NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2020
(UNAUDITED)
Note 1 – Nature of Business and Significant Accounting
Policies
Nature of Business
WEED,
Inc. (the “Company”), (formerly United Mines, Inc.) was
incorporated under the laws of the State of Arizona on August 20,
1999 (“Inception Date”) as Plae, Inc. to engage in the
exploration of gold and silver mining properties. On November 26,
2014, the Company was renamed from United Mines, Inc. to WEED, Inc.
and was repurposed to pursue a business involving the purchase of
land, and building Commercial Grade “Cultivation
Centers” to consult, assist, manage & lease to Licensed
Dispensary owners and organic grow operators on a contract basis,
with a concentration on the legal and medical marijuana sector. The
Company’s plan is to become a True “Seed-to-Sale”
company providing infrastructure, financial solutions and real
estate options in this new emerging market. The Company, under
United Mines, was formerly in the process of acquiring mineral
properties or claims located in the State of Arizona, USA. The name
was previously changed on February 18, 2005 to King Mines, Inc. and
then subsequently changed to United Mines, Inc. on March 30, 2005.
The Company trades on the OTC Pink Sheets under the stock symbol:
BUDZ.
On
April 20, 2017, the Company acquired Sangre AT, LLC, a Wyoming
company doing business as Sangre AgroTech. (“Sangre”).
Sangre is a plant genomic research and breeding company comprised
of top-echelon scientists with extensive expertise in genomic
sequencing, genetics-based breeding, plant tissue culture, and
plant biochemistry, utilizing the most advanced sequencing and
analytical technologies and proprietary bioinformatics data systems
available. No work is being conducted now until further funds are
available.
The
accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States
of America. These statements reflect all adjustments, consisting of
normal recurring adjustments, which in the opinion of management
are necessary for fair presentation of the information contained
therein.
The
Company has a calendar year end for reporting
purposes.
Basis of Presentation:
The
accompanying condensed consolidated balance sheet at December 31,
2019, has been derived from audited consolidated financial
statements and the unaudited condensed consolidated financial
statements as of March 31, 2020 and 2019 ( the “financial
statements”), have been prepared in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and
with the instructions to Form 10-Q and Article 8 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements and
should be read in conjunction with the audited consolidated
financial statements and related footnotes included in our
Registration Statement on Form S-1 for the year ended December 31,
2019 (the “2019 Annual Report”), filed with the
Securities and Exchange Commission (the “SEC”). It is
management’s opinion, however, that all material adjustments
(consisting of normal recurring adjustments), have been made which
are necessary for a fair financial statements presentation. The
condensed consolidated financial statements include all material
adjustments (consisting of normal recurring accruals) necessary to
make the condensed consolidated financial statements not misleading
as required by Regulation S-X, Rule 10-01.
Principles of Consolidation
The
accompanying consolidated financial statements include the accounts
of the following entities, all of which are under common control
and ownership:
|
|
State
of
|
|
|
|
Abbreviated
|
Name of
Entity
|
|
Incorporation
|
|
Relationship
(1)
|
|
Reference
|
WEED,
Inc.
|
|
Nevada
|
|
Parent
|
|
WEED
|
Sangre
AT, LLC (2)
|
|
Wyoming
|
|
Subsidiary
|
|
Sangre
|
(1)
Sangre is a wholly-owned subsidiary of WEED, Inc.
(2)
Sangre AT, LLC is doing business as Sangre AgroTech.
The
consolidated financial statements herein contain the operations of
the wholly-owned subsidiary listed above. All significant
inter-company transactions have been eliminated in the preparation
of these financial statements. The parent company, WEED and
subsidiary, Sangre will be collectively referred to herein as the
“Company”, or “WEED”. The Company's
headquarters are located in Tucson, Arizona and its operations are
primarily within the United States, with minimal operations in
Australia.
These
statements reflect all adjustments, consisting of normal recurring
adjustments, which in the opinion of management are necessary for
fair presentation of the information contained
therein.
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and the 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. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
Under
FASB ASC 820-10-05, the Financial Accounting Standards Board
establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosures about fair
value measurements. This Statement reaffirms that fair value is the
relevant measurement attribute. The adoption of this standard did
not have a material effect on the Company’s financial
statements as reflected herein. The carrying amounts of cash,
prepaid expenses and accrued expenses reported on the balance sheet
are estimated by management to approximate fair value primarily due
to the short term nature of the instruments.
Impairment of Long-Lived Assets
Long-lived
assets held and used by the Company are reviewed for possible
impairment whenever events or circumstances indicate the carrying
amount of an asset may not be recoverable or is impaired.
Recoverability is assessed using undiscounted cash flows based upon
historical results and current projections of earnings before
interest and taxes. Impairment is measured using discounted cash
flows of future operating results based upon a rate that
corresponds to the cost of capital. Impairments are recognized in
operating results to the extent that carrying value exceeds
discounted cash flows of future operations.
Basic and Diluted Loss Per Share
The
basic net loss per common share is computed by dividing the net
loss by the weighted average number of common shares outstanding.
Diluted net loss per common share is computed by dividing the net
loss adjusted on an “as if converted” basis, by the
weighted average number of common shares outstanding plus potential
dilutive securities. For the periods presented, potential dilutive
securities had an anti-dilutive effect and were not included in the
calculation of diluted net loss per common share.
Stock-Based Compensation
Under
FASB ASC 718-10-30-2, all share-based payments to employees,
including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure
is no longer an alternative.
Revenue Recognition
On
January 1, 2018, the Company adopted the new revenue recognition
standard ASU 2014-09, “Revenue from Contracts with Customers
(Topic 606)”, using the cumulative effect (modified
retrospective) approach. Modified retrospective adoption requires
entities to apply the standard retrospectively to the most current
period presented in the financial statements, requiring the
cumulative effect of the retrospective application as an adjustment
to the opening balance of retained earnings at the date of initial
application. No cumulative-effect adjustment in retained earnings
was recorded as the Company’s has no historical revenue. The
impact of the adoption of the new standard was not material to the
Company’s condensed consolidated financial statements for the
three months ended March 31, 2020. The Company expects the impact
to be immaterial on an ongoing basis.
The
primary change under the new guidance is the requirement to report
the allowance for uncollectible accounts as a reduction in net
revenue as opposed to bad debt expense, a component of operating
expenses. The adoption of this guidance did not have an impact on
our condensed consolidated financial statements, other than
additional financial statement disclosures. The guidance requires
increased disclosures, including qualitative and quantitative
disclosures about the nature, amount, timing and uncertainty of
revenue and cash flows arising from contracts with
customers.
The
Company operates as one reportable segment.
Sales
on fixed price contracts are recorded when services are earned, the
earnings process is complete or substantially complete, and the
revenue is measurable and collectability is reasonably assured.
Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in
the same period the related sales are recorded. The Company will
defer any revenue from sales in which payment has been received,
but the earnings process has not occurred. Sales have not yet
commenced.
Advertising and Promotion
All
costs associated with advertising and promoting products are
expensed as incurred. These expenses were $0 and $1,247 for the
three months ended March 31, 2020 and 2019.
Recently Issued Accounting Pronouncements
In
August 2018, the FASB issued ASU 2018-15 Accounting for
Implementation Costs Related to Cloud Computing or Hosting
Arrangements. This standard provides authoritative guidance
intended to address a customer’s accounting for
implementation costs incurred in a cloud computing arrangement that
is a service contract. This guidance aligns the requirements for
capitalizing implementation costs incurred in a hosting arrangement
that is a service contract with the requirements for capitalizing
implementation costs incurred to develop or obtain internal-use
software. The guidance also requires presentation of the
capitalized implementation costs in the statement of financial
position and in the statement of cash flows in the same line item
that a prepayment for the fees of the associated hosting
arrangement would be presented, and the expense related to the
capitalized implementation costs to be presented in the same line
item in the statement of operations as the fees associated with the
hosting element (service) of the arrangement. This guidance is
effective for annual periods beginning after December 15,
2019, including interim periods within those annual periods, with
early adoption permitted. We are currently evaluating the potential
impact on our financial position, results of operations and
statement of cash flows upon adoption of this guidance. We do not
expect this guidance to have a significant impact, or potential
significant impact, to our unaudited condensed consolidated interim
financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases. The standard
requires lessees to recognize lease assets and lease liabilities on
the consolidated balance sheet and requires expanded disclosures
about leasing arrangements. We adopted the standard, effective
January 1, 2019, and the new standard has no material impact on our
consolidated financial statements. We are currently assessing the
impact that the new standard will have on our consolidated
financial statements, which will consist primarily of a balance
sheet gross up of our operating leases to show equal and offsetting
lease assets and lease liabilities.
The Company adopted the new lease guidance effective January 1,
2019 using the modified retrospective transition approach,
applying the new standard to all of its leases existing at the date
of initial application which is the effective date of
adoption. Consequently, financial information will not be
updated and the disclosures required under the new standard will
not be provided for dates and periods before January 1,
2019. We elected the package of practical expedients which
permits us to not reassess (1) whether any expired or existing
contracts are or contain leases, (2) the lease classification for
any expired or existing leases, and (3) any initial direct costs
for any existing leases as of the effective date. We did not elect
the hindsight practical expedient which permits entities to use
hindsight in determining the lease term and assessing impairment.
The adoption of the lease standard did not change our previously
reported consolidated statements of operations and did not result
in a cumulative catch-up adjustment to opening equity. As of
December 31, 2019, the adoption of the standard had no impact on
the Company, as there were no leases in place longer than 12
months.
In June 2018, the FASB issued
Accounting Standards Update (“ASU”) 2018-07,
Compensation
– Stock Compensation (Topic 718) Improvements to Nonemployee
Share-Based Payment Accounting.
This ASU expands the scope of Topic 718 to include share-based
payment transactions for acquiring goods and services from
nonemployees. The amendments in this ASU became effective beginning
January 1, 2019, and it does not have a material effect on our
consolidated financial statements.
Note 2 – Going Concern
As
shown in the accompanying financial statements, the Company has no
revenues, incurred net losses from operations resulting in an
accumulated deficit of $79,030,309 and negative working capital of
676,999 at March 31, 2020. These factors raise substantial doubt
about the Company’s ability to continue as a going concern.
