Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No
☒
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act. Yes ☐ No
☒
Indicate by check mark whether the registrant
(1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant was $34,919,384 as of June 30, 2018, based upon the closing price on the OTC
Markets, Inc. reported for such date.
The number of the registrant’s shares of common stock
of the registrant was 27,953,848 as of April 29, 2019.
This Amendment
No. 1 on Form 10-K/A (this “Form 10-K/A”) to the Annual Report on Form 10-K of Medicine Man Technologies, Inc. (the
“Company,” “Medicine Man,” “we,” “us” or “our”) for the year ended
December 31, 2018, filed with the Securities and Exchange Commission on April 16, 2019 (the “Original 10-K”), is being
filed for the purposes of including the information required by Part III (Items 10-14) of Form 10-K. At that time the Company filed
the Original 10-K, it intended to file a definitive proxy statement for its 2019 Annual Meeting of Stockholders within 120 days
after the end of its fiscal year pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended.
Because the Company will not file the definitive proxy statement within such 120-day period, the omitted information is filed herewith
and provided below as required.
As a result,
Part III, Items 10-14 of the Company's Original 10-K are hereby amended and restated in their entirety.
Except as
described above, this Form 10-K/A does not modify or update disclosure in, or exhibits to, the Original 10-K, and such disclosure
in, or exhibits to, the Original 10-K remain unchanged and speak as of the date of the filing of the Original 10-K. In
particular, this Form 10-K/A does not change any previously reported financial results, nor does it reflect events occurring after
the date of the Original 10-K.
PART III
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
DIRECTORS & EXECUTIVE OFFICERS
Set forth below are the Company’s
Directors and Executive Officers, together with an overview of their professional experience and expertise.
Name
|
|
Age
|
|
Position(s) Held
|
|
Andrew Williams (3)
|
|
51
|
|
Chief Executive Officer and Director (director since 2014)
|
|
Paul Dickman (1)(2)
|
|
39
|
|
Interim Chief Financial Officer, Chairman and Secretary (director
since 2016)
|
|
Joseph P. Puglise
|
|
48
|
|
Chief Operating Officer and Director (director since 2019)
|
|
Joshua Haupt
|
|
33
|
|
Chief Revenue Officer
|
|
Charles Haupt (1)(2)(3)
|
|
56
|
|
Director (director since 2017)
|
|
(1)
|
Currently a member of the Audit and Finance Committee.
|
(2)
|
Currently a member of the Nominating and Corporate Governance Committee.
|
(3)
|
Currently a member of the Compensation Committee.
|
Andrew Williams
is a Co-founder and Chief Executive
Officer of the Company. From 2014 to 2018, Mr. Williams was the Company’s Chairman. Since 2016, Mr. Williams, has also been
a founding partner of MedPharm, a phytopharmaceutical company. He currently serves as a board member of the Cannabis Trade Federation,
Colorado Leads, American Trade Association for cannabis and Hemp and Flatiron Venture Partners, LLC. Mr. Williams was previously
a project portfolio manager with Jeppesen, a software company offering navigational and flight planning products, as well as a
director with Electronic Warfare Associates (EWA). Mr. Williams is currently the co-founder and director of the Medicine Man Family
Foundation, a community-focused nonprofit investing in impact-driven projects rooted in the communities in which the Medicine Man
brand operates .Mr. Williams received his Bachelor of Science in industrial engineering from Colorado State University-Pueblo.
The Board of Directors has concluded that Mr. Williams is qualified
to serve in his capacity due to his significant industry and leadership experience.
Paul Dickman
was named the Chairman of the Company
in December 2018 and interim Chief Financial Officer of the Company in April 2019. Mr. Dickman was previously appointed as a Director
and Corporate Secretary of the Company in December 2018. He was CFO of the Company until June 2017. Mr. Dickman has also been a
board advisor to GrowFlow Corp, a seed-to-sale cannabis company in Washington State, since 2017, and a manager of Breakwater MB,
LLC, a boutique merchant bank dedicated to investing in companies in emerging industries, since 2017. Since 2009, Mr. Dickman has
been a principal with Breakwater Corporate Finance, a consulting firm which provides outsourced CFO and Board governance services.
Mr. Dickman received his Bachelor of Sciences in financial management and accounting from Bob Jones University and is a licensed
C.P.A.
Mr. Dickman is qualified to serve as the Chairman of the company
due to his significant board and leadership experience in both the cannabis and financial services industries.
Joseph P Puglise
, was
appointed as a director of our Company in February 2019. He had previously been appointed as the Chief Operating Officer in
December 2018. In addition to his positions with the Company, from April 2015 through November 2018, Mr. Puglise was the CEO
and a member of the Board of Directors of Brite Media/Beekman Group, New York, NY, a company engaged in media services. He
remains a director of this company as of the date of this report. Previously, from August 1993 through April 2015, he held a
variety of positions, rising to be President of iHeartmedia, New York, a company engaged in media services, where he oversaw
approximately 300 employees and nearly $200 million in annual revenue and $100 million in annual EBITDA. Mr. Puglise received
a Bachelor of Science degree from the Wharton School, University of Pennsylvania, in 1992.
Mr. Paglise is qualified to serve on the
Company’s board of directors due to his significant management experience in innovative technology organizations as well
as his board experience with private and charitable organizations.
Joshua Haupt
was appointed
the Chief Revenue Officer of the Company in 2018. Since 2015, Mr. Haupt has been the co-owner of Superfarm,
a commercial grow facility in Denver producing over 15,000 pounds of Cannabis annually. Mr. Haupt founded Success Nutrients, a
nutrient line designed for cannabis cultivation and growing; he was with Success Nutrients from 2014 to 2017. Mr. Haupt is also
the author of Three A Light, a how-to book on cannabis cultivation.
Charles Haupt
was appointed
a Director of the Company in June 2017. Mr. Haupt has been the President of New Energy Technology since 2003, formed to create
a solution that empowers clients with actionable energy information and is used widely across all different market segments both
public and private in North America. Mr. Haupt founded Utility Cost Management in 1993 (“UM”). He sold UM to Illinova
in 1996 and founded Save More Resources (“SMR”) at that time; Mr. Haupt was with SMR until founding New Energy Technology
in 2003. Mr. Haupt holds a Bachelor of Science in Business with an emphasis in Marketing from Arizona State University, Phoenix,
AZ.
Mr. Haupt is qualified to serve as a Director
of the Company due to his significant prior leadership experience, including as a serial entrepreneur and founder.
Family Relationship
Joshua Haupt is the son of Charles Haupt. There are no other
family relationship between any director or executive officer.
Involvement in Certain Legal Proceedings
None of our directors or
executive officers has been involved in any legal proceeding in the past 10 years that would require disclosure under Item 401(f)
of Regulation S-K.
Code of Business Conduct and Ethics
Our Code of Business Conduct and Ethics
applies to all of our officers, employees and directors, including our Chief Executive Officer and Chief Financial Officer. We
have always conducted our business in accordance with the highest standards of conduct. Full compliance with the letter and spirit
of the laws applicable to our businesses is fundamental to us. Equally important are equitable conduct and fairness in our business
operations and in our dealings with others. Our Code of Business Conduct and Ethics reflects the foregoing principles. The Company
will provide a copy of our Code of Business Conduct and Ethics to any person without charge upon request to: Medicine man Technologies,
Inc., 4880 Havana Street, Suite 201, Denver Colorado, 80239 Attention: Corporate Secretary
We intend to satisfy the disclosure requirement
under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of the Code of Business Conduct and Ethics
applicable to our Chief Executive Officer and Chief Financial Officer by posting such information on our website at
www.medicinemantechnologies.com
in
the near future
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires
our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of
ownership and changes in ownership with the SEC. These persons are required by regulation to furnish us with copies of all Section
16(a) reports that they file. Based solely upon a review of the copies of these reports received by us, or written representations
from the reporting persons that no other reports were required, we believe that, during our fiscal year ended December 31, 2018,
there were six (6) untimely filings of a Form 3, 4 and/or 5 by the Company’s Section 16(a) filers: Paul Dickman (one Form
4; one transaction); Andrew Williams (three Form 4s; twenty seven transactions) and Jonathan Sandberg (one Form 4; four transactions)
and one for a prior Section 16 filer.
CORPORATE GOVERNANCE
Committees
of the Board
The Board has established various Committees
of the Board to assist it with the performance of its responsibilities. These Committees and their members are listed below. The
Board designates the members of these Committees and the Committee Chairs annually at its organizational meeting following the
Annual Meeting of Stockholders, based on the recommendation of the Nominating and Corporate Governance Committee. The Board has
adopted written charters for each of these Committees which can be found at the investor relations section of the Company’s
website at
www.medicinemantechnologies.com
. Copies are also available in
print to any stockholder upon written request to Medicine Man Technologies, Inc., 4880 Havana Street, Suite 201, Denver, Colorado
80239, Attention: Corporate Secretary. The Chair of each Committee develops the agenda for that Committee and determines the frequency
and length of Committee meetings.
Audit Committee
Our Board has established an Audit Committee,
which is composed of Mr. Dickman and Mr. Haupt. The Board has determined that Mr. Dickman is an audit committee financial expert.
The Committee’s primary duties are to:
|
·
|
review and discuss with management and
our independent auditor our annual and quarterly financial statements and related disclosures, including disclosure under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” and the results of the independent auditor’s
audit or review, as the case may be;
|
|
·
|
review our financial reporting processes
and internal control over financial reporting systems and the performance, generally, of our internal audit function;
|
|
·
|
oversee the audit and other services of
our independent registered public accounting firm and be directly responsible for the appointment, independence, qualifications,
compensation and oversight of the independent registered public accounting firm, which reports directly to the Audit Committee;
|
|
·
|
provide an open means of communication
among our independent registered public accounting firm, management, our internal auditing function and our Board;
|
|
·
|
review any disagreements between our management
and the independent registered public accounting firm regarding our financial reporting;
|
|
·
|
prepare the Audit Committee report for
inclusion in our proxy statement for our annual stockholder meetings; and
|
|
·
|
establish procedures for complaints received
regarding our accounting, internal accounting control and auditing matters.
|
Our Audit Committee charter also mandates
that our Audit Committee approve all audit and permissible non-audit services conducted by our independent registered public accounting
firm. The Audit Committee was established in 2016.
Nominating and Corporate Governance
Committee
Our Board has also established a Governance
Committee. The Nominating Corporate Governance Committee consists of Mr. Dickman and Mr. Williams. The Committee’s primary
duties are to:
|
·
|
recruit new directors, consider director
nominees recommended by stockholders and others and recommend nominees for election as directors;
|
|
·
|
review the size and composition of our
Board and its Committees;
|
|
·
|
oversee the evaluation of the Board;
|
|
·
|
recommend actions to increase the Board’s
effectiveness; and
|
|
·
|
develop, recommend and oversee our corporate
governance principles, including our Code of Business Conduct and Ethics and our Nominating and Corporate Governance Guidelines.
|
The Nominating and Corporate Governance
Committee was established in 2016.
Compensation Committee
Our Board has established a Compensation
Committee. Mr. Dickman and Mr. Haupt serve on this committee. The Committee’s primary duties are to:
|
·
|
approve corporate goals and objectives
relevant to executive officer compensation and evaluate executive officer performance in light of those goals and objectives;
|
|
·
|
determine and approve executive officer
compensation, including base salary and incentive awards;
|
|
·
|
make recommendations to the Board regarding
compensation plans;
|
|
·
|
administer our stock plan; and
|
|
·
|
prepare a report on executive compensation
for inclusion in our proxy statement for our annual stockholder meetings.
|
Our Compensation Committee determines and
approves all elements of executive officer compensation. It also provides recommendations to the full Board of Directors with respect
to non-employee director compensation. The Compensation Committee may not delegate its authority to any other person, although
it may delegate its authority to a subcommittee.
The Compensation Committee was established
in 2016.
ITEM 11.
|
EXECUTIVE COMPENSATION
|
SUMMARY COMPENSATION TABLE
Name and principal
position
|
|
Year
|
|
|
Salary ($)(1)
|
|
|
Bonus ($)
|
|
|
Bonus
Stock Awards (in $)
|
|
|
Bonus
Stock Awards (in Shares)
|
|
|
Option
Awards ($)(2)
|
|
|
Option
Awards (in options)
|
|
|
All
Other Compensation ($)
|
|
|
Total ($)
|
|
Jonathan Sandberg,
|
|
|
2018
|
|
|
$
|
124,000
|
|
|
$
|
–
|
|
|
$
|
80,400
|
|
|
|
60,000
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
$
|
204,400
|
|
CFO
|
|
|
2017
|
|
|
$
|
61,962
|
|
|
$
|
–
|
|
|
$
|
40,000
|
|
|
|
25,000
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
$
|
101,962
|
|
Brett Roper,
|
|
|
2018
|
|
|
$
|
156,000
|
|
|
$
|
75,000
|
|
|
$
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
265,000
|
|
|
$
|
496,000
|
|
previous CEO
|
1
|
|
2017
|
|
|
$
|
156,000
|
|
|
$
|
14,875
|
|
|
$
|
800,000
|
|
|
|
500,000
|
|
|
|
–
|
|
|
|
1,000,000
|
|
|
$
|
89,495
|
|
|
$
|
1,045,495
|
|
Andy Williams,
|
|
|
2018
|
|
|
$
|
25,000
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
$
|
25,000
|
|
CEO
|
2
|
|
2017
|
|
|
$
|
–
|
|
|
$
|
31,962
|
|
|
$
|
600,000
|
|
|
|
375,000
|
|
|
|
–
|
|
|
|
750,000
|
|
|
$
|
–
|
|
|
$
|
631,962
|
|
Josh Haupt,
|
|
|
2018
|
|
|
$
|
156,000
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
72,230
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
12,000
|
|
|
$
|
168,000
|
|
CRO
|
3
|
|
2017
|
|
|
$
|
120,000
|
|
|
$
|
–
|
|
|
$
|
40,000
|
|
|
|
25,000
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
$
|
120,000
|
|
Joe Puglise,
|
|
|
2018
|
|
|
$
|
25,000
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
250,000
|
|
|
$
|
–
|
|
|
$
|
25,000
|
|
COO
|
4
|
|
2017
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Paul Dickman,
|
|
|
2018
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
previous CFO
|
5
|
|
2017
|
|
|
$
|
30,000
|
|
|
$
|
–
|
|
|
$
|
200,000
|
|
|
|
125,000
|
|
|
|
–
|
|
|
|
250,000
|
|
|
$
|
–
|
|
|
$
|
230,000
|
|
1.
|
Mr. Roper passed away in December
2018. Salary reflected is annual.
|
2.
|
Mr.
Williams served as Interim CEO beginning December 1, 2018. Salary reflected is 1 month of annual salary.
|
3.
|
Joshua
Haupt also receives automobile reimbursement up to $1,000 p/month.
|
4.
|
Reflects
compensation commencing on December 1, 2018.
|
5.
|
Mr.
Dickman resigned as CFO of the Company June 3, 2017.
|
OUTSTANDING EQUITY AWARDS AT FISCAL-YEAR
END
The following table discloses information
regarding outstanding equity awards granted or accrued as of December 31, 2018 for each of our named executive officers.
Outstanding Equity Awards
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or Units
of Stock that
have not
Vested (#)
|
|
|
Market Value of
Shares or Units
of Stock that
have not
Vested ($)
|
|
Joe Puglise
|
|
250,000
|
|
|
-
|
|
|
|
1.49
|
|
|
12/3/2021
|
|
|
-
|
|
|
-
|
|
Director Compensation
Independent Directors having
Chairpersonship duties of the committees of our Board of Directors are paid an annual salary of $30,000 and may also
receive reimbursement for expenses incurred as the result of their service on the Board of Directors. They may also be
considered for additional compensation by the Compensation Committee, should such consideration be determined advisable.
All other Directors shall receive an annual
salary of $24,000 and may also receive reimbursement for expenses incurred as the result of their service on the Board of Directors.
They may also be considered for additional compensation by the Compensation Committee, should such consideration be determined
advisable.
Directors that are also employees of the
Company also receive compensation as determined by the Board and Compensation Committee.
The Board provides compensation to its
Chairperson at an annual rate of $36,000.
