2014 Farm Bill was to generate and protect research into hemp. The 2018 Farm Bill continues this effort. Section 7605 re-extends
the protections for hemp research and the conditions under which such research can and should be conducted. Further, section 7501
of the Farm Bill extends hemp research by including hemp under the Critical Agricultural Materials Act. This provision recognizes
the importance, diversity, and opportunity of the plant and the products that can be derived from it, but also recognizes that
there is a still a lot to learn about hemp and its products from commercial and market perspectives.
We currently operate two divisions
within the regulated hemp industry: (i) the development, manufacturing, marketing and sale of our hempSMART™ consumer products
that include non-psychoactive industrial hemp-based CBD as an ingredient; and, (ii) professional financial consulting and property
management services.
The United States Food &
Drug Administration (“FDA”) is generally responsible for protecting the public health by ensuring the safety,
efficacy, and security of (1) prescription and over the counter drugs; (2) biologics including vaccines, blood & blood
products, and cellular and gene therapies; (3) foodstuffs including dietary supplements, bottled water, and baby formula;
and, (4) medical devices including heart pacemakers, surgical implants, prosthetics, and dental devices.
Regarding its regulation of drugs,
the FDA process requires a review that begins with the filing of an “Investigational New Drug” (IND) application, with
follow on clinical studies and clinical trials that the FDA uses to determine whether a drug is safe and effective, and therefore
subject to approval for human use by the FDA.
Aside from the FDA’s mandate
to regulate drugs, the FDA also regulates dietary supplement products and dietary ingredients under the Dietary Supplement Health
and Education Act of 1994. This law prohibits manufacturers and distributors of dietary supplements and dietary ingredients from
marketing products that are adulterated or misbranded. This means that these firms are responsible for evaluating the safety and
labeling of their products before marketing to ensure that they meet all the requirements of the law and FDA regulations, including,
but not limited to the following labeling requirements: (1) identifying the supplement; (2) nutrition labeling; (3) ingredient
labeling; (4) claims; and, (5) daily use information.
The FDA has not approved cannabis,
hemp or CBD derived from industrial hemp as a safe and effective drug for any indication. As of the date of this filing, we have
not, and do not intend to file an IND with the FDA, concerning any of our consumer products that contain CBD derived from industrial
hemp.
The FDA has concluded that products
containing industrial hemp derived CBD are excluded from the dietary supplement definition under sections 201(ff)(3)(B)(i) and
(ii) of the U.S. Food, Drug & Cosmetic Act, respectively. The FDA’s position is that products containing industrial hemp
derived CBD are Schedule 1 drugs under the Controlled Substances Act, and so are illegal drugs that are under the purview of the
U.S. Drug Enforcement Agency and U.S. Justice Dept., who are charged with enforcing the Controlled Substances Act. However, at
some indeterminate future time, the FDA may choose to change its position concerning cannabis generally, and specifically products
containing industrial hemp derived CBD, and may choose to enact regulations that are applicable to such products as either drugs
or supplements. In this event, our industrial hemp-based products containing CBD may be subject to regulation (See Risk Factors,
Item IA).
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 Consolidated Financial Statements describes the significant accounting policies and
methods used in the preparation of the Consolidated Financial Statements. Estimates are used for, but not limited to, 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 Consolidated Financial Statements.
Stock-Based Compensation
- The Company accounts for
employee and non-employee compensation in accordance wiht ASC 718-10-30 of the FASB Accounting Standards Codification. See
Note 3 - “Summary of Significant Accounting Policies.”
Recent Accounting Pronouncements
- See Note 3 of the condensed consolidated financial statements for discussion of recent accounting pronouncements.
ITEM 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Not applicable to Smaller Reporting
Companies.
ITEM 4.
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CONTROLS AND PROCEDURES
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Disclosure Controls and Procedures
Management is responsible for establishing
and maintaining adequate disclosure controls and procedures that are designed to ensure that information required to be disclosed
by the Company in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in
the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate, to allow for timely and reliable financial reporting and the
preparation of financial statements in accordance with accounting principles generally accepted in the United States of America.
As of the quarter ended June 30,
2020, our principal executive officer and principal financial officer completed an assessment of the effectiveness of our disclosure
controls and procedures, to determine the existence of any material weaknesses or significant deficiencies. A material weakness
is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or
detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over
financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible
for oversight of the registrant's financial reporting.
Based on this evaluation, the Company's
management concluded its internal controls over financial reporting were not effective as of June 30, 2020. The ineffectiveness
of the Company's internal control over financial reporting was due to the following identified material weaknesses and significant
deficiencies:
Material Weakness
(1) We lack organizational controls
designed to allow us to gather and provide our auditor timely documentation concerning our financial records. This material weakness
causes us to not be able to provide reasonable assurances that transactions are recorded as necessary to permit preparation of
financial statements in accordance with US GAAP, and effectively close our books in a timely fashion and report to the Commission
consistent with its rules and forms.
Significant Deficiency
(a) We do not have an Audit Committee
– While not being legally obligated to have an Audit Committee, it is management’s view that such a committee, including
a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently
the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent
of management to provide the necessary oversight over management’s activities.
(b) We do not have procedures in
place to update our disclosures to include relevant accounting standards updates.
Changes in Internal Control over
Financial Reporting.
In order to address the material
weakness and significant deficiency noted above, we made the following respective changes to our internal control over financial
reporting, numbered to correspond with the foregoing discussion:
(1)(a) On May 28, 2019, we formed
an internal audit sub-committee to obtain timely information on a weekly basis on the status of our operations, respective budgets,
expenses and variances on balances. We additionally retained accounting personnel to help us in this effort. Although we believe
our continued implementation of this framework will provide an effective preventative control that will allow us to provide our
auditor timely information about our business so that we can close our books in a timely fashion and file our reports to the Commission
consistent with its rules and forms, our evaluation of its effectiveness is not complete and will require further review, assessment
and disclosure. Therefore, this material weakness is not resolved.
(b) We also included as part of
our closing process a checklist to review and update accounting standard updates to be reviewed and approved by our Chief Financial
Officer and auditor for inclusion in our Commission filings. We expect that this remedy will insure that
our disclosures going forward will include the appropriate accounting standards updates and will remedy the significant deficiency.
Therefore, we believe this significant deficiency to be remediated.
Our management will continue to
monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting
on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary.