PART
I
Explanatory
Note
Forward
Looking Statements
This
Annual Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the Exchange
Act). These statements are based on managements beliefs and assumptions, and on information currently available
to management. Forward-looking statements include the information concerning possible or assumed future results of operations
of the Company set forth under the heading Managements Discussion and Analysis of Financial Condition or Plan of Operation.
Forward-looking statements also include statements in which words such as expect, anticipate, intend,
plan, believe, estimate, consider, or similar expressions are used.
Forward-looking
statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions. The Companys future
results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned
not to put undue reliance on any forward-looking statements.
ITEM
1 – BUSINESS
Corporate
History
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 BLM mining claims and Arizona State Land Department exploration leases.
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 effected in order to make our corporate name and ticker symbol better align with our short-term and long-term business
focus, which in the short-term is to conduct Sangres Cannabis Genomic Study over the next 5 years, process those results,
and in the long-term to be an international cannabis and hemp 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 worldwide 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 plans may also include acquisitions of synergistic businesses, such as distilleries to make infused
beverages and/or super oxygenated water with CBD and THC. 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 essentially dormant other than building relationships
and speaking at The Pharmaceutical Guild of Australia conference event in Sydney Australia, September 2019, since its inception.
Our
corporate offices are located at 4920 N. Post Trail, Tucson, AZ 85750, telephone number (520) 818-8582.
Business Overview
General
Currently,
we are either working on or planning for several different business opportunities in the cannabis space. Our first business opportunity
is through our wholly-owned subsidiary, Sangre AT, LLC (Sangre), where we are focused on the development and application
of cannabis-derived compounds for the treatment of human disease. To that end Sangre , is working on 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. Second, we are under contract to purchase a golf course property located in Westfield, New York. We own the unlimited
water extractions rights from Lake Erie to the property already, but need to raise at least $500,000 to acquire the property.
If we are successful in acquiring the property we plan to utilize the property to access the hemp and infused beverage markets.
Third, we have established WEED Australia Ltd. and The Cannabis Institute of Australia (C.I.A.) in Australia for the purpose of
conducting cannabis and hemp research and potentially developing products in Australia. C.I.A. is a non-profit entity formed for
the purpose of conducting cannabis and hemp research and potentially developing products in Australia for domestic research and
development of products, services and educational purposes to all 7 States and territories including Tasmania. Fourth, we have
an arrangement with Professor Elka Touitou to assist us with cannabis research and studies in Israel. Professor Touitou was the
Head of the Innovative Dermal, Transdermal and Transmucosal Delivery Lab at the Institute of Drug Research, The School of Pharmacy,
HUJ, now retired but still has HUJ clinical trial & independent studies/lab privileges. Professor Touitou is an internationally
renowned authority in the field of drug delivery and design of new technologies for efficient administration of drugs and development
of new products. Professor Touitou has been involved in Cannabinoid research since 1988 at The Hebrew University of Jerusalem,
(HUJ) Jerusalem, Israel.
Using
annotated genomic data and newly generated phenotypic data, WEED 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 to move forward either independently or with strategic partners to develop medicinal products for the treatment and therapies
for a multitude of human and animal 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 brands focusing on building and purchasing labs, land and building commercial
grade Cultivation Centers. WEED plans 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 thru acquisitions and strategic partnerships. 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, WEED, Inc. has 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, and in March 2019, WEED Israel Cannabis Ltd. was involved in the transaction with Yissum discussed
herein. In 2018, we formed a non-profit company in Australia called The Cannabis Institute of Australia. To date this company
has been dormant.
As
of December 31, 2018, the original Sangres research team leader is no longer with the Company. However, we believe his
departure will have little to no impact on Sangres genomic study. Although Mr. Williams was the team leader of the Sangre
project, most of the work on the study was conducted under contract by Industrial Metagenomics in connection with a public university
in Texas. The leadership of Industrial Metagenomics is intact and will still be conducting the study once we have secured sufficient
financing. In addition, we will plan to utilize top researchers from Israel. WEEDs facilities manager is the only individual
who is currently located onsite at the Sangre BioSciences compound in La Veta, Colorado. His duties also include caretaker for
our 6,000 sq ft corporate Colorado headquarters and our 3 bedroom condo in Cucharas, Colorado to house personnel.
Cannabis
Genomic Study
After
more than 40 years of illicit, underground breeding programs, the genetic integrity of Cannabis has been significantly degraded.
Our subsidiary, Sangre AT, LLC (Sangre) plans to use a gene-based breeding program to root out inferior cultivars
and replace them with fully-validated and patentable cultivars which produce consistent plant products for the medicinal markets.
We believe our unique gene-based breeding program will improve cultivars and introduce integrity, stability, and quality to the
market in the following ways:
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Accelerated
and optimized growth rates; modern genomic resources will enhance traditional breeding methods
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Generation
of new cultivars, accelerating and perfecting the art of selective breeding
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Provide
the ability to assay for specific genes within the crop, which is critical to strain tracking and market quality assurance
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Improve
disease and drought resistance
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We
believe our gene-based breeding program will facilitate and accelerate:
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Improved
therapeutic properties
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New
therapies for migraines/chronic pain, epilepsy, cancer, PTSD, chronic head injury, and others
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Enhanced
opportunities for new drug discovery through collaborations with national and international medical research/treatment centers,
bio-pharma companies including nutraceuticals and botanical companies
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Development
and protection of intellectual property on a global scale. WEED currently owns several trademarks for WEED, WEED Rules!, Panama
Red and Acapulco Gold in several countries in certain limited International categories as placeholders for future growth.
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The
Research Plan
In
order to achieve the desired results outlined above, Sangre has developed a research plan entitled
the Cannabis Genomic Study. The goal of the study is to complete a global genomic classification of the Cannabis
plant genus. Once the classification is complete, the research team plans to develop new cannabis strains that show the highest
likelihood of being successful in the treatment of a variety of human diseases, test those strains and then work to produce those
strains in a medicinal form for the treatment of disease. The research plan will be conducted using the following steps: Extraction,
Purification, Sequencing. Annotation, and Cloning (micro-propagation).
Extraction:
The extraction of genomic DNA from cannabis is a complex process of cell lysis and DNA recovery. Sangre has evaluated, updated,
and validated new methods for DNA recovery.
Purification:
Using next generation purification chemistries, the DNA is cleaned and concentrated for downstream applications.
Sequencing:
The Cannabis DNA is sequenced using both the Illumina MiSeq and MinIon instruments.
Annotation:
The genomic data is assembled and annotated using proprietary bioinformatic systems and the data provided to the Sangre AgroTech
genetic breeders and cellular cloners.
Cloning:
Through this process, new, high-value cannabis strains are developed.
The
objectives of the research plan are as follows:
Technical
Objective 1: Using two next generation sequencing platforms and proprietary bioinformatics programs, we will sequence five
cultivars of Cannabis, and generate fully annotated genomic data.
Technical
Objective 2: Using the selected cultivars,
backcross and forward hybridization studies will be performed to produce a new generation of stock.
The progeny of these crosses will be grown, genetically finger-printed, and introduced to the market under patent protection.
Up-selection and cultivation of cultivars for quality assurance.
Technical
Objective 3: Genotypic and phenotypic measurements
of the offspring will be performed using Next Generation Sequence Analysis, Genotyping, and Phenotyping
analysis. Product focus groups will evaluate new cultivars. Patent protection will be initiated for new cultivars which meet product
development criteria.
Technical
Objective 4: Utilize
gene-driven breeding of up-selected cultivars to initiate the generation of designer cultivars for clinical research.
Technical
Objective 5: Market placement of selected,
genetically enhanced cultivars for the medicinal and bio-pharma markets.
Where
We Are in the Research Plan
As
noted above, phase one of our planned five year Cannabis Genomic Study includes extraction technologies.
On April 20, 2017, we, in connection with Industrial Metagenomics, initiated the genomic study by extracting DNA from seven cannabis
strains in Tucson, Arizona. Sangre followed the initial extraction with a second round of extractions in July 2017. So far, Industrial
Megagenomics, under their agreement with Sangre have designed, tested, and developed standard operating procedures for efficient
DNA isolation and sequencing of Cannabis genomes. Extensive bioinformatics analysis of repeatable and variable regions has been
performed on newly generated DNA, sequencing data of 26 landrace cultivars and publicly available genomes to identify potential
biomarkers to type cannabis plants without the need for whole genome sequencing. The developed biomarkers were prepared into a
package for patenting, however, we are waiting for funding to perform in-vivo validation. We believe we will be able to finish
phase one of the trial within 9-12 months after we have secured sufficient financing.
Under
the next phase of our genomic study, we plan to continue our genetic studies in both the United States and Israel for phase 2,
moving directly to clinical human trials with our wholly owned subsidiary, WEED Israel Cannabis Ltd. under the guidance currently
of Professor Elka Touitou, who has patented Delivery systems to increase bioavailability with Hundreds of formulas
she developed at the Hebrew University of Jerusalem since 1988. In addition, Professor Elka has worked with World Class scientists
such as Dr. Raphael Mechoulam and many top echelon scientists in Israel in Cannabis studies and Human Trials outside of the scope
of Patents and Formulas with WEED Inc. In February 2019, Glenn Martin, our CEO, and WEED Israel Managing Director, Elliot Kwestel,
met with Dr. Mechoulam in his office at HUJ to discuss WEED Israel goals of attaining a high THC cultivar to synthesis for controlled
dosing purposes as discussed below. We are ready to begin this phase, but need additional funding in order to proceed with the
planned clinical trials, as well as to continue on to future phases of the genomic study.
After
the planned clinical trials, and assuming they are successful, then in Phase 3, we plan for WEED Israel Cannabis Ltd. to utilize
our human clinical trials with continuing genetic studies in Israel, not just at University levels but to include separate studies
at Israeli Hospitals and clinics across Israel from Haifa to Tel Aviv, under Contract Research Organizations (CROs) in order to
begin final research & developments from strain extractions to advance manufacturing, refinement of raw product, scientifically
backed, to incorporate into Protocols and Procedures, QA/QC to meet EU standards, TGA standards in Australia, and that will meet
World Class standards required by the FDA in the United States. This strong pipeline and provenance will clarify and streamline
licensing standards to issue all vertically integrated licenses needed in each jurisdiction that we enter in each country. We
plan to utilize the highest GMP standards for eventual sale to the public, both for Domestic use and International export.
Under
the continuation of Phase 3 and for Phase 4 – assuming our human clinical trials proved to be successful, we plan for WEED
Israel Cannabis Ltd., once cleared and permitted by The Israeli Ministry of Health, to begin to move to manufacturing of product
both for commercial pharmaceutical and non-pharmaceutical uses. These above stated studies will include development of educational
courses for continuing education to medical professionals to attract; Drs. PHDs, pharmacists, pharmacist assistants and
retail managers, pharmacy industry service providers, pharmacy trade press, educators, government officials, students & new
graduates, other pharmaceutical & health-related industry professionals.
In
addition, we plan for proprietary strains of cannabis genetics to be imported & incorporated into our studies upon Ministry
of Health authorization or lead authorities globally for additional research and evaluation to complete DNA sequencing, Pathogen
studies, Metabolic Studies, and MetaBolomics analysis adding to our databases to increase efficiencies, worldwide. Our goal is
to achieve a 38% - 40% THC (tetrahydrocannabinol) plant, natural or enhanced genetics, to synthesis THC and THC-A to separate
THC (pyschoactive) from THC-A (non-pyschoactive) to control dosing for commercial release of products. We will conduct separate
studies and evaluations for Cannabidiol (CBD), a phytocannabinoid. CBD does not have the same psychoactivity as THC. CBD is one
of 113 currently identified cannabinoids in the Cannabaceae plant. CBD accounts for up to 40% of plant extracts.
This
also requires the development of continuing Education Studies to educate doctors and health practitioners on proper
use as stated above for increased bioavailability to achieve consistent controlled dosing for patients medical requirements and
needs. This will require short and long term, continual studies to supply proper medical advice and treatment to provide the highest
quality medical and legal use products for both humans and animal conditions and diseases. We will look to supply constant and
continual medical information and products for preventative treatments, therapies, with ultimate goal for eventual cures utilizing
the Cannabis plant and its potential for a panacea of medical relief worldwide.
New
York Property – Infused Beverage Industry
As
detailed elsewhere herein, we currently have an agreement in place that allows us the option to acquire 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 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. We made the six $10,000 monthly payments but were not able to pay the balloon payment by the August
3, 2020 deadline, but on July 31, 2020 we worked out an additional extension with the bank. Under the terms of that agreement,
we paid $10,000 in exchange for an additional extension and we owed approximately $332,000 to acquire the property. We agreed
to pay that amount in installment payments of $10,000 per month for six months beginning September 2020, with a balloon payment
of approximately $272,000 due on or before February 1, 2021. We made the six $10,000 monthly payments but were not able to pay
the balloon payment by the February 1, 2021 deadline, but on January 18, 2021 we worked out an additional extension with the bank.
Under the terms of that agreement, we agreed to pay $10,000 per month beginning February 1, 2021 until November 1, 2021, and then
pay a balloon payment of approximately $172,000 due on or before December 1, 2021. These payments are in addition to the approximately
$540,000 in payments we have already made. We made the $10,000 payments due on February 1, 2021 and March 1, 2021. We need to
raise funds in order to make the remaining scheduled payments. In the event we make the payments we will own the property. In
the event we do not make the payments, all monies we have paid are non-refundable and the bank may acquire the property. The property
is approximately 43 acres and has unlimited water extraction rights from the State of New York. If we are successful in acquiring
the property, we plan to use this property as our inroads to the New York hemp and infused beverage markets in the future. In
order to make the payments required to acquire the property we must raise funds.
WEED
Australia Ltd.
WEED
Australia Ltd.s corporate strategy is to become a leader in cannabis and hemp research and development. To support this
goal WEED Australia Ltd. has assembled a highly qualified team of well-respected Ph.D.s, scientists, researchers and business
experts with the goal of establishing an export industry. WEED Australias personnel has presented at several conferences
regarding the use of cannabis for medical purposes as well as for other uses. We need additional funding in order to further WEED
Australias efforts to conduct research and development activities in Australia.
WEED
Israel Cannabis Ltd.
Through
our subsidiary, WEED Israel Cannabis, Ltd., we have an arrangement with Professor Elka Touitou to assist us with cannabis research
and studies in Israel. Professor Touitou was the Head of the Innovative Dermal, Transdermal and Transmucosal Delivery Lab at the
Institute of Drug Research, The School of Pharmacy, HUJ, now retired but still has HUJ clinical trial & independent studies/lab
privileges. Professor Touitou is an internationally renowned authority in the field of drug delivery and design of new technologies
for efficient administration of drugs and development of new products. As noted above with our genomic study, there is a strong
possibility we do our initial clinic trials in Israel due to a variety of factors, including the fact that Dr.Touitou is located
in Israel, and the fact that Israel has certain advancements in the study of cannabis that we believe would be beneficial to our
clinic trial work. We need to raise additional funds in order to conduct our planned operations in Israel.
Competitive
Advantages
Sangres
research and development team works with next generation sequencing (NGS) and emerging third generation instruments and has developed
the most advanced proprietary bioinformatics data systems available. Sangre uses a unique two sequencing approach. One system
provides DNA reads of up to 300,000 base pair reads and an NGS system which provides highly accurate short reads. This allows
the genomic data to be assembled in a scaffold construct; the long reads forming the scaffold and the short reads providing highly
accurate verification and quality assurance of the genomic data. This approach, together with the bioinformatics program, facilitates
a highly accurate construct of the Cannabis genome which can be annotated and facilitate gene discovery and gene location. Sangre
combination of personnel, skill-sets, and data analytics capabilities will allow us to accomplish our goals in months, rather
than years.
Using
annotated genomic data and newly generated phenotypic data, we plan to identify and isolate regions of the genome which are related
to growth, synthesis of desired molecules, and environmental compatibility. This complex data set will be utilized in a breeding
program to generate and establish new hybrid cultivars which exemplify the traits that are desired by the medical community. This
breeding program will produce new seed stocks, clones, cultivars, and intellectual property which will generate value for the
business organization. Eventual expansion to Israel will allow us to include human clinical trials thru product development for
its domestic and international export markets.
Sangre
plans to develop a translational breeding program to establish a new collection of Cannabis cultivars for the USA national market.
In Israel we plan to establish a unique 2nd new collection of Cannabis Cultivars exclusive to WEED for the EU marketplace. Using
genetic screening technology and micro-propagation, cultivars can be up-selected for specific traits and grown to address the
needs of consumers in the medicinal and drug discovery markets. The combination of next generation genomics, selective hybridization,
and In Vitro cloning provide us with the tools to enhance new cultivars of patentable Cannabis.
Marketing
We
have not developed a marketing plan and do not intend to until we are in the latter stages of the Cannabis Genomic Study and believe
we have strains that are marketable for the treatment of disease. At that time we plan to develop a marketing plan for our newly-developed
strains of Cannabis. We believe that if we are successful in developing strains of Cannabis that effectively treat human diseases
then the market for our products will be a vibrant market. We will continue to look to acquire companies with revenue and companies
or individuals with unique proprietary strains for future growth. We believe securing intellectual property, where possible, and
branding are keys to long term financial success in the emerging global cannabis and hemp industries.
Manufacturing
We
are not currently manufacturing any products and do not intend to do so until we are in the latter stages of the Cannabis Genomic
Study and believe we have strains that are marketable for the treatment of disease such that we could begin the manufacturing
of such products, either in-house or through relationships with third party companies. We do not currently have any relationships
with third party companies for the manufacturing of any products.
Competition
The
cannabis industry, taken as a whole, is an emerging industry with many new entrants, with some of them focused on research, some
on medicinal cannabis and others focused on cannabis for legal, adult use, i.e. recreational use. We are currently
focused solely on the research and medicinal cannabis part of the industry. Additionally, many cannabis companies are international
companies due to the restrictions on the cannabis industry in the U.S.
At
this point in our development, we believe our competitors are those companies that are attempting study and sequence cannabis
DNA with the goal of creating medicines from that research. We do not view ourselves in competition with those companies currently
growing and/or selling cannabis for medicinal or recreational use since we are primarily a research company at this stage. However,
in the future WEED looks provide both pharmaceutical grade medicinal products along with non-pharmaceutical products, such as
Acapulco Gold suntan lotion as an example. We are aware of companies that supply synthetic cannabinoids and cannabis extracts
to researchers for pre-clinical and clinical investigation. We are also aware of various companies that cultivate cannabis plants
with a view to supplying herbal cannabis or non-pharmaceutical cannabis-based formulations to patients. These activities have
not been approved by the FDA or the TGA in Australia.
We
have never endorsed or supported the idea of distributing or legalizing crude herbal cannabis, or preparations derived from crude
herbal cannabis for medical use and do not believe our research to hopefully create prescription cannabinoids are the same, and
therefore competitive, with crude herbal cannabis. We believe that only a cannabinoid medication, one that is standardized in
composition, formulation and dose, administered by means of an appropriate delivery system, and tested in properly controlled
pre-clinical and clinical studies, can meet the standards of regulatory authorities around the world, including those of the FDA.
We believe that any cannabinoid medication must be subjected to, and satisfy, such rigorous scrutiny through proper accredited
education and federal regulations.
As
cannabis has moved through the legalization process in North America, research groups in Canada and the Unites States, along with
Israel, Australia, have initiated work on understanding the Cannabis genome.
The
methods of competition for companies in the cannabis research market segment revolve around a variety of factors, including, but
not limited to, experience of the companys research team, the facilities used by the company to conduct research, the instrumentation
used to sequence DNA, the companys internal research protocols, and the companys relationship with those in the
scientific community.
Applying
those competitive factors to WEED, Inc.: our research team averages over 15 years of experience (including peer-reviewed publications
and conference presentations), we have dedicated over 14,000 square feet of research space to the resolution of cannabis genomics
and the development of new strains, our instrumentation is designed to sequence large pieces of DNA (>25,000 bp - 10 times
larger than our typical competitors), and we use custom bioinformatics (DNA sequence analysis software) not available to any other
competitor in the industry. We believe these factors, along with our strong relationships in the industry and our unique validation
protocols, will allow us to measure up favorably when compared to our competition.
Next
Generation Sequencing
Next-generation
sequencing (NGS), introduced nearly ten years ago, is the catch-all term used to describe several sequencing technologies including:
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Illumina
(Solexa) sequencing
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Ion
torrent: Proton / PGM sequencing
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These
recent sequencing technologies allow scientists to sequence DNA and RNA much more quickly and cheaply than the previously used
Sanger sequencing, and as such, have greatly expanded the study of genomics and molecular biology. Numerous laboratories within
the Cannabis community are currently employing this technology.
Colorado
State University – Boulder
To
the best of our knowledge, Colorado State University – Boulder is conducting a Cannabis Genomic Research Initiative, which
is currently seeking to describe the Cannabis genome. The data generated through this effort is provided through the public domain
to growers in an effort to stimulate the production of new, high-value stains of Cannabis.
Anandia
Labs
Anandia
Labs is conducting work in the area of Cannabis genomics based on sequence work which was completed in 2011. The sequencing work
conducted was based on next generation sequencing technology and resulted in the generation of tens-of-thousands
of DNA segments that have yet to be completely and correctly reassembled. Much of the sequence data that was generated through
their sequencing efforts has been placed into the public domain and shared with other laboratories. In some instances, the data
has been found to be less than accurate.
Phylos
Biosciences
Phylos
Biosciences is currently using DNA-based genetic fingerprinting to establish relationships between strains and to assist in the
development of phenotypic databases to accelerate traditional breeding programs. Phylos Biosciences has a primary goal of bringing
clarity to the Cannabis market and promote the generation of IP held by individual growers. To the best of our knowledge, Phylos
Biosciences is not engaged in whole genome sequencing and is not engaged in any genetic enhancements of the Cannabis strains.
They simply supply genetic data to their customer base to more effectively drive the traditional
breeding process.
New
West Genetics
New
West Genetics aims to improve and develop industrial hemp as a viable crop for the United States. New West Genetics seeks to exploit
the diverse end uses of hemp and optimize the genetics of hemp to create a lucrative crop to add to the rotation of US farmers.
Industrial hemps uses and potential are as great as many major crops, if not more. We believe NWG is utilizing modern sequencing
technology and statistical genomics approaches to understand these factors as they apply to hemp production in states where it
is legal to grow. Understanding the genotype to phenotype map will be increasingly useful for expanding production of hemp.
While
we do not believe any of the above companies or universities are direct competitors of ours based on what we believe about their
work in the industry, they could be competitors for research funding dollars. We are not aware of the financial situation of many
of the above companies and universities, but we will need to raise substantial additional capital in order to fully-fund the five
year genomic study and the facilities to complete the study. Most of the above companies and universities are likely better financed
than we are and we will need to raise substantial funds in order to compete in the cannabis research industry.
Intellectual
Property
On
March 1, 2019, we entered into an Exclusive License and Assignment Agreement (the Technology Agreement) with Yissum
Research Development Company of the Hebrew University of Jerusalam, Ltd., an entity organized in Israel (Yissum).
Under the terms of the Technology Agreement, Yissum agreed to grant an exclusive license, and eventually assign, to us certain
platform technologies relating to different formulations for administration and delivery of lipophilic compositions, (including
cannabinoids) (collectively, the Technology) invented and/or developed by Prof. Elka Touitou at The Hebrew University
of Jerusalem, which technologies are more fully described in the patent applications and/or patents listed in Appendix A to the
Technology Agreement.
Under
the Agreement, in exchange for an exclusive license to use the Existing Technologies, we were to pay Yissum a total of USD$1,000,000
as follows: (i) $100,000 within three (3) business days of signing the Technology Agreement (which amount has been paid), (ii)
$400,000 on or before May 1, 2019, and (iii) $500,000 on or before December 31, 2019 (together, the License Payments).
The grant of the exclusive license and the transfer to us of the responsibility for the administration and control of patent activities
and patent expenses related to the Existing Technologies was to occur after the USD$400,000 payment due May 1, 2019. However,
prior to that payment, WEED terminated the agreement with Yissum. We do not currently plan to revisit our agreement with Yissum
in the future. However, we do plan to continue to work with Professor Elka Touitou of Hebrew University of Jerusalem, who remains
our Chairperson for our Israeli Scientific Advisory Board, to implement our research and product development along with WEED Israel
clinical trials.
Additionally,
we consider certain elements of our Cannabis Genomic Study to be trade secrets and we protect it as our intellectual property.
In the future, if we are successful in identifying certain Cannabis strains as promising for the treatment of diseases we will
seek to patent those strains.
Government
Regulation
As
of the end of March 2021, 35 states and the District of Columbia allow its citizens to use medical marijuana, and 16 states have
legalized cannabis for adult recreational use. The state laws are in conflict with the Federal Controlled Substances Act, which
makes marijuana use and possession illegal at the federal level. Prior administrations (namely, President Obama) effectively stated
that it is not an efficient use of resources to direct law federal law enforcement agencies to prosecute those lawfully abiding
by state-designated laws allowing the use and distribution of medical marijuana. The current administration (Biden administration)
has not yet indicated how it might regulate the marijuana industry at the federal level, but to date there has been very little
in terms of action. There is no guarantee that the Biden administration or future administrations will maintain the low-priority
enforcement of federal laws in the marijuana industry that was adopted by the Obama administration. Any new administration that
follows could change this policy and decide to enforce the federal laws strongly. Any such change in the federal governments
enforcement of current federal laws could cause significant financial damage to our business and our shareholders.
Further,
and while we do not intend to harvest, distribute or sell cannabis, if we conduct research with the cannabis plant or lease buildings
to growers of marijuana, etc., we could be deemed to be participating in cannabis cultivation, which remains illegal under federal
law, and exposes us to potential criminal liability, with the additional risk that our properties could be subject to civil forfeiture
proceedings.
Currently,
there are no approvals needed in order to sequence the cannabis genome, which is what is currently being conducted by Sangre.
However, prior to doing any research into the medical applications of the cannabis plant once the study is completed, we will
need to obtain medicinal cannabis and hemp research licenses from the State of Colorado and New York State. Additionally, if we
ever cultivate and process cannabis plants, we will need cultivation and processing licenses from the State of Colorado and New
York State which covers cannabis and hemp. These licenses will cost approximately $1,000 to $5,000 per license, and likely take
approximately six months to 1 year to obtain.
Sangre
Agreement
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.
Le
Veta, Colorado Properties
On
July 26, 2017, we acquired 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 Sangres 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, including 25,000 shares of our common stock, and Sangre took immediate
possession of the property. Under the terms of the purchase we were 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, we entered into an Amendment No. 1 to the $475,000 principal amount promissory note issued by us to the seller of the
property, under which both parties agreed to amend the purchase and the promissory note to allow us to payoff the note in full
if we paid $100,000 in 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, we 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 is deemed paid-in-full and fully satisfied and we own the property without encumbrances. To
date we have spent $354,000 renovating the property and an additional $400,000 on extraction and analytical lab equipment. Our
plans to complete the property renovations, at an estimated cost of $300,000, are currently on hold pending future financing.
We will need additional extraction equipment and analytical lab equipment, totaling approximately $700,000. We will need to raise
additional funds in order to complete the planned renovations and pay the purchase price for the equipment. We currently have
another $1.2 million dollar property in La Veta, CO that was to house Sangre personnel, on the market to sell in order to keep
our options open and to fund other operations, and we may or may not consummate a sale of the property, depending on the timing
of future financing.
On
January 3, 2018, Sangre closed on the purchase of a condominium in La Veta, Colorado. Sangre paid $140,000 in cash for the condominium
which is a three story condominium, with three bedrooms and three bathrooms and is approximately 1,854 square feet. In February
2018, we 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 bathrooms. Under the terms of the purchase agreement,
we paid $150,000 down, entered into a note payable in the amount of approximately $1,041,000. We secured a below-market interest
rate of 1.81% based on the short-term nature of the term. This note was repaid on October 5, 2018. Sangre took immediate possession
of the property. We acquired these properties for the purpose of housing personnel we believe are vital to the 5-year Cannabis
Genomic Study. La Veta, Colorado is a small town without many rentals, so it became necessary to find more permanent housing in
La Veta, Colorado for those that will be working with Sangre on the study.
New
York Property
On
October 24, 2017, we entered into an amended Purchase and Sale Agreement with Greg DiPaolos 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 had already made. We made the six $10,000 monthly payments but were not
able to pay the balloon payment by the August 3, 2020 deadline, but on July 31, 2020 we worked out an additional extension with
the bank. Under the terms of that agreement, we paid $10,000 in exchange for an additional extension and we owed approximately
$332,000 to acquire the property. We agreed to pay that amount in installment payments of $10,000 per month for six months beginning
September 2020, with a balloon payment of approximately $272,000 due on or before February 1, 2021. We made the six $10,000 monthly
payments but were not able to pay the balloon payment by the February 1, 2021 deadline, but on January 18, 2021 we worked out
an additional extension with the bank. Under the terms of that agreement, we agreed to pay $10,000 per month beginning February
1, 2021 until November 1, 2021, and then pay a balloon payment of approximately $172,000 due on or before December 1, 2021. These
payments are in addition to the approximately $540,000 in payments we have already made. We made the $10,000 payments due on February
1, 2021 and March 1, 2021. We need to raise funds in order to make the remaining scheduled payments.
Employees
As
of December 31, 2019, we employed two people on a full time basis, namely Glenn E. Martin and Nicole M. Breen. We
also contract with Thomas Perry, and Tom Pool as consultants on a full-time basis who work with Sangre. As of December 31, 2019,
WEED Israel Cannabis Ltd. had one consultant. As of December 31, 2019, WEED Australia Ltd. had three consultants. WEED Hong Kong
Limited has hired; Ed Lehman of Lehman, Lee and Xu as corporate counsel and Lehman, Lee and Xu Corporate Services Limited as WEED
HKs legal representative in China and Hong Kong.
Human
Capital Resources
As
noted above, we only have a small number of employees. The remainder of our workforce is consultants due to the nature of our
business. As it relates to our employees and the consultants that work with us:
Oversight
and Management
Our
executive officers are tasked with leading our organization in managing employment-related matters, including recruiting and hiring,
onboarding and training, compensation planning, talent management and development. We are committed to providing team members
with the training and resources necessary to continually strengthen their skills. Our executive team is responsible for periodically
reviewing team member programs and initiatives, including healthcare and other benefits, as well as our management development
and succession planning practices. Management periodically reports to the Board regarding our human capital measures and results
that guide how we attract, retain and develop a workforce to enable our business strategies.
Diversity,
Equity and Inclusion
We
believe that a diverse workforce is critical to our success, and we continue to monitor and improve the application of our hiring,
retention, compensation and advancement processes for women and underrepresented populations across our workforce, including persons
of color, veterans and LGBTQ to enhance our inclusive and diverse culture. When possible we plan to invest in recruiting diverse
talent.
Workplace
Safety and Health
A
vital part of our business is providing our workforce with a safe, healthy and sustainable working environment. We focus on implementing
change through workforce observation and feedback channels to recognize risk and continuously improve our processes.
Importantly
during 2020, our focus on providing a positive work environment on workplace safety have enabled us to preserve business continuity
without sacrificing our commitment to keeping our colleagues and workplace visitors safe during the COVID-19 pandemic. We took
immediate action at the onset of the COVID-19 pandemic to enact rigorous safety protocols in our facilities by improving sanitation
measures, implementing mandatory social distancing, use of facing coverings, reducing on-site workforce through staggered shifts
and schedules, remote working where possible, and restricting visitor access to our locations. We believe these actions helped
minimize the impact of COVID-19 on our workforce.
Available
Information
We
are a fully reporting issuer, subject to the Securities Exchange Act of 1934. Our Quarterly Reports, Annual Reports, and other
filings can be obtained from the SECs Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business
days during the hours of 10 a.m. to 3 p.m. You may also obtain information on the operation of the Public Reference Room by calling
the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the Commission at http://www.sec.gov.
ITEM
1A. – RISK FACTORS.
As
a smaller reporting company we are not required to provide a statement of risk factors. However, we believe this information may
be valuable to our shareholders. We reserve the right to not provide risk factors in our future filings. Our primary risk factors
and other considerations include:
We
have a limited operating history and historical financial information upon which you may evaluate our performance.
You
should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies
that, like us, are in their early stages of development. We may not successfully address these risks and uncertainties or successfully
complete our studies and/or implement our existing and new products. If we fail to do so, it could materially harm our business
and impair the value of our common stock. Even if we accomplish these objectives, we may not generate the positive cash flows
or profits we anticipate in the future. We were incorporated in the State of Arizona on August 20, 1999. 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
and we shifted our business focus to a company concentrating on the development and application of cannabis-derived compounds
for the treatment of human disease. Although our subsidiary, Sangre, has begun its planned five-year Cannabis Genomic Study to
complete a global genomic classification of the Cannabis plant genus the completion of the study is likely years away. Unanticipated
problems, expenses and delays are frequently encountered in establishing a new business, conducting research, and developing new
products. These include, but are not limited to, inadequate funding, unforeseen research issues, lack of consumer acceptance,
competition, product development, and inadequate sales and marketing. The failure by us to meet any of these conditions would
have a materially adverse effect upon us and may force us to reduce or curtail operations. No assurance can be given that we can
or will ever operate profitably.
We
may not be able to meet our future capital needs.
To
date, we have not generated any revenue and we have limited cash liquidity and capital resources. Our
future capital requirements will depend on many factors, including the progress and results of our Cannabis Genomic Study, our
ability to develop products, cash flow from operations, and competing market developments. We anticipate the Cannabis Genomic
Study will cost approximately $15,000,000 to complete. We will need additional capital in the near future. Any equity financings
will result in dilution to our then-existing stockholders. Although we currently do not have any debt financing, any sources of
debt financing in the future may result in a high interest expense. Any financing, if available, may be on unfavorable terms.
If adequate funds are not obtained, we will be required to reduce or curtail operations.
If
we cannot obtain additional funding, our research and development efforts may be reduced or discontinued and we may not be able
to continue operations.
We
have historically experienced negative cash flows from operations since our inception and we expect the negative cash flows from
operations to continue for the foreseeable future. Unless and until we are able to generate revenues, we expect such losses to
continue for the foreseeable future. As discussed in our financial statements, there exists substantial doubt regarding our ability
to continue as a going concern.
Research
and development efforts are highly dependent on the amount of cash and cash equivalents on hand combined with our ability to raise
additional capital to support our future operations through one or more methods, including but not limited to, issuing additional
equity or debt.
In
addition, we may also raise additional capital through additional equity offerings and licensing our
research and/or future products in development. While we will continue to explore these potential opportunities, there can be
no assurances that we will be successful in raising sufficient capital on terms acceptable to us, or at all, or that we will be
successful in licensing our future products. Based on our current projections, we believe we have insufficient cash on hand to
meet our obligations as they become due based on current assumptions. The uncertainties surrounding our future cash inflows have
raised substantial doubt regarding our ability to continue as a going concern.
One
of our current projects is our 5-year cannabis genomic study being conducted by Sangre. In the event that we are unable to complete
that study for any reason, such as inability to complete our human clinical trials, or if those trials are not successful, then
it could significantly impact our business.
Although
we have plans to be a company with a multitude of business segments, one of our first foray into medical cannabis research is
the 5-year cannabis genomic study being conducted by Sangre. In the event that we are unable to complete the 5-year study for
any reason, such as the inability to complete our planned human clinical trials in phases 2 and 3 of the study, or if those trials
are not successful, then it could significantly impact our business.
Our
research plan, which is focused on the development and application of cannabis-derived compounds for the treatment of human disease,
and includes our 5-year cannabis genomic study being conducted by Sangre, is dependent upon our ability to complete the necessary
research and clinical human trials.
Our
research plan, which is focused on the development and application of cannabis-derived compounds for the treatment of human disease,
and includes our 5-year cannabis genomic study being conducted by Sangre, is dependent upon our ability to complete the necessary
research and clinical human trials. In the event that we are unable to complete those research and/or human clinical trials, or
if those trials are not successful, then it could significantly, negatively impact all phases of our research plan and significantly
impact our business.
The
coronavirus pandemic is causing disruptions in the workplace, which will have negative repercussions on our business if they continue
for an extended period time.
We
are closely monitoring the coronavirus pandemic and the directives from federal and local authorities regarding not only our workforce,
but how it impacts companies we work with for our various projects. As states and localities continue with social distancing and
work from home regulations more and more companies have been forced to either shut down, slow down or alter their
work routines. This could have a negative impact our business going forward if these conditions persist for an extended period
of time.
Our
proposed business is dependent on laws pertaining to the cannabis industry.
Continued
development of the cannabis industry is dependent upon continued legislative authorization of marijuana at the state level. Any
number of factors could slow or halt progress in this area. Further, progress for the industry, while encouraging, is not assured.
While there may be ample public support for legislative action, numerous factors impact the legislative process. Any one of these
factors could slow or halt use of marijuana, which would negatively impact our business.
As
of March 2021, 35 states and the District of Columbia allow its citizens to use
medical marijuana, and 16 states have legalized cannabis for adult recreational use. The state laws are in conflict with the Federal
Controlled Substances Act, which makes cannabis use and possession illegal on a national level. Prior administrations (namely,
President Obama) effectively stated that it is not an efficient use of resources to direct law federal law enforcement agencies
to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana. The current
administration (Biden administration) has not yet indicated how it might regulate the marijuana industry at the federal level,
but to date there has been very little in terms of action. There is no guarantee that the Biden administration or future administrations
will maintain the low-priority enforcement of federal laws in the marijuana industry that was adopted by the Obama administration.
Any new administration that follows could change this policy and decide to enforce the federal laws strongly. Any such change
in the federal governments enforcement of current federal laws could cause significant financial damage to our business
and our shareholders.
Further,
and while we do not intend to harvest, distribute or sell cannabis, if we conduct research with the cannabis plant or lease buildings
to growers of cannabis, etc., we could be deemed to be participating in cannabis cultivation, which remains illegal under federal
law, and exposes us to potential criminal liability, with the additional risk that our properties could be subject to civil forfeiture
proceedings.
The
cannabis industry faces strong opposition.
It
is believed by many that large well-funded businesses may have a strong economic opposition to the cannabis industry. We believe
that the pharmaceutical industry clearly does not want to cede control of any product that could generate significant revenue.
For example, medical cannabis will likely adversely impact the existing market for the current marijuana pill sold
by mainstream pharmaceutical companies. Further, the medical cannabis industry could face a material threat from the pharmaceutical
industry, should cannabis displace other drugs or encroach upon the pharmaceutical industrys products. The pharmaceutical
industry is well funded with a strong and experienced lobby that eclipses the funding of the medical cannabis movement. Any inroads
the pharmaceutical industry could make in halting or impeding the cannabis industry could have a detrimental impact on our proposed
business.
Cannabis
remains illegal under Federal law.
Cannabis
is a schedule-I controlled substance and is illegal under federal law. Even in those states in which the use of cannabis has been
legalized, its production and use remains a violation of federal law. Since federal law criminalizing the use of cannabis preempts
state laws that legalize its use, strict enforcement of federal law regarding cannabis would likely result in our inability to
proceed with our business plan.
Laws
and regulations affecting the medical cannabis industry are constantly changing, which could detrimentally affect our proposed
operations.
Local,
state and federal medical cannabis laws and regulations are broad in scope and subject to evolving interpretations, which could
require us to incur substantial costs associated with compliance or alter our business plan. In addition, violations of these
laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations.
In addition, it is possible that regulations may be enacted in the future that will be directly applicable to our proposed business.
We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect
additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.
If
we are unable to recruit and retain qualified personnel, our business could be harmed.
Our
growth and success highly depend on qualified personnel. Competition in the industry could cause us difficulty in recruiting or
retaining a sufficient number of qualified technical personnel, which could harm our ability to develop new products. Also, the
fact cannabis remains illegal at the federal level may dissuade qualified personnel from working in the cannabis industry, thus
limiting the pool of qualified individuals to run our business. If we are unable to attract and retain necessary key talents,
it would harm our ability to develop competitive product and retain good customers and could adversely affect our business and
operating results.
We
may be unable to adequately protect our proprietary rights.
Our
ability to compete partly depends on the superiority, uniqueness and value of our intellectual property. To protect our proprietary
rights, we will rely on a combination of patent, copyright and trade secret laws, confidentiality agreements with our employees
and third parties, and protective contractual provisions. Despite these efforts, any of the following occurrences may reduce the
value of our intellectual property:
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Our
applications for patents relating to our business may not be granted and, if granted, may be challenged or invalidated;
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Issued
patents may not provide us with any competitive advantages;
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Our
efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology;
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Our
efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior
to those we develop;
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Another
party may obtain a blocking patent and we would need to either obtain a license or design around the patent in order to continue
to offer the contested feature or service in our products; or
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The
fact cannabis is illegal at the federal level may impact our ability to secure patents from the United States Patent and Trademark
Office, and other intellectual property protections may not be available to us.
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We
may become involved in lawsuits to protect or enforce our patents that would be expensive and time consuming.
In
order to protect or enforce our patent rights, we may initiate patent or trademark litigation against third parties. In addition,
we may become subject to interference or opposition proceedings conducted in patent and trademark offices to determine the priority
and patentability of inventions. The defense of intellectual property rights, including patent rights through lawsuits, interference
or opposition proceedings, and other legal and administrative proceedings, would be costly and divert our technical and management
personnel from their normal responsibilities. An adverse determination of any litigation or defense proceedings could put our
pending patent applications at risk of not being issued.
Furthermore,
because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that
some of our confidential information could be compromised by disclosure during this type of litigation. For example, during the
course of this kind of litigation, confidential information may be inadvertently disclosed in the form of documents or testimony
in connection with discovery requests, depositions or trial testimony. This disclosure could have a material adverse effect on
our business and our financial results.
We
may be involved in litigation at some in the future.
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. Litigation is also expensive and could cause us to spend substantial sums
on legal fees even if we are eventually successful in the litigation.
We
have several opportunities that we may not be able to take advantage of or close without substantial funding.
As
detailed elsewhere in this Offering Circular we have several business opportunities that we either cannot continue or cannot begin
without raising substantial funds either in this Offering or through other sources. Notably, we have an opportunity to close on
a golf course property in New York, with unlimited water extraction rights from Lake Erie, but currently need approximately $500,000
to pay the remainder of the purchase price and close on the acquisition. We are not sure if we will be able to secure the necessary
funds to acquire the property within the current timeframe. If we are unable to acquire the property we could miss a significant
opportunity and it could affect our future business plans.
Our
common stock has been thinly traded and we cannot predict the extent to which a trading market will develop.
Our
common stock is traded on the OTC Markets OTCQB tier. Our common stock is thinly traded compared to larger
more widely known companies. Thinly traded common stock can be more volatile than common stock trading in an active public market.
We cannot predict the extent to which an active public market for our common stock will develop or be sustained after this Offering.
Because
we are subject to the penny stock rules, the level of trading activity in our stock may be reduced.
Our
common stock is traded on the OTC Markets OTCQB tier. Broker-dealer practices in connection with transactions
in penny stocks are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny
stocks, like shares of our common stock, generally are equity securities with a price of less than $5.00, other than securities
registered on certain national securities exchanges or quoted on NASDAQ. The penny stock rules require a broker-dealer, prior
to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact
and the broker-dealers presumed control over the market, and monthly account statements showing the market value of each penny
stock held in the customers account. In addition, broker-dealers who sell these securities to persons other than established
customers and accredited investors must make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchasers written agreement to the transaction. Consequently, these requirements
may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny
stock rules, and investors in our common stock may find it difficult to sell their shares.
ITEM
1B – UNRESOLVED STAFF COMMENTS
This
Item is not applicable to us as we are not an accelerated filer, a large accelerated filer, or a well-seasoned issuer; however,
we have not received written comments from the Commission staff regarding our periodic or current reports under the Securities
Exchange Act of 1934 within the last 180 days before the end of our last fiscal year.
ITEM
2 – PROPERTIES
Le
Veta, Colorado Properties
On
July 26, 2017, we acquired 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 Sangres 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, including 25,000 shares of our common stock, and Sangre took immediate
possession of the property. Under the terms of the purchase we were 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, we entered into an Amendment No. 1 to the $475,000 principal amount promissory note issued by us to the seller of the
property, under which both parties agreed to amend the purchase and the promissory note to allow us to payoff the note in full
if we paid $100,000 in 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, we 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 is deemed paid-in-full and fully satisfied and we own the property without encumbrances. To
date we have spent $354,000 renovating the property and an additional $400,000 on extraction and analytical lab equipment. Our
plans to complete the property renovations, at an estimated cost of $300,000, are currently on hold pending future financing.
We will need additional extraction equipment and analytical lab equipment, totaling approximately $700,000. We will need to raise
additional funds in order to complete the planned renovations and pay the purchase price for the equipment. We currently have
another $1.2 million dollar property in La Veta, CO that was to house Sangre personnel, on the market to sell in order to keep
our options open and to fund other operations, and we may or may not consummate a sale of the property, depending on the timing
of future financing.
On
January 3, 2018, Sangre closed on the purchase of a condominium in La Veta, Colorado. Sangre paid $140,000 in cash for the condominium
which is a three story condominium, with three bedrooms and three bathrooms and is approximately 1,854 square feet. In February
2018, we 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 bathrooms. Under the terms of the purchase agreement,
we paid $150,000 down, entered into a note payable in the amount of approximately $1,041,000. We secured a below-market interest
rate of 1.81% based on the short-term nature of the term. This note was repaid on October 5, 2018. Sangre took immediate possession
of the property. We acquired these properties for the purpose of housing personnel we believe are vital to the 5-year Cannabis
Genomic Study. La Veta, Colorado is a small town without many rentals, so it became necessary to find more permanent housing in
La Veta, Colorado for those that will be working with Sangre on the study.
New
York Property
On
October 24, 2017, we entered into an amended Purchase and Sale Agreement with Greg DiPaolos 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 had already made. We made the six $10,000 monthly payments but were not
able to pay the balloon payment by the August 3, 2020 deadline, but on July 31, 2020 we worked out an additional extension with
the bank. Under the terms of that agreement, we paid $10,000 in exchange for an additional extension and we owed approximately
$332,000 to acquire the property. We agreed to pay that amount in installment payments of $10,000 per month for six months beginning
September 2020, with a balloon payment of approximately $272,000 due on or before February 1, 2021. We made the six $10,000 monthly
payments but were not able to pay the balloon payment by the February 1, 2021 deadline, but on January 18, 2021 we worked out
an additional extension with the bank. Under the terms of that agreement, we agreed to pay $10,000 per month beginning February
1, 2021 until November 1, 2021, and then pay a balloon payment of approximately $172,000 due on or before December 1, 2021. These
payments are in addition to the approximately $540,000 in payments we have already made. We made the $10,000 payments due on February
1, 2021 and March 1, 2021. We need to raise funds in order to make the remaining scheduled payments.
ITEM
3 – LEGAL PROCEEDINGS
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. Currently, there
is no further hearing scheduled in this matter.
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 Martins 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 are seeking compensatory damages caused by William
Martins 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. Martins 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 Martins 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 attorneys 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 plaintiffs claims and the Corporations 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 Plaintiffs counsel. Subsequently, Plaintiffs 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 Plaintiffs
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 Plaintiffs claims for breach of contract, and (iii) granted Plaintiffs
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 Plaintiffs motion. As a result, on March 10, 2020,
the Court entered an Order dismissing Plaintiffs remaining counts in the Complaint without prejudice. The only remaining
claims relate to awards for attorneys fees, with the Parties motions pending.
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 Plaintiffs 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 Colorados 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. Due to concerns related to the COVID-19 pandemic the
case had mainly remained static during 2020 until mid-summer. On July 3, 2020, Plaintiff offered to dismiss the case in exchange
for payment of $10,000. We rejected the offer. On July 21, 2020, the Parties filed a Joint Stipulation for Dismissal of all claims
with Prejudice. On July 27, 2020, the Court issued its Order granting the Stipulation for Dismissal with Prejudice. The lawsuit
is now terminated and all claims against us have been dismissed with prejudice.
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.
ITEM
4 – MINE SAFETY DISCLOSURES
There
is no information required to be disclosed under this Item.
PART
II
ITEM
5 – MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
Information
Our
common stock is currently quoted on the OTCQB-tier of OTC Markets under the symbol BUDZ. We were originally
quoted over-the-counter on November 2009. We started being quoted on the OTCQB-tier of OTC Markets on September 13, 2018. As
of March 29, 2021, we had 114,262,685 shares of our common stock outstanding. The following table sets forth the high and low
bid information for each quarter within the two most recent fiscal years, as estimated based on information on OTC Markets.
The information reflects prices between dealers, and does not include retail markup, markdown, or commission, and may not
represent actual transactions.
|
|
|
|
Bid Prices
|
|
Fiscal Year
Ended
December 31,
|
|
Period
|
|
High
|
|
|
Low
|
|
2019
|
|
First Quarter
|
|
$
|
1.78
|
|
|
$
|
1.02
|
|
|
|
Second Quarter
|
|
$
|
1.03
|
|
|
$
|
0.57
|
|
|
|
Third Quarter
|
|
$
|
0.68
|
|
|
$
|
0.40
|
|
|
|
Fourth Quarter
|
|
$
|
0.42
|
|
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
First Quarter
|
|
$
|
0.41
|
|
|
$
|
0.21
|
|
|
|
Second Quarter
|
|
$
|
0.48
|
|
|
$
|
0.18
|
|
|
|
Third Quarter
|
|
$
|
0.25
|
|
|
$
|
0.18
|
|
|
|
Fourth Quarter
|
|
$
|
0.32
|
|
|
$
|
0.19
|
|
The
Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks
in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define
a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions which
we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.
We
have not adopted any stock option or stock bonus plans.
Holders
As
of December 31, 2020, there were 113,372,685 shares of our common stock outstanding held by approximately 270 holders of record
and numerous shares held in brokerage accounts. As of March 29, 2021, there were 114,262,685 shares of our common stock outstanding
held by 270 holders of record. Of these shares, 38,870,680 were held by non-affiliates. As of June 30, 2020, we had 36,530,680
shares held by non-affiliates. On the cover page of this filing we value the 36,530,680 shares held by non-affiliates as of June
30, 2020 at $10,959,204. These shares were valued at $0.30 per share, based on our closing share price on June 30, 2020.
As
of December 31, 2020, we did not have any shares of preferred stock issued or outstanding.
Warrants
and Other Convertible Instruments
We
do not currently have any warrants outstanding to purchase our common stock. All the warrants we previously issued have expired
by their terms.
Dividends
There
have been no cash dividends declared on our common stock, and we do not anticipate paying cash dividends in the foreseeable future.
Dividends are declared at the sole discretion of our Board of Directors.
Securities
Authorized for Issuance Under Equity Compensation Plans
There
are no outstanding options or warrants to purchase shares of our common stock under any equity compensation plans.
Currently,
we do not have any equity compensation plans. As
a result, we did not have any options, warrants or rights outstanding under equity compensation plans as of December 31, 2020.
Recent
Issuance of Unregistered Securities
During
the three months ended December 31, 2020, we issued the following unregistered securities. All such
securities were issued pursuant exemptions from registration under Section 4(a)(2) of the Securities Act of 1933, as amended,
as a transaction by an issuer not involving any public offering, as noted below.
During
the three months ended December 31, 2020, we issued an aggregate of 500,000 shares of our common stock to non-affiliate investors
for an aggregate of $60,000. The issuances of the shares were exempt from registration pursuant to Section 4(a)(2) of the Securities
Act of 1933. The investors were sophisticated, familiar with our operations, and there was no solicitation.
During
the three months ended December 31, 2020, we issued an aggregate of 200,000 shares of common stock to consultants for services
performed. The total fair value of the common stock was $23,000 based on the closing price of our common stock on the measurement
date. The issuances of the shares were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933. The
investors were sophisticated, familiar with our operations, and there was no solicitation.
If
our stock is listed on an exchange we will be subject to the Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock.
The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of
less than $5.00 per share, subject to a few exceptions which we do not meet. Unless an exception is available, the regulations
require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market
and the risks associated therewith.
ITEM
6 – SELECTED FINANCIAL DATA
As
a smaller reporting company we are not required to provide the information required by this Item.
ITEM
7 – MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Disclaimer
Regarding Forward Looking Statements
Our
Managements 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 Registration Statement 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, Sangres 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 Sangres 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 by Q3 of 2019, at an estimated
cost of $300,000. 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 Annual Report.
Results
of Operations for the Years Ended December 31, 2020 and 2019
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
313,917
|
|
|
|
969,913
|
|
Professional fees
|
|
|
3,616,760
|
|
|
|
26,287,730
|
|
Depreciation and amortization
|
|
|
145,797
|
|
|
|
159,424
|
|
Total operating expenses
|
|
|
4,076,474
|
|
|
|
27,417,067
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(4,076,474
|
)
|
|
|
(27,417,067
|
)
|
|
|
|
|
|
|
|
|
|
Other expense
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
(40,828
|
)
|
|
|
(11,672
|
)
|
Other income
|
|
|
-
|
|
|
|
1,016
|
|
Loss on deposit
|
|
|
-
|
|
|
|
(100,000
|
)
|
Gain
on extinguishment of debt
|
|
|
5,277
|
|
|
|
-
|
|
Gain on extinguishment of debt
|
|
|
46,948
|
|
|
|
-
|
|
Other expense
|
|
|
-
|
|
|
|
(1,956
|
)
|
Total other expense, net
|
|
|
11,397
|
|
|
|
(112,612
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,065,077
|
)
|
|
$
|
(27,529,679
|
)
|
Operating
Loss; Net Loss
Our
comprehensive net loss decreased by $23,465,700, from ($27,530,288) to ($4,064,588), from the year ended 2019 compared to 2020.
Our operating loss decreased by $23,340,593, from ($27,417,067) to ($4,076,474) for the same period. The decrease in operating
loss is primarily a result of our decreases in our professional fees and our general and administrative expenses. The decrease
in our net loss is also a result of our operating loss decrease, partially offset by an increase in interest expense. These changes
are detailed below.
Revenue
We
have not had any revenues since our inception. Prior to October 1, 2014, we were an exploration stage mineral exploration company
that owned a number of unpatented mining claims and Arizona State Land Department claims. In late 2014, we changed our short-term
and long-term business focus to the medical cannabis sector. In the short-term we plan to conduct Sangres 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 $655,996, from $969,913 for the year ended December 31, 2019 to $313,917 for the year
ended December 31, 2020, primarily due to decreases in our travel
and charitable contributions.
Professional
Fees
Our
professional fees decreased during the year ended December 31, 2020 compared to the year ended December 31, 2019. Our professional
fees were $3,616,760 for the year ended December 31, 2020 and $26,287,730 for the year ended December 31, 2019. These fees are
largely related to fees paid for legal and accounting services, along with compensation to independent contractors, and increased
primarily as a result of increased stock-based compensation awards and the value attributed to those shares of stock. We expect
the amount of professional fees we pay in cash to grow steadily as our business expands. However, the amount attributed to the
stock-based compensation could decrease in periods when our stock price is lower, 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 year ended December 31, 2020, we had depreciation and amortization of $145,797, compared to $159,424 in the year ended December
31, 2019. The depreciation and amortization expense in 2020 was related to properties and trademarks. The depreciation and amortization
expense in 2019 was related to the sale of the two Audi vehicles as a repayment to Nicole Breen.
Interest
Expense
Interest
expense increased from ($11,672) to ($40,828) for the year ended December 31, 2020 compared to the same period in 2019. Our interest
expense primarily relates to interest on short-term loans.
Other
Income
In
2020, we had other income of $0 compared to $1,016 in 2019. The other income in 2019 related to a refund from a merchant.
Loss
on Deposit
In
2020, we had loss on deposit of $0, compared to $100,000 in 2019. The loss on deposit for 2019 period was related to the
termination of the exclusive license and assignment agreement between us and Yissum Research Development Company.
Gain
on Extinguishment of Debt
During
the year ended December 31, 2020, we had a gain on extinguishment of debt of $5,277, compared to $0 in the year ended December
31, 2019. The gain on extinguishment of debt in 2020 was related to shares issued for relief of payables.
Other
Expense
During
2020, we had other expense of $0, compared to $1,956 in 2019. In 2019, the other expense primarily related to credit card finance
charges.
Liquidity
and Capital Resources
Introduction
During
the years ended December 31, 2020 and 2019, because of our operating losses, we did not generate positive operating cash flows.
Our cash on hand as of December 31, 2020 was $12,629 and our monthly cash flow burn rate was approximately $40,000. 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 operations for many years to come.
Our
cash, current assets, total assets, current liabilities, and total liabilities as of December 31, 2020 and 2019, respectively,
are as follows:
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
12,629
|
|
|
$
|
2,509
|
|
|
$
|
10,120
|
|
Total Current Assets
|
|
|
255,134
|
|
|
|
126,310
|
|
|
|
128,824
|
|
Total Assets
|
|
|
1,818,997
|
|
|
|
1,952,612
|
|
|
|
(133,615
|
)
|
Total Current Liabilities
|
|
|
937,278
|
|
|
|
752,970
|
|
|
|
184,308
|
|
Total Liabilities
|
|
$
|
937,278
|
|
|
$
|
752,970
|
|
|
|
184,308
|
|
Our
current assets increased by $128,824 as of December 31, 2020 as compared to December 31, 2019, primarily due to increases in cash
and deposits. The decrease in our total assets between the two periods was primarily attributed to a decrease in our property
and equipment, net and depreciation of certain of our assets.
Our
current liabilities and total liabilities increased by $184,308, as of December 31, 2020 as compared to December 31, 2019. This
increase in liabilities as of December 31, 2020 was primarily related to increases in our accounts payable, accrued officer compensation,
accrued expenses, accrued interest, and notes payable, related parties, partially offset by a decrease in our notes payable, compared
to December 31, 2019.
In
order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources.
There is no assurance, however, that we will be successful in these efforts.
Cash
Requirements
We
had cash available as of December 31, 2020 of $12,629 and $2,509 on December 31, 2019. Based on our revenues, cash on hand and
current monthly burn rate of approximately $40,000, 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 $430,987 for the year ended December 31, 2020, as compared to $1,110,597 for the
year ended December 31, 2019. In 2020, the net cash used in operating activities consisted primarily of our net loss of ($4,065,077),
offset by estimated fair value of stock-based compensation of $2,015,911, estimated fair of shares issued for services of $1,407,200,
depreciation and amortization of $145,797, gain on sale of fixed asset of $46,948, and gain on relief of payable of $5,277, adjusted
by an increases in prepaid expenses and other assets of $118,704, and increases in accounts payable of $45,073 and accrued expenses
of $1782,484. In 2019, the net cash used in operating activities consisted primarily of our net loss of ($27,529,679), offset
by estimated fair value of stock-based compensation of $22,770,662, estimated fair of shares issued for services of $2,578,250,
depreciation and amortization of $159,423, and impairment of construction in progress of $499,695 adjusted by an increases in
accounts receivable of $801, accrued expenses of $141,800, and a decreases in prepaid expenses and other assets of $298,331 and
accounts payable of $28,278.
Investments
In
2020, we have net cash from investing activities of $163,590, consisting entirely of proceeds from sales of fixed asset. In 2019,
we had net cash used in investing activities of $2,979, consisting entirely of purchases of property and equipment.
Financing
Our
net cash provided by financing activities for the year ended December 31, 2020 was $277,028, compared to $1,046,086 for the year
ended December 31, 2019. For the period in 2020, our financing activities related to proceeds from the sale of common stock of
$295,000, proceeds from notes payable - related party of $64,100, and proceeds from notes payable of $10,201, offset by repayments
on notes payable – related party of $30,000 and repayments of notes payable of $62,273. For the period in 2019, our financing
activities related to proceeds from the sale of common stock of $573,000, proceeds from notes payable, related party of $305,823,
and proceeds from notes payable of $250,850, offset by repayments on notes payable of ($83,587).
Off
Balance Sheet Arrangements
We
have no off-balance sheet arrangements.
ITEM
7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As
a smaller reporting company we are not required to provide the information required by this Item.
ITEM
8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For
a list of financial statements and supplementary data filed as part of this Annual Report, see the Index to Financial Statements
beginning at page F-1 of this Annual Report.
ITEM
9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There
are no items required to be reported under this Item.
ITEM
9A – CONTROLS AND PROCEDURES
(a) Evaluation
of Disclosure Controls and Procedures
We
carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer (our Principal Accounting Officer), of the effectiveness of our disclosure controls and procedures
(as defined) in Exchange Act Rules 13a – 15(c) and 15d – 15(e)). Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer, who are our principal executive officer and principal financial officers, respectively,
concluded that, as of the end of the period ended December 31, 2020, our disclosure controls and procedures were not effective
(1) to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms and (2) to
ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated
and communicated to us, including our chief executive and chief financial officers, as appropriate to allow timely decisions regarding
required disclosure.
Our
Chief Executive Officer and Chief Financial Officer (our Principal Accounting Officer) do not expect that our disclosure controls
or internal controls will prevent all error and all fraud. No matter how well conceived and operated, our disclosure
controls and procedures can provide only a reasonable level of assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Further,
the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because
of a simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire
to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions.
Furthermore,
smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult
to properly segregate duties. Often, one or two individuals control every aspect of the companys operation and are
in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting
software packages that lack a rigorous set of software controls.
(b) Managements
Annual Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as amended,
as a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer (our Principal
Financial Officer), and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles in the United States and includes those policies and procedures that:
|
●
|
Pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and any disposition of
our assets;
|
|
●
|
Provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations
of our management and directors; and
|
|
●
|
Provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
|
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis. Our management assessed the effectiveness of our internal control over financial reporting
as of December 31, 2020. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment,
Management has identified the following three material weaknesses that have caused management to conclude that, as of December
31, 2020, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the
reasonable assurance level:
1. We
do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to
our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However,
to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed
by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment
of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. We
have not documented our internal controls. We have limited policies and procedures that cover the recording and reporting
of financial transactions and accounting provisions. As a result we may be delayed in our ability to calculate certain
accounting provisions. While we believe these provisions are accounted for correctly in the attached audited financial
statements our lack of internal controls could lead to a delay in our reporting obligations. We are required to provide
written documentation of key internal controls over financial reporting. Management evaluated the impact of our failure
to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures
and has concluded that the control deficiency that resulted represented a material weakness.
3. Effective
controls over the control environment were not maintained. Specifically, a formally adopted written code of business
conduct and ethics that governs our employees, officers, and directors was not in place. Additionally, management has
not developed and effectively communicated to our employees its accounting policies and procedures. This has resulted
in inconsistent practices. Further, our Board of Directors does not currently have any independent members and no director
qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity
level programs have a pervasive effect across the organization, management has determined that these circumstances constitute
a material weakness.
4. We
have no formal process related to the identification and approval of related party transactions.
To
address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial
statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows
for the periods presented. Accordingly, we believe that the consolidated financial statements included in this report
fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
(c) Remediation
of Material Weaknesses
In
order to remediate the material weakness in our documentation, evaluation and testing of internal controls, we hope to hire additional
qualified and experienced personnel to assist us in remedying this material weakness.
(d) Changes
in Internal Control over Financial Reporting
There
are no changes to report during our fiscal quarter ended December 31, 2020.
ITEM
9B – OTHER INFORMATION
There
are no events required to be disclosed by the Item.
PART
III
ITEM
10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
and Executive Officers
The
following table sets forth the names and ages of the current directors and executive officers of the Company, the principal offices
and positions with the Company held by each person and the date such person became a director or executive officer of the Company.
The executive officers of the Company are elected annually by the Board of Directors. The directors serve one-year terms until
their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the
Board of Directors. Unless described below, there are no family relationships among any of the directors and officers.
Name
|
|
Age
|
|
Position(s)
|
|
|
|
|
|
Glenn
E. Martin
|
|
67
|
|
President,
Chief Executive Officer, Chief Financial Officer and a Director
|
|
|
|
|
|
Nicole
M. Breen
|
|
44
|
|
Secretary,
Treasurer and a Director
|
Glenn
E. Martin was appointed as our President, Chief Executive Officer and Chief Financial Officer on September 30, 2014. Mr. Martin
has been a Director since January 1, 2005. Mr. Martin was our President from 2005 until 2012. Between July 2012 and September
2014, there was a dispute with our Board of Directors and Mr. Martin remained on the Board of Directors but was no longer our
Chief Executive Officer or Chief Financial Officer. During this time he was still involved with our company and was reinstated
to those positions in September 2014. Prior to joining United Mines, Mr. Martin has served in an executive capacity with several
different companies. From 1988 through the fall of 1992, Mr. Martin was Executive Director of World Trade Center, Tucson, a subsidiary
of the former Twin Towers in New York City. In this position he oversaw the day to day operation, including projects, programs,
and seminars for the U.S. Dept. of Commerce associate office in the W.T.C., Tucson promoting D.O.C. programs, servicing clients
for both the D.O.C. and Small Business administration. During his tenure with World Trade Center he served as speaker for international
trade seminars and the AIESEC (U.S) National Leadership Seminars. Member; Hong Kong Trade Association 1988 to present. Member;
Society of Mining, Metallurgy & Exploration (2008) Guest speaker at Inaugural HKBAH Annual Event in May 2010 & member
of Hong Kong Business Association of Hawaii (2010)
During
our fiscal years ended December 31, 2020 and December 31, 2019, Mr. Martin received $0 and $16,000, respectively, in cash compensation
for his services. As of December 31, 2020, we owe Mr. Martin $176,000 in cash compensation for his services. Mr. Martin did not
receive shares of our common stock as compensation for the years ended December 31, 2020 and December 31, 2019. As of March 29,
2021, Mr. Martin owned, beneficially-owned, or controlled an aggregate of 55,841,078 shares of our common stock. Mr. Martin has
not sold any shares of his stock since inception in January 2005.
Nicole
M. Breen, was appointed as our Secretary and Treasurer on September 30, 2014. Ms. Breen has been a Director since January
1, 2005. Ms. Breen was our Secretary and Treasurer from 2005 until 2012. Between July 2012 and September 2014, there was a dispute
with our Board of Directors and Ms. Breen remained on the Board of Directors but was no longer our Secretary and Treasurer. During
this time she was still involved with our company and was reinstated to those positions in September 2014. From June 2000 to 2012
she served as the Managing Associate of GEM Management Group, LLC specializing in acquiring mineral rights and mining properties,
along with servicing administration requirements for the company. All Ms. Breens current work in the Cannabis industry
is done on our behalf. In this position, she oversees as corporate secretary, recording secretary and the day-to-day treasury
operations of the company. Ms. Breen received her Bachelor of Science in Physical Education in Education, with a minor in Elementary
Education, from the University of Arizona.
During
our fiscal years ended December 31, 2020 and December 31, 2019, Ms. Breen received $24,000 and $37,250, respectively, in cash
compensation for her services. As of December 31, 2020, we owe Ms. Breen $96,250 in cash compensation for her services. As of
March 29, 2021, Ms. Breen owned, beneficially-owned, or controlled an aggregate of 22,058,816 shares of our common stock.
Term
of Office
Our
directors hold office until the next annual meeting or until their successors have been elected and qualified, or until they resign
or are removed. Our board of directors appoints our officers, and our officers hold office until their successors are chosen and
qualify, or until their resignation or their removal.
Family
Relationships
Nicole
Breen is Glenn Martins daughter.
Involvement
in Certain Legal Proceedings
Our
directors and executive officers have not been involved in any of the following events during the past ten years:
|
1.
|
No
bankruptcy petition has been filed by or against any business of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that time;
|
|
2.
|
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses);
|
|
3.
|
being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities
or banking activities;
|
|
4.
|
being
found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed,
suspended, or vacated;
|
|
5.
|
being
the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or
regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited
to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist
order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with
any business entity; or
|
|
6.
|
being
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary
authority over its members or persons associated with a member.
|
Committees
All
proceedings of the board of directors for the year ended December 31, 2020 were conducted by resolutions consented to in writing
by the board of directors and filed with the minutes of the proceedings of our board of directors. Our company currently does
not have nominating, compensation or audit committees or committees performing similar functions nor does our company have a written
nominating, compensation or audit committee charter. Our board of directors does not believe that it is necessary to have such
committees because it believes that the functions of such committees can be adequately performed by the board of directors.
We
do not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors.
The board of directors believes that, given the stage of our development, a specific nominating policy would be premature and
of little assistance until our business operations develop to a more advanced level. Our company does not currently have any specific
or minimum criteria for the election of nominees to the board of directors and we do not have any specific process or procedure
for evaluating such nominees. The board of directors will assess all candidates, whether submitted by management or shareholders,
and make recommendations for election or appointment.
A
shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our president
at the address appearing on the first page of this annual report.
Audit
Committee Financial Expert
Our
board of directors has determined that it does not have an audit committee member that qualifies as an audit committee
financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. We believe that the audit committee members are collectively
capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial
reporting. In addition, we believe that retaining an independent director who would qualify as an audit committee financial
expert would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development
and the fact that we have not generated revenues to date.
Nomination
Procedures For Appointment of Directors
As
of December 31, 2020, we did not effect any material changes to the procedures by which our stockholders may recommend nominees
to our board of directors.
Code
of Ethics
We
do not have a code of ethics.
Section
16(a) Beneficial Ownership
Section
16(a) of the Securities Exchange Act of 1934 requires the Companys directors and executive officers and persons who own
more than ten percent of a registered class of the Companys equity securities to file with the SEC initial reports of ownership
and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater
than ten percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they
file.
During
the fiscal year ended December 31, 2020, to the Companys knowledge, the following delinquencies occurred:
Name
|
No.
of Late
Reports
|
No.
of
Transactions
Reported Late
|
No.
of
Failures to
File
|
Glenn
E. Martin
|
0
|
0
|
0
|
Nicole
M. Breen
|
12
|
16
|
0
|
Indemnification
of Directors and Officers
Section
15 of our Articles of Incorporation provides that, to the fullest extent permitted by law, no director or officer shall be personally
liable to the corporation or its shareholders for damages for breach of any duty owed to the corporation or its shareholders.
Section
16 of our Articles of Incorporation provides that, to the fullest extent permitted by the General Corporation Law of the State
of Nevada we will indemnify our officers and directors from and against any and all expenses, liabilities, or other matters.
Article
IX of our Bylaws further addresses indemnification of our directors and officers and allows us to indemnify our directors in the
event they meet certain criteria in terms of acting in good faith and in an official capacity within the scope of their duties,
when such conduct leads them to be involved in a legal action.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the Act) may be permitted to directors,
officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
ITEM 11 – EXECUTIVE COMPENSATION
The
particulars of compensation paid to the following persons:
|
(a)
|
all
individuals serving as our principal executive officer during the year ended December 31, 2020;
|
|
(b)
|
each
of our two most highly compensated executive officers other than our principal executive officer who were serving as executive
officers at December 31, 2020 who had total compensation exceeding $100,000; and
|
|
(c)
|
up
to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was
not serving as our executive officer at December 31, 2020,
|
who
we will collectively refer to as the named executive officers, for the years ended December 31, 2020, 2019 and 2018, are set out
in the following summary compensation table:
Summary
Compensation
The
following table provides a summary of the compensation received by the persons set out therein for each of our last three fiscal
years:
SUMMARY COMPENSATION TABLE
|
Name
and Principal
Position
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-
Equity
Incentive
Plan
Compensation
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
Glenn E. Martin
|
2020
|
|
96,000
|
(2)
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
96,000
|
(2)
|
President, CEO,
|
2019
|
|
96,000
|
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
96,000
|
|
CFO(1)
|
2018
|
|
80,000
|
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
80,000
|
|
Nicole M. Breen,
|
2020
|
|
78,000
|
(4)
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
78,000
|
(4)
|
Secretary and
|
2019
|
|
79,500
|
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
79,500
|
|
Treasurer(3)
|
2018
|
|
52,000
|
|
5,000
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
57,000
|
|
|
(1)
|
Mr.
Martin was appointed President, Chief Executive Officer, and Chief Financial Officer on September 30, 2014.
|
|
(2)
|
All
$96,000 owed to Mr. Martin was accrued in 2020.
|
|
(3)
|
Ms.
Breen was appointed Secretary and Treasurer on September 30, 2014.
|
|
(4)
|
Ms.
Breen was paid $24,000 in 2020 with the remaining $54,000 accrued.
|
Employment
Contracts
In
2014 and 2016 we entered into employment agreements with Glenn E. Martin, our Chief Executive Officer and Chief Financial Officer,
Nicole Breen, our Secretary and Treasurer and Ryan Breen, our Vice President and Social Media Officer.
Under
the terms of our agreement with Mr. Martin dated October 1, 2016, he serves as our President and Chief Executive Officer. The
agreement was for a two-year term and Mr. Martin received Seven Million (7,000,000) shares of our common stock, restricted in
accordance with Rule 144, and was to receive Seven Million (7,000,000) additional shares as his annual salary for agreeing to
serve as our President and Chief Executive Officer. Additionally, Mr. Martin was entitled to One Million (1,000,000) shares
of a yet-to-be-created class of Series B Preferred Stock if we regained fully-reporting status with the
Securities and Exchange Commission. We are obligated to maintain and pay the premiums for key man life insurance
in the amount of $1,000,000. Our agreement with Mr. Martin also contained various provisions related to his termination
without cause and in the event we undergo a change of control transaction. To date, no key man insurance has been
obtained.
On
January 23, 2018, our Board of Directors agreed to enter into an Amended and Restated Employment Agreement with Glenn E. Martin.
Under the new agreement, Mr. Martin will serve as our President and Chief Executive Officer for a five (5) year term in exchange
for a base salary of $1,500 per week, which will be increased to $120,000 annually in the event we raise an aggregate of $2,000,000
during the term of the agreement. The agreement went effective beginning February 1, 2018. Additionally, we agreed to grant Mr.
Martin One Million (1,000,000) shares of our restricted common stock on February 1, 2018 pursuant to the terms of a Restricted
Stock Agreement, with the shares subject to certain restrictions on transfer which expire on 33% of the shares on February 1,
2019, 66% of the shares on February 1, 2020 and 100% of the shares on February 1, 2021. We also agreed to issue Mr. Martin a Non-Qualified
Stock Option on February 1, 2018 to purchase up to Four Million (4,000,000) shares of our common stock at $10.55 per share, with
the options vesting 33 1/3% on August 1, 2018, 33 1/3% on February 1, 2019 and 33 1/3rd % on February 1, 2020. The options expire
ten years from the date of grant. As a result of the Amended and Restated Employment Agreement with Mr. Martin, he is no longer
entitled to the Seven Million (7,000,000) shares of our common stock as annual salary, or the One Million (1,000,000) shares of
a yet-to-be-created class of Series B Preferred Stock if we become fully-reporting, which were both set forth in his prior employment
agreement. On December 19, 2018, Mr. Martin requested termination of his Restricted Stock Agreement dated February 1, 2018 and
requested that the grants of restricted stock therein be forfeited. As a result, we terminated his Restricted Stock Agreement
and the grants of stock thereunder immediately. At the time of the termination none of the transfer restrictions on the shares
had been lifted and Mr. Martin never received the shares.
Under
the terms of our agreement with Mrs. Breen dated October 1, 2016, she serves as our Secretary and Treasurer. The agreement was
for a two-year term and Ms. Breen received Four Million (4,000,000) shares of our common stock, restricted in accordance with
Rule 144, and was to receive Four Million (4,000,000) additional shares as her annual salary for agreeing to serve as our Secretary
and Treasurer. Additionally, Ms. Breen was entitled to One Hundred Thousand (100,000) shares of a yet-to-be-created class of Series
B Preferred Stock if we regained fully-reporting status with the Securities and Exchange Commission. Our agreement
with Ms. Breen also contained various provisions related to her termination without cause and in the event we undergo a change
of control transaction.
On
January 23, 2018, our Board of Directors agreed to enter into an Amended and Restated Employment Agreement with Nicole M. Breen.
Under the new agreement, Ms. Breen will serve as our Secretary and Treasurer for a five (5) year term in exchange for a base salary
of $1,000 per week. The agreement went effective beginning February 1, 2018. Additionally, we agreed to grant Ms. Breen Five Hundred
Thousand (500,000) shares of our restricted common stock on February 1, 2018 pursuant to the terms of a Restricted Stock Agreement,
with the shares subject to certain restrictions on transfer which expire on 33% of the shares on February 1, 2019, 66% of the
shares on February 1, 2020 and 100% of the shares on February 1, 2021. We also agreed to issue Ms. Breen a Non-Qualified Stock
Option on February 1, 2018 to purchase up to Two Million (2,000,000) shares of our common stock at $10.55 per share, with the
options vesting 33 1/3% on August 1, 2018, 33 1/3% on February 1, 2019 and 33 1/3rd % on February 1, 2020. The options expire
ten years from the date of grant. As a result of the Amended and Restated Employment Agreement with Ms. Breen, she is no longer
entitled to the One Million (1,000,000) shares of our common stock as annual salary, or the One Hundred Thousand (100,000) shares
of a yet-to-be-created class of Series B Preferred Stock if we become fully-reporting, which were both set forth in her prior
employment agreement. On December 19, 2018, Ms. Breen requested termination of her Restricted Stock Agreement dated February 1,
2018 and requested that the grants of restricted stock therein be forfeited. As a result, we terminated her Restricted Stock Agreement
and the grants of stock thereunder immediately. At the time of the termination none of the transfer restrictions on the shares
had been lifted and Ms. Breen never received the shares.
Long-Term
Incentive Plans. We do not provide its officers or employees with pension, stock appreciation rights, long-term incentive or other
plans and has no intention of implementing any of these plans for the foreseeable future.
Employee
Pension, Profit Sharing or other Retirement Plans. We do not have a defined benefit, pension plan, profit sharing or other retirement
plan, although it may adopt one or more of such plans in the future.
Director
Compensation
The
following table sets forth director compensation for 2020:
Name
|
Fees
Earned
or Paid
in Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
Glenn
E. Martin
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
Nicole
M. Breen
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
No
director received compensation for the fiscal years December 31, 2020 and December 31, 2019. We have no formal plan for compensating
our directors for their service in their capacity as directors, although such directors are expected in the future to receive
stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee
which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred
in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to
any director undertaking any special services on our behalf other than services ordinarily required of a director.
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth certain information concerning outstanding stock awards held by the Named Executive Officers on December
31, 2020:
|
Option
Awards
|
Stock
Awards
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
|
Glenn
E. Martin
|
4,000,000
|
-0-
|
-0-
|
10.55
|
2/1/2028
|
-0-
|
-0-
|
-0-
|
-0-
|
Nicole
M. Breen
|
2,000,000
|
-0-
|
-0-
|
10.55
|
2/1/2028
|
-0-
|
-0-
|
-0-
|
-0-
|
Outstanding
Equity Awards at Fiscal Year-End
On
February 1, 2018, we granted Mr. Glenn Martin a Non-Qualified Stock Option to purchase up to Four Million (4,000,000) shares of
our common stock at $10.55 per share, with the options vesting 33 1/3% on August 1, 2018, 33 1/3% on February 1, 2019 and 33 1/3rd
% on February 1, 2020. The options expire ten years from the date of grant.
On
February 1, 2018, we granted Ms. Nicole Breen a Non-Qualified Stock Option to purchase up to Two Million (2,000,000) shares of
our common stock at $10.55 per share, with the options vesting 33 1/3% on August 1, 2018, 33 1/3% on February 1, 2019 and 33 1/3rd
% on February 1, 2020. The options expire ten years from the date of grant.
Aggregated
Option Exercises
There
were no options exercised by any officer or director of our company during our twelve-month period ended December 31, 2020.
Long-Term
Incentive Plan
Currently,
our company does not have a long-term incentive plan in favor of any director, officer, consultant or employee of our company.
ITEM
12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth, as of March 29, 2021, certain information with respect to our equity securities owned of record or
beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than 5% of each class
of the Companys outstanding equity securities; and (iii) all Directors and Executive Officers as a group.
Common
Stock
Title of Class
|
|
Name and Address
of Beneficial Owner(2)
|
|
Nature of
Beneficial Ownership
|
|
Amount
|
|
|
Percent
of Class (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Glenn E. Martin (3)
|
|
President, CEO, CFO, and Director
|
|
|
57,174,412
|
(4)
|
|
|
48.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Nicole M. Breen (3)
|
|
Secretary, Treasurer, and Director
|
|
|
24,058,816
|
(4)
|
|
|
20.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
All Officers and Directors as a Group (2 people)
|
|
|
|
|
81,233,228
|
(4)(5)
|
|
|
67.5
|
%
|
|
(1)
|
Unless
otherwise indicated, based on 114,262,685 shares of common stock issued and outstanding.
Shares of common stock subject to options or warrants currently exercisable, or exercisable
within 60 days, are deemed outstanding for purposes of computing the percentage of the
person holding such options or warrants, but are not deemed outstanding for the purposes
of computing the percentage of any other person.
|
|
(2)
|
Unless
indicated otherwise, the address of the shareholder is 4920 N. Post Trail, Tucson, AZ
85750.
|
(3) Indicates
one of our officers or directors.
|
(4)
|
Includes
80,666 shares of common stock held in the name of Tanque Verde Valley Missionary Society,
an entity controlled by Mr. Martin, as well as options to acquire 4,000,000 shares of
our common stock at an exercise price of $10.55 per share. The options are exercisable
at the discretion of the holder and expire 10 years from the date of grant.
|
|
(5)
|
Includes
305,505 shares of common stock held in the name of GEM Management Group, LLC, an entity
controlled by Ms. Breen, an aggregate of 15,927 shares of common stock held in the name
of Ms. Breens children, and 4,012,972 held in the name of Ryan Breen, Ms. Breens
husband. Also includes options to acquire 2,000,000 shares of our common stock at an
exercise price of $10.55, which options expire ten years from the date of grant.
|
The
issuer is not aware of any person who owns of record, or is known to own beneficially, ten percent or more of the outstanding
securities of any class of the issuer, other than as set forth above. The issuer is not aware of any person who controls the issuer
as specified in Section 2(a)(1) of the 1940 Act. There are no classes of stock other than common stock issued or outstanding.
The Company does not have an investment advisor.
ITEM
13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Employment
Contracts
In
2014 and 2016 we entered into employment agreements with Glenn E. Martin, our Chief Executive Officer and Chief Financial Officer,
Nicole Breen, our Secretary and Treasurer and Ryan Breen, our Vice President and Social Media Officer.
Under
the terms of our agreement with Mr. Martin dated October 1, 2016, he serves as our President and Chief Executive Officer. The
agreement was for a two-year term and Mr. Martin received Seven Million (7,000,000) shares of our common stock, restricted in
accordance with Rule144, and was to receive Seven Million (7,000,000) additional shares as his annual salary for agreeing to serve
as our President and Chief Executive Officer. Additionally, Mr. Martin was entitled to One Million (1,000,000) shares of a yet-to-be-created
class of Series B Preferred Stock if we regained fully-reporting status with the Securities and Exchange Commission.
We are obligated to maintain and pay the premiums for key man life insurance in the amount of $1,000,000. Our agreement
with Mr. Martin also contained various provisions related to his termination without cause and in the event we undergo a change
of control transaction. To date, no key man insurance has been obtained.
On
January 23, 2018, our Board of Directors agreed to enter into an Amended and Restated Employment Agreement with Glenn E. Martin.
Under the new agreement, Mr. Martin will serve as our President and Chief Executive Officer for a five (5) year term in exchange
for a base salary of $1,500 per week, which will be increased to $120,000 annually in the event we raise an aggregate of $2,000,000
during the term of the agreement. The agreement went effective beginning February 1, 2018. Additionally, we agreed to grant Mr.
Martin One Million (1,000,000) shares of our restricted common stock on February 1, 2018 pursuant to the terms of a Restricted
Stock Agreement, with the shares subject to certain restrictions on transfer which expire on 33% of the shares on February 1,
2019, 66% of the shares on February 1, 2020 and 100% of the shares on February 1, 2021. We also agreed to issue Mr. Martin a Non-Qualified
Stock Option on February 1, 2018 to purchase up to Four Million (4,000,000) shares of our common stock at $10.55 per share, with
the options vesting 33 1/3% on August 1, 2018, 33 1/3% on February 1, 2019 and 33 1/3rd % on February 1, 2020. The options expire
ten years from the date of grant. As a result of the Amended and Restated Employment Agreement with Mr. Martin, he is no longer
entitled to the Seven Million (7,000,000) shares of our common stock as annual salary, or the One Million (1,000,000) shares of
a yet-to-be-created class of Series B Preferred Stock if we become fully-reporting, which were both set forth in his prior employment
agreement. On December 19, 2018, Mr. Martin requested termination of his Restricted Stock Agreement dated February 1, 2018 and
requested that the grants of restricted stock therein be forfeited. As a result, we terminated his Restricted Stock Agreement
and the grants of stock thereunder immediately. At the time of the termination none of the transfer restrictions on the shares
had been lifted and Mr. Martin never received the shares.
Under
the terms of our agreement with Mrs. Breen dated October 1, 2016, she serves as our Secretary and Treasurer. The agreement was
for a two-year term and Ms. Breen received Four Million (4,000,000) shares of our common stock, restricted in accordance with
Rule 144, and was to receive Four Million (4,000,000) additional shares as her annual salary for agreeing to serve as our Secretary
and Treasurer. Additionally, Ms. Breen was entitled to One Hundred Thousand (100,000) shares of a yet-to-be-created class of Series
B Preferred Stock if we regained fully-reporting status with the Securities and Exchange Commission. Our agreement
with Ms. Breen also contained various provisions related to her termination without cause and in the event we undergo a change
of control transaction.
On
January 23, 2018, our Board of Directors agreed to enter into an Amended and Restated Employment Agreement with Nicole M. Breen.
Under the new agreement, Ms. Breen will serve as our Secretary and Treasurer for a five (5) year term in exchange for a base salary
of $1,000 per week. The agreement went effective beginning February 1, 2018. Additionally, we agreed to grant Ms. Breen Five Hundred
Thousand (500,000) shares of our restricted common stock on February 1, 2018 pursuant to the terms of a Restricted Stock Agreement,
with the shares subject to certain restrictions on transfer which expire on 33% of the shares on February 1, 2019, 66% of the
shares on February 1, 2020 and 100% of the shares on February 1, 2021. We also agreed to issue Ms. Breen a Non-Qualified Stock
Option on February 1, 2018 to purchase up to Two Million (2,000,000) shares of our common stock at $10.55 per share, with the
options vesting 33 1/3% on August 1, 2018, 33 1/3% on February 1, 2019 and 33 1/3rd % on February 1, 2020. The options expire
ten years from the date of grant. As a result of the Amended and Restated Employment Agreement with Ms. Breen, she is no longer
entitled to the One Million (1,000,000) shares of our common stock as annual salary, or the One Hundred Thousand (100,000) shares
of a yet-to-be-created class of Series B Preferred Stock if we become fully-reporting, which were both set forth in her prior
employment agreement. On December 19, 2018, Ms. Breen requested termination of her Restricted Stock Agreement dated February 1,
2018 and requested that the grants of restricted stock therein be forfeited. As a result, we terminated her Restricted Stock Agreement
and the grants of stock thereunder immediately. At the time of the termination none of the transfer restrictions on the shares
had been lifted and Ms. Breen never received the shares.
Long-Term
Incentive Plans. We do not provide its officers or employees with pension, stock appreciation rights, long-term incentive or other
plans and has no intention of implementing any of these plans for the foreseeable future.
Employee
Pension, Profit Sharing or other Retirement Plans. We do not have a defined benefit, pension plan, profit sharing or other retirement
plan, although it may adopt one or more of such plans in the future.
Share
Issuances
On
June 18, 2018, we issued an aggregate of 100,000 shares of our common stock to Patrick E. Williams, who at the time was one of
our Directors and an officer of Sangre for services rendered. The total fair value of the stock was $514,000 based on the closing
price of our common stock on the date of grant.
On
October 1, 2016, we granted 7,000,000 shares of common stock to Glenn E. Martin, our Chief Executive Officer, as a bonus for services
to be performed from January 1, 2017 to December 31, 2020, as our primary executive officer, pursuant to an amended employment
agreement. The total fair value of the common stock was $700,000 based on the closing price of our common stock on the date of
grant.
In
addition, on October 1, 2016, we granted a total of 14,000,000 shares of common stock to Glenn E. Martin, our Chief Executive
Officer, for services performed from January 1, 2015 to December 31, 2016, as our primary executive officer, pursuant to his previous
employment agreement. The total fair value of the common stock was $1,400,000 based on the closing price of our common stock on
the date of grant.
On
October 1, 2016, we granted 4,000,000 shares of common stock to Nicole Breen, our Secretary and Treasurer, for services to be
performed from January 1, 2017 to December 31, 2020, in those capacities, pursuant to an amended employment agreement. The total
fair value of the common stock was $400,000 based on the closing price of our common stock on the date of grant.
In
addition, on October 1, 2016, we granted a total of 8,000,000 shares of common stock to Nicole, our Secretary and Treasurer, for
services performed from January 1, 2015 to December 31, 2016, in those capacities, pursuant to their previous employment agreement.
The total fair value of the common stock was $800,000 based on the closing price of our common stock on the date of grant.
On
January 1, 2015, we granted 7,000,000 shares of common stock to our Glenn E. Martin, our Chief Executive Officer, as a bonus for
services performed from January 1, 2015 to December 31, 2016, as our primary executive officer. The total fair value of the common
stock was $490,000 based on the closing price of our common stock on the date of grant. The shares were subsequently issued on
June 29, 2015.
On
January 1, 2015, we granted 4,000,000 shares of common stock to Nicole Breen, our Secretary and Treasurer, as a bonus for services
performed from January 1, 2015 to December 31, 2016, in those capacities. The total fair value of the common stock was $280,000
based on the closing price of our common stock on the date of grant. The shares were subsequently issued on June 29, 2015.
On
or about December 5, 2014, we issued 18,000,000 shares to Glenn Martin, our Chief Executive Officer, at $0.05 per share, in exchange
for services rendered to the company from January 1, 2012 until December 31, 2014.
On
or about September 30, 2014, we issued: (i) an aggregate of 9,600,000 shares to Glenn Martin, Nicole Breen and Ryan Breen, affiliates
of the company, at $0.05 per share, in exchange for services rendered to the company from July 2012 to September 30, 2014.
Notes
Payable
On
various dates, we received advances from our Chief Executive Officer, Glenn Martin, and our Secretary, Nicole Breen. Mr. Martin
and Ms. Breen own approximately 50% and 20% of our common stock, respectively. The unsecured interest bearing loans at 5% are
due on demand. As of December 31, 2020, we owed Mr. Martin $0 and Ms. Breen $246,200 under these notes.
On
January 2, 2018, Dr. Pat Williams, at the time a member of our Board of Directors, loaned us $37,000, at an interest rate of 2%
per annum, compounded annually and due on demand. The loan was for the purpose of assisting us in purchasing the condominium in
La Veta, CO.
Lease of Real Property
We
lease our executive offices from Glenn E. Martin, our President, on a month-to-month basis at a monthly rent of $1,000, which
began on April 1, 2017.
Corporate
Governance
As
of December 31, 2020, our Board of Directors consisted of Glenn E. Martin and Nicole M. Breen. As of December 31, 2020, we did
not have any directors that qualified as independent directors as the term is used in NASDAQ rule 5605(a)(2).
Our
current Board of Directors consists of Glenn E. Martin and Nicole M. Breen as our only directors.
ITEM
14 – PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit
fees
The
aggregate fees billed for the two most recently completed fiscal periods ended December 31, 2020 and December 31, 2019 for professional
services rendered by M&K CPAS, PLLC, for the audit of our annual consolidated financial statements, quarterly reviews of our
interim consolidated financial statements and services normally provided by the independent accountant in connection with statutory
and regulatory filings or engagements for these fiscal periods were as follows:
|
|
Year Ended
December 31,
2020
|
|
|
Year Ended
December 31,
2019
|
|
Audit Fees and Audit Related Fees
|
|
$28,000
|
|
|
$30,200
|
|
Tax Fees
|
|
$0
|
|
|
$0
|
|
All Other Fees
|
|
$0
|
|
|
$70,455
|
|
Total
|
|
$28,000
|
|
|
$100,655
|
|
In
the above table, audit fees are fees billed by our companys external auditor for services provided in auditing
our companys annual financial statements for the subject year. Audit-related fees are fees not included in
audit fees that are billed by the auditor for assurance and related services that are reasonably related to the performance of the
audit review of our companys financial statements. Tax fees are fees billed by the auditor for professional
services rendered for tax compliance, tax advice and tax planning. All other fees are fees billed by the auditor
for products and services not included in the foregoing categories.
Policy
on Pre-Approval by Audit Committee of Services Performed by Independent Auditors
The
board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed
and approved by the board of directors before the respective services were rendered.
The
board of directors has considered the nature and amount of fees billed by M&K CPAS, PLLC and believes that the provision of
services for activities unrelated to the audit is compatible with maintaining M&K CPAS, PLLC independence.
WEED,
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
12,629
|
|
|
$
|
2,509
|
|
Accounts Receivable
|
|
|
822
|
|
|
|
822
|
|
Prepaid expenses
|
|
|
29,683
|
|
|
|
30,979
|
|
Deposits
|
|
|
212,000
|
|
|
|
92,000
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS
|
|
|
255,134
|
|
|
|
126,310
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
124,708
|
|
|
|
136,400
|
|
|
|
|
|
|
|
|
|
|
Building
|
|
|
1,759,292
|
|
|
|
1,887,802
|
|
Computers & Equipment
|
|
|
73,681
|
|
|
|
73,681
|
|
Leasehold improvements
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
|
1,962,681
|
|
|
|
2,102,883
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(441,918
|
)
|
|
|
(322,498
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
1,520,763
|
|
|
|
1,780,385
|
|
|
|
|
|
|
|
|
|
|
Trademark
|
|
|
50,000
|
|
|
|
50,000
|
|
Less: Accumulated amortization
|
|
|
(6,900
|
)
|
|
|
(4,083
|
)
|
Trademark, net
|
|
|
43,100
|
|
|
|
45,917
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
1,818,997
|
|
|
$
|
1,952,612
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
241,977
|
|
|
$
|
212,181
|
|
Accrued expense
|
|
|
18,500
|
|
|
|
10,000
|
|
Accrued officer compensation
|
|
|
272,250
|
|
|
|
122,250
|
|
Accrued interest
|
|
|
30,437
|
|
|
|
16,453
|
|
Notes payable, related parties
|
|
|
258,200
|
|
|
|
224,100
|
|
Notes payable
|
|
|
115,191
|
|
|
|
167,263
|
|
Due to officer
|
|
|
723
|
|
|
|
723
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
937,278
|
|
|
|
752,970
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
937,278
|
|
|
|
752,970
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 200,000,000 authorized, 113,372,685 and 109,262,685 issued and outstanding, respectively
|
|
|
113,373
|
|
|
|
109,263
|
|
Additional paid-in capital
|
|
|
80,403,267
|
|
|
|
76,660,712
|
|
Subscription payable
|
|
|
356,250
|
|
|
|
356,250
|
|
Accumulated deficit
|
|
|
(79,991,051
|
)
|
|
|
(75,925,974
|
)
|
Accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
(120
|
)
|
|
|
(609
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS EQUITY
|
|
|
881,719
|
|
|
|
1,199,642
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES &
STOCKERHOLDERS EQUITY
|
|
$
|
1,818,997
|
|
|
$
|
1,952,612
|
|
The
accompanying notes are an integral part of the condensed consolidated financial statements
WEED,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
(UNAUDITED)
|
|
|
For the Years
|
|
|
|
Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
REVENUE
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
313,917
|
|
|
|
969,913
|
|
Professional fees
|
|
|
3,616,760
|
|
|
|
26,287,730
|
|
Depreciation & amortization
|
|
|
145,797
|
|
|
|
159,424
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
4,076,474
|
|
|
|
27,417,067
|
|
|
|
|
|
|
|
|
|
|
NET OPERATING LOSS
|
|
|
(4,076,474
|
)
|
|
|
(27,417,067
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
(40,828
|
)
|
|
|
(11,672
|
)
|
Other income
|
|
|
-
|
|
|
|
1,016
|
|
Loss on deposit
|
|
|
-
|
|
|
|
(100,000
|
)
|
Gain on extinguishment of debt
|
|
|
5,277
|
|
|
|
-
|
|
Gain on Sale of Fixed Asset
|
|
|
46,948
|
|
|
|
-
|
|
Other expense
|
|
|
-
|
|
|
|
(1,956
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER EXPENSE, NET
|
|
|
11,397
|
|
|
|
(112,612
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(4,065,077
|
)
|
|
|
(27,529,679
|
)
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS
|
|
|
489
|
|
|
|
(609
|
)
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
|
(4,064,588
|
)
|
|
|
(27,530,288
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - basic and fully diluted
|
|
|
112,215,827
|
|
|
|
107,649,127
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and fully diluted
|
|
$
|
(0.04
|
)
|
|
|
(0.26
|
)
|
The
accompanying notes are an integral part of the condensed consolidated financial statements
WEED,
INC.