Management is actively pursuing new products and services to begin
generating revenues. In addition, the Company is currently seeking
additional sources of capital to fund short term operations. The
Company, however, is dependent upon its ability to secure equity
and/or debt financing and there are no assurances that the Company
will be successful; therefore, without sufficient financing it
would be unlikely for the Company to continue as a going
concern.
The
financial statements do not include any adjustments that might
result from the outcome of any uncertainty as to the
Company’s ability to continue as a going concern. The
financial statements also do not include any adjustments relating
to the recoverability and classification of recorded asset amounts
or amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going
concern.
Note 3 – Related Party
Notes Payable
From
time to time, the Company has received short term loans from
officers and directors as disclosed in Note 7 below. The Company
has a total of $246,100 and $224,100 of note payable on the
consolidated balance sheet as of March 31, 2020 and December 31,
2019, respectively. On October 28, 2019, the Company transferred
the ownership of the 2017 Audi Q7 and Audi A4, valued at $46,609,
to Nicole Breen as a repayment for her loans. $93,000 was recorded
as a forgiveness on notes payable, and $46,391 recorded to
additional paid-in capital.
Services
Nicole
M. Breen receives $1,500 a week in cash compensation for her
services rendered to the Company.
Glenn
E. Martin receives $8,000 a month in cash compensation for his
services rendered to the Company.
Capital Contributions
The
Company imputed interest on non-interest bearing, related party
loans, resulting in a total of $0 and $0 of contributed capital
during the three months ended March 31, 2020 and 2019,
respectively.
Common Stock Issued for Bartered Assets
On
January 18, 2017, the Company exchanged 66,000 units, consisting of
66,000 shares of common stock and warrants to purchase 66,000
shares of common stock at an exercise price of $3.00 per share,
exercisable until January 18, 2018, in exchange for a 2017 Audi Q7
and a 2017 Audi A4 driven by the Officers. The total fair value
received, based on the market price of the stock at $4.02 per
share, was allocated to the $105,132 purchase price of the vehicles
and the $160,188 excess value of the common stock and warrants was
expensed as stock-based compensation. On October 28, 2019, the
Company transferred the ownership of the two Audi vehicles, valued
at $46,609, to Nicole Breen as a repayment for her loans. $93,000
was recorded as a forgiveness on notes payable, and $46,391
recorded to additional paid-in capital.
Common Stock
On
August 1, 2017, the Company granted 150,000 shares of common stock
to Mary Williams, a principal of Sangre AT, LLC, for services
performed. The fair value of the common stock was $154,500 based on
the closing price of the Company’s common stock on the date
of grant.
On
January 7, 2017, the Company granted 50,000 shares of common stock
to Pat Williams. PhD, a principal of Sangre AT, LLC, for services
performed. The total fair value of the common stock was $210,250
based on the closing price of the Company’s common stock on
the date of grant.
A total
of $161,750 and $8,000 of officer compensation was unpaid and
outstanding at March 31, 2020 and 2019, respectively.
Stock Options Issued for Services – related
party
On
February 1, 2018, in connection with executive employment
agreements, the Company granted non-qualified options to purchase
an aggregate of 6,000,000 shares of the Company’s common
stock at the exercise price of $10.55 per share. The options shall
become exercisable at the rate of 1/3 upon the six-month
anniversary, 1/3 upon the one-year anniversary and 1/3 upon the
second anniversary of the grant. The options were valued at
$45,987,970 using the Black-Scholes option pricing model. The
Company recognized expense of approximately, $2,015,911 relating to
these options during the three months ended March 31,
2020.
Note 4 – Fair Value of Financial Instruments
Under
FASB ASC 820-10-5, fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date (an exit price). The standard outlines a valuation framework
and creates a fair value hierarchy in order to increase the
consistency and comparability of fair value measurements and the
related disclosures. Under GAAP, certain assets and liabilities
must be measured at fair value, and FASB ASC 820-10-50 details the
disclosures that are required for items measured at fair
value.
The
Company has certain financial instruments that must be measured
under the new fair value standard. The Company’s financial
assets and liabilities are measured using inputs from the three
levels of the fair value hierarchy. The three levels are as
follows:
Level 1
- Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to
access at the measurement date.
Level 2
- Inputs include quoted prices for similar assets and liabilities
in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than
quoted prices that are observable for the asset or liability (e.g.,
interest rates, yield curves, etc.), and inputs that are derived
principally from or corroborated by observable market data by
correlation or other means (market corroborated
inputs).
Level 3
- Unobservable inputs that reflect our assumptions about the
assumptions that market participants would use in pricing the asset
or liability.
The
following schedule summarizes the valuation of financial
instruments at fair value on a recurring basis in the balance
sheets as of March 31, 2020 and 2019, respectively:
Fair Value Measurements at December 31, 2019
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|
|
|
Assets
|
|
|
|
Cash
|
$2,509
|
$-
|
$-
|
Total
assets
|
$2,509
|
$-
|
$-
|
Liabilities
|
|
|
|
Notes payable,
related parties
|
|
224,100
|
|
Notes
payable
|
$-
|
$167,263
|
$-
|
Total
liabilities
|
$-
|
$391,363
|
$-
|
|
$2,509
|
$391,363
|
$-
|
Fair Value Measurements at March 31, 2020
|
|
|
|
Assets
|
|
|
|
Cash
|
$5,404
|
$-
|
$-
|
Total
assets
|
5,404
|
$-
|
$-
|
Liabilities
|
|
|
|
Notes payable,
related parties
|
|
$246,100
|
|
Notes
payable
|
$-
|
$154,529
|
$-
|
Total
liabilities
|
$-
|
$400,629
|
$-
|
|
$5,404
|
$400,629
|
$-
|
The
fair values of our related party debts are deemed to approximate
book value and are considered Level 2 inputs as defined by ASC
Topic 820-10-35.
There
were no transfers of financial assets or liabilities between Level
1, Level 2 and Level 3 inputs for the three months ended March 31,
2020 and the year ended December 31, 2019.
Note 5 – Investment in Land and Property
On July
26, 2017, the Company closed on the purchase of property,
consisting of a home, recreational facility and RV park located at
5535 State Highway 12 in La Veta, Colorado to be developed into a
bioscience center. The home has 4 Bedrooms and 2 Baths, and the
recreational facility has showers, laundry, and reception area with
an additional equipment barn attached, in addition to another
facility with 9,500 square feet. The RV Park has 24 sites with full
hook-ups including water, sewer, and electric, which the Company
plans to convert into a series of small research pods. Under the
terms of the purchase agreement, the Company paid $525,000 down,
including 25,000 shares of our common stock, and Sangre took
immediate possession of the property. Under the terms of the
original purchase agreement, the Company was obligated to pay an
additional $400,000 in cash and issue an additional 75,000 shares
of our common stock over the next two years in order to pay the
entire purchase price. On January 12, 2018, the Company entered
into an Amendment No. 1 to the $475,000 principal amount promissory
note issued by the Company to the seller of the property, under
which both parties agreed to amend the purchase and the promissory
note to allow the Company to pay off the note in full if it paid
$100,000in cash on or before January 15, 2018 and issued the seller
125,000 shares of common stock, restricted in accordance with Rule
144, on before January 20, 2018. Through an escrow process, the
Company paid the seller $100,000 in cash and issued him 125,000
shares of common stock in accordance with the Amendment No. 1, in
exchange for a full release of the deed of trust that was securing
the promissory note, on January 17, 2018. As a result, the $475,000
principal promissory note issued to the seller was deemed
paid-in-full and fully satisfied and the Company owned the property
without encumbrances as of that date. The Company recorded a loss
on extinguishment of debt of approximately $1,065,000 based on the
fair value of the consideration paid and the carrying value of the
note payable on the settlement date. The total purchase price was
as follows:
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Common stock
payment of 25,000 shares (1)
|
$30,000
|
Cash payment of
down payment
|
50,000
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Cash paid at
closing
|
44,640
|
Short term
liabilities assumed and paid at closing (2)
|
5,360
|
Note payable
(3)
|
475,000
|
Total
purchase price
|
$1,005,000
|
(1)
Consideration
consisted of an advance payment of 25,000 shares of the
Company’s common stock valued at $30,000 based on the closing
price of the Company’s common stock on the July 18, 2017 date
of grant.
(2)
Purchaser’s
shares of closing costs, including the seller’s prepaid
property taxes.
(3)
As noted above, the
note was settled with a payment of $100,000 and the issuance of
125,000 shares of common stock.
In
January 2018, the Company closed on the purchase of property,
consisting of a condominium in La Veta, Colorado to house Company
personnel and consultants for total consideration approximating
$140,000, which was paid in cash at the time of closing. The home
has 3 bedrooms and 2.5 baths. Sangre took immediate possession
of the property. La Veta, Colorado is a small town and rental or
short-term housing is very difficult to obtain. The Company
personnel and consultants are no longer residing at the property,
and it is
currently
vacant.
In
February 2018, the Company closed on the purchase of property,
consisting of a home in La Veta, Colorado to house Company
personnel and consultants for total consideration approximating
$1,200,000. The home has 5 Bedrooms and 3 Baths. Under the terms of
the purchase agreement, the Company paid $150,000 down, entered
into a note payable in the amount of approximately $1,041,000 (see
Note 8). The Company secured a below-market interest rate of 1.81%
based on the short-term nature of the term (due on August 15,
2018). Sangre took immediate possession of the property. La Veta,
Colorado is a small town and rental or short-term housing is very
difficult to obtain. The Company personnel and consultants are no
longer residing at the property, and it is currently vacant. On
October 10, 2018, a payment of $750,000 was made to Craig W. Clark
to pay off the note payable, and a loan discount of $125,475 was
given to the Company which was recorded as a gain.
A
settlement payment of $155,000 was received from an insurance
company related to a fire near one of our properties in La Veta,
Colorado.
On June
25, 2019, the Company received $60,000 from Lex Seabre in exchange
for 120,000 shares of common stock of the Company. The $60,000 was
paid as a deposit for the Sugar Hill golf course property
auction.
On June
28, 2019, the Company received a loan of $12,000 from Nicole Breen.
The $12,000 was paid as a deposit for the Sugar Hill golf course
property auction.
On
September 25, 2019, the Company received $20,000 from Lex Seabre in
exchange for 100,000 shares of common stock of the Company. The
$20,000 was paid as a deposit for the additional 60-day extension
for the Sugar Hill golf course property purchase.
The
Company entered into Memorandum of Sale agreement for the Sugar
Hill property with M&T Bank and the Referee to make payment of
$10,000 per month commencing on February 1, 2020 and continuing on
the 1st of
each month until July 1, 2020 with a balloon payment of $332,167.73
on August 3, 2020.
Note 6 – Property and Equipment
Property
and equipment consist of the following at March 31, 2020 and
December 31, 2019, respectively:
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|
|
|
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Property
improvements
|
$5,000
|
$5,000
|
Automobiles
|
0
|
0
|
Office
equipment
|
4,933
|
4,933
|
Furniture &
Fixtures
|
2,979
|
2,979
|
Lab
equipment
|
65,769
|
65,769
|
Construction in
progress
|
0
|
0
|
Property
(1)
|
1,887,802
|
1,887,802
|
Property and
equipment, gross
|
1,966,483
|
1,966,483
|
Less accumulated
depreciation
|
(357,347)
|
(322,498)
|
Property and
equipment, net
|
$1,609,136
|
$1,643,985
|
(1)
|
In
2018, the Company purchased two properties in La Veta, Colorado.
The property located on 169 Valley Vista was purchased for
$140,000, and the property located on 1390 Mountain Valley Road was
purchased for $1,200,000 (see Note 8).
|
Depreciation
and amortization expense totaled $35,499 and $40,660 for the years
ended March 31, 2020 and 2019, respectively.
On
October 28, 2019, the Company transferred the ownership of the 2017
Audi Q7 and Audi A4, valued at $46,609, to Nicole Breen as a
repayment for her loans. $93,000 was recorded as a forgiveness on
notes payable, and $46,391 recorded to additional paid-in
capital.
Construction
in progress in the amount of $499,695 was fully impaired due to the
Company may not receive funds to complete the research facility
center project. There was no work performed in 2019.
Note 7 – Intangible Assets
In
accordance with FASB ASC 350, “Intangibles-Goodwill and
Other”, the Company evaluates the recoverability of
identifiable intangible assets whenever events or changes in
circumstances indicate that an intangible asset’s carrying
amount may not be recoverable. The impairment loss would be
calculated as the amount by which the carrying value of the asset
exceeds its fair value. The US and Europe trademarks were acquired
for $40,000 and $50,000, respectively, for the year ended December
31, 2018. Trademarks are initially measured based on their fair
value and amortized by 10 and 25 years.
Amortization
expense totaled $650 and $650 for the three months ended March 31,
2020 and 2019, respectively.
Note 8 – Notes Payable, Related Parties
Notes
payable, related parties consist of the following at March 31, 2020
and December 31, 2019, respectively:
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On April 12, 2010,
the Company received an unsecured, non-interest-bearing loan in the
amount of $2,000, due on demand from Robert Leitzman. Interest is
being imputed at the Company’s estimated borrowing rate, or
10% per annum. The largest aggregate amount outstanding was $2,000
during the periods ended December 31, 2019 and December 31, 2018.
Mr. Leitzman owns less than 1% of the Company’s common stock,
however, the Mr. Leitzman is deemed to be a related party given the
non-interest-bearing nature of the loan and the materiality of the
debt at the time of origination.
|
2,000
|
2,000
|
|
|
|
Over various dates
in 2011 and 2012, the Company received unsecured loans in the
aggregate amount of $10,000, due on demand, bearing interest at
10%, from Sandra Orman. The largest aggregate amount outstanding
was $10,000 during the periods ended December 31, 2019 and December
31, 2018. Mrs. Orman owns less than 1% of the Company’s
common stock, however, Mrs. Orman is deemed to be a related party
given the nature of the loan and the materiality of the debt at the
time of origination.
|
10,000
|
10,000
|
|
|
|
Over various dates
from April 2019 to March2020, the company received a total of
$327,100 of advances, bearing interest at 5%, from Nicole Breen. A
detailed list of advances and repayments follows. On October 28,
2019, the company’s vehicles valued at $93,000 were used as a
repayment.
|
234,100
|
212,100
|
|
|
|
Notes payable,
related parties
|
$246,100
|
$224,100
|
The
Company recorded interest expense in the amount of $2,979 and $249
for the three months ended March 31, 2020 and 2019, respectively,
including imputed interest expense in the amount of $0 and $0
during such periods related to notes payable, related
parties.
Note 9 – Notes Payable
Note
payable consist of the following at March 31, 2020 and December 31,
2019, respectively:
|
|
|
On July 26, 2017,
the Company issued a $475,000 note payable, bearing interest at 5%
per annum, to A.R. Miller (“Miller Note”) pursuant to
the purchase of land and property in La Veta, Colorado. The note is
to be paid in four consecutive semi-annual installments in the
amount of $118,750 plus accrued interest commencing on January 26,
2018 and continuing on the 26th day of July and the 26th day of
January each year until the debt is repaid on July 26, 2019. The
note carries a late fee of $5,937.50 in the event any installment
payment is more than 30 days late, and upon default the interest
rate shall increase to 12% per annum. During the three months ended
March 31, 2018, the Company issued 125,000 shares of common stock,
valued at $1,450,000 based on the closing price on the measurement
date. Accordingly, the Company recorded a loss on extinguishment of
$1,064,719.
|
$-
|
$-
|
|
|
|
On February 16,
2018, the Company issued a $1,040,662 note payable, bearing
interest at 1.81% per annum (the low interest rate was due to the
short-term nature of the note – six months. See Note 6), to
Craig and Carol Clark (“Clark Note”) pursuant to the
purchase of land and property in La Veta, Colorado. The note is to
be paid in consecutive monthly installments in the amount of
$5,000, including accrued interest commencing on March 15, 2018 and
continuing through August 15, 2018. The note carries a late fee of
3% in the event any installment payment is more than 10 days late,
and upon default the interest rate shall increase to 10% perannum.
As of September 12, 2018, a total of $171,300 was paid to the note
holder. On October 9, 2018, the Company entered into a settlement
agreement with the note holder to pay the settlement payment of
$750,000. The Company had already paid $650,000 by September 27,
2018 and made the remaining payment of $100,000 on October 10,
2018. The Company recorded a gain on extinguishment of
$121,475.
On August 5, 2019,
the Company entered into a promissory note, whereby the Company
promises to pay Snell & Wilmer L.L.P the principal amount of
$250,000, bearing interest at 2.5% per annum. The note is to be
paid in consecutive monthly installments in the amount of $25,000,
including accrued interest commencing on August 30, 2019, until the
final balloon payment is paid on January 30, 2020. The promissory
note is secured by the Deed of Trust, Assignment of Leases and
Rents, Security Agreement and Fixture Filing with respect to the
real property owned by Sangre located on 1390 Mountain Valley Road,
La Veta, Colorado 81055. As of March 31, 20120, $97,629 has been
paid to Snell & Wilmer.
|
$152,372
|
166,412
|
|
|
|
On various dates,
the Company received advances from consultant, Patrick Brodnik,
bearing 0% interest.
|
$2,157
|
850
|
|
|
|
|
$154,529
|
$167,262
|
|
|
|
|
|
|
The
Company recognized interest expense of $1,041 and $0 related to the
note payables for the three months ended March 31, 2020 and 2019,
respectively.
Note 10 – Commitments and Contingencies
On
November 8, 2016, the Company entered into an agreement with
Gregory DiPaolo’s Pro Am Golf, LLC to acquire improved
property located in Westfield, New York. The total purchase price
of $1,600,000 is to be paid with a deposit of 50,000 shares of
common stock, followed by cash of $1,250,000 and 300,000 shares of
the Company’s common stock to be delivered at closing. The
deposit of 50,000 shares issued as a deposit was $42,500 based on
the closing price of the Company’s common stock on the date
of grant. Subsequently, we entered into an amended Purchase and
Sale Agreement on October 24, 2017, under which we amended the
total purchase price to Eight Hundred Thousand Dollars ($800,000)
and forfeited our previous deposit of stock. Under the terms of the
amended agreement, we paid an additional Ten Thousand Dollar
($10,000) deposit on October 26, 2017, with the remaining purchase
price to be paid on or before the date closing date, which was
scheduled on May 1, 2018. The property is approximately 43 acres
and has unlimited water extraction rights from the State of New
York. We had planned to use this property as our inroads to the New
York hemp and infused beverage markets in the future. Since the
property was in foreclosure it was put up for auction, which
occurred on July 1, 2019. At the auction, we were the winning
bidder with a bid of $597,000. Our prior deposit payment of
$120,000 was credited towards the purchase price, and the remaining
$477,000, was finally due on November 30, 2019, after several
extensions (which cost us total of $40,000 to obtain). At the end
of December 31, 2019, a total of $92,00 was issued as a deposit for
the property. We were not able to meet that deadline, but in
January 2020 we worked out an additional extension with the bank.
Under the terms of the new agreement, we still owe approximately
$392,000 to acquire the property. We have agreed to pay that amount
in installment payments of $10,000 per month for six months
beginning February 2020, with a balloon payment of approximately
$332,000 due on or before August 3, 2020. To date we have paid the
$10,000 payments for February 2020, March 2020, April 2020 and May
2020, and plan to pay the June 2020 payment on time. We need to
raise funds in order to make the remaining scheduled
payments.
On
January 19, 2018, the Company was sued in the United States
District Court for the District of Arizona ( William Martin v. WEED, Inc.. , Case
No. 4:18-cv-00027-RM) by the listed Plaintiff. The Company was
served with the Verified Complaint on January 26, 2018. The
Complaint alleges claims for breach of contract-specific
performance, breach of contract-damages, breach of the covenant of
good faith and fair dealing, conversion, and injunctive relief. In
addition to the Verified Complaint, the Company was served with an
application to show cause for a temporary restraining order. The
Verified Complaint alleges the Company entered into a contract with
the Plaintiff on October 1, 2014 for the Plaintiff to perform
certain consulting services for the Company in exchange for 500,000
shares of its common stock up front and an additional 700,000
shares of common stock to be issued on May 31, 2015. The Plaintiff
alleges he completed the requested services under the agreement and
received the initial 500,000 shares of common stock, but not the
additional 700,000 shares. The request for injunctive relief asks
the Court to Order the Company to issue the Plaintiff 700,000
shares of its common stock, and possibly include them in its
Registration Statement on Form S-1, or, in the alternative, issue
the shares and have them held by the Court pending resolution of
the litigation, or, alternatively, sell the shares and deposit the
sale proceeds in an account that the Court will control. The
hearing on the Temporary Restraining Order occurred on January 29,
2018. On January 30, 2018, the Court issued its ruling denying the
application for a Temporary Restraining Order. Currently, there is
no further hearing scheduled in this matter. On February 13, 2018, the Company filed
an Answer to the Verified Complaint and Counterclaim. On February
15, 2018, the Company filed a Motion to Dismiss the Verified
Complaint. On February 23, 2018, the Company filed a Motion to
Amend Counterclaim to add W. Martin’s wife, Joanna Martin as
a counterdefendant. On March 9, 2018, William Martin filed a Motion
to Dismiss the Counterclaim. On March 12, 2018, William Martin
filed a Motion to Amend the Verified Complaint to, among other
things, add claims against Glenn Martin and Nicole and Ryan Breen.
On March 27, 2018, the Court granted both William Martin and WEED,
Inc.’s Motions to Amend. On March 27, 2018, the Company filed
an Amended Counterclaim adding Joanna Martin. On April 2, 2018, the
Company filed a Motion to Amend our Counterclaim to add a breach of
contract claim. On April 10, 2018, the Company filed an Answer to
First Amended Verified Complaint. On April 23, 2018, Glenn Martin
and Nicole and Ryan Breen filed their Answer to the First Amended
Complaint. On May 31, 2018, the Court issued an Order: (a) granting
the Company’s Motion to Dismiss thereby dismissing the
Plaintiff’s claims for breach of the covenant of good faith
and fair dealing and the claim for conversion, (b) denying William
Martin’s Motion to Dismiss the counterclaim as to the claims
for fraudulent concealment and fraudulent misrepresentation, but
granting the Motion to Dismiss only as to the claim for fraudulent
nondisclosure, and (c) granting the Company’s Motion to Amend
its Counterclaim to add a breach of contract claim. On June 1,
2018, William Martin and his wife filed their Answer to the First
Amended Counterclaim. On June 1, 2018, William Martin and his wife
filed their Answer to the Second Amended Counterclaim. In addition
to the above pleadings and motions, the parties have exchanged
disclosure statements and served and responded to written
discovery. The Company denies the Plaintiff’s allegations in
the Verified Complaint in their entirety and plan to vigorously
defend against this lawsuit. Due to the loss not being probable, no
accrual has been recorded for the 700,000 shares of common stock
the Plaintiff alleges he is owed under his agreement with the
Company.
Travis
Nelson v. Sangre AgroTech, LLC, et al. (Huerfeno County Colorado
District Court, Case No. 2018CV30003, filed on February 5, 2018).
Mr. Travis Nelson, formerly a member of the subsidiary Sangre
AgroTech, LLC, filed this action alleging wrongful discharge in
retaliation for whistleblower activity purportedly related to
insider trading, fraud and unlawful interstate transportation of
plant genetics. After a motion to dismiss was granted in part, Mr.
Nelson filed a second amended complaint asserting revised claims
for breach of fiduciary duty, wrongful discharge, and violation of
the Colorado organized crime control act. Mr. Nelson has alleged
lost wages in the amount of $600,000, unspecified losses related to
whistleblower allegations, plus costs and attorneys’ fees. In
his initial disclosures, Mr. Nelson alleges damages of $10,000,000.
On January 31, 2019, Mr. Nelson submitted an offer of judgement in
the amount of $100,000. That offer was rejected by the Corporation.
Court-ordered mediation was conducted on April 24, 2019, but the
matter was not resolved. By order dated February 4, 2020, the court
scheduled trial for October 5, 2020. The Corporation denies
liability as to all claims. Inasmuch as an unfavorable outcome is
neither probable nor remote within the meaning of the ABA Statement
of Policy referred to in the last paragraph of this letter, we
decline to express an opinion concerning the likely outcome of this
matter or the liability of the Corporation, if any, associated
therewith.
Material Definitive Agreements
On May
1, 2018, the Company entered into a Fourth Addendum and Fifth
Addendum to that certain Purchase and Sale Agreement between the
Company and Greg DiPaolo’s Pro Am Golf, LLC, amending the
“Closing Date” under the Agreement to August 1, 2018,
in exchange for the Company paying $50,000 as a non-refundable
deposit to be applied against the purchase price once the property
sale is completed and $10,000 for maintenance, tree removal and
other grounds keeping in order to prepare the golf course for the
2018 season.
On July
23, 2018, the Company entered into a Sixth Addendum, extending the
“Closing Date” to November 1, 2018, in exchange for the
Company paying an additional $50,000 as a non-refundable deposit to
be applied against the purchase price.
On July
1, 2019, the Greg DiPaolo’s Pro Am Golf, LLC property was in
foreclosure, and it was put up for auction. At the auction, we were
the winning bidder with a bid of $597,000. Our prior deposit
payment of $120,000 was credited towards the purchase price, and
the remaining $477,000, was finally due on November 30, 2019, after
several extensions (which cost us total of $40,000 to obtain). At
the end of March 31, 2020, a total of $122,00 was issued as a
deposit for the property. We were not able to meet that deadline,
but in January 2020 we worked out an additional extension with the
bank. Under the terms of the new agreement, we still owe
approximately $392,000 to acquire the property. We have agreed to
pay that amount in installment payments of $10,000 per month for
six months beginning February 2020, with a balloon payment of
approximately $332,000 due on or before August 3, 2020. To date we
have paid the $10,000 payments for February 2020 and March 2020,
and plan to pay the April 2020 payment on time. We need to raise
funds in order to make the remaining scheduled
payments.
On May
21, 2018, the Company entered into a Trademark Purchase Agreement
with Copalix Pty Ltd., a private South African company, to acquire
U.S. Trademark Registration No. 4,927,872 for the WEED TM mark, in
exchange for USD$40,000.
On July
27, 2018, the Company entered into a Trademark Purchase Agreement
with Copalix Pty Ltd., to acquire European Community Trademark
Registration No. 11953387 for WEED Registered Mark in exchange for
USD$10,000.
Note 11 – Stockholders’ Equity
Preferred Stock
On
December 5, 2014, the Company amended the Articles of
Incorporation, pursuant to which 20,000,000 shares of “blank
check” preferred stock with a par value of $0.001 were
authorized. No series of preferred stock has been designated to
date.
Common Stock
On
December 5, 2014, the Company amended the Articles of
Incorporation, and increased the authorized shares to 200,000,000
shares of $0.001 par value common stock.
2020 Common Stock Activity
Common Stock Sales (2020)
During
the quarter ended March 31, 2020, the Company issued 150,000 shares
of common stock for proceeds of $40,000. 200,000 shares valued at
$55,000 were not issued at March 31, 2019, and such amount has been
included in subscriptions payable.
Common Stock Issued for Services (2020)
During
the three months ended March 31, 2020, the Company agreed to issue
an aggregate of 1,310,000 shares of common stock to consultants for
services performed. The total fair value of common stock was
$907,700 based on the closing price of the Company’s common
stock earned on the measurement date.
Common Stock Cancellations
No
common stocks were cancelled during the quarter ended March 31,
2020.
2019 Common Stock Activity
Common Stock Sales (2019)
During
the year ended December 31, 2019, the Company issued 1,065,000
shares of common stock for proceeds of $573,000
Common Stock Issued for Services (2019)
During
the year ended December 31, 2019, the Company agreed to issue an
aggregate of 2,467,000 shares of common stock to consultants for
services performed. The total fair value of common stock was
$2,578,250 based on the closing price of the Company’s common
stock earned on the measurement date. Shares valued at $121,650
were issued at December 31, 2019 and services will be performed in
2020 and has been included in unamortized stock-based
compensation.
Common Stock Cancellations (2019)
During
the year ended December 31, 2019, the Company cancelled a total of
220,000 shares of common stock valued at $0 previously granted to
consultants, David Johnson, and Avigor Gordon, for non-performance
of services. The cancellation was accounted as a repurchase for no
consideration.
Note 12 – Common Stock Warrants and Options
Common Stock Warrants Granted (2020)
No
common stock warrants were granted during the three months ended
March 31, 2020 and December 31, 2019.
A
summary of the Company’s outstanding common stock warrants is
as follows as of March 31, 2020:
Issuance
|
Warrant
|
|
|
# of
Common
|
Strike
|
Date
|
#
|
Name
|
Document
|
Stock
Warrants
|
Price
|
|
|
|
|
|
|
12/31/2018
|
|
|
|
3,278,833
|
|
|
|
|
|
|
|
1/5/2018
|
1029
|
Expired
- Lex Seabre
|
Subscription
Agreement
|
-100,000
|
$5.00
|
2/9/2018
|
1033
|
Expired
- Lawrence Wesigal
|
Subscription
Agreement
|
-15,000
|
$12.50
|
3/19/2018
|
1034
|
Expired
- Donald Steinberg
|
Subscription
Agreement
|
-150,000
|
$5.00
|
3/15/2018
|
1035
|
Expired
- Donald Harrington
|
Subscription
Agreement
|
-12,500
|
$5.00
|
4/26/2018
|
1036
|
Expired
-Roger Seabre
|
Subscription
Agreement
|
-100,000
|
$5.00
|
4/26/2018
|
1037
|
Expired
-Michael Kirk Wines
|
Subscription
Agreement
|
-100,000
|
$5.00
|
5/7/2018
|
1038
|
Expired
-Donald Steinberg
|
Subscription
Agreement
|
-400,000
|
$6.00
|
5/15/2018
|
1039
|
Expired
-Roger Seabre
|
Subscription
Agreement
|
-200,000
|
$6.00
|
6/13/2018
|
1040
|
Expired
-Blue Ridge Enterprises
|
Subscription
Agreement
|
-450,000
|
$6.00
|
6/26/2018
|
1041
|
Expired
-Dianna Steinberg
|
Subscription
Agreement
|
-200,000
|
$6.00
|
5/25/2017
|
1016
|
Expired
-Russ Karlen
|
Subscription
Agreement
|
-100,000
|
$3.00
|
5/25/2017
|
1017
|
Expired
-Eric Karlen
|
Subscription
Agreement
|
-20,000
|
$3.00
|
5/31/2017
|
1018
|
Expired
-Matt Turner
|
Subscription
Agreement
|
-20,000
|
$3.00
|
5/31/2017
|
1022
|
Expired
-Rodger Seabre
|
Subscription
Agreement
|
-300,000
|
$3.00
|
7/7/2017
|
1021
|
Expired
- Rodger Seabre
|
Subscription
Agreement
|
-200,000
|
$3.00
|
8/2/2017
|
1026
|
Expired
- Rodger Seabre
|
Subscription
Agreement
|
-100,000
|
$3.00
|
9/5/2017
|
1023
|
Expired
- Harry Methewson #1
|
Subscription
Agreement
|
-40,000
|
$3.00
|
9/24/2017
|
1024
|
Expired
- Harry Methewson #2
|
Subscription
Agreement
|
-133,000
|
$3.00
|
9/29/2017
|
1025
|
Expired
- A2Z Inc.
|
Subscription
Agreement
|
-300,000
|
$3.00
|
10/24/2017
|
1027
|
Expired
– Salvatore Rutigliano
|
Subscription
Agreement
|
-13,3333
|
$3.00
|
11/10/2017
|
1028
|
Expired
– Roger Seabre
|
Subscription
Agreement
|
-125,000
|
$3.00
|
12/31/2019
|
|
|
|
3,078,833
|
|
|
|
|
|
|
|
1/21/2018
|
1031
|
Expired
– Roger Forsyth
|
Subscription
Agreement
|
-100,000
|
$12.50
|
1/23/2018
|
1032
|
Expired
– Roger Forsyth
|
Subscription
Agreement
|
-100,000
|
$12.50
|
3/31/2020
|
|
|
|
2,878,833
|
|
Common Stock Warrants Expired (2020)
A total
of 200,000 warrants expired during the three months ended March 31,
2020.
Warrants Exercised (2020)
No warrants were exercised during the three months ended
March 31, 2020.
2019 Common Stock Warrant Activity
Common Stock Warrants Granted (2019)
No
common stock warrants were granted during the year ended December
31, 2019.
Common Stock Warrants Exercised (2019)
No
warrants were exercised during the year ended December 31,
2019.
Common Stock Warrants Expired (2019)
A total
of 3,078,833 warrants expired during the year ended December 31,
2019.
Common Stock Options (2019)
On
February 1, 2018, in connection with executive employment
agreements, the Company granted non-qualified options to purchase
an aggregate of 6,000,000 shares of the Company’s common
stock at the exercise price of $10.55 per share. The options shall
become exercisable at the rate of 1/3 upon the six-month
anniversary, 1/3 upon the one-year anniversary and 1/3 upon the
second anniversary of the grant. The options expire ten years from
the date of grant. The options were valued at $45,753,000 using the
Black-Scholes option pricing model. The Company recognized expense
of approximately $22,770,662 relating to these options during the
year ended December 31, 2019.
The
assumptions used in the Black-Scholes model are as
follows:
|
For the period ended March 31, 2020
|
Risk-free
interest rate
|
1.75%
|
Expected
dividend yield
|
0%
|
Expected
lives
|
10.0
years
|
Expected
volatility
|
200%
|
A
summary of the Company’s stock option activity and related
information is as follows:
|
For the Three Months Ended March 31, 2020 and
2019
|
|
|
|
|
|
|
Outstanding at the
beginning of period
|
$-
|
$-
|
Granted
|
6,000,000
|
10.55
|
Exercised/Expired/Cancelled
|
-
|
-
|
Outstanding at the
end of period
|
6,000,000
|
$10.55
|
Exercisable at the
end of period
|
1,250,000
|
$10.55
|
Note 13 – Subsequent Events
We have
evaluated subsequent events through the filing date of this Form
10-Q and determined that no subsequent events have occurred that
would require recognition in the condensed consolidated financial
statements or disclosures in the notes thereto.
ITEM 2
Management’s Discussion and Analysis of
Financial Condition and Results of Operations Disclaimer Regarding Forward Looking
Statements
Our
Management’s Discussion and Analysis or Plan of Operations
contains not only statements that are historical facts, but also
statements that are forward-looking. Forward-looking statements
are, by their very nature, uncertain and risky. These risks and
uncertainties include international, national and local general
economic and market conditions; demographic changes; our ability to
sustain, manage, or forecast growth; our ability to successfully
make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing
government regulations and changes in, or the failure to comply
with, government regulations; adverse publicity; competition; the
loss of significant customers or suppliers; fluctuations and
difficulty in forecasting operating results; changes in business
strategy or development plans; business disruptions; the ability to
attract and retain qualified personnel; the ability to protect
technology; and other risks that might be detailed from time to
time in our filings with the Securities and Exchange
Commission.
Although
the forward-looking statements in this Quarterly Report reflect the
good faith judgment of our management, such statements can only be
based on facts and factors currently known by them. Consequently,
and because forward-looking statements are inherently subject to
risks and uncertainties, the actual results and outcomes may differ
materially from the results and outcomes discussed in the
forward-looking statements. You are urged to carefully review and
consider the various disclosures made by us in this report and in
our other reports as we attempt to advise interested parties of the
risks and factors that may affect our business, financial
condition, and results of operations and prospects.
Overview
We
are an early stage holding company currently focused on the
development and application of cannabis-derived compounds for the
treatment of human disease. Our wholly-owned subsidiary, Sangre AT,
LLC (“Sangre”), has begun a planned five-year Cannabis
Genomic Study to complete a genetic blueprint of the Cannabis plant
genus, by creating a global genomic classification of the entire
plant. By targeting cannabis-derived molecules that stimulate the
endocannabinoid system, Sangre’s research team plans to
develop scientifically-valid and evidence-based cannabis strains
for the production of disease-specific medicines. The goal of the
research is to identify, collect, patent, and archive a collection
of highly-active medicinal strains. We plan to conduct this study
only in states where cannabis has been legalized for medicinal
purposes.
Using
annotated genomic data and newly generated phenotypic data, Sangre
plans to identify and isolate regions of the plant genome which are
related to growth, synthesis of desired molecules, and drought and
pest resistance. This complex data set would then be utilized in a
breeding program to generate and establish new hybrid cultivars
which exemplify the traits that are desired by the medical and
patient community. This breeding program would produce new seed
stocks and clones, which we plan on patenting. If successful this
intellectual property should generate immense value for the
Company. After developing a comprehensive understanding of the
annotated genome of a variety of cannabis strains, and obtaining
intellectual property protection over the most promising strains,
we plan move forward either independently or with strategic
partners to develop medicinal products for the treatment of a
multitude of human diseases.
Our
current, short-term goals relate to the Cannabis Genomic Study and
the resulting development of a variety of new cannabis strains,
and, over the next 5 years, we plan to process those results in
order to become an international cannabis research and product
development company, with a globally-recognized brand focusing on
building and purchasing labs, land and building commercial grade
“Cultivation Centers” to consult, assist, manage &
lease to universities, state governments, licensed dispensary
owners and organic grow operators on a contract basis with a
concentration on the legal and medical cannabis
sector..
Our
long-term plan is to become a true “Seed-to-Sale”
global holding company providing infrastructure, financial
solutions, product development, and real estate options in this new
emerging market. Our long term growth may also come from the
acquisition of synergistic businesses, such as distilleries, to
make anything from infused beverages to super oxygenated water with
CBD and THC. Currently, we have formed WEED Australia Ltd.,
registered as an unlisted public company in Australia to address
this Global demand. We have also formed WEED Australia Ltd.,
registered as an unlisted public company in Australia, to address
future global demand, however the entity has been dormant since its
inception. We will look to conduct future research, marketing,
import/exporting, and manufacturing of our proprietary products on
an international level.
In
furtherance of our current, short terms goals, Sangre initiated the
cannabis genome project in April 2017, by extracting DNA from seven
cannabis strains in Tucson, Arizona. Sangre followed the initial
extraction with a second round of extractions in July 2017. The
extracted DNA is currently being sequenced by the Sangre team using
a binary sequencing approach based on the use of two distinct
sequencing technologies and a proprietary bioinformatics database.
Following the generation of genomic data, the sequences will be
annotated (compared) against over 300,000 plant genes to elucidate
specific de novo pathways responsible for the synthesis of specific
compounds and classes of compounds.
Under
the genome project directives, additional strains are slated for
sequencing and annotation as part of the overall expansion of this
research project. An integral part of this expansion is the
acquisition of additional DNA extraction, amplification, and
sequencing technologies. The expansion also includes the
installation of high-level IT networks for data acquisition,
analysis, and storage.
On
July 26, 2017, we acquired a property located in La Veta, Colorado
in order for Sangre to complete its 5-Year, $15+ million Cannabis
Genomic Study. The site includes a 10,000+ sq. ft. building that
will house Sangre’s genomic research facility, a 4,000+
square foot building for plant product analytics and plant product
extraction, a 3,500 sq. ft. corporate office center, and 25 RV
slots with full water and electric, which we plan to convert into a
series of small research pods. Under the terms of the purchase
agreement, we paid $525,000 down, along with 25,000 shares of our
common stock, and Sangre took immediate possession of the property.
We were obligated to pay an additional $400,000 in cash and issue
an additional 75,000 shares of our common stock over the two next
years in order to pay the entire purchase price. To date we have
spent $354,000 renovating the property and an additional $400,000
on extraction and analytical lab equipment. We plan to complete the
property renovations, at an estimated cost of $300,000, if we raise
sufficient funding. We will need additional extraction equipment
and analytical lab equipment, totaling approximately $700,000.
During the year ended December 31, 2019, construction in progress
in the amount of $499,695 was fully impaired due to the Company may
not receive funds to complete the research facility center project.
There was no work performed in 2019. We will need to raise
additional funds in order to complete the planned renovations and
pay the purchase price for the equipment.
