UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the fiscal year ended September 30, 2020
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
000-56090
Commission File Number
PHARMAGREEN
BIOTECH INC.
(Exact
name of registrant as specified in its charter)
Nevada 98-0491567
(State
or other jurisdiction of incorporation or
organization) (I.R.S. Employer Identification No.)
2987 Blackbear Court, Coquitlam, British
Columbia V3E
3A2
(Address
of principal executive offices)(Zip Code)
702-803-9404
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
Common
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [X]
No
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes
[X] No
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities 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.
(X)Yes
(_) No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted 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
(X) 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. [ ] Yes [ ] No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act:
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Large
accelerated filer
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¨
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Non-accelerated filer
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¨
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Accelerated filer
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¨
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Smaller reporting company
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x
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Emerging Growth
|
x
|
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 (X)
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
(
) Yes (X) No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
(
) Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date. As of
December 31, 2020, we had 245,611,669 shares of common stock issued
and outstanding.
TABLE of CONTENTS
Item 1. Business.2
Item 1A. Risk Factors.3
Item 1B. Unresolved Staff Comments.3
Item 2. Properties.3
Item 3. Legal Proceedings.3
Item 4. Mine Safety Disclosures.4
Item 5. Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity
Securities.4
Item 6. Selected Financial Data4
Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations.5
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.7
Item 8. Financial Statements and Supplementary
Data.8
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.29
Item 9A. Controls and Procedures.29
Item 9B. Other Information.30
Item 10. Directors, Executive Officers and Corporate
Governance.31
Item 11. Executive Compensation.34
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.36
Item 13. Certain Relationships and Related Transactions, and
Director Independence.37
Item 14. Principal Accounting Fees and
Services.38
Item 15. Exhibits, Financial Statement
Schedules.38
SIGNATURES39
1
PART I
Item 1. Business.
Pharmagreen
Biotech Inc. (the “Company”) was incorporated under the laws of the
State of Nevada on November 26, 2007. The Company is headquartered
in Coquitlam, British Columbia. The Company’s mission is to
advance the technology of tissue culture science and to provide the
highest quality 100% germ free, disease free and all genetically
the same plantlets of high CBD hemp and other flora and offering
full spectrum DNA testing for plant identification, live genetics
preservation using low temperature storage for various
cannabis and horticulture plants; extraction of botanical oils
mainly CBD oil, and to deliver laboratory based services to the
North American high CBD hemp, Cannabis and agriculture sectors.
Management
cannot provide assurance that the Company will ultimately achieve
profitable operations or become cash flow positive, or raise
additional debt and/or equity capital. However, if the Company is
unable to raise additional capital in the near future, due to the
Company’s liquidity problems, management expects that the Company
will need to curtail operations, liquidate assets, seek additional
capital on less favourable terms and/or pursue other remedial
measures. These consolidated financial statements do not include
any adjustments related to the recoverability and classification of
assets or the amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going
concern.
Its immediate
focus will be on producing tissue cultured high CBD hemp starter
plantlets. The Company has applied to Health Canada for a
license to produce and sell tissue culture plantlets and cannabis
oil. On February 7, 2019, The Company’s, wholly owned
Canadian subsidiary, WFS Pharmagreen Inc., received notification
from Health Canada that its cannabis licensing application under
the Cannabis Act and the Cannabis Regulations to obtain a license
at the proposed site in Deroche, British Columbia, Canada has
advanced from the first stage, “Intake and Screening” to the second
stage, “Detailed Review and Initiation of Security Clearance
Process,” of a three stage approval process. On May 10, 2019, the
Company received confirmation from Health Canada that the second
stage review was completed and that the Company can proceed to the
third and final stage, construction of the biotech complex for
final inspection and licensing.
Detailed Review
and Initiation of Security Clearance Process means applications are
reviewed against the licensing and personnel security requirements
of the regulations.
The third stage
is Confirmation of Readiness: Confirmation is provided to the
applicant that the application substantively meets the requirements
and asks for confirmation that the site is ready for licensing or
inspection. This stage will be dependent on the timing of
completing the development of its site.in Deroche, British Columbia
Canada. The Company does not anticipate any additional costs
related to this stage.
The Company is
currently completing its engineering stage and has begun site
development work for the building process of a 63,000 square foot
biotech complex.
The
recent outbreak of the novel coronavirus COVID-19, which was
declared a pandemic by the World Health Organization on March 11,
2020, has led to adverse impacts on the U.S. and global economies,
disruptions of financial markets, and created uncertainty regarding
potential impacts to the Company’s supply chain, operations, and
customer demand. The COVID-19 pandemic has impacted and could
further impact the Company’s operations and the operations of the
Company’s suppliers and vendors as a result of quarantines,
facility closures, and travel and logistics restrictions. The
extent to which the COVID-19 pandemic impacts the Company’s
business, results of operations and financial condition will depend
on future developments, which are highly uncertain and cannot be
predicted, including, but not limited to the duration, spread,
severity, and impact of the COVID-19 pandemic, the effects of the
COVID-19 pandemic on the Company’s customers, suppliers, and
vendors and the remedial actions and stimulus measures adopted by
local and federal governments, and to what extent normal economic
and operating conditions can resume. The management team is closely
following the progression of COVID-19 and its potential impact on
the Company. Even after the COVID-19 pandemic has subsided,
the Company may experience adverse impacts to its business as a
result of any economic recession or depression that has occurred or
may occur in the future. Therefore, the Company cannot reasonably
estimate the impact at this time our business, liquidity, capital
resources and financial results.
Company
History Overview
Pharmagreen
Biotech Inc. (“the Company”) was incorporated under the laws of
Nevada, U.S. on November 26, 2007 under the name Azure
International, Inc. On October 30, 2008 and effective as of the
same date, the Company filed Articles of Merger with the Secretary
of the State of Nevada, to effect a merger by and between Air
Transport Group Holdings, Inc., a Nevada corporation incorporated
on October 16, 2008, and Azure International, Inc. As a result of
the merger, the Company changed its name to Air Transport Group
Holdings, Inc.
2
Air Transport
Group Holdings, Inc. was originally set up to be in the business of
acquiring aviation, travel and leisure companies. During
February 2018, change of control of the Company was effected and on
February 21, 2018 new management took over.
On April 12,
2018, the Company entered into a share exchange agreement with WFS
Pharmagreen Inc., a private company incorporated under the laws of
British Columbia, Canada, whereby the Company acquired all of the
issued and outstanding shares of WFS Pharmagreen Inc. in exchange
for 37,704,500 shares of common stock of the Company. Upon
completion of this transaction, the shareholders of WFS Pharmagreen
hold 95.5% of voting control of the Company.
Immediately
prior to closing of the Agreement, the majority shareholder of the
Company was also the majority shareholder of WFS. As a result of
the common ownership upon closing of the transaction, the
acquisition was considered a common-control transaction and was
outside the scope of the business combination guidance in ASC
805-50. The entities are deemed to be under common control as of
February 27, 2018, which was the date that the majority shareholder
acquired control of the Company and, therefore, held control over
both companies. On May 2, 2018, the Share Exchange Agreement was
effected. In connection with this transaction, the Company changed
its name on May 8, 2018 to Pharmagreen Biotech Inc. and changed its
year end from April 30th to September 30th.
Our principal
executive offices are temporarily located at 2987 Blackbear Court,
Coquitlam, British Columbia, Canada. Our telephone number is
(702-803-9404). Our internet address is www.pharmagreen.ca.
On
August 7, 2020, (the “Petition Date”), the Company filed voluntary
petitions for reorganization (the “Bankruptcy Petitions” and the
cases commenced thereby, the “Chapter 11 Cases”) under chapter 11
of the United States Bankruptcy Code (the “Bankruptcy Code”) in the
United States Bankruptcy Court for the District of Nevada (the
“Court”). The Company’s filing with the Court was designated as
Case No. 20-13886. During the pendency of this matter, the Company
has also filed motions with the Court seeking authorization to
continue to operate its businesses as “debtors-in-possession” under
the jurisdiction of the Court and in accordance with the applicable
provisions of the Bankruptcy Code and orders of the Court. To
maintain and continue uninterrupted ordinary course operations
during the Chapter 11 Cases, the Company filed a variety of “first
day” motions seeking approval from the Court for various forms of
customary relief. These motions are designed primarily to minimize
the effect of bankruptcy on the Company’s operations, customers and
employees.
On
October 9, 2020, a stay order was lifted by a United States
District Judge of the United States District Court for
the Southern District of New York, on an action filed by a lender.
This effectively removed the Company from its Chapter 11 bankruptcy
proceedings and protection.
We
expect to continue to incur losses for at least the next 12 months.
We do not expect to generate revenue that is sufficient to cover
our expenses, and we do not have sufficient cash and cash
equivalents to execute our plan of operations for at least the next
twelve months. We will need to obtain additional financing, through
equity security sales, debt instruments and private financing, to
conduct our day-to-day operations, and to fully execute our
business plan. We plan to raise the capital necessary to fund our
business through the sale of equity securities, debt instruments or
private financing. These factors raise substantial doubt upon the
Company’s ability to continue as a going concern. This report
does not reflect all the adjustments that may be necessary if the
Company is unable to continue as a going concern.
Item 1A. Risk
Factors.
As a
“smaller reporting company,” as defined in Rule 12b-2 of the
Exchange Act, we are not required to provide the information called
for by this Item.
Item 1B. Unresolved Staff
Comments.
None
Item 2. Properties.
We do
not own any real estate or other properties and have not entered
into any long-term lease or rental agreements for property.
Item 3. Legal
Proceedings.
3
On July 22,
2020, the Company received a preliminary statement of claim from a
convertible note holder for failure of the Company to deliver
shares of common stock upon receipt of notices of conversion.
Pursuant to the claim, the plaintiff has requested receipt of all
shares of common stock requested in the notices of conversion, and
also damages in an amount to be determined at trial but in any
event in excess of principal amount of $78,000 for a total sum of
$180,000, including without limitation the balance of any portion
of the convertible note that ultimately is not converted into
shares of common stock, along with default interest, liquidated
damages, and damages as provided for in the convertible note.
On October
29th, 2020 a second note holder filed a statement of
claim. This lender as of December 24th, 2020 has
completely converted the full amount of the note of $100,000,
interest of $8,689.80 and penalty and fees aggregating $19,500.
Also,
as mentioned above, the Company filed voluntary petitions for
reorganization under chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the District of
Nevada on August 7, 2020. The Company’s filing with the Court was
designated as Case No. 20-13886. During the pendency of this
matter, the Company has also filed motions with the Court seeking
authorization to continue to operate its businesses as
“debtors-in-possession” under the jurisdiction of the Court and in
accordance with the applicable provisions of the Bankruptcy Code
and orders of the Court.
On
October 9, 2020, a stay order was lifted by a United States
District Judge of the United States District Court for
the Southern District of New York, on an action filed by a lender.
This effectively removed the Company from its Chapter 11 bankruptcy
proceedings and protection. The lifting of the stay order further
allowed the convertible note holders to convert thereby increasing
the number of shares issued and outstanding.
Except as mentioned in the preceding paragraphs, there are no
pending legal proceedings to which the Company is a party or in
which any director, officer or affiliate of the Company, any owner
of record or beneficially of more than 5% of any class of voting
securities of the Company, or stockholder is a party adverse to the
Company or has a material interest adverse to the Company.
Item 4. Mine Safety
Disclosures.
N/A
PART II
Item 5. Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
Our
Common Stock is currently quoted on the OTC Market under the symbol
“PHBI.” Prior to July 31, 2018, our Common Stock was quoted under
the symbol “AITGD.” Quotations of our Common Stock began on June
10, 2008. Our Common Stock was listed and commenced trading on the
OTC Market on June 10, 2008.
As of
September 30, 2020, we had 95,806,289 shares of our Common Stock
issued and outstanding held by approximately 188 stockholders of
record. To date, we have not paid dividends on our Common
Stock.
Our
Common Stock is very thinly traded and, thus, pricing of our Common
Stock on OTC Markets does not necessarily represent its fair market
value.
|
|
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Date
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Hi
Bid
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Low
Bid
|
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September 30, 2020
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$0.089
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$0.080
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June
30, 2020
|
$0.16
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$0.083
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March
31, 2020
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$0.15
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$0.127
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December 31, 2019
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$0.70
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0.70
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September 30, 2019
|
$2.10
|
$2.00
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|
June
30, 2019
|
$2.22
|
$2.22
|
|
March
31, 2019
|
$1.95
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$1.95
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December 31, 2018
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$1.70
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$1.70
|
Item 6. Selected Financial
Data
4
As a
“smaller reporting company,” as defined in Rule 12b-2 of the
Exchange Act, we are not required to provide the information called
for by this Item.
Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
Management’s Discussion and Analysis
This section of the Form 10-K includes a number of
forward-looking statements that reflect our current views with
respect to future events and financial performance. Forward-looking
statements are often identified by words like believe, expect,
estimate, anticipate, intend, project and similar expressions, or
words which, by their nature, refer to future events. You should
not place undue certainty on these forward-looking statements.
These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from our predictions.
Capital Resources and Liquidity
Our
auditors have issued a “going concern” opinion, meaning that there
is substantial doubt if we can continue as an on-going business
unless we obtain additional capital. No substantial revenues from
our planned business model are anticipated until we have completed
financing the Company. As at September 30, 2020, the Company has a
working capital deficit of $2,900,629 and an accumulated deficit of
$7,167,346. These factors raise substantial doubt about the
Company’s ability to continue as a going concern.
We
need to seek capital from resources such as the sale of private
placements in the Company’s common stock or debt financing, which
may not even be available to the Company. However, if such
financing were available, because we are a, early stage company
with no or limited operations to date, it would likely have to pay
additional costs associated with such financing and in the case of
high risk loans be subject to an above market interest rate. At
such time these funds are required, management would evaluate the
terms of such financing. If the Company cannot raise additional
proceeds via such financing, it may be required to cease business
operations.
As of
September 30, 2020, we had $12,196 in cash, amounts receivable of
$295, and prepaid expenses and deposits of $253,754, as compared to
$62,682 in cash, amounts
receivable of $10,639 and prepaid expenses and deposits of $115,856
as of September 30, 2019. As of the date of this Form 10-K, the
current funds available to the Company will not be sufficient to
fund the expenses related to maintaining our planned operations. We
are in the process of seeking additional equity financing in the
form of private placements, loans and registration statements to
fund our intended business operations.
Management believes that if subsequent private placements are
successful or we are successful in raising funds from registered
securities, we will generate sales revenue within twelve months
thereof. However, additional equity financing may not be available
to us on acceptable terms or at all, and thus we could fail to
satisfy our future cash requirements.
We do
not anticipate researching any further products nor the purchase or
sale of any significant equipment. We also do not expect any
significant additions to the number of employees.
Results of Operations
We
had $Nil in revenue for the fiscal year ended September 30, 2020,
as compared to revenue for the fiscal year ended September 30,
2019, of $Nil.
Total
expenses in the fiscal year ended September 30, 2020, were $485,756
as compared to total expenses for the fiscal year ended September
30, 2019, of $642,178. In addition, total other expenses in the
fiscal year ended September 30, 2020, were $1,996,856 as compared
to total other expenses for the fiscal year ended September 30,
2019, of $126,633, resulting in a net loss for the fiscal year
ended September 30, 2020, of $2,437,870, as compared to a net loss
of $767,537 for the fiscal year ended September 30, 2019. The
increase in net loss for the fiscal year ended September 30, 2020,
compared to 2019 was mainly due to the following:
·An
increase in professional fees from $81,090 in 2019 to $179,015,
which was primarily due to an increase in legal fees associated
with the Company’s convertible debentures and related legal
proceedings;
·An
increase in accretion of discount of convertible notes from $1,296
in 2019 to $328,333 in 2020, which related to the increase in
convertible debt financing during the year;
·An
increase in interest expense from $3,783 in 2019 to $298,942 in
2020, which was mainly attributable to default penalties incurred
on convertible notes of $229,364 during 2020;
5
·An
increase in impairment of property and equipment from $nil in 2019
to $434,601 in 2020, which related to an impairment of the
capitalized construction in progress costs due to the economic
uncertainty of having sufficient financing available to complete
the proposed construction; and
·An
increase in loss on change in fair value of derivative liabilities
from $nil in 2019 to $1,149,450 in 2020, which related to the
embedded conversion features on the Company’s convertible
debentures entered into during the year.
The
increase was partially offset by the following:
·A
decrease in consulting fees from $442,529 in 2019 to $224,691 in
2020 due to less labour costs required during 2020; and
·An
increase in the gain from write-off of accounts payable from $nil
in 2019 to $292,557 in 2020, which related to professional fees
that are no longer outstanding.
During the year ended September 30, 2020, and 2019, we incurred a
net loss of $0.03 and $0.01 per share, respectively.
Off-balance sheet arrangements
The
Company has no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect or change on
the Company’s financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources
that are material to investors. The term “off-balance sheet
arrangement” generally means any transaction, agreement or other
contractual arrangement to which an entity unconsolidated with the
Company is a party, under which the Company has (i) any obligation
arising under a guarantee contract, derivative instrument or
variable interest; or (ii) a retained or contingent interest in
assets transferred to such entity or similar arrangement that
serves as credit, liquidity or market risk support for such
assets.
The
Company is temporarily headquartered in Coquitlam, British
Columbia. Our mission is to advance the technology of tissue
culture science and to provide the highest quality 100% germ free,
disease free and all genetically the same plantlets of high CBD
hemp and other flora and offering full spectrum DNA testing for
plant identification, live genetics preservation using low
temperature storage for various cannabis and horticulture plants;
extraction of botanical oils mainly CBD oil, and to deliver
laboratory based services to the North American high CBD hemp,
Cannabis and agriculture sectors.
Its
immediate focus will be on producing tissue cultured high CBD hemp
starter plantlets. The Company has applied to Health Canada
for a license to produce and sell tissue culture plantlets and
cannabis oil. On February 7, 2019, the Company’s, Canadian
subsidiary, WFS Pharmagreen Inc., received notification from Health
Canada that its cannabis licensing application under the Cannabis
Act and the Cannabis Regulations to obtain a license at the
proposed site in Deroche, British Columbia, Canada has advanced
from the first stage, “Intake and Screening” to the second stage,
“Detailed Review and Initiation of Security Clearance Process,” of
a three stage approval process. On May 10, 2019, the Company
received confirmation from Health Canada that the second stage has
been completed and the company can move into the third stage,
construction of the biotech complex for inspection and
licensing.
The
Company is currently completing its engineering stage and has begun
site development work for the building process of a 63,000 square
foot biotech complex. The Botany Center will serve the
following purposes:
·Plantlets
tissue culture unit (under Cannabis licence and under Hemp License
for high CBD hemp strain tissue culture starter
plantlets)
·Plantlets
low temperature storage unit (under Cannabis licence and Hemp
license) **
·Plant
DNA testing unit (Under Cannabis licence and Hemp
license)**
·Cannabis
and high CBD hemp product development unit (under Cannabis
Licence)**
·Cannabis
and high CBD hemp oil products extraction (under Cannabis
Licence)**
**
when funds become available in the future
The
Company is dedicated to become internationally recognized and
valued biotech science solutions company in North America for its
proprietary micro-propagation techniques, tissue culture plantlets
production, preservation of genetics, extraction of cannabis oil,
Cannabis and high CBD hemp products development, and plant DNA
species identification and certification. The extraction of
cannabis oil and new cannabis and high CBD hemp product development
will be conducted under the Cannabis License. The company has
concurrently applied for a Cannabis License administrated by Health
Canada.
6
If
the Company is awarded Cannabis License with Health Canada it will
continue to build out the Biotech Complex. It will take 19
months to construct and make operational the Biotech Complex.
Item 7A. Quantitative and
Qualitative Disclosures About Market Risk.
As a
“smaller reporting company,” as defined in Rule 12b-2 of the
Exchange Act, we are not required to provide the information called
for by this Item.
7
Item 8. Financial Statements
and Supplementary Data
PHARMAGREEN BIOTECH INC.
Consolidated Financial Statements
Years
Ended September 30, 2020, and 2019
(Expressed in U.S. Dollars)
8
9
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
1.Nature
of Business and Continuance of Operations
Pharmagreen Biotech Inc. (“the Company”) was incorporated under the
laws of the State of Nevada, U.S. on November 26, 2007, under the
name Azure International, Inc. On October 30, 2008, and
effective as of the same date, the Company filed Articles of Merger
(“Articles”) with the Secretary of State of the State of Nevada, to
effect a merger by and between Air Transport Group Holdings, Inc.,
a Nevada corporation and Azure International, Inc. As a
result of the merger, the Company changed its name to Air Transport
Group Holdings, Inc. The Company was previously in the
business of providing technical advisory and appraisals to the
aircraft and aviation business as well as providing sourcing for
aircraft leases and parts. Pursuant to a Share Exchange Agreement
with WFS Pharmagreen Inc. (“WFS”) on May 2, 2018, the Company
changed its name to Pharmagreen Biotech Inc. and changed its
principal business to the construction of a biotech complex in
Deroche, British Columbia, Canada, for the purpose of producing a
variety of starter plantlets for the Canadian and international
high CBD hemp and medical cannabis industries through the
application of the proprietary plant tissue culture in vitro
process called “Chibafreen”. This proprietary process will produce
plantlets that will be genetically identical and free of pests and
disease free with consistent and certifiable constituent
properties.
Going Concern
These
consolidated financial statements have been prepared on the going
concern basis, which assumes that the Company will be able to
realize its assets and discharge its liabilities in the normal
course of business. As at September 30, 2020, the Company has not
earned any revenues from operations, has a working capital deficit
of $2,900,629, and has an accumulated deficit of $7,167,346. During
the year ended September 30, 2020, the Company incurred a net loss
of $2,482,612 and used cash flows for operations of $607,634. In
addition, the Company filed voluntary petitions for reorganization
under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Nevada on August 7,
2020. As a result of the voluntary petition, various convertible
note holders triggered default provisions on the Company’s
outstanding convertible notes. On October 9, 2020, a stay
order was lifted by a United States District Judge of the
United States District Court for the Southern District of New York,
on an action filed by a lender. This effectively removed the
Company from its Chapter 11 bankruptcy proceedings and protection.
These factors raise substantial doubt upon the Company’s ability to
continue as a going concern. These consolidated financial
statements do not reflect any adjustments that may be necessary if
the Company is unable to continue as a going concern.
The recent outbreak of the novel coronavirus COVID-19, which was
declared a pandemic by the World Health Organization on March 11,
2020, has led to adverse impacts on the U.S. and global economies,
disruptions of financial markets, and created uncertainty regarding
potential impacts to the Company’s supply chain, operations, and
customer demand. The COVID-19 pandemic has impacted and could
further impact the Company’s operations and the operations of the
Company’s suppliers and vendors as a result of quarantines,
facility closures, and travel and logistics restrictions. The
extent to which the COVID-19 pandemic impacts the Company’s
business, results of operations and financial condition will depend
on future developments, which are highly uncertain and cannot be
predicted, including, but not limited to the duration, spread,
severity, and impact of the COVID-19 pandemic, the effects of the
COVID-19 pandemic on the Company’s customers, suppliers, and
vendors and the remedial actions and stimulus measures adopted by
local and federal governments, and to what extent normal economic
and operating conditions can resume. The management team is closely
following the progression of COVID-19 and its potential impact on
the Company. Even after the COVID-19 pandemic has subsided,
the Company may experience adverse impacts to its business as a
result of any economic recession or depression that has occurred or
may occur in the future. Therefore, the Company cannot reasonably
estimate the impact at this time our business, liquidity, capital
resources and financial results.
2.Significant
Accounting Policies
(a)Basis
of Presentation
The
accompanying consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the
United States and are expressed in U.S. dollars. These consolidated
financial statements include the accounts of the Company and its
wholly owned subsidiary, WFS Pharmagreen Inc. (“WFS”), and its
89.7% owned subsidiary 1155097 BC Ltd. (“115BC”), companies
incorporated in British Columbia, Canada. All inter-company
accounts and transactions have been eliminated. The Company’s
fiscal year-end is September 30.
14
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
2.Significant
Accounting Policies (continued)
(b)Use
of Estimates and Judgments
The preparation of these consolidated financial statements in
conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and 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. The Company regularly evaluates estimates and
assumptions related to the allowance for doubtful accounts, the
recoverability of property and equipment, the equity component of
convertible notes, fair value of derivative liabilities, fair value
of stock-based payments, and deferred income tax asset valuation
allowances. The Company bases its estimates and assumptions on
current facts, historical experience, and various other factors
that it believes to be reasonable under the circumstances, the
results of which form the basis for making judgments about the
carrying values of assets and liabilities and the accrual of costs
and expenses that are not readily apparent from other sources. The
actual results experienced by the Company may differ materially and
adversely from the Company’s estimates. To the extent there are
material differences between the estimates and the actual results,
future results of operations will be affected.
The Company applies judgment in the application of the going
concern assumption which requires management to take into account
all available information about the future, which is at least, but
not limited to, 12 months from the end of the reporting period and
in the factors regarding the impairment of the property and
equipment.
(c)Cash
and Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less at the time of issuance to be cash
equivalents.
(d)Property,
Plant, and Equipment
Property, plant, and equipment is measured at cost less accumulated
depreciation, residual values, and impairment losses. Cost includes
expenditures that are directly attributable to the acquisition of
the asset. The cost of self-constructed assets includes the cost of
materials and direct labor, any other costs directly attributable
to bringing the asset to a working condition for the intended use
and borrowing costs on qualifying assets. During their
construction, items of property, plant, and equipment are
classified as construction in progress. When the asset is available
for use, it is transferred from construction in progress to the
appropriate category of property, plant, and equipment and
depreciation on the item commences.
The Company capitalizes borrowing costs on capital invested in
projects under construction. Upon the asset becoming available for
use, capitalized borrowing costs, as a portion of the total cost of
the asset, are depreciated over the estimated useful life of the
related asset.
(e)Long-lived
Assets
In accordance with ASC 360, “Property, Plant and Equipment”,
the Company tests long-lived assets or asset groups for
recoverability when events or changes in circumstances indicate
that their carrying amount may not be recoverable. Circumstances
which could trigger a review include, but are not limited to:
significant decreases in the market price of the asset; significant
adverse changes in the business climate or legal factors;
accumulation of costs significantly in excess of the amount
originally expected for the acquisition or construction of the
asset; current period cash flow or operating losses combined with a
history of losses or a forecast of continuing losses associated
with the use of the asset; and current expectation that the asset
will more likely than not be sold or disposed significantly before
the end of its estimated useful life. Recoverability is assessed
based on the carrying amount of the asset and its fair value, which
is generally determined based on the sum of the undiscounted cash
flows expected to result from the use and the eventual disposal of
the asset, as well as specific appraisal in certain instances. An
impairment loss is recognized when the carrying amount is not
recoverable and exceeds fair value.
15
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
2.Significant
Accounting Policies (continued)
(f)Fair
Value Measurements
The Company measures and discloses the estimated fair value of
financial assets and liabilities using the fair value hierarchy
prescribed by U.S. generally accepted accounting principles. The
fair value hierarchy has three levels, which are based on reliable
available inputs of observable data. The hierarchy requires the use
of observable market data when available.
The three-level hierarchy is defined as follows:
Level 1 – quoted prices for identical instruments in active
markets.
Level 2 – quoted prices for similar instruments in active
markets; quoted prices for identical or similar instruments in
markets that are not active; and model derived valuations in which
significant inputs and significant value drivers are observable in
active markets; and.
Level 3 – fair value measurements derived from valuation
techniques in which one or more significant inputs or significant
value drivers are unobservable.
Financial instruments consist principally of cash, amounts
receivable, accounts payable and accrued liabilities, advances from
Alliance Growers Corp., loans payable, amounts due to related
parties, and convertible notes. The fair value of cash is
determined based on Level 1 inputs and the fair value of derivative
liabilities is determined based on Level 3 inputs. There were no
transfers into or out of “Level 3” during the years ended September
30, 2020, and 2019. The recorded values of all other financial
instruments, with the exception of non-current convertible notes,
approximate their current fair values because of their nature and
respective relatively short maturity dates or durations. Fair value
estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could
significantly affect the estimates.
The following table presents assets and liabilities that are
measured and recognized at fair value as of September 30, 2020 on a
recurring basis:
September 30,
2020
|
|
Level 1
$
|
Level 2
$
|
Level 3
$
|
Total Gains
(Losses)
$
|
|
|
|
|
|
|
|
Derivative liability
|
–
|
–
|
1,380,957
|
(1,149,450)
|
(g)Foreign
Currency Translation
The Company’s functional and reporting currency is the U.S. dollar.
Transactions may occur in foreign currencies and management has
adopted ASC 830, “Foreign Currency Translation Matters”.
Monetary assets and liabilities denominated in foreign currencies
are translated using the exchange rate prevailing at the balance
sheet date. Non-monetary assets and liabilities denominated in
foreign currencies are translated at rates of exchange in effect at
the date of the transaction. Average monthly rates are used to
translate revenues and expenses. Gains and losses arising on
translation or settlement of foreign currency denominated
transactions or balances are included in the consolidated statement
of operations. The Company uses the current rate method to
translate the accounts of its wholly-owned subsidiary into U.S.
dollars. Monetary assets and liabilities are translated at the
exchange rates in effect at the balance sheet date. Non-monetary
assets and liabilities are translated at historical rates. Revenues
and expenses are translated at average rates for the period. The
resulting exchange gains or losses are recognized in accumulated
other comprehensive income.
16
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
2.Significant
Accounting Policies (continued)
(h)Stock-based
Compensation
The Company records stock-based compensation in accordance with ASC
718, “Compensation – Stock Compensation”, using
the fair value method. 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 Company uses the
Black-Scholes option pricing model to calculate the fair value of
stock-based awards. This model is affected by the Company’s stock
price as well as assumptions regarding a number of subjective
variables. These subjective variables include, but are not limited
to the Company’s expected stock price volatility over the term of
the awards, and actual and projected employee stock option exercise
behaviors. The value of the portion of the award that is ultimately
expected to vest is recognized as an expense in the consolidated
statement of operations and comprehensive loss over the requisite
service period.
(i)Loss
Per Share
The Company computes loss per share in accordance with ASC 260,
"Earnings per Share" which requires presentation of both
basic and diluted earnings per share (“EPS”) on the face of the
income statement. Basic EPS is computed by dividing the loss
available to common shareholders (numerator) by the weighted
average number of shares outstanding (denominator) during the
period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock
method and convertible preferred stock using the if-converted
method. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants. Diluted
EPS excludes all dilutive potential shares if their effect is
anti-dilutive. As at September 30, 2020, there were 388,372,556
(2019 – 364,850,535) potentially dilutive shares
outstanding.
(j)Comprehensive
Loss
ASC 220, “Comprehensive Income” establishes standards for
the reporting and display of comprehensive income and its
components in the consolidated financial statements. As at
September 30, 2020 and 2019, comprehensive loss consists of foreign
currency translation gains and losses.
(k)Income
Taxes
The Company accounts for
income taxes using the asset and liability method in accordance
with ASC 740, “Income Taxes”. The asset and liability method
provides that deferred income tax assets and liabilities are
recognized for the expected future tax consequences of temporary
differences between the financial reporting and tax bases of assets
and liabilities, and for operating loss and tax credit
carryforwards. Deferred income tax assets and liabilities are
measured using the currently enacted tax rates and laws that will
be in effect when the differences are expected to reverse. The
Company records a valuation allowance to reduce deferred income tax
assets to the amount that is believed more likely than not to be
realized. As of September 30, 2020 and 2019, the Company did not
have any amounts recorded pertaining to uncertain tax
positions.
The Company files federal and provincial income tax returns in
Canada and federal, state and local income tax returns in the U.S.,
as applicable. The Company may be subject to a reassessment of
federal and provincial income taxes by Canadian tax authorities for
a period of three years from the date of the original notice of
assessment in respect of any particular taxation year. For Canadian
and U.S. income tax returns, the open taxation years range from
2014 to 2020. In certain circumstances, the U.S. federal statute of
limitations can reach beyond the standard three year period. U.S.
state statutes of limitations for income tax assessment vary from
state to state. Tax authorities of Canada and U.S. have not
examined any of the Company’s, or its subsidiaries’, income tax
returns for the open taxation years noted above.
17
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
2.Significant
Accounting Policies (continued)
(l)Recently
Adopted Accounting Pronouncements
In June 2018, the FASB issued ASU 2018-07, which simplifies the
accounting for nonemployee share-based payment transactions. The
amendments specify that Topic 718 applies to all share-based
payment transactions in which a grantor acquires goods or services
to be used or consumed in a grantor’s own operations by issuing
share-based payment awards. The standard became effective for the
Company in the first quarter of fiscal year 2020. The adoption of
this standard did not have a material impact on the Company’s
consolidated financial statements.
In February 2016, Topic 842, Leases, was issued to
replace the leases requirements in Topic 840, Leases.
The main difference between previous GAAP and Topic 842 is the
recognition of lease assets and lease liabilities by lessees for
those leases classified as operating leases under previous GAAP. A
lessee should recognize in the balance sheet a liability to make
lease payments (the lease liability) and a right-of-use asset
representing its right to use the underlying asset for the lease
term. For leases with a term of 12 months or less, a lessee is
permitted to make an accounting policy election by class of
underlying asset not to recognize lease assets and lease
liabilities. If a lessee makes this election, it should recognize
lease expense for such leases generally on a straight-line basis
over the lease term. The accounting applied by a lessor is largely
unchanged from that applied under previous GAAP. The standard
became effective for the Company in the first quarter of fiscal
year 2020. The adoption of this standard did not have a material
impact on the Company’s consolidated financial
statements.
The Company has implemented all new accounting pronouncements that
are in effect and that may impact its consolidated financial
statements and does not believe that there are any other new
accounting pronouncements that have been issued that might have a
material impact on its financial position or results of
operations.
3.Property
and Equipment
|
|
|
|
|
Construction in progress
$
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September
30, 2018
|
|
|
|
251,310
|
|
|
|
|
|
|
|
Additions
|
|
|
|
196,127
|
|
Change due to foreign exchange
|
|
|
|
(6,342)
|
|
|
|
|
|
|
|
Balance, September
30, 2019
|
|
|
|
441,095
|
|
|
|
|
|
|
|
Impairment
|
|
|
|
(434,601)
|
|
Change due to foreign exchange
|
|
|
|
(6,494)
|
|
|
|
|
|
|
|
Balance, September
30, 2020
|
|
|
|
–
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September
30, 2018, 2019 and 2020
|
|
|
|
–
|
|
|
|
|
|
|
|
Balance, September
30, 2019
|
|
|
|
441,095
|
|
|
|
|
|
|
|
Balance, September
30, 2020
|
|
|
|
–
|
During the year ended September 30, 2020, the Company recognized an
impairment of $434,601 of the capitalized construction in progress
costs due to economic uncertainty of sufficient financing available
to complete the proposed construction.
18
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
4.Accounts
Payable and Accrued Liabilities
Accounts payable and accrued liabilities consists of the
following:
|
|
September
30,
2020
$
|
September
30,
2019
$
|
|
|
|
|
|
Accounts payable (Note 8)
|
455,310
|
829,942
|
|
Accrued
interest payable (Notes 5 and 6)
|
84,353
|
25,824
|
|
|
|
|
|
|
539,663
|
855,766
|
During the year ended September 30, 2020, the Company recognized a
write-off of accounts payable of $292,557 (2019 - $nil) related to
professional fees that are no longer owing.
5.Loans
Payable
(a)On
November 22, 2019, the Company entered into a promissory note with
an unrelated party for $40,000 in connection with an equity
purchase agreement (Refer to Note 11(b)). The promissory note is
unsecured, due on November 30, 2020, and bears interest on the
unpaid principal balance at a rate of 10% per annum. During the
year ended September 30, 2020, the Company recorded accrued
interest payable of $3,421 (2019 - $nil).
(b)On
April 22, 2020, the Company received a loan for $30,028
(Cdn$40,000) from the Government of Canada under the Canada
Emergency Business Account program (“CEBA”). These funds are
interest free until December 31, 2022, at which time the remaining
balance will convert to a 3-year term loan at an interest rate of
5% per annum. If the Company repays the loan prior to December 31,
2022, there will be loan forgiveness of 25% of the principal
balance repaid, up to a maximum of Cdn$10,000.
6.Convertible
Notes
(a)On
April 4, 2018, the amount of $32,485 owed to related parties was
converted to Series A convertible notes, which are unsecured,
non-interest bearing, and due on April 4, 2023. These notes are
convertible in whole or in part, at any time until maturity, to
common shares of the Company at $0.0001 per share. The outstanding
balance remaining at maturity shall bear interest at 12% per annum
until fully paid. The Company evaluated the convertible notes for a
beneficial conversion feature in accordance with ASC 470-20 Debt
with Conversion and Other Options. The Company determined that
the conversion price was below the closing stock price on the
commitment date, and the convertible notes contained a beneficial
conversion feature. The Company recognized the intrinsic value of
the embedded beneficial conversion feature of $32,485 as additional
paid-in capital and reduced the carrying value of the convertible
note to $nil. The carrying value will be accreted over the term of
the convertible notes up to their face value of $32,485.
During the year ended September 30, 2018, the Company issued
31,745,000 shares of common stock upon the conversion of $3,175 of
Series A convertible notes, which included 18,000,000 common shares
to the President of the Company and 5,320,000 common shares to
family members of the President of the Company. Upon conversion,
the Company immediately recognized the related remaining debt
discount of $3,112 as accretion expense.
During the year ended September 30, 2019, the Company issued
3,900,000 shares of common stock upon the conversion of $390 of
Series A convertible notes. Upon conversion, the Company
immediately recognized the related remaining debt discount of $375
as accretion expense.
During the year ended September 30, 2020, the Company issued
18,525,000 shares of common stock upon the conversion of $1,853 of
Series A convertible notes. Upon conversion, the Company
immediately recognized the related remaining debt discount of
$1,670 as accretion expense.
As at September 30, 2020, the carrying value of the convertible
notes was $3,448 (2019 – $1,599) and had an unamortized
discount of $23,619 (2019 - $27,321). During the year ended
September 30, 2020, the Company recorded accretion expense of
$3,702 (2019 - $1,296).
19
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
6. Convertible Notes (continued)
(b)On
September 17, 2019, the Company entered into a convertible note
with an unrelated party for $78,000, of which $3,000 was paid
directly to third parties for financing costs, resulting in cash
proceeds to the Company of $75,000. The note is due on September
20, 2020, and bears interest on the unpaid principal balance at a
rate of 10% per annum, which increases to 22% per annum upon
default of the note. The note may be converted at any time after
180 days of the date of issuance into shares of Company’s common
stock at a conversion price equal to 61% of the average 2 lowest
trading prices during the 10-trading day period prior to the
conversion date. Due to this provision, the Company considered
whether the embedded conversion option qualifies for derivative
accounting under ASC 815-15 Derivatives and Hedging. As the
note was not convertible until 180 days following issuance, no
derivative liability was initially recognized.
The convertible note became convertible on March 15, 2020. The
Company evaluated the convertible note for a beneficial conversion
feature in accordance with ASC 470-20 Debt with Conversion and
Other Options. The Company determined that the conversion price
was below the closing stock price on the measurement date, and the
convertible note contained a beneficial conversion feature. The
initial fair value of the conversion feature was determined to be
$82,631. The Company recognized the maximum intrinsic value of the
embedded beneficial conversion feature of $76,019 and reduced the
carrying value of the convertible note to $500. The carrying value
will be accreted over the term of the convertible note up to its
face value of $78,000.
During the year ended September 30, 2020, the Company issued
1,498,168 shares of common stock upon the conversion of $68,000 of
the convertible note.
On June 17, 2020, the Company paid the remaining principal of
$10,000 and interest of $4,601 pursuant to a settlement agreement
with the lender. Upon entering into the settlement agreement, the
Company immediately recognized the remaining debt discount of
$4,427.
The financing costs were netted against the convertible note and
were being amortized over the term using the effective interest
rate method. During the year ended September 30, 2020, the Company
recognized accretion expense of $10,382 (2019 - $105). As at
September 30, 2020, the carrying value of the convertible note was
$nil (2019 - $75,105), net of an unamortized discount of $nil (2019
- $2,895).
(c)On
October 1, 2019, the Company entered into a convertible note with
an unrelated party for $78,000, of which $3,255 was paid directly
to third parties for financing costs, resulting in proceeds to the
Company of $74,745. The note is due on October 1, 2020, and bears
interest on the unpaid principal balance at a rate of 10% per
annum, which increases to 24% per annum upon default of the note.
The note may be converted at any time after the date of issuance
into shares of Company’s common stock at a conversion price equal
to lower of: (i) the lowest trading price during the 10-trading day
period prior to the issuance date; or (ii) 61% of the average 2
lowest trading prices during the 10-trading day period prior to the
conversion date. In connection with the issuance of the above
convertible note, the Company evaluated the conversion option for
derivative treatment under ASC 815-15, Derivatives and
Hedging, and determined the note and conversion feature
qualified as derivatives. The Company classified the conversion
feature as a derivative liability at fair value. The initial fair
value of the conversion feature was determined to be $70,744. The
Company recognized the maximum intrinsic value of the embedded
beneficial conversion feature of $74,245 and reduced the carrying
value of the convertible note to $500. The carrying value will be
accreted over the term of the convertible note up to its face value
of $78,000.
On July 22, 2020, the Company received a preliminary statement of
claim from the note holder for failure of the Company to deliver
shares of common stock upon receipt of notices of conversion.
Pursuant to the claim, the note holder requested receipt of all
shares of common stock requested in the notices of conversion, and
also damages in an amount to be determined at trial but in any
event in excess of principal in the sum of $180,000, including
without limitation the balance of any portion of the convertible
note that ultimately is not converted into shares of common stock,
along with default interest, liquidated damages, and damages as
provided for in the convertible note. Upon default, the Company
recognized the remaining debt discount of $46,904 as accretion
expense.
20
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
6. Convertible Notes (continued)
The financing costs were netted against the convertible note and
were being amortized over the term using the effective interest
rate method. During the year ended September 30, 2020, the Company
recognized accretion expense of $77,500 and a default penalty of
$85,864. As at September 30, 2020, the carrying value of the
convertible note was $163,864 (2019 - $nil) and the fair value of
the derivative liability was $485,863 (2019 - $nil).
(d)On
October 17, 2019, the Company entered into a convertible note with
an unrelated party for $63,000, of which $3,000 was paid directly
to third parties for financing costs, resulting in cash proceeds to
the Company of $60,000. The note is due on October 17, 2020, and
bears interest on the unpaid principal balance at a rate of 10% per
annum, which increases to 22% per annum upon default of the note.
The note may be converted at any time after 180 days of the date of
issuance into shares of Company’s common stock at a conversion
price equal to 61% of the average 2 lowest trading prices during
the 10-trading day period prior to the conversion date.
On June 17, 2020, the Company entered into a settlement agreement
with the lender, whereby the Company and the lender agreed on
repayment terms for the remaining principal balance of $63,000, and
accrued interest owing on the note of $5,775 which was due on
September 30, 2020. Upon entering into the settlement agreement,
the Company immediately recognized the remaining debt discount of
$1,657. On September 30, 2020, the Company failed to meet the
repayment terms within the settlement agreement which resulted in a
default penalty of $63,000 and the resumption of the convertibility
feature at a conversion price equal to 61% of the average 2 lowest
trading prices during the 10-trading day period prior to the
conversion date. On September 30, 2020, the Company evaluated the
conversion option for derivative treatment under ASC 815-15,
Derivatives and Hedging, and determined the note and
conversion feature qualified as derivatives. The Company classified
the conversion feature as a derivative liability at fair value. The
initial fair value of the conversion feature was determined to be
$112,822.
The financing costs were netted against the convertible note and
were being amortized over the term using the effective interest
rate method. During the year ended September 30, 2020, the Company
recognized accretion expense of $3,000 and a default penalty of
$63,000. As at September 30, 2020, the carrying value of the
convertible note was $126,000 (2019 - $nil) and the fair value of
the derivative liability was $112,822 (2019 - $nil).
(e)On
January 2, 2020, the Company entered into a convertible note with
an unrelated party for $53,000, of which $3,000 was paid directly
to third parties for financing costs, resulting in cash proceeds to
the Company of $50,000. The note is due on January 2, 2021, and
bears interest on the unpaid principal balance at a rate of 10% per
annum, which increases to 22% per annum upon default of the note.
The note may be converted at any time after 180 days of the date of
issuance into shares of Company’s common stock at a conversion
price equal to 61% of the average 2 lowest trading prices during
the 10-trading day period prior to the conversion date.
On June 17, 2020, the Company entered into a settlement agreement
with the lender, whereby the Company and the lender agreed on
repayment terms for the remaining principal of $53,000 and accrued
interest of $5,300 owing on the note. Upon entering into the
settlement agreement, the Company immediately recognized the
remaining debt discount of $2,286. Effective September 30, 2020,
the Company failed to meet the repayment terms of the settlement
agreement and defaulted on the convertible note. On September 30,
2020, the Company evaluated the conversion option for derivative
treatment under ASC 815-15, Derivatives and Hedging, and
determined the note and conversion feature qualified as
derivatives. The Company classified the conversion feature as a
derivative liability at fair value. The initial fair value of the
conversion feature was determined to be $139,702.
The financing costs were netted against the convertible note and
were being amortized over the term using the effective interest
rate method. During the year ended September 30, 2020, the Company
recognized accretion expense of $3,000 and a default penalty of
$53,000. As at September 30, 2020, the carrying value of the
convertible note was $106,000 (2019 - $nil) and the fair value of
the derivative liability was $139,702 (2019 - $nil).
21
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
6. Convertible Notes (continued)
(f)On
January 14, 2020, the Company entered into a convertible note with
an unrelated party for $78,000, of which $3,000 was paid for
financing costs, resulting in net proceeds to the Company of
$75,000. The note is due on January 14, 2021, and bears interest on
the unpaid principal balance at a rate of 12% per annum, which
increases to 15% per annum upon default of the note. The note may
be converted at any time after the date of issuance into shares of
Company’s common stock at a conversion price equal to lower of: (i)
65% of the lowest trading price during the 20-trading day period
prior to the issuance date; or (ii) 65% of the lowest trading price
during the 20-trading day period prior to the conversion date. In
connection with the issuance of the above convertible note, the
Company evaluated the conversion option for derivative treatment
under ASC 815-15, Derivatives and Hedging, and determined
the note and conversion feature qualified as derivatives. The
Company classified the conversion feature as a derivative liability
at fair value. The initial fair value of the conversion feature was
determined to be $76,330. The Company recognized the maximum
intrinsic value of the embedded beneficial conversion feature of
$74,500, resulting in a loss on change in fair value of derivative
liabilities of $1,830, and reduced the carrying value of the
convertible note to $500. The carrying value will be accreted over
the term of the convertible note up to its face value of
$78,000.
The financing costs were netted against the convertible note and
are being amortized over the term using the effective interest rate
method. During the year ended September 30, 2020, the Company
recognized accretion expense of $16,447. As at September 30, 2020,
the carrying value of the convertible note was $16,947 (2019 -
$nil), net of an unamortized discount of $61,053 (2019 - $nil), and
the fair value of the derivative liability was $110,604 (2019 -
$nil).
(g)On
January 15, 2020, the Company entered into a convertible note with
an unrelated party for $61,000, of which $7,400 was paid directly
to third parties for financing costs and an original issue discount
of $3,000, resulting in proceeds to the Company of $50,600. The
note is due on January 15, 2021, and bears interest on the unpaid
principal balance at a rate of 10% per annum, payable in common
stock, which increases to 24% per annum upon default of the note.
The note may be converted at any time after the date of issuance
into shares of Company’s common stock at a conversion price equal
65% of the lowest trading price during the 20-trading day period
prior to the conversion date. In connection with the issuance of
the above convertible note, the Company evaluated the conversion
option for derivative treatment under ASC 815-15, Derivatives
and Hedging, and determined the note and conversion feature
qualified as derivatives. The Company classified the conversion
feature as a derivative liability at fair value. The initial fair
value of the conversion feature was determined to be $67,846.
The Company recognized the maximum intrinsic value of the embedded
beneficial conversion feature of $50,100, resulting in a loss on
change in fair value of derivative liabilities of $17,746, and
reduced the carrying value of the convertible note to $500. The
carrying value will be accreted over the term of the convertible
note up to its face value of $61,000.
On July 23, 2020, the Company entered into a settlement agreement
with the note holder, wherein the Company and the lender agreed to
settle a convertible note and accrued interest for a total of
$63,440 on a non-convertible basis, of which $15,000 was payable on
or before July 24, 2020 (paid), followed by 6 monthly instalment
payments of $8,073. Upon entering into the settlement agreement,
the Company immediately recognized the remaining debt discount of
$56,566. Effective August 24, 2020, the Company failed to meet the
repayment terms and defaulted on the settlement agreement.
The financing costs were netted against the convertible note and
were being amortized over the term using the effective interest
rate method. During the year ended September 30, 2020, the Company
recognized accretion expense of $60,500. As at September 30, 2020,
the carrying value of the convertible note was $46,000 (2019 -$
nil) and the fair value of the derivative liability was $69,320
(2019 - $nil).
22
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
6.Convertible
Notes (continued)
(h)On
January 15, 2020, the Company entered into a convertible note with
an unrelated party for $55,000, of which $2,500 was paid directly
to third parties for financing costs, resulting in proceeds to the
Company of $52,500. The note is due on January 15, 2021, and bears
interest on the unpaid principal balance at a rate of 10% per
annum, which increases to 24% per annum upon default of the note.
The note may be converted at any time after the date of issuance
into shares of Company’s common stock at a conversion price equal
to lower of: (i) the lowest trading price during the 20-trading day
period ending on the latest complete trading day prior to the
issuance date; or (ii) 65% of the lowest trading price during the
20 consecutive trading day period on which at least 100 shares of
common stock were traded prior to the conversion date. In
connection with the issuance of the above convertible note, the
Company evaluated the conversion option for derivative treatment
under ASC 815-15, Derivatives and Hedging, and determined
the note and conversion feature qualified as derivatives. The
Company classified the conversion feature as a derivative liability
at fair value. The initial fair value of the conversion feature was
determined to be $61,173. The Company recognized the maximum
intrinsic value of the embedded beneficial conversion feature of
$52,000, resulting in a loss on change in fair value of derivative
liabilities of $9,173, and reduced the carrying value of the
convertible note to $500. The carrying value will be accreted over
the term of the convertible note up to its face value of
$55,000.
During the year ended September 30, 2020, the Company defaulted on
the convertible note which resulted in a default penalty of $27,500
and the amendment of the conversion rate from 65% to 50% of the
lowest trading price during the 20 consecutive trading days prior
to conversion. The Company recognized the remaining debt
discount of $50,767 as accretion expense.
The financing costs were netted against the convertible note and
were being amortized over the term using the effective interest
rate method. During the year ended September 30, 2020, the Company
recognized accretion expense of $54,500 and a default penalty of
$27,500. As at September 30, 2020, the carrying value of the
convertible note was $82,500 (2019 - $nil) and the fair value of
the derivative liability was $146,272 (2019 - $nil).
(i)On
January 21, 2020, the Company entered into a convertible note with
an unrelated party for $66,150, of which $7,800 was paid directly
to third parties for financing costs and an original issue discount
of $3,150, resulting in proceeds to the Company of $55,200. The
note is due on January 21, 2021, and bears interest on the unpaid
principal balance at a rate of 8% per annum, payable in common
stock, which increases to 24% per annum upon default of the note.
The note may be converted at any time after the date of issuance
into shares of Company’s common stock at a conversion price equal
60% of the lowest trading price during the 20-trading day period
prior to the conversion date. In connection with the issuance of
the above convertible note, the Company evaluated the conversion
option for derivative treatment under ASC 815-15, Derivatives
and Hedging, and determined the note and conversion feature
qualified as derivatives. The Company classified the conversion
feature as a derivative liability at fair value. The initial fair
value of the conversion feature was determined to be $71,278.
The Company recognized the maximum intrinsic value of the embedded
beneficial conversion feature of $54,700, resulting in a loss on
change in fair value of derivative liabilities of $16,578, and
reduced the carrying value of the convertible note to $500. The
carrying value will be accreted over the term of the convertible
note up to its face value of $66,150.
The financing costs were netted against the convertible note and
are being amortized over the term using the effective interest rate
method. During the year ended September 30, 2020, the Company
recognized accretion expense of $13,202. As at September 30, 2020,
the carrying value of the convertible note was $13,702 (2019 -
$nil), net of an unamortized discount of $52,448 (2019 - $nil), and
the fair value of the derivative liability was $98,579 (2019 -
$nil).
23
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
6.Convertible
Notes (continued)
(j)On
January 22, 2020, the Company entered into a convertible note with
an unrelated party for $78,750, of which $9,750 was paid directly
to third parties for financing costs, resulting in proceeds to the
Company of $69,000. The note is due on January 22, 2021, and bears
interest on the unpaid principal balance at a rate of 10% per
annum, payable in common stock, which increases to 24% per annum
upon default of the note. The note may be converted at any time
after the date of issuance into shares of Company’s common stock at
a conversion price equal to 65% of the lowest trading price during
the 20-trading day period ending on the latest complete trading day
prior to the conversion date. In connection with the issuance of
the above convertible note, the Company evaluated the conversion
option for derivative treatment under ASC 815-15, Derivatives
and Hedging, and determined the note and conversion feature
qualified as derivatives. The Company classified the conversion
feature as a derivative liability at fair value. The initial fair
value of the conversion feature was determined to be $75,179. The
Company recognized the maximum intrinsic value of the embedded
beneficial conversion feature of $68,500, resulting in a loss on
change in fair value of derivative liabilities of $6,679, and
reduced the carrying value of the convertible note to $500. The
carrying value will be accreted over the term of the convertible
note up to its face value of $78,750.
The financing costs were netted against the convertible note and
are being amortized over the term using the effective interest rate
method. During the year ended September 30, 2020, the Company
defaulted on the convertible note and recognized accretion expense
of $78,250. As at September 30, 2020, the carrying value of the
convertible note was $78,750 and the fair value of the derivative
liability was $107,660 (2019 - $nil).
(k)On
February 4, 2020, the Company entered into a convertible note with
an unrelated party for $100,000, of which $16,970 was paid directly
to third parties for financing costs, resulting in proceeds to the
Company of $83,030. The note is due on February 4, 2021, and bears
interest on the unpaid principal balance at a rate of 12% per
annum, which increases to 24% per annum upon default of the note.
The note may be converted at any time after the date of issuance
into shares of Company’s common stock at a conversion price equal
to lower of: (i) the lowest trading price during the 10-trading day
period ending on the latest complete trading day prior to the
issuance date; or (ii) 60% of the average of the two lowest trading
prices during the 10-trading day period prior to the conversion
date. In connection with the issuance of the above convertible
note, the Company evaluated the conversion option for derivative
treatment under ASC 815-15, Derivatives and Hedging, and
determined the note and conversion feature qualified as
derivatives. The Company classified the conversion feature as a
derivative liability at fair value. The initial fair value of the
conversion feature was determined to be $125,640. The Company
recognized the maximum intrinsic value of the embedded beneficial
conversion feature of $82,530, resulting in a loss on change in
fair value of derivative liabilities of $43,110, and reduced the
carrying value of the convertible note to $500. The carrying value
will be accreted over the term of the convertible note up to its
face value of $100,000.
During the year ended September 30, 2020, the Company lender
converted $24,175 of the convertible note for common stock issuable
with a fair value of $180,000. Upon conversion, the Company
immediately recognized the related remaining debt discount of
$23,136 as accretion expense.
The financing costs were netted against the convertible note and
are being amortized over the term using the effective interest rate
method. During the year ended September 30, 2020, the Company
recognized accretion expense of $7,854. As at September 30, 2020,
the carrying value of the convertible note was $7,314 (2019 -
$nil), net of an unamortized discount of $68,511 (2019 - $nil), and
the fair value of the derivative liability was $110,135 (2019 -
$nil).
24
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
7.Derivative Liabilities
The embedded conversion option of certain of the Company’s
convertible notes described in Note 6 contain a conversion feature
that qualifies for embedded derivative classification. The
fair value of this liability will be re-measured at the end of
every reporting period and the change in fair value will be
reported in the statement of operations as a gain or loss on change
in fair value of derivative liabilities. The table below sets forth
a summary of changes in the fair value of the Company’s Level 3
financial liabilities:
|
|
|
$
|
|
|
|
|
|
Balance, September
30, 2018 and 2019
|
|
–
|
|
|
|
|
|
Addition
|
|
1,020,071
|
|
Conversion of convertible notes
|
|
(301,087)
|
|
Change in fair value
|
|
661,973
|
|
|
|
|
|
Balance, September
30, 2020
|
|
1,380,957
|
The Company uses Level 3 inputs for its valuation methodology for
the embedded conversion option liabilities as their fair values
were determined by using a binomial model based on various
assumptions. Significant changes in any of these inputs in
isolation would result in a significant change in the fair value
measurement. As required, these are classified based on the lowest
level of input that is significant to the fair value measurement.
The following table shows the weighted-average assumptions used in
the calculations:
|
|
Expected
volatility
|
Risk-free interest rate
|
Expected dividend yield
|
Expected life (in years)
|
|
|
|
|
|
|
|
As at date of
issuance
|
161.13%
|
1.19%
|
0%
|
0.87
|
|
As at September 30,
2020
|
295.81%
|
0.09%
|
0%
|
0.20
|
8.Related
Party Transactions
(a)As
at September 30, 2020, the Company owed $453,697 (Cdn$604,366)
(2019 - $372,799 (Cdn$493,694)) to the President of the Company,
which is non-interest bearing, unsecured, and due on demand. During
the year ended September 30, 2020, the Company incurred consulting
fees of $93,000 (2019 - $90,423) to the President of the
Company.
(b)As
at September 30, 2020, the Company owed $nil (2019 - $47,367
(Cdn$62,730)) to a company controlled by the President of the
Company, which is non-interest bearing, unsecured, and due on
demand.
(c)As
at September 30, 2020, the Company owed $55,177 (Cdn$73,500) (2019
- $55,500 (Cdn$73,500)) to the father of the President of the
Company, which is non-interest bearing, unsecured, and due on
demand.
(d)As
at September 30, 2020, the Company owed $nil (2019 - $25,825
(Cdn$34,200)) to a Company owned by the father of the President of
the Company, which is included in accounts payable and accrued
liabilities. The amount due is non-interest bearing, unsecured, and
due on demand.
(e)As
at September 30, 2020, the Company owed $347,229 (Cdn$462,540)
(2019 – $291,504 (Cdn$386,039)) to a company controlled by the
Chief Financial Officer of WFS, which is included in accounts
payable and accrued liabilities. The amount due is non-interest
bearing, unsecured, and due on demand. During the year ended
September 30, 2020, the Company incurred consulting fees of $93,000
(2019 - $90,423) to the company controlled by the Chief Financial
Officer of WFS.
(f)During
the year ended September 30, 2020, the Company incurred research
and development fees of $nil (2019 - $3,956), license application
fees of $nil (2019 - $3,758) and expenses related to the
construction of the cannabis construction complex of $nil (2019 -
$8,308) (Cdn$11,025) to the Chief Financial Officer of
WFS.
25
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
9.Common Stock
Year ended September
30, 2020
(a)On
March 24, 2020, the Company issued 78,064 shares of common stock
with a fair value of $21,077 pursuant to the conversion of $10,000
of a convertible note (Note 6(b)).
(b)On
April 1, 2020, the Company issued 6,000,000 shares of common stock
pursuant to the conversion of $600 of a convertible note (Note
6(a)).
(c)On
April 2, 2020, the Company issued 136,612 shares of common stock
with a fair value of $20,492 pursuant to the conversion of $10,000
of a convertible note (Note 6(b)).
(d)On
April 16, 2020, the Company issued 351,288 shares of common stock
with a fair value of $38,642 pursuant to the conversion of $15,000
of a convertible note (Note 6(b)).
(e)On
April 30, 2020, the Company issued 423,729 shares of common stock
with a fair value of $47,881 pursuant to the conversion of $15,000
of a convertible note (Note 6(b)).
(f)On
May 4, 2020, the Company issued 508,475 shares of common stock with
a fair value of $33,915 pursuant to the conversion of $18,000 of a
convertible note (Note 6(b)).
(g)On
June 30, 2020, the Company issued 8,000,000 shares of common stock
pursuant to the conversion of $800 of a convertible note (Note
6(a)).
(h)On
July 9, 2020, the Company issued 22,000 shares of common stock with
a fair value of $10,780 for management consulting and strategic
business advisory services.