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
|
|
For
the Year Ended December 31, 2020
|
(UNAUDITED)
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Subscriptions
|
|
|
Accumulated
|
|
|
Other
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-In Capital
|
|
|
Payable
|
|
|
Deficit
|
|
|
Comprehensive
|
|
|
Equity
|
|
Balance, December 31, 2018
|
|
|
105,950,685
|
|
|
$
|
105,951
|
|
|
$
|
50,695,721
|
|
|
$
|
356,250
|
|
|
$
|
(48,396,295
|
)
|
|
$
|
|
|
|
$
|
2,761,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock sold for cash
|
|
|
1,065,000
|
|
|
|
1,065
|
|
|
|
571,935
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
573,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock returned
|
|
|
(220,000
|
)
|
|
|
(220
|
)
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
2,467,000
|
|
|
|
2,467
|
|
|
|
2,575,783
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
2,578,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Vesting of employee stock options
|
|
|
|
|
|
|
|
|
|
|
22,770,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,770,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Related party gain on sale of automobile
|
|
|
|
|
|
|
|
|
|
|
46,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,529,679
|
)
|
|
|
|
|
|
|
(27,529,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(609
|
)
|
|
|
(609
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
109,262,685
|
|
|
$
|
109,263
|
|
|
$
|
76,660,712
|
|
|
$
|
356,250
|
|
|
$
|
(75,925,974
|
)
|
|
$
|
(609
|
)
|
|
$
|
1,199,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock sold for cash
|
|
|
1,350,000
|
|
|
|
1,350
|
|
|
|
293,650
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
295,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock returned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
2,710,000
|
|
|
|
2,710
|
|
|
|
1,404,490
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
1,407,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Vesting of employee stock options
|
|
|
|
|
|
|
|
|
|
|
2,015,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,015,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Shares issued for settlement of debt
|
|
|
50,000
|
|
|
|
50
|
|
|
|
9,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed Interest on RP Loans
|
|
|
|
|
|
|
|
|
|
|
18,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,065,077
|
)
|
|
|
|
|
|
|
(4,065,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
489
|
|
|
|
489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
|
|
113,372,685
|
|
|
$
|
113,373
|
|
|
$
|
80,403,267
|
|
|
$
|
356,250
|
|
|
$
|
(79,991,051
|
)
|
|
|
(120
|
)
|
|
$
|
881,719
|
|
The
accompanying notes are an integral part of the condensed consolidated financial statements
WEED,
INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For
the Year Ended December 31, 2020 and December 31, 2019
|
(UNAUDITED)
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
|
2020
|
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,065,077
|
)
|
|
$
|
(27,529,679
|
)
|
Adjustments to reconcile net loss used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
145,797
|
|
|
|
159,423
|
|
Gain on sale of fixed asset
|
|
|
(46,948
|
)
|
|
|
-
|
|
Gain on settlement of debt
|
|
|
(5,277
|
)
|
|
|
-
|
|
Loss on deposit
|
|
|
-
|
|
|
|
|
|
Impairment of CIP
|
|
|
-
|
|
|
|
499,695
|
|
Imputed Interest on RP Loans
|
|
|
18,554
|
|
|
|
|
|
Estimated fair value of stock based compensation
|
|
|
2,015,911
|
|
|
|
22,770,662
|
|
Estimated fair value of shares issued for services
|
|
|
1,407,200
|
|
|
|
2,578,250
|
|
Loss on debt extinguishment
|
|
|
-
|
|
|
|
|
|
Decrease (increase) in assets
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
-
|
|
|
|
(801
|
)
|
Prepaid expenses and other assets
|
|
|
(118,704
|
)
|
|
|
298,331
|
|
Increase (decrease) in liabilities
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
|
45,073
|
|
|
|
(28,278
|
)
|
Accrued expenses
|
|
|
172,484
|
|
|
|
141,800
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(430,987
|
)
|
|
|
(1,110,597
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
-
|
|
|
|
(2,979
|
)
|
Purchase of intangible assets
|
|
|
-
|
|
|
|
-
|
|
Proceeds from sale of fixed asset
|
|
|
163,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
163,590
|
|
|
|
(2,979
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Payable
|
|
|
-
|
|
|
|
|
|
Proceeds from notes payable - related party
|
|
|
64,100
|
|
|
|
305,823
|
|
Proceeds from the sale of common stock
|
|
|
295,000
|
|
|
|
573,000
|
|
Proceeds on notes payable
|
|
|
10,201
|
|
|
|
250,850
|
|
Repayments on notes payable - related party
|
|
|
(30,000
|
)
|
|
|
|
|
Repayments on notes payable
|
|
|
(62,273
|
)
|
|
|
(83,587
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
277,028
|
|
|
|
1,046,086
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
|
9,631
|
|
|
|
(67,490
|
)
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE ON CASH
|
|
|
489
|
|
|
|
(609
|
)
|
|
|
|
|
|
|
|
|
|
CASH, BEGINNING OF PERIOD
|
|
|
2,509
|
|
|
|
70,608
|
|
|
|
|
|
|
|
|
|
|
CASH, END OF PERIOD
|
|
$
|
12,629
|
|
|
$
|
2,509
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in relief of debt
|
|
$
|
10,000
|
|
|
$
|
-
|
|
Gain on related party transaction
|
|
|
|
|
|
|
93,000
|
|
The
accompanying notes are an integral part of the condensed consolidated financial statements
WEED, INC.
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
December
31, 2020 and 2019
|
|
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 Companys 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, 2020, has been derived from audited consolidated financial statements
and the unaudited condensed consolidated financial statements as of December 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, 2020 (the 2020 Annual Report), filed with the Securities and Exchange Commission (the
SEC). It is managements 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.
|
Note
1 – Nature of Business and Significant Accounting Policies (continued)
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 Companys 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 Companys 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 Companys has no historical revenue. The impact
of the adoption of the new standard was not material to the Companys condensed consolidated financial statements for the
year ended December 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.
Note
1 – Nature of Business and Significant Accounting Policies (continued)
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 $3,450 for the year
ended December 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 customers 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, 2020, 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 $79,991,051 and negative working capital of $682,144 at December 31, 2020. These factors raise substantial
doubt about the Companys 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 Companys
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 $258,200 and $224,100 of note payable on the consolidated balance sheet as of December 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. In March 2020, the Company received $22,000 loan from Nicole Breen, and from April 1, 2020 to June
30, 2020, the Company received an additional $37,500 loan from Nicole Breen. From August 1, 2020 to December 31, 2020, the Company
received $4,600 loan from Nicole Breen and repaid her $30,000.
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 nine months ended December 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 Companys 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 Companys common stock
on the date of grant.
A
total of $272,250 and $122,250 of officer compensation was unpaid and outstanding at December 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 Companys 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 for the year ended December 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.
Note
4 – Fair Value of Financial Instruments (continued)
The
Company has certain financial instruments that must be measured under the new fair value standard. The Companys 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 December 31, 2020 and 2019, respectively:
Fair
Value Measurements at December 31, 2019
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
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 December 31, 2020
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
12,629
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
assets
|
|
|
12,629
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable, related parties
|
|
|
|
|
|
$
|
258,200
|
|
|
|
|
|
Notes
payable
|
|
$
|
-
|
|
|
$
|
115,191
|
|
|
$
|
-
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
373,391
|
|
|
$
|
-
|
|
|
|
$
|
12,629
|
|
|
$
|
373,391
|
|
|
$
|
-
|
|
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 years ended December
31, 2020 and 2019, respectively.
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 $100,000 in 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:
|
|
July
26, 2017
|
|
Consideration:
|
|
|
|
|
Common
stock payment of 25,000 shares (1)
|
|
$
|
30,000
|
|
Cash
payment of down payment
|
|
|
50,000
|
|
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 Companys common stock valued at $30,000 based on the closing price
of the Companys common stock on the July 18, 2017 date of grant.
|
|
(2)
|
Purchasers
shares of closing costs, including the sellers 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.
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.
As
of December 31, 2020, a total of $212,000 has been paid as a deposit for the Sugar Hill golf course property purchase.
Note
5 – Investment in Land and Property (continued)
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 January 1, 2021 with
a balloon payment of $272,167.73 on February 1, 2021. On January 18, 2021, the Company worked out an additional extension with
the bank. Under the terms of that agreement, we agreed to pay $10,000 per month beginning February 1, 2021 until November 1, 2021,
and then pay a balloon payment of approximately $172,000 due on or before December 1, 2021.
The
property located on 169 Valley Vista was sold for $175,000 on September 25, 2020 with selling expenses of $11,410. The cost basis of
the property was $104,950 and land was $11,692. $46,948 was recorded as gain on the sale. The Company received a check in the amount
of $153,809.03 for the sale on September 25, 2020, and the check was deposited into a new bank account set up under Sangre AT, LLC
on October 2, 2020, due to the property was purchased by Sangre AT, LLC in 2018.
Note
6 – Property and Equipment
Property
and equipment consist of the following at December 31, 2020 and December 31, 2019, respectively:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
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
|
|
Land
|
|
|
124,708
|
|
|
|
136,400
|
|
Property (1)
|
|
|
1,759,292
|
|
|
|
1,887,802
|
|
Property and equipment, gross
|
|
|
1,962,681
|
|
|
|
2,102,883
|
|
Less accumulated depreciation
|
|
|
(441,918
|
)
|
|
|
(322,498
|
)
|
Property and equipment, net
|
|
$
|
1,520,763
|
|
|
$
|
1,780,385
|
|
|
(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). The property located on 169 Valley
Vista was sold for $175,000 on September 25, 2020 and $46,948 was recorded as gain on the sale.
|
Depreciation
and amortization expense totaled $145,797 and $159,424 for the years ended December 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 and 2020.
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 assets 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 $2,817 and $2,600 for the year ended December 31, 2020 and 2019, respectively.
Note
8 – Notes Payable, Related Parties
Notes
payable, related parties consist of the following at December 31, 2020 and December 31, 2019, respectively:
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
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 Companys 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 Companys 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 Companys 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 December 2020, the company received a total of $369,200 of advances, bearing interest at
5%, from Nicole Breen. A detailed list of advances and repayments follows. On October 28, 2019, the companys vehicles
valued at $93,000 were used as a repayment. In October 2020, the Company repaid Nicole $30,000.
|
|
|
246,200
|
|
|
|
212,100
|
|
|
|
|
|
|
|
|
|
|
Notes
payable, related parties
|
|
$
|
258,200
|
|
|
$
|
224,100
|
|
The
Company recorded interest expense in the amount of $20,231 and $9,264 for the year ended December 31, 2020 and 2019, respectively,
including imputed interest expense in the amount of $18,554 and $0 during such periods related to notes payable, related parties.
Note
9 – Notes Payable
Note
payable consist of the following at December 31, 2020 and December 31, 2019, respectively:
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
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% per annum. 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 December 31, 2020, $145,861 has been paid to Snell & Wilmer.
|
|
$
|
104,139
|
|
|
|
166,412
|
|
|
|
|
|
|
|
|
|
|
On
various dates, the Company received advances from consultant, Patrick Brodnik, bearing 5% interest.
|
|
$
|
11,052
|
|
|
|
851
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
115,191
|
|
|
$
|
167,263
|
|
The
Company recognized interest expense of $19,697 and $2,408 related to the note payables for the year ended December 31, 2020 and
2019, respectively.
During
the year ended December 31, 2020, the Company issued 50,000 shares of common stock to Pearl Cohen Zedek Latzer, valued at $10,000
based on the closing price on the measurement date, to settle the full outstanding debt of $15,277. The Company recorded a gain
on extinguishment of $5,277.
Note
10 – Commitments and Contingencies
On
November 8, 2016, the Company entered into an agreement with Gregory DiPaolos 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 Companys 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 Companys 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, 2020, a total of $212,000 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. We were not able to pay the balloon payment by the August 3, 2020 deadline, but on July 31, 2020
we worked out an additional extension with the bank. Under the terms of that agreement, we paid $10,000 in exchange for an additional
extension and we owed approximately $332,000 to acquire the property. We agreed to pay that amount in installment payments of
$10,000 per month for six months beginning September 2020, with a balloon payment of approximately $272,000 due on or before February
1, 2021. We made the six $10,000 monthly payments but were not able to pay the balloon payment by the February 1, 2021 deadline,
but on January 18, 2021 we worked out an additional extension with the bank. Under the terms of that agreement, we agreed to pay
$10,000 per month beginning February 1, 2021 until November 1, 2021, and then pay a balloon payment of approximately $172,000
due on or before December 1, 2021. These payments are in addition to the approximately $540,000 in payments we have already made.
We made the $10,000 payments due on February 1, 2021 and March 1, 2021.
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. Martins 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 Companys Motion to Dismiss thereby dismissing the Plaintiffs claims for breach of the covenant of good faith
and fair dealing and the claim for conversion, (b) denying William Martins 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 Companys 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 Plaintiffs 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.
Note
10 – Commitments and Contingencies (continued)
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, 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 that agreement, we owed approximately $392,000 to acquire the property. We 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. We were not able to pay the balloon payment by the August 3, 2020 deadline, but on July 31, 2020 we
worked out an additional extension with the bank. Under the terms of that agreement, we paid $10,000 in exchange for an additional
extension and we owed approximately $