WEED
Inc. acquired the property in La Veta, Colorado in order to
facilitate the expansion of the genomic studies and the development
of new hybrid strains. The facility is currently under re-design
and renovation to convert the existing structures into a
world-class genetics research center.
A
gene-based breeding program will allow us to root out inferior
cultivars and replace them with fully-validated and patentable
cultivars which produce consistent plant products for the medicinal
markets. The gene-based breeding program will improve cultivars and
introduce integrity, stability, and quality to the market in the
following ways:
● accelerated
and optimized growth rates; modern genomic resources will enhance
traditional breeding methods
● generate
new cultivars, accelerating and perfecting the art of selective
breeding
● provide
the ability to assay for specific genes within the crop, establish
strain tracking, and promote market quality
assurance
● improved
disease, pest, and drought resistance of the Cannabis
plant
We
believe the gene-based breeding program will facilitate and
accelerate:
● improved
therapeutic properties, i.e., increased THC/CBD concentration and
the production of specific classes of oils and
terpenses
● enhanced
opportunities for new drug discovery
● accelerated
breeding of super-cultivars: drought, pest, and mold resistant,
increased %THC
● revenue
generation through our unique ability to breed and genetically
fingerprint new, super-cultivars: establish strong patent
protection; and provide these cultivars to the market on a
favorable cost and royalty basis.
Our
goal with this program is to develop a translational breeding
program to establish a new collection of Cannabis cultivars for the
Colorado, national, and international markets. Through the use of
genetic screening technology, cultivars can be up-selected for
specific traits and grown to address the needs of consumers in the
medicinal market.
Corporate Overview
We
were originally incorporated under the name Plae, Inc., in the
State of Arizona on August 20, 1999. At the time we operated under
the name Plae, Inc., no business was conducted. No books or records
were maintained and no meetings were held. In essence, nothing was
done after incorporation until Glenn E. Martin took possession of
Plae, Inc. in January 2005. On February 18, 2005, the corporate
name was changed to King Mines, Inc. and then subsequently changed
to its current name, United Mines, Inc., on March 30, 2005. No
shares were issued until the Company became United Mines, Inc. From
2005 until 2015, we were an exploration stage mineral exploration
company that owned a number of unpatented mining claims and Arizona
State Land Department claims.
On
November 26, 2014, our Board of Directors approved the
redomestication of our company from Arizona to Nevada (the
“Articles of Domestication”), and approved Articles of
Incorporation in Nevada, which differed from then-Articles of
Incorporation in Arizona, primarily by (a) changing our name from
United Mines, Inc. to WEED, Inc., (b) authorizing Twenty Million
(20,000,000) shares of preferred stock, with blank check rights
granted to our Board of Directors, and (c) authorizing Two Hundred
Million (200,000,000) shares of common stock (the “Nevada
Articles of Incorporation”). On December 19, 2014, the
holders of a majority of our outstanding common stock approved the
Articles of Domestication and the Nevada Articles of Incorporation
at a Special Meeting of Shareholders. On January 16, 2015, the
Articles of Domestication and the Nevada Articles of Incorporation
went effective with the Secretary of State of the State of Nevada.
On February 2, 2015, our name change to WEED, Inc., and a
corresponding ticker symbol change to “BUDZ” went
effective with FINRA and was reflected on the quotation of our
common stock on OTC Markets.
These
changes were affected in order to make our corporate name and
ticker symbol better align with our short-term and long-term
business focus. Our current, short-term goals relate to the
Cannabis Genomic Study and the resulting development of a variety
of new cannabis strains, and, over the next 5 years, we plan to
process those results in order to become an international cannabis
research and product development company, with a
globally-recognized brand focusing on building and purchasing labs,
land and building commercial grade “Cultivation
Centers” to consult, assist, manage & lease to
universities, state governments, licensed dispensary owners and
organic grow operators on a contract basis with a concentration on
the legal and medical cannabis sector.
Our
long-term plan is to become a true “Seed-to-Sale”
global holding company providing infrastructure, financial
solutions, product development, and real estate options in this new
emerging market. Our long term growth may also come from the
acquisition of synergistic businesses, such as distilleries, to
make anything from infused beverages to super oxygenated water with
CBD and THC. Currently, we have formed WEED Australia Ltd.,
registered as an unlisted public company in Australia to address
this Global demand. We have also formed WEED Israel Cannabis Ltd.,
an Israeli corporation, to address future global demand. We will
look to conduct future research, marketing, import/exporting, and
manufacturing of our proprietary products on an international
level.
On
April 20, 2017, we entered into a Share Exchange Agreement with
Sangre AT, LLC, a Wyoming limited liability company, under which we
acquired all of the issued and outstanding limited liability
company membership units of Sangre in exchange for Five Hundred
Thousand (500,000) shares of our common stock, restricted in
accordance with Rule 144. As a result of this agreement, Sangre is
a wholly-owned subsidiary of WEED, Inc.
This
discussion and analysis should be read in conjunction with our
financial statements included as part of this Quarterly
Report.
Three Months Ended March 31, 2020 compared to Three Months Ended
March 31, 2019
Results of Operations
|
Three Months Ended
March
31,
|
|
|
|
Revenue
|
$-
|
$-
|
|
|
|
Operating expenses:
|
|
|
|
|
|
General and
administrative
|
75,596
|
185,760
|
Professional fees
|
2,988,649
|
10,909,326
|
Depreciation and
amortization
|
35,499
|
40,660
|
Total operating
expenses
|
3,099,744
|
11,135,746
|
|
|
|
Net operating loss
|
(3,099,744)
|
(11,135,746)
|
|
|
|
Other Expense
|
|
|
Interest expense
|
(4,591)
|
(249)
|
Other income
|
-
|
1,000
|
Other expense
|
-
|
(1,480)
|
|
|
|
Net loss
|
$(3,104,335)
|
$(11,136,475)
|
|
|
|
Other
Comprehensive Loss
|
(723)
|
(609)
|
|
|
|
Comprehensive
Loss
|
(3,105,058)
|
(11,137,084)
|
Operating Loss; Net Loss
Our net loss decreased by $8,032,140, from ($11,136,475) to
($3,104,335), from the three months ended March 31, 2019 compared
to the three months ended March 31, 2020. Our operating loss
decreased by $8,036,002, from ($11,135,746) to ($3,099,744) for the
same period. The decrease in operating loss and net loss compared
to the same period of the prior year is primarily a result of
decreases in professional fees general and administrative expenses
and depreciation and amortization, offset by a slight increase in
our interest expense. These changes are detailed
below.
Revenue
We have not had any revenues since our inception. We are company
focused on the medical cannabis sector. In the short-term we plan
to conduct Sangre’s Cannabis Genomic Study over the next 5
years and process those result, and in the long-term is to be a
company focused on purchasing land and building commercial grade
“Cultivation Centers” to consult, assist, manage &
lease to licensed dispensary owners and organic grow operators on a
contract basis, with a concentration on the legal and medical
marijuana (Cannabis) sector. Our long-term plan is to become a True
“Seed-to-Sale” company providing infrastructure,
financial solutions and real estate options in this new emerging
market, worldwide. We plan to make our brand global and therefore
we will look for opportunities to conduct future research,
marketing, import and exporting, and manufacturing of any
proprietary products on an international level.
General and Administrative Expenses
General and administrative expenses decreased by $110,164, from
$185,760 for the three months ended March 31, 2019 to $75,596 for
the three months ended March 31, 2020, primarily due to decreases
in travel, facilities maintenance, and charitable contribution
expenses.
Professional Fees
Our professional fees decreased by $7,920,677 during the three
months ended March 31, 2020 compared to the three months ended
March 31, 2019. Our professional fees were $2,988,649 for the three
months ended March 31, 2020 and $10,909,326 for the three months
ended March 31, 2019. These fees are largely related to fees paid
for legal and accounting services, along with compensation to
independent contractors, and decreased primarily as a result of a
decrease in the value of stock-based compensation awards due to our
lower stock price. We expect these fees to vary quarter-to-quarter
as our business and stock price fluctuate if we continue to use
stock-based compensation. In the event we undertake an unusual
transaction, such as an acquisition, securities offering, or file a
registration statement, we would expect these fees to substantially
increase during that period.
Depreciation and Amortization
During the three months ended March 31, 2020 we had depreciation
and amortization expense of $35,499, compared to $40,660 in the
three months ended March 31, 2019. Our depreciation and
amortization expense primarily relates to our property and
trademark acquisitions.
Interest Expense
Interest expense increased from $249 to $4,591 for the three months
ended March 31, 2019 compared to the same period in 2020. Our
interest expense primarily relates to the mortgages maintained on
our acquired properties.
Other Income
Other income during the three months ended March 31, 2020 was $0,
compared to $1,000 for the three months ended March 31, 2019. Our
other income for the three months ended March 31, 2019, related to
a refund from a merchant.
Other Expense
Other expense decreased from $1,480 to $0 for the three months
ended March 31, 2019 compared to the same period in 2020. Our other
expense for the three months ended March 31, 2020, relates to bank
service charges.
Liquidity and Capital
Resources
Introduction
During the three months ended March 31, 2020, because of our
operating losses, we did not generate positive operating cash
flows. Our cash on hand as of March 31, 2020 was $5,404 and our
monthly cash flow burn rate was approximately $45,000. Our cash on
hand was primarily proceeds from the sales of our securities. We
currently do not believe we will be able to satisfy our cash needs
from our revenues for many years to come.
Our cash, current assets, total assets, current liabilities, and
total liabilities as of March 31, 2020 and December 31, 2019,
respectively, are as follows:
|
|
|
|
|
|
|
|
Cash
|
$5,404
|
$2,509
|
$2,895
|
Total Current
Assets
|
155,374
|
126,310
|
29,064
|
Total
Assets
|
1,946,177
|
1,952,612
|
(6,435)
|
Total Current
Liabilities
|
832,373
|
752,970
|
79,403
|
Total
Liabilities
|
$832,373
|
$752,970
|
$79,403
|
Our total assets decreased by $6,435 as of March 31, 2020 as
compared to December 31, 2019. The slight decrease in our total
assets between the two periods was primarily attributed to
decreases in our property and equipment, net (due to depreciation)
and our prepaid expenses, partially offset by increases in our cash
and deposits at March 31, 2020 compared to December 31,
2019.