The following table represents compensation paid in 2018 to our non-executive directors.
Name
|
|
Fees
Earned
or Paid
in Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Non-Qualified
Deferred
Compensation
Earnings ($)
|
|
|
All Other
Compensation
($)
|
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Dickman
|
|
$
|
32,500
|
|
|
$
|
71,000
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
7,500
|
|
|
$
|
111,000
|
|
Jim Toreson
|
|
$
|
30,000
|
|
|
$
|
71,000
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
5,000
|
|
|
$
|
106,000
|
|
Charly Haupt
|
|
$
|
30,000
|
|
|
$
|
71,000
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
5,000
|
|
|
$
|
106,000
|
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
The following table sets forth, based
on 27,953,848 shares of our Common Stock outstanding as of April 29, 2019, certain information as to the stock ownership of each
person known by us to own beneficially five percent or more of our outstanding Common Stock, of each of the named executive officers
and directors, and of all the named executive officers and directors as a group. In computing the outstanding shares of Common
Stock, we have excluded all shares of Common Stock subject to options, warrants or other securities that are not currently exercisable
or exercisable within 60 days and are therefore not deemed to be outstanding and beneficially owned by the person holding the options,
warrants or other securities for the purpose of computing the number of shares beneficially owned and the percentage ownership
of that person. Unless otherwise indicated, the address of each of the following beneficial owner is c/o Medicine Man Technologies,
Inc., 4880 Havana Street, Suite 201, Denver, CO 80239
Name and Address of Beneficial Holder
|
|
Number of Shares of
Beneficially Owned(A)
|
|
|
Percent of
Outstanding
Class
|
|
Officers & Directors
|
|
|
|
|
|
|
|
|
Joshua Haupt
|
|
|
3,620,556
|
|
|
|
13%
|
|
Andrew Williams )(1)
|
|
|
2,074,506
|
|
|
|
7.4%
|
|
Charles Haupt
|
|
|
25,000
|
|
|
|
*
|
|
Paul Dickman
|
|
|
314,800
|
|
|
|
1.1%
|
|
Joseph P. Puglise (2)
|
|
|
250,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
All Officers and Directors as a Group
(5 Persons)
|
|
|
5,734,862
|
|
|
|
20.5%
|
|
*
less than 1%
(1)
|
|
Includes 1,555,307 shares held in the name of the Andrew Johns Williams Revocable Trust.
|
(2)
|
|
Includes shares underlying options to purchase 250,000 shares, which are currently vested.
|
EQUITY COMPENSATION PLAN INFORMATION
Securities Authorized for Issuance
under Equity Compensation Plans
Plan Category
|
|
Number of
securities to
be issued
upon
exercise of
outstanding
options,
warrants
and rights
|
|
|
Weighted-
average
exercise
prices of
outstanding
options,
warrants
and rights
|
|
|
Number of
securities
remaining
available for
future
issuance
under the
equity
compensation
plans
(excluding
securities
reflected in
column (a))
|
|
|
|
|
(a)
|
|
|
|
(b)
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
2,125,000
|
|
|
$
|
n/a
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders
|
|
|
–
|
|
|
|
n/a
|
|
|
|
–
|
|
Total
|
|
|
2,125,000
|
|
|
|
|
|
|
|
100,000
|
|
The Medicine Man Technologies, Inc. 2017
Equity Incentive Plan (the “Plan”) is intended to promote the best interests of the Company and its stockholders by
assisting the Company in the recruitment and retention of persons with ability and initiative and providing an incentive to such
persons to contribute to the growth of the Company’s business. The Company reserved an aggregate of 3,500,000 shares of the
Company’s common stock underlying awards available under the plan such awards being common
stock awards, restricted stock awards, appreciation rights, deferred shares, performance shares, incentive stock options, nonqualified
stock options, or restricted stock awards, as applicable. Eligible persons under the Plan include
employees, directors and consultants of the Company or any affiliate of the Company. Unless earlier terminated, the Plan will terminate
ten (10) years after the earlier of (i) the date the Plan was adopted by the Board of the Company or (ii) the date the Plan is
approved by the stockholders of the Company.