(i)On
July 31, 2020, the Company issued 4,525,000 shares of common stock
pursuant to the conversions of an aggregate of $453 of a
convertible note.
(j)On
July 31, 2020, the Company issued 114,286 units at $0.35 per unit
for proceeds of $40,000. Each unit consisted of one share of common
stock and one common share purchase warrant exercisable at $0.55
per share until July 16, 2022.
(k)As
at September 30, 2020, the Company received a conversion notice for
2,000,000 shares of common stock with a fair value of $180,000
pursuant to the conversion of $30,750 of a convertible note.
Year ended September
30, 2019
(l)On
December 6, 2018, the Company issued 2,000,000 shares of common
stock upon the conversion of $200 of Series A convertible notes at
$0.0001 per share (Note 6 (a)).
(m)On
December 6, 2018, the Company issued 51,735 shares of common stock
with a fair value of $121,554 for financing costs. The fair value
of common stock was determined based on the end of day trading
price of the Company’s common stock on the date of
issuance.
(n)On
February 1, 2019, the Company issued 1,000,000 shares of common
stock upon the conversion of $100 of Series A convertible notes at
$0.0001 per share (Note 6 (a)).
(o)On
August 19, 2019, the Company issued 900,000 shares of common stock
upon the conversion of $90 of Series A convertible notes at $0.0001
per share (Note 6 (a)).
(p)On
September 17, 2019, the Company issued 75,000 shares of common
stock with a fair value of $172,500 for consulting fees. The fair
value of common stock was determined based on the end of day
trading price of the Company’s common stock on the date of
issuance.
10.Share Purchase Warrants
The following table summarizes the continuity of the Company’s
share purchase warrants:
|
|
Number
of
warrants
|
Weighted average exercise price
$
|
|
|
|
|
|
Balance,
September 30, 2018 and 2019
|
–
|
–
|
|
|
|
|
|
Issued
|
114,286
|
0.55
|
|
|
|
|
|
Balance,
September 30, 2020
|
114,286
|
0.55
|
The share purchase warrants have an expiry date of July 16,
2022.
26
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
11.Commitments
(a)Effective
December 11, 2017, the Company entered into a binding Letter of
Intent (“LOI”) with Alliance Growers Corp. (“Alliance”), whereby
the Company will build a new cannabis biotech complex located in
Deroche, British Columbia, through their subsidiary, 115BC. On
January 25, 2019, the Company’s subsidiaries WFS and 115BC entered
into an option agreement with Alliance, which superseded the LOI
entered into on December 11, 2017. The option agreement grants an
option to Alliance to purchase 10% equity interest in 115BC for
Cdn$1,350,000 and previously granted a second option to purchase an
additional 20% equity interest in 115BC for funding of 30% of the
total construction and equipment costs for the biotech complex less
Cdn$1,350,000. On January 25, 2019, 115BC issued 8 shares of common
stock to Alliance upon exercise of the first option for
consideration of $1,018,182 (Cdn$1,350,008), which was recognized
as additional paid-in capital. The second option expired
unexercised. As at September 30, 2020, the Company received
advances of $56,303 (Cdn$75,000) (2019 - $56,634 (Cdn$75,000)) from
Alliance, which is unsecured, non-interest bearing, and due on
demand.
(b)On
November 22, 2019, the Company entered into an equity purchase
agreement with an unrelated party, whereby the third party is to
purchase up to $10,000,000 of the Company’s common stock. The
equity purchase agreement is effective for a term of 2 years from
the effective date of the registration statement. The purchase
price would be 85% of the market price. In return, the Company
issued a promissory note of $40,000 (Refer to Note 5(a)). In
addition, the third party is required to pay an additional
commitment fee of $10,000, of which $5,000 was paid upon signing
the term sheet and the remaining $5,000 is due upon completion of
the first tranche of the financing.
12.Income
Taxes
The Company is subject to Canadian federal and provincial taxes at
an approximate rate of 27% (2019 – 27%) and United States
federal and state income taxes at an approximate rate of 21% (2019
– 21%). The reconciliation of the provision for income taxes
at the federal statutory rate compared to the Company’s income tax
expense as reported is as follows:
|
|
2020
$
|
2019
$
|
|
|
|
|
|
Income tax recovery at statutory rate
|
(531,798)
|
(177,541)
|
|
|
|
|
|
Permanent differences and other
|
288,722
|
(5,970)
|
|
Change in enacted tax rate
|
–
|
(401,110)
|
|
Change in valuation allowance
|
243,076
|
584,621
|
|
|
|
|
|
Income tax provision
|
–
|
–
|
The significant components of deferred income tax assets and
liabilities are as follows:
|
|
2020
$
|
2019
$
|
|
|
|
|
|
Net
operating losses carried forward
|
1,691,669
|
1,567,688
|
|
Property and equipment
|
52,954
|
(66,141)
|
|
Valuation allowance
|
(1,744,623)
|
(1,501,547)
|
|
|
|
|
|
Net
deferred income tax asset
|
–
|
–
|
The 2017 Act reduces the corporate tax rate from 34% to 21% for tax
years beginning after December 31, 2017. For net operating losses
arising after December 31, 2017, the 2017 Act limits a taxpayer’s
ability to utilize net operating losses carryforwards to 80% of
taxable income. In addition, net operating losses arising after
2017 can be carried forward indefinitely, but carryback is
generally prohibited. Net operating losses generated in tax years
beginning before January 1, 2018 will not be subject to the taxable
income limitation. The 2017 Act would generally eliminate the
carryback of all net operating losses arising in a tax year ending
after 2017 and instead would permit all such net operating losses
to be carried forward indefinitely.
27
PHARMAGREEN
BIOTECH INC.
Notes
to the Consolidated Financial Statements
Year Ended September
30, 2020, and 2019
(Expressed in U.S. dollars)
12.Income
Taxes (continued)
The Company has net operating losses carried forward of $6,509,481
which may be carried forward to apply against future years’ taxable
income, subject to the final determination by taxation authorities,
expiring in the following years:
|
|
Canada
$
|
USA
$
|
|
|
|
|
|
2029
|
–
|
54,040
|
|
2030
|
–
|
101,259
|
|
2034
|
401,530
|
–
|
|
2035
|
740,776
|
1,003
|
|
2036
|
1,008,613
|
1,000
|
|
2037
|
1,229,859
|
–
|
|
2038
|
1,575,665
|
91,177
|
|
2039
|
272,632
|
493,609
|
|
2040
|
182,216
|
356,102
|
|
|
|
|
|
|
5,411,291
|
1,098,190
|
13.Subsequent
Events
(a)On
October 13, 2020. The Company filed a certificate of amendment to
its articles of incorporation, whereby it increased the authorized
capital to 2,000,000,000 shares of common stock with a par value of
$0.001 per share and 1,000,000 preferred shares with a par value of
$0.001.
(b)Subsequent
to the year ended September 30, 2020, the Company issued a total of
144,315,380 shares of common stock pursuant to conversions of
convertible notes of an aggregate of $645,629 of principal, $31,716
of accrued interest, and $32,500 in conversion fees and
penalties.
(c)Subsequent
to the year ended September 30, 2020, the Company closed a private
placement for units of the company consisting of one common share
and one share purchase unit at $0.005 per unit. The share purchase
warrants have an exercise price of $0.05 exercisable for 24 months
for the purchase of an additional share. The Company issued
5,400,000 units to various subscribers for proceeds of $27,000.
(d)Subsequent
to year end the Company issued 90,000 shares for fair value of
$1,215 for a consulting agreement entered into with an arms-length
party.
28
Item 9. Changes in and Disagreements
With Accountants on Accounting and Financial Disclosure.
None
Item 9A. Controls and
Procedures.
Evaluation of
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to
be disclosed in our reports filed or submitted under the Securities
Exchange Act of 1934 is recorded, processed, summarized and
reported, within the time period specified in the SEC’s rules and
forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that
information required to be disclosed in our reports filed or
submitted under the Securities Exchange Act of 1934 is accumulated
and communicated to management including our principal executive
officer and principal financial officer as appropriate, to allow
timely decisions regarding required disclosure.
In connection
with this annual report, as required by Rule 13a -15d and 15d-15e
under the Securities Exchange Act of 1934, we have carried out an
evaluation of the effectiveness of the design and operation of our
company’s disclosure controls and procedures. This evaluation was
carried out under the supervision and with the participation of our
company’s management, including our company’s principal executive
officer and principal financial officer. Based upon that
evaluation, our company’s principal executive officer and principal
financial officer concluded that as of September 30, 2020, our
disclosure controls and procedures were not effective due to the
existence of material weaknesses in our internal controls over
financial reporting.
Management’s
Annual Report on Internal Control Over Financial Reporting
Our management
is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial
reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated
under the Securities Exchange Act of 1934 as a process designed by,
or under the supervision of, the Company’s Principal Executive and
Principal Financial officer and effected by the Company’s board of
directors, management and other personnel to provide reasonable
assurance regarding the reliability of our financial reporting and
the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the
United States of America and includes those policies and procedures
that:
1.Pertains
to the maintenance of records that in reasonable detail accurately
and fairly reflect our transactions and disposition of
assets;
2.Provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of our financial statements in accordance with
accounting principles generally accepted in the United States of
America and receipts and expenditures are being made in accordance
with authorizations of management and directors; and
3.Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of company assets that
could have a material effect on our financial statements.
Management
assessed the effectiveness of the Company’s internal control over
financial reporting based on the criteria for effective internal
control over financial reporting established in SEC guidance on
conducting such assessments as of the end of the period covered by
this report. Management conducted the assessment based on certain
criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission in 2013. As of September 30, 2020, management determined
material weaknesses occurred over our internal control over
financial reporting as discussed below.
The matters
involving internal controls and procedures that the Company’s
management considered to be material weaknesses under the standards
of the Public Company Accounting Oversight Board were: (1) lack of
a functioning audit committee and lack of a majority of outside
directors on the Company's board of directors, resulting in
ineffective oversight in the establishment and monitoring of
required internal controls and procedures; (2) inadequate
segregation of duties consistent with control objectives; (3)
insufficient written policies and procedures for accounting and
financial reporting with respect to the requirements and
application of US GAAP and SEC disclosure requirements; and (4)
ineffective controls over period end financial disclosure and
reporting processes. Due to these material weaknesses
management concluded that our internal control over financial
reporting was not effective as of September 30, 2020.
29
Material
Weakness Discussion and Remediation
Management
believes that the material weaknesses set forth in items (2), (3)
and (4) above did not have an effect on the Company's previous
reported financial results. However, management believes that the
lack of a functioning audit committee and lack of a majority of
outside directors on the Company's board of directors, resulting in
ineffective oversight in the establishment and monitoring of
required internal controls and procedures can result in the
Company's determination to its financial statements for the future
periods.
We are committed
to improving our financial organization. As part of this
commitment, we will create a position to segregate duties
consistent with control objectives and will increase our personnel
resources and technical accounting expertise within the accounting
function when funds are available to the Company: i) Appointing one
or more outside directors to our board of directors who shall be
appointed to the audit committee of the Company resulting in a
fully functioning audit committee who will undertake the oversight
in the establishment and monitoring of required internal controls
and procedures; and ii) Preparing and implementing sufficient
written policies and checklists which will set forth procedures for
accounting and financial reporting with respect to the requirements
and application of US GAAP and SEC disclosure requirements.
Management
believes that the appointment of one or more outside directors, who
shall be appointed to a fully functioning audit committee, will
remedy the lack of a functioning audit committee and a lack of a
majority of outside directors on the Company's Board. In addition,
management believes that preparing and implementing sufficient
written policies and checklists will remedy the following material
weaknesses (i) insufficient written policies and procedures for
accounting and financial reporting with respect to the requirements
and application of US GAAP and SEC disclosure requirements; and
(ii) ineffective controls over period end financial close and
reporting processes. Further, management believes that the hiring
of additional personnel who have the technical expertise and
knowledge will result proper segregation of duties and provide more
checks and balances within the department. Additional personnel
will also provide the cross training needed to support the Company
if personnel turn over issues within the department occur. This
coupled with the appointment of additional outside directors will
greatly decrease any control and procedure issues the company may
encounter in the future.
We 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 are committed to taking further action and
implementing additional enhancements or improvements, as necessary
and as funds allow.