Our current liabilities
and total liabilities increased by $79,403, as of March 31, 2020 as
compared to December 31, 2019. This increase was due to increases
in accounts payable, accrued officer compensation, notes payable,
related party, accrued expenses, and accrued interest, partially
offset by a decrease in notes payable.
In order to pay our obligations in full or in part when due, we
will be required to raise capital from other sources. There is no
assurance, however, that we will be successful in these
efforts.
Cash Requirements
We had cash available of $5,404 and $2,509 as of March 31, 2020 and
December 31, 2019, respectively. Based on our revenues, cash on
hand and current monthly burn rate of approximately $45,000, we
will need to continue borrowing from our shareholders and other
related parties, and/or raise money from the sales of our
securities, to fund operations.
Sources and Uses of Cash
Operations
We had net cash used in operating activities of $101,257 for the
three months ended March 31, 2020, as compared to $333,086 for the
three months ended March 31, 2019. For the period in 2020, the net
cash used in operating activities consisted primarily of our net
loss of ($3,104,335), adjusted by estimated fair value of
stock-based compensation of $2,015,911, estimated value of shares
issued for services of $907,700, and depreciation and amortization
of $35,499, and adjusted by an increase in prepaid expenses and
other assets of $26,169, and increases in accounts payable of
$26,076 and accrued expenses of $44,061. For the period in 2019,
the net cash used in operating activities consisted primarily of
our net loss of ($11,136,475), offset by estimated fair value of
stock-based compensation of $9,680,572, estimated value of shares
issued for services of $802,050, and depreciation and amortization
of $40,660, and adjusted by an increase in prepaid expenses and
other assets of $250,754, a decrease in accrued expenses of $8,249,
and a decrease in accounts payable of $21,482.
Investments
For the three months ended March 31, 2020, we did not have any cash
flows in investing activities. For the period in 2019, the net cash
used in investing activities of $2,979, with the entire amount
related to purchases of property and equipment.
Financing
Our net cash provided by financing activities for the three months
ended March 31, 2020 was $104,266, compared to $350,000 for the
three months ended March 31, 2019. For the period in 2020, our
financing activities related to proceeds from the sale of common
stock of $40,000, proceeds from notes payable of $1,306, proceeds
from notes payable-related party of $22,000, and stock payable of
$150,000, partially offset by repayments on notes payable of
$14,040. For the period in 2019, our financing activities related
to proceeds from the sale of common stock of $200,000, and stock
payable of $150,000.
Off Balance Sheet Arrangements
We have
no off balance sheet arrangements.
Quantitative
and Qualitative Disclosures About Market Risk
As a
smaller reporting company, we are not required to provide the
information required by this Item.
Evaluation
of Disclosure Controls Procedures
Disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act) are designed to ensure that information required
to be disclosed in reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms. Disclosure and control
procedures are also designed to ensure that such information is
accumulated and communicated to management, including the chief
executive officer and chief financial officer, to allow timely
decisions regarding required disclosures.
As of
March 31, 2020, we carried out an evaluation, under the supervision
and with the participation of management, including our chief
executive officer (our Principal Executive Officer) and chief
financial officer (our Principal Financial Officer), of the
effectiveness of the design and operation of our disclosure
controls and procedures. In designing and evaluating the disclosure
controls and procedures, management recognizes that there are
inherent limitations to the effectiveness of any system of
disclosure controls and procedures, including the possibility of
human error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving their
desired control objectives. Additionally, in evaluating and
implementing possible controls and procedures, management is
required to apply its reasonable judgment. We also do not have an
audit committee. Based on the evaluation described above, and as a
result, in part, of not having an audit committee and having one
individual serve as our chief executive officer and chief financial
officer has concluded that, as of the end of the period covered by
this report, our disclosure controls and procedures were not
effective as of March 31, 2020 to the same extent they were not
effective as of December 31, 2019.
In
addition to the deficiencies previously reported, we do not have
formal processes related to the identification and approval of
related party transactions.
As
funds become available to us, we expect to implement additional
measures to improve disclosure controls and
procedures.
(b)
Changes
in Internal Controls over Financial Reporting
There
was no change in our internal controls over financial reporting
that occurred during the period covered by this report, which has
materially affected, or is reasonably likely to materially affect,
our internal controls over financial reporting.
(c)
Officer’s
Certifications
Appearing as an
exhibit to this quarterly report on Form 10-Q are
“Certifications” of our Chief Executive and Financial
Officer. The Certifications are required pursuant to Sections 302
of the Sarbanes-Oxley Act of 2002 (the “Section 302
Certifications”). This section of the quarterly report on
Form 10-Q contains information concerning the Controls Evaluation
referred to in the Section 302 Certifications. This information
should be read in conjunction with the Section 302 Certifications
for a more complete understanding of the topics
presented.
PART II – OTHER INFORMATION
William Martin v. WEED, Inc. et al
On
January 19, 2018, we were sued in the United States District Court
for the District of Arizona (William Martin v. WEED, Inc.,
Case No. 4:18-cv-00027-RM) by the listed Plaintiff. We were served
with the Verified Complaint on January 26, 2018. The Complaint
alleges claims for breach of contract-specific performance, breach
of contract-damages, breach of the covenant of good faith and fair
dealing, conversion, and injunctive relief. In addition to the
Verified Complaint, we were served with an application to show
cause for a temporary restraining order. The Verified Complaint
alleges we entered into a contract with the Plaintiff on October 1,
2014 for the Plaintiff to perform certain consulting services for
the company in exchange for 500,000 shares of our common stock up
front and an additional 700,000 shares of common stock to be issued
on May 31, 2015. The Plaintiff alleges he completed the requested
services under the agreement and received the initial 500,000
shares of common stock, but not the additional 700,000 shares. The
request for injunctive relief asks the Court to Order us to issue
the Plaintiff 700,000 shares of our common stock, and possibly
include them in our previously-filed Registration Statement on Form
S-1, or, in the alternative, issue the shares and have them held by
the Court pending resolution of the litigation, or, alternatively,
sell the shares and deposit the sale proceeds in an account that
the Court will control. The hearing on the Temporary Restraining
Order occurred on January 29, 2018. On January 30, 2018, the Court
issued its ruling denying the application for a Temporary
Restraining Order.
On
February 13, 2018, we filed an Answer to the Verified Complaint and
a Counterclaim. In the original Counterclaim we named William
Martin as the sole counter-defendant, and alleged, that based upon
William Martin’s representations and recommendation, WEED,
Inc. hired Michael Ryan as a consultant. We allege that William
Martin misrepresented, failed to disclose, and concealed facts from
us concerning the relationship between him and Michael Ryan. We
were seeking compensatory damages caused by William Martin’s
misrepresentation, failure to disclose, and
concealment.
On
February 15, 2018, we filed a Motion to Dismiss the Verified
Complaint. On February 23, 2018, we filed a Motion to Amend
Counterclaim to add W. Martin’s wife, Joanna Martin as a
counterdefendant. On March 9, 2018, William Martin filed a Motion
to Dismiss the Counterclaim. On March 12, 2018, William Martin
filed a Motion to Amend the Verified Complaint to, among other
things, add claims against Glenn Martin and Nicole and Ryan Breen.
On March 27, 2018, the Court granted both William Martin and WEED,
Inc.’s Motions to Amend. On March 27, 2018, we filed an
Amended Counterclaim adding Joanna Martin. On April 2, 2018, we
filed a Motion to Amend our Counterclaim to add a breach of
contract claim. On April 10, 2018, we filed an Answer to First
Amended Verified Complaint. On April 23, 2018, Glenn Martin and
Nicole and Ryan Breen filed their Answer to the First Amended
Complaint. On May 31, 2018, the Court issued an Order: (a) granting
our Motion to Dismiss thereby dismissing the claims for breach of
the covenant of good faith and fair dealing and the claim for
conversion, (b) denying William Martin’s Motion to Dismiss
the counterclaim as to the claims for fraudulent concealment and
fraudulent misrepresentation, but granting the Motion to Dismiss
only as to the claim for fraudulent nondisclosure, and (c) granting
our Motion to Amend our Counterclaim to add a breach of contract
claim. In our breach of contract claim, we allege William Martin
breached his Consulting Agreement with us by failing to perform
consulting services to us in a professional and timely manner using
the highest degree of skill, diligence, and expertise pursuant to
the Consulting Agreement. We are seeking an award of compensatory
damages caused by the breach of the Consulting Agreement, together
with attorney’s fees and costs. On June 1, 2018, William
Martin and his wife filed their Answer to the First Amended
Counterclaim. On June 1, 2018, William Martin and his wife filed
their Answer to the Second Amended Counterclaim.
The
parties have conducted discovery and disclosure, including the
production by WEED, Inc. of voluminous electronically stored
information and the depositions of William, Martin, Glenn E.
Martin, Michael Ryan, and Chris Richardson. No other depositions
are presently anticipated.
On
September 14, 2018, WEED, Inc. filed a Motion for Partial Summary
Judgment (MPSJ) seeking the dismissal of all remaining claims in
the First Amended Complaint. On November 26, 2018, plaintiff filed
an opposition to the motion for partial summary judgment, together
with a cross-motion for summary judgment on both plaintiff’s
claims and the Corporation’s counterclaims. Those motions
have been fully briefed. Originally, the Court set oral argument on
the motions for May 16, 2019, but that hearing has been postponed
by the Court due to health issues with Plaintiff’s counsel.
Subsequently, Plaintiff’s counsel withdrew and consequently,
William Martin and his wife are unrepresented. By order of the
Court, the Parties participated in a judicial settlement conference
August 21, 2019 with Magistrate Judge Thomas Ferraro, but the case
did not settle. On October 15, 2019, Judge Marquez heard oral
argument on the cross-motions for partial summary judgment. The
judge took the motions under considerations. On November 21, 2019,
the Judge issued a ruling, which (i) granted our motion for summary
judgment as to the Plaintiff’s claim for fraudulent transfer,
and as a result Glenn Martin, Nicole Breen, Ryan Breen and GEM
Management Group, LLC were dismissed from the lawsuit, (ii) denied
our motion to dismiss Plaintiff’s claims for breach of
contract, and (iii) granted Plaintiff’s motion to dismiss our
claims for fraudulent misrepresentation/concealment, which acted to
dismiss our claims against the Plaintiffs. As a result of this
ruling, the remaining claim in the lawsuit was one for breach of
contract against WEED, Inc.