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|
Related Party Transactions
As of December 31, 2018, we had eight related
parties, Future Vision dba Medicine Man Denver, Josh Haupt, Andy Williams, Future Vision, Med Pharm Holdings, De Best Inc. and
Super Farm LLC. One of our officers, Joshua Haupt, currently owns 20% of both De Best and Super Farm. Additionally, one of our
Directors, Andrew Williams, currently owns 38% of Future Vision. He also owns 10% of Med Pharm Holdings.
During the twelve months ended December
31, 2018, we had sales from Super Farm LLC totaling $207,827 and $72,585 sales from De Best Inc. We give a larger discount on nutrient
sales to related parties than non-related parties. As of December 31, 2018, we had accounts receivable balance with Super Farm
LLC totaling $7,519 and $6,404 accounts receivable from De Best Inc. During the twelve months ended December 31, 2018, we had cost
of sales associated with Super Farm LLC totaling $104,259 and $37,830 from De Best Inc.
During the twelve months ended December
31, 2018, we had sales from Future Vision totaling $242,720 and cost of sales totaling $121,360. As of December 31, 2018, we had
an accounts payable balance owed to Joshua Haupt totaling $7,013 and an additional $4,080 owed to Future Vision. As of December
31, 2018, we had an accounts payable balance arising out of a note we had previously issued in favor of a third party, who on [INSER
DATE] assigned this note in favor of Andy Williams and which totaled $100,000.. As of December 31, 2018, we had an accounts receivable
balance owed from Future Vision totaling $4,836 and $6,960 owed from Future Vision. During the twelve months ended December 31,
2018, we had sales from Med Pharm Holdings totaling $4,495 and cost of sales totaling $1,498. During the twelve months ended December
31, 2018, we had sales from Future Vision totaling $11,738.
Procedures for Approval of Related
Party Transactions
Related party transactions are subject
to the advance review and approval of the Audit Committee and/or the full Board of Directors, with advice from outside counsel.
In its review, the Audit Committee and/or Board is provided with full disclosure of the parties involved in the transaction and
considers the relationships amongst the parties and members of our Board of Directors and executive officers.
Independence Standards for Directors
There are no arrangements between our directors
and any other person pursuant to which our directors were nominated or elected for their positions.
We currently do not have any independent
directors serving on our Board of Directors, as determined in accordance with Rule 4200(a)(15) of the Marketplace Rules of the
Nasdaq Stock Market, Inc.
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES.
|
The following table sets forth the aggregate
fees billed by BF Borgers, CPA P.C. (“BFB”), our independent registered accounting firm for the fiscal years ended
December 31, 2018 and December 31, 2017. These fees are categorized as audit fees, audit-related fees, tax fees, and all other
fees. The nature of the services provided in each category is described in the table below.
|
|
2018
|
|
|
2017
|
|
Audit fees
|
|
$
|
85,000
|
|
|
$
|
107,660
|
|
Audit-related fees
|
|
|
–
|
|
|
|
–
|
|
Tax fees
|
|
|
2,5000
|
|
|
|
1,296
|
|
All other fees
|
|
|
–
|
|
|
$
|
–
|
|
Total Fees
|
|
$
|
87,500
|
|
|
$
|
108,956
|
|
Audit fees. Consist of fees billed for
professional services rendered for the audit of the consolidated financial statements and review of the quarterly interim consolidated
financial statements. These fees also include the review of registration statements and the delivery of consents in connection
with registration statements.
Tax fees. Consists of fees paid to BFB
related to the filings of Federal and State returns during the years ended December 31, 2018 and 2017.
All other fees. Consists of fees related
to letters to underwriters in connection with certain registration statements for the years ended December 31, 2018 and 2017.
The Audit Committee of our Board of Directors
has established its pre-approval policies and procedures, pursuant to which the Audit Committee approved the foregoing audit and
audit-related services provided by BFB in 2018 and 2017 consistent with the Audit Committee’s responsibility for engaging
our independent auditors. The Audit Committee also considered whether the non-audit services rendered by our independent registered
public accounting firm are compatible with an auditor maintaining independence. The Audit Committee has determined that the rendering
of such services is compatible with BFB maintaining its independence.