This annual
report does not include an attestation report of the company’s
registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to
attestation by the company’s registered public accounting firm
pursuant to temporary rules of the Securities and Exchange
Commission that permit the Company to provide only management’s
report in this annual report.
Changes in
Internal Control Over Financial Reporting
There have been
no changes in our internal control over financial reporting
identified in connection with the evaluation required by paragraph
(d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred
during the small business issuer's last fiscal year that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Item 9B. Other
Information.
None
30
PART III
Item 10. Directors, Executive
Officers and Corporate Governance.
Identification of directors and executive officers
Our directors
serve until their successor are elected and qualified. Our officers
are elected by the Board of Directors to a term of one (1) year and
serve until their successor(s) is duly elected and qualified, or
until they are removed from office. The Board of Directors has no
nominating or compensation committees. The company’s current Audit
Committee consists of our officers and directors.
Our directors
serve until a successor is elected and qualified. Our officers are
elected by the Board of Directors to a term of one (1) year and
serves until their successor(s) is duly elected and qualified, or
until they are removed from office. The Board of Directors has no
nominating or compensation committees. The company’s current Audit
Committee consists of our officers and directors.
The name, age
and position of our present officers and directors is set forth
below:
Management
Directors of the
Company are elected by the shareholders to a term of one year and
serve until their successors are elected and qualified.
Officers of the Company are appointed by the Board of
Directors to a term of one year and serve until their successors
are duly appointed and qualified, or until the officer is removed
from office. The Board of Directors has no nominating, auditing or
compensation committees.
Management of
Pharmagreen Biotech Inc.
|
|
|
|
|
|
Name
|
Age
|
Position
|
Director
Since
|
|
Peter Wojcik
|
49
|
President/Sole
Director
|
February 2, 2018
|
Peter
Wojcik B.A. Adv., President / Sole
Director
A graduate of
advanced degree in Economics from the University of
Regina. Additionally, Mr.
Wojcik has a natural compassion for the health and well-being of
others, which has naturally led to his decade-plus experience in
the research and application of cannabis and its extracts as a
therapeutic agent, specifically in their application in the
treatment of illness and disease for individuals.
May 2018 to
September 30, 2020 (Current) Mr. Wojcik is President and Director
of Pharmagreen Biotech, Inc.
Mr. Wojcik
duties include include making major corporate decisions, managing
the overall operations and resources of a company, acting as the
main point of communication between the board of directors and
corporate operations, and being the public face of the company.
Mr. Wojcik has
held the offices/positions since February 2, 2018 to his respective
office/positions, is expected to hold said office/position until
the next annual meeting of the shareholders. The persons named
above are the company’s only officers, directors, promoters and
control persons.
Management of WFS Pharmagreen
Inc. (wholly owned subsidiary of Pharmagreen Biotech
Inc.)
Directors of the
Company are elected by the shareholders to a term of one year and
serve until their successors are elected and qualified.
Officers of the Company are appointed by the Board of
Directors to a term of one year and serve until their successors
are duly appointed and qualified, or until the officer is removed
from office. The Board of Directors has no nominating, auditing or
compensation committees.
|
|
|
|
|
|
Name
|
Age
|
Position
|
Director
Since
|
|
Peter Wojcik
|
49
|
Chief Executive
Officer / Director
|
December 19, 2013
|
|
Terry Kwan
|
73
|
Chief Financial
Officer / Director
|
July 22, 2015
|
|
Fawzia Afreen
|
54
|
Chief Operations
Officer
|
|
31
Mr. Wojcik has
held the offices/positions since the inception of the Company and
Mr. Kwan was appointed on July 22, 2015 to his respective
office/positions, both are expected to hold said offices/positions
until the next annual meeting of the shareholders. The persons
named above are the company’s only officers, directors, promoters
and control persons.
WFS
Pharmagreen Inc. (wholly owned subsidiary of Pharmagreen
Biotech Inc.)
Peter
Wojcik B.A. Adv., Chief Executive Officer /
Director
December 2013 to
current Mr. Wojcik is Chief Executive Officer of WFS Pharmagreen
Inc. Mr. Wojcik duties for WFS include day to day management of the
company, oversight for the construction project development,
coordinating with Engineering firms and project manager, in charge
of Health Canada cannabis license application process.
Terry
Kwan B. Comm., CPA-CA, Chief Financial
Officer / Director
Terry is a
graduate from the University of British Columbia with a Bachelor of
Commerce and is a chartered professional accountant with the
Institute of Chartered Professional Accountants of B.C. He brings
more than four decades of significant finance related experience in
both the private and public sectors.
2005 -2015 Mr. Kwan
worked for Global Securities Corp. and Global Securities Futures
Corp., where he was CFO, a compliance officer and broker.
August-2013 to
current Mr. Kwan is CFO and Director of WFS Pharmagreen Inc.
His
responsibilities include financial management and reporting and
corporate structuring. He sits on the business development
committee and the tissue culture complex planning, design and
construction committees. He is the “Head of Security” for
purposes of the application for the Cannabis license application
with Health Canada. Additional responsibility will be to design and
implement a reporting system that meets both Health Canada
Guidelines and good corporate governance.
Fawzia
Afreen Ph.D., Chief Operations
Officer
Fawzia has a
Ph.D. in Botany from University of Hull (UK). She has achieved
designation as a JSPS Fellow from Chiba University, Japan, teaching
M.Sc. courses in (I) Protected Horticulture; (ii) Plant Tissue
Culture, and (iii) Plant Production in Controlled Environment. In
addition to holding three international patents, publishing over 40
articles in peer-reviewed international journals and publishing two
books, Fawzia brings 16 years of experience in plant horticulture,
plant tissue culture, plant production and an increase of secondary
metabolites in a controlled environment to the Company.
Consulting role
from June of 2014 to June
of 2015 and on January 1, 2018 Dr. Fawzia Afreen became the Chief
Operating Officer of WFS Pharmagreen Inc.
Dr. Afreen
duties for WFS include, the head of the committee for facility
design, assisting in building engineering plans, planning and
selecting of equipment requirements, screening and hiring process
of future facility employees, in charge of development of standard
operating procedures, and quality control person for the cannabis
license.
1155907 B.C.
Ltd. (wholly owned subsidiary of WFS Pharmagreen Inc.)
Directors of the
Company are elected by the shareholders to a term of one year and
serve until their successors are elected and qualified.
Officers of the Company are appointed by the Board of
Directors to a term of one year and serve until their successors
are duly appointed and qualified, or until the officer is removed
from office. The Board of Directors has no nominating, auditing or
compensation committees.
|
|
|
|
|
|
Name
|
Age
|
Position
|
Director Since
|
|
Peter
Wojcik
|
49
|
Chief
Executive Officer / Director
|
March
2, 2018
|
Mr. Wojcik has
held the offices/positions since March 2, 2018 to his respective
office/positions, is expected to hold said office/position until
the next annual meeting of the shareholders. The persons named
above are the company’s only officers, directors, promoters and
control persons.
This company
will be used as an operating entity, once the Biotech Complex is
built and occupied.
32
Our directors
and officers do not hold positions on the board of directors of any
other U.S. reporting companies and have no affiliation with any
company that has filed for bankruptcy within the last five years.
The Company is not aware of any proceedings to which any of the
Company’s officers or directors, or any associate of any such
officer or director, is a party adverse to the Company or any of
the Company’s subsidiaries or has a material interest adverse to it
or any of its subsidiaries.
The Company
believes that Mr. Wojcik’s business experience and his
entrepreneurial success make him well suited to serve as our
officer and director.
Our
directors and officers do not hold positions on the board of
directors of any other U.S. reporting companies and has no
affiliation with any company that has filed for bankruptcy within
the last five years. The Company is not aware of any proceedings to
which any of the Company’s officers or directors, or any associate
of any such officer or director, is a party adverse to the
Company.
Significant
Employees
The
Company does not, at present, have any employees other than the
current officer and director. We have not entered into any
employment agreements, as we currently do not have any employees
other than the current officer and director.
Family Relations
There are no family relationships
among the Directors and Officers of Pharmagreen Biotech
Inc.
Involvement in Legal Proceedings
No
executive Officer or Director of the Company has been convicted in
any criminal proceeding or is the subject of a criminal proceeding
that is currently pending.
No
Executive Officer or Director of the Company is involved in any
bankruptcy petition by or against any business in which they are a
general partner or executive officer at this time or within two
years of any involvement as a general partner, executive officer,
or Director of any business.
Corporate
Governance
The Company does
not have a compensation committee and it does not have an audit
committee financial expert. It does not have a compensation
committee because its Board of Directors consists of only one
director who is not independent as he is also an officer.
There is no independent audit committee financial expert
because it is believed the cost related to retaining a financial
expert at this time is prohibitive in the circumstances of the
Company. Further, because there are only minimal operations, at the
present time, it is believed the services of a financial expert are
not warranted.
Conflicts of
Interest
The Company does
not currently foresee any conflict of interest.
Section 16(a)
Beneficial Ownership Reporting Compliance
16(a) of the
Securities Exchange Act of 1934 requires the company directors and
executive officers, and persons who own more than ten percent of
the Company’s common stock, to file with the Securities and
Exchange Commission initial reports of ownership and reports of
changes of ownership of its common stock. Officers, directors and
greater than ten percent shareholders are required by SEC
regulation to furnish the company with copies of all Section 16(a)
forms they file. The Company intends to ensure to the best of
its ability that all Section 16(a) filing requirements applicable
to its officers, directors and greater than ten percent beneficial
owners are complied with in a timely fashion.
33
Item 11. Executive Compensation.
The
table below summarizes all compensation awarded to, earned by, or
paid to our named executive officers and director for all services
rendered in all capacities to us for the fiscal year September 30,
2020, and fiscal year September 30, 2019. The Board of Directors
may adopt an incentive stock option plan for the executive officers
that would result in additional compensation.
Summary
Executive Compensation Table
|
Name
and
Principal
Position
|
Fiscal
Year
Ended
09/30
|
Salary and
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All Other
Compensation
($)
|
Total
($)
|
|
Peter Wojcik
(1)(2)
President, CEO,
Secretary, Treasurer and Director
|
2020
|
93,000
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
93,000
|
|
|
2019
|
90,423
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
90,423
|
|
Terry Kwan
(1)(3) Principle Accounting Officer
|
2020
|
93,000
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
93,000
|
|
|
2019
|
90,423
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
90,423
|
|
Fawzia Afreen
(4)
COO
|
2020
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
|
2019
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
(1) Peter Wojcik
and Terry Kwan, two Company’s officers and sole director currently
devote approximately 45-55 hours per week to manage the affairs of
the Company, including, but not limited to the upkeep of
Pharmagreen Biotech Inc., and its subsidiaries.
(2) Mr. Wojcik
is the President, CEO, Secretary, Treasurer and a sole Director of
Pharmagreen Biotech Inc., he is the CEO, Director of the subsidiary
WFS Pharmagreen Inc. and CEO, Director of the subsidiary 1155907
B.C. Ltd.
(3) Mr. Kwan is
the CFO and a Director of the WFS Pharmagreen Inc., wholly owned
subsidiary of Pharmagreen Biotech Inc., since July 22, 2015. Mr
Kwan is the Principle Accounting Officer of Pharmagreen Biotech
Inc.
(4) Dr. Afreen
has been an officer of WFS Pharmagreen Inc., wholly owned
subsidiary of Pharmagreen Biotech Inc., since January 1, 2018. Dr.
Afreen is employed by Botanical Research In Motion Inc., a British
Columbia corporation owned by Peter Wojcik. Because of Dr. Afreen’s
close association with Mr. Wojcik and her work at Botanical
Research In Motion Inc., she volunteers a limited amount of time to
act as COO of Pharmagreen Biotech, Inc. and WFS Pharmagreen
Inc.
Narrative
Disclosure to Summary Compensation Table
There are no
compensatory plans or arrangements, including payments to be
received from the Company with respect to any executive officer,
that would result in payments to such person because of his or her
resignation,
34
retirement or other termination of employment with
the Company, or its subsidiaries, any change in control, or a
change in the person’s responsibilities following a change in
control of the Company.
Outstanding
Equity Awards at Fiscal Year-End
No executive
officer received any equity awards, or holds exercisable or
unexercisable options, as of the year ended September 30, 2020.
Stock Awards Plan
The
company has not adopted a Stock Awards Plan, but may do so in the
future. The terms of any such plan have not been determined.