On
March 5, 2020, the Plaintiffs filed a Motion to Dismiss the
remaining counts in the lawsuit, without prejudice. On March 5,
2020, we filed a Response to the Motion to Dismiss stating that we
did not object to the Plaintiff’s motion. As a result, on
March 10, 2020, the Court entered an Order dismissing
Plaintiff’s remaining counts in the Complaint without
prejudice. The only remaining claims relate to awards for
attorneys’ fees, with the Parties motions due on March 31,
2020, if they elect to file one.
Travis Nelson v. WEED, Inc.
On
February 5, 2018, we were sued in Huerfano County, Colorado
District Court (Travis
Nelson v. WEED, Inc., et al., Case No. 18CV30003) by the
listed Plaintiff. After we successfully pursued motions to dismiss
Plaintiff’s two initial Complaints, the Court issued an Order
on October 1, 2018 granting Plaintiff permission to file a Second
Amended Complaint, which was then filed on October 22, 2018. The
Second Amended Complaint includes three claims: 1) breach of
fiduciary duty/shareholder derivative action; 2) a claim under
Colorado’s Organized Crime Control Act; and 3) a wrongful
discharge claim. We have answered the Second Amended Complaint,
denying all allegations and alleging that the decision not to offer
employment to Nelson, the core factual dispute in this case, was
the result of pre-employment background checks that showed Nelson
had an extensive, violent criminal history. The parties exchanged
Initial Disclosures on November 11, 2018. We still have a motion
pending with the Court that seeks attorneys’ fees in the
amount of $53,000 for the expense of defending the first two
Complaints. On January 31, 2019, Plaintiff submitted an Offer of
Judgment under Colorado Statute §13-17-202 offering to dismiss
the case in exchange for payment of $100,000. The Company has
rejected this offer. Plaintiff served us with written discovery
that we responded to in March 2019. The parties attended mediation
in April 2019, but the case did not settle. The Court has set a
trial date for October 5, 2020, but we are not sure if this matter
will go forward at that time due to the current coronavirus
concerns. We believe that the Plaintiff’s allegations are
baseless and plan to vigorously defend against this lawsuit. We
have not accrued any expenses related to this lawsuit due to the
loss not being probable.
In the
ordinary course of business, we are from time to time involved in
various pending or threatened legal actions. The litigation process
is inherently uncertain and it is possible that the resolution of
such matters might have a material adverse effect upon our
financial condition and/or results of operations. However, in the
opinion of our management, other than as set forth herein, matters
currently pending or threatened against us are not expected to have
a material adverse effect on our financial position or results of
operations.
As a
smaller reporting company, we are not required to provide the
information required by this Item.
Unregistered
Sales of Equity Securities and Use of Proceeds
During
the three months ended March 31, 2020, we issued the following
unregistered securities:
Common Stock Sales
During the three months ended March 31, 2020, we sold an aggregate
of 150,000 shares of our common stock to unrelated investors, for
an aggregate of $40,000. The issuances were made in reliance on
Section 4(a)(2) of the Securities Act of 1933, as amended. To make
this determination we relied on the representations of the
purchaser contained in the securities purchase agreements signed by
the purchaser, which indicated the purchaser were knowledgeable
about our management and our operations, were sophisticated
investors, and understood the purchase was part of a private
placement.
Common Stock Issued to Consultants
During the three months ended March 31, 2020, we issued an
aggregate of 1,310,000 shares of our common stock to several
unrelated consultants for services rendered. The shares were valued
at an average of $0.69 per share. The issuances were made in
reliance on Section 4(a)(2) of the Securities Act of 1933, as
amended. To make that determination we relied on the
representations of the purchasers contained in the agreements
signed by the purchasers and the fact the consultants did work for
the company and was familiar with the company, its operations and
its management.
Defaults
Upon Senior Securities
There
have been no events which are required to be reported under this
Item.
ITEM
4
Mine
Safety Disclosures
There
have been no events which are required to be reported under this
Item.
Status of New York Property
On
October 24, 2017, we entered into an amended Purchase and Sale
Agreement with Greg DiPaolo’s Pro Am Golf, LLC
(“DiPaolo”), under which we agreed to purchase certain
improved property located in Westfield, New York from DiPaolo for a
total purchase price of Eight Hundred Thousand Dollars ($800,000).
Under the terms of the agreement, we paid a Ten Thousand Dollar
($10,000) deposit on October 26, 2017, with the remaining purchase
price to be paid on or before the date closing date, which was
originally scheduled for February 1, 2018. On February 19, 2018, we
entered into a Second Addendum to the Purchase and Sale Agreement
extending the closing date to May 1, 2018 in exchange for payment
of $8,750. On May 1, 2018, we entered into a Fourth Addendum and a
Fifth Addendum to agreement amending the “Closing Date”
under the Agreement to August 1, 2018, in exchange for our payment
of $50,000 as a non-refundable deposit to be applied against the
purchase price when the property sale is completed and $10,000 for
maintenance, tree removal and other grounds keeping in order to
prepare the golf course for the 2018 season. The property is
approximately 43 acres and has unlimited water extraction rights
from the State of New York. We had planned to use this property as
our inroads to the New York hemp and infused beverage markets in
the future. Since the property was in foreclosure it was put up for
auction, which occurred on July 1, 2019. At the auction, we were
the winning bidder with a bid of $597,000. Our prior deposit
payment of $120,000 was credited towards the purchase price, and
the remaining $477,000, was finally due on November 30, 2019, after
several extensions (which cost us total of $40,000 to obtain). We
were not able to meet that deadline, but in January 2020 we worked
out an additional extension with the bank. Under the terms of the
new agreement, we still owe approximately $392,000 to acquire the
property. We have agreed to pay that amount in installment payments
of $10,000 per month for six months beginning February 2020, with a
balloon payment of approximately $332,000 due on or before August
3, 2020. These payments are in addition to the approximately
$420,000 in payments we have already made. We made the initial
$10,000 payment for February 2020 at the end of January 2020. To
date we have made the $10,000 payments for February 2020, March
2020, April 2020, and May 2020. We need to raise funds in order to
make the remaining scheduled payments.
Item No.
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Description
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Articles
of Incorporation of WEED, Inc.
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Bylaws of WEED, Inc.
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Share Exchange Agreement by and between WEED, Inc. and Sangre AT,
LLC dated April 20, 2017
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Promissory Note dated July 26, 2017 issued to A.R. Miller for
acquisition of La Veta, CO Property
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Deed of Trust dated July 26, 2017 related to acquisition of La
Veta, CO Property
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Form of Securities Purchase Agreement
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Form of Warrant Agreement
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Purchase and Sale Agreement by and between WEED, Inc. and Greg
DiPaolo’s Pro Am Golf, LLC dated October 24,
2017
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Amendment No. 1 to Promissory Note by and between WEED, Inc. and
A.R. Miller dated January 12, 2018
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Amended & Restated Employment Agreement with Glenn E. Martin
dated February 1, 2018
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Amended & Restated Employment Agreement with Nicole M. Breen
dated February 1, 2018
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Form of WEED, Inc. Restricted Stock Agreement
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Form of WEED, Inc. Notice of Grant of Non-Qualified Stock
Options
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Wage Settlement and Release Agreement with Ryan Breen dated
February 1, 2018
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Second Addendum to Purchase and Sale Agreement Greg DiPaolo's Pro
Am Gold, LLC dated February 19, 2018
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Exclusive License and Assignment Agreement with Yissum Research
Development Company of the Hebrew University of Jerusalem, Ltd.
dated March 1, 2019
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Consulting Agreement with Yissum Research Development Company of
the Hebrew University of Jerusalem, Ltd. and Prof. Elka Touitou
dated March 1, 2019
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Subsidiaries of WEED, Inc.
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Rule
13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed
herewith).
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Rule
13a-14(a)/15d-14(a) Certification of Chief Accounting Officer
(filed herewith).
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Section
1350 Certification of Chief Executive Officer (filed
herewith).
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Section
1350 Certification of Chief Accounting Officer (filed
herewith).
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101.INS **
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XBRL
Instance Document
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101.SCH **
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XBRL
Taxonomy Extension Schema Document
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101.CAL **
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XBRL
Taxonomy Extension Calculation Linkbase Document
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101.DEF **
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XBRL
Taxonomy Extension Definition Linkbase Document
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101.LAB **
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XBRL
Taxonomy Extension Label Linkbase Document
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101.PRE **
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XBRL
Taxonomy Extension Presentation Linkbase Document
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*Filed herewith.
** XBRL (Extensible Business Reporting Language) information is
furnished and not filed or a part of a registration statement or
prospectus for purposes of Sections 11 or 12 of the Securities
Act of 1933, as amended, is deemed not filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended,
and otherwise is not subject to liability under these
sections.
(1)
Incorporated by reference from our Registration Statement on Form
S-1 filed with the Commission on August 11, 2017.
(2)
Incorporated by reference from the Amendment No. 1 to our
Registration Statement on Form S-1 filed with the Commission on
November 16, 2017.
(3)
Incorporated by reference from the Amendment No. 2 to our
Registration Statement on Form S-1 filed with the Commission on
February 1, 2018.
(4)
Incorporated by reference from the Amendment No. 3 to our
Registration Statement on Form S-1 filed with the Commission on
April 30, 2018.
(5)
Incorporated by reference from the Current Report on Form 8-K filed
with the Commission on March 7, 2019.
(6)
Incorporated by reference from the Annual Report on Form 10-K filed
with the Commission on April 16, 2019.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
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WEED,
Inc.
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Dated:
May 15, 2020
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/s/
Glenn E. Martin
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By:
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Glenn E. Martin
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Its:
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President,
Chief Executive Officer (Principal Executive Officer), Chief
Financial Officer (Principal Accounting Officer) (Principal
Financial Officer)
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