Compensation
Committee
The Company
currently does not have a compensation committee of the Board of
Directors. The Board of Directors as a whole determines executive
compensation.
There have never
been any grants of stock options to our officers or directors.
Our directors
are appointed for a one-year term to hold office until the next
annual general meeting of our shareholders or until their
successors are elected or appointed. Our officers are
appointed by our board of directors and serve at the discretion of
the board.
We believe Mr.
Wojcik is qualified to act as director based upon his knowledge of
business practices and, in particular, the regulations relating to
public companies.
Mr. Wojcik is
not independent as that term is defined in Section 803 of the NYSE
MKT Company Guide.
We do not have a
financial expert as that term is defined by the Securities and
Exchange Commission.
Our Board of
Directors does not have standing audit, nominating, or compensation
committees, committees performing similar functions, or charters
for such committees. Instead, the functions that might be delegated
to such committees are carried out by our Directors, to the extent
required. Our Directors believe that the cost of associated with
such committees, has not been justified under our current
circumstances.
Compensation
of Directors
During the years
ended September 30, 2020, and 2019, we did not compensate any
person for serving as a director.
There have never
been any grants of stock options to our officers or directors.
|
|
|
|
|
|
|
|
|
|
|
Name
|
Year
|
Fees
earned or paid in cash
0($)
|
Stock awards
($)
|
Option awards
($)
|
Non-equity incentive plan
compensation
($)
|
Nonqualified deferred
compensation earnings
($)
|
All
other compensation
($)
|
Total
($)
|
|
Peter
Wojcik
|
2020
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
|
2019
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
Terry
Kwan
|
2020
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
|
2019
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
Fawzia
Afreen
|
2020
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
|
2019
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
Director Independence
35
The Board of
Directors is currently composed of one member. Peter Wojcik does
not qualify as an independent director in accordance with the
published listing requirements of the NASDAQ Global Market. The
NASDAQ independence definition includes a series of objective
tests, such as that the director is not, and has not been for at
least three years, one of the Company’s employees and that neither
the director, nor any of his family members has engaged in various
types of business dealings with us. In addition, the board of
directors has not made a subjective determination as to each
director that no relationships exist which, in the opinion of the
board of directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director, though such subjective determination is required by the
NASDAQ rules. Had the board of directors made these determinations,
the board of directors would have reviewed and discussed
information provided by the directors and the Company with regard
to each director’s business and personal activities and
relationships as they may relate to the Company and its
management.
Item 12. Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The following
table sets forth certain information at September 30, 2020, with
respect to the beneficial ownership of shares of Common Stock by
(i) each person known to the Company who owns beneficially more
than 5% of the outstanding shares of Common Stock (based upon
reports which have been filed and other information known to the
Company), (ii) each of the Directors, (iii) each of the Executive
Officers and (iv) all of the Executive Officers and Directors as a
group. Unless otherwise indicated, each stockholder has sole voting
and investment power with respect to the shares shown. As of
September 30, 2020, the Company had 95,806,289 shares of Common
Stock issued and outstanding.
|
|
|
|
|
|
|
Beneficial
Name
of
Owner
|
|
|
No.
of
Shares
After Offering
|
Percentage of Ownership as at September 30, 2020
|
|
Peter Wojcik(2)
|
|
|
35,077,500
|
36.614%
|
|
Terry
Kwan(3)
|
|
|
5,000,000
|
5.219%
|
|
Fawzia
Afreen(4)
|
|
|
2,000,000
|
2.088%
|
|
All
Officers and
Directors as a Group(5)
|
|
|
42,077,500
|
43.921%
|
|
Wlaydyslaw Wojcik(6)
|
|
|
10,730,000
|
11.199%
|
(1) Under Rule 13d-3 promulgated under the Exchange Act, a
beneficial owner of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which
includes the power to vote, or to direct the voting of shares; and
(ii) investment power, which includes the power to dispose or
direct the disposition of shares. Certain shares may be deemed to
be beneficially owned by more than one person (if, for example,
persons share the power to vote or the power to dispose of the
shares). In addition, shares are deemed to be beneficially owned by
a person if the person has the right to acquire the shares (for
example, upon exercise of an option) within 60 days of the date as
of which the information is provided. In computing the percentage
ownership of any person, the amount of shares is deemed to include
the amount of shares beneficially owned by such person (and only
such person) by reason of these acquisition rights.
(2) Peter Wojcik has 31,077,500 shares in his name and his group
includes, Jordan Wojcik, son of Peter Wojcik, residing at same
residence who has 1,000,000 shares, Jessica Wojcik, daughter of
Peter Wojcik, residing at same residence, who has 1,000,000 shares
and Leonna Wojcik, wife of Peter Wojcik, residing at same
residence, who has 2,000,000, who collectively hold 35,077,500
shares. The residence is located at 2987 Blackbear Court,
Coquitlam, B.C., Canada, V3E 3A2.
(3) Terry Kwan is the current officer and director of WFS
Pharmagreen Inc., the wholly owned subsidiary of Pharmagreen
Biotech Inc. The 5,000,000 shares are held in TK Investments Ltd.,
and he may be deemed to have voting and investment
power over the shares held thereby.
(4) Fawzia Afreen is the current Chief Operating Officer of WFS
Pharmagreen Inc., the wholly owned subsidiary of Pharmagreen
Biotech Inc.
(5) All officers and directors as a group includes the officer and
director of Pharmagreen Biotech Inc. and its wholly owned
subsidiary WFS Pharmagreen Inc.
36
(6) Wladyslaw Wojcik has 4,830,000 shares in his name that he
controls and he also has 5,900,000 in W. Wojcik Medical
Professional Corporation, which he controls.
Item 13. Certain
Relationships and Related Transactions, and Director
Independence.
·As at
September 30, 2020, the Company owed $453,697 (Cdn$604,366) (2019 -
$372,799 (Cdn$493,694)) to the President of the Company, which is
non-interest bearing, unsecured, and due on demand. During the year
ended September 30, 2020, the Company incurred consulting fees of
$93,000 (2019 - $90,423) to the President of the Company.
·As at
September 30, 2020, the Company owed $nil (2019 - $47,367
(Cdn$62,730)) to a company controlled by the President of the
Company, which is non-interest bearing, unsecured, and due on
demand.
·As at
September 30, 2020, the Company owed $55,177 (Cdn$73,500) (2019 -
$55,500 (Cdn$73,500)) to the father of the President of the
Company, which is non-interest bearing, unsecured, and due on
demand.
·As at
September 30, 2020, the Company owed $nil (2019 - $25,825
(Cdn$34,200)) to a Company owned by the father of the President of
the Company, which is included in accounts payable and accrued
liabilities. The amount due is non-interest bearing, unsecured, and
due on demand.
·As at
September 30, 2020, the Company owed $347,229 (Cdn$462,540) (2019
– $291,504 (Cdn$386,039)) to a company controlled by the Chief
Financial Officer of WFS, which is included in accounts payable and
accrued liabilities. The amount due is non-interest bearing,
unsecured, and due on demand. During the year ended September 30,
2020, the Company incurred consulting fees of $93,000 (2019 -
$90,423) to the company controlled by the Chief Financial Officer
of WFS.
·During
the year ended September 30, 2020, the Company incurred research
and development fees of $nil (2019 - $3,956), license application
fees of $nil (2019 - $3,758) (Cdn$ 4,988) and expenses related to
the construction of the cannabis construction complex of $nil (2019
- $8,308) (Cdn$11,025) to the Chief Financial Officer of
WFS.
Common Stock
Year ended September
30, 2020
·On
March 24, 2020, the Company issued 78,064 shares of common stock
with a fair value of $21,077 pursuant to the conversion of $10,000
of a convertible note.
·On
April 1, 2020, the Company issued 6,000,000 shares of common stock
pursuant to the conversion of $600 of a convertible note.
·On
April 2, 2020, the Company issued 136,612 shares of common stock
with a fair value of $20,492 pursuant to the conversion of $10,000
of a convertible note.
·On
April 16, 2020, the Company issued 351,288 shares of common stock
with a fair value of $38,642 pursuant to the conversion of $15,000
of a convertible note.
·On
April 30, 2020, the Company issued 423,729 shares of common stock
with a fair value of $47,881 pursuant to the conversion of $15,000
of a convertible note.
·On
May 4, 2020, the Company issued 508,475 shares of common stock with
a fair value of $33,915 pursuant to the conversion of $18,000 of a
convertible note.
·On
June 30, 2020, the Company issued 8,000,000 shares of common stock
pursuant to the conversion of $800 of a convertible note.
·On
July 9, 2020, the Company issued 22,000 shares of common stock with
a fair value of $10,780 for management consulting and strategic
business advisory services.
·On
July 31, 2020, the Company issued 4,525,000 shares of common stock
pursuant to the conversions of an aggregate of $453 of a
convertible note.
·On
July 31, 2020, the Company issued 114,286 units at $0.35 per unit
for proceeds of $40,000. Each unit consisted of one share of common
stock and one common share purchase warrant exercisable at $0.55
per share until July 16, 2022.
37
·As at
September 30, 2020, the Company received a conversion notice for
2,000,000 shares of common stock with a fair value of $180,000
pursuant to the conversion of $30,750 of a convertible note.
Year ended September
30, 2019
·On
December 6, 2018, the Company issued 2,000,000 shares of common
stock upon the conversion of $200 of Series A convertible notes at
$0.0001 per share.
·On
December 6, 2018, the Company issued 51,735 shares of common stock
with a fair value of $121,554 for financing costs. The fair value
of common stock was determined based on the end of day trading
price of the Company’s common stock on the date of
issuance.
·On
February 1, 2019, the Company issued 1,000,000 shares of common
stock upon the conversion of $100 of Series A convertible notes at
$0.0001 per share.
·On
August 19, 2019, the Company issued 900,000 shares of common stock
upon the conversion of $90 of Series A convertible notes at $0.0001
per share.
·On
September 17, 2019, the Company issued 75,000 shares of common
stock with a fair value of $172,500 for consulting fees. The fair
value of common stock was determined based on the end of day
trading price of the Company’s common stock on the date of
issuance.
Item 14. Principal Accounting
Fees and Services.
During the fiscal year ended September 30, 2020, we incurred
$25,250 in fees to our principal independent accountants for
professional services rendered in connection with the audit of
financial statements for the fiscal year ended September 30, 2020,
and reviews of our financial statements for the quarters ended
December 30, 2019, March 31, 2020, and June 30, 2020.
During the fiscal year ended September 30, 2019 we incurred $20,450
in fees to our principal independent accountants for professional
services rendered in connection with the audit of financial
statements for the fiscal year ended September 30, 2019, and
reviews of our financial statements for the quarters ended December
30, 2018, March 31, 2019, and June 30, 2019.
During the fiscal years ended September 30, 2020, and 2019, we did
not incur any other fees for professional services rendered by our
principal independent accountants for all other non-audit services
which may include, but not limited to, tax related services,
actuarial services or valuation services.
PART IV
Item 15. Exhibits, Financial
Statement Schedules.
The following
exhibits are incorporated into this Form 10-K Annual Report:
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Exhibit
Number
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Description
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(3)
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Articles of
Incorporation; and (ii) Bylaws
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3.1
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Articles of
Incorporation and Bylaws dated November 26, 2007, as
previously filed with the SEC on March 20, 2019.
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3.2
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Articles of Merger
dated, October 30, 2008 (Azure International, Inc./ Air Transport
Group Holding, Inc. as previously filed with the SEC on March 20,
2019.
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3.3
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Securities Exchange
Agreement dated April 12, 2018, by and among Air Transport Group
Holdings Inc. and WFS Pharmagreen Inc., as previously filed with
the SEC on March 20, 2019.
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3.4
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Articles of
Incorporation and Bylaws dated December 19, 2013 for WFS
Pharmagreen Inc. as previously filed with the SEC on March 20,
2019.
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3.5
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Articles of
Incorporation and Bylaws dated March 2, 2018 for BC1155097 as
previously filed with the SEC on March 20, 2019.
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38
* Included in
Exhibit 31.1
** Included in
Exhibit 32.1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Pharmagreen Biotech
Inc
BY:
/s/ Peter
Wojcik
Peter Wojcik
President and
Director
Principal Executive
Officer
/s/Terry
Kwan
Terry Kwan
Principal Accounting
Officer
Dated: January
8, 2021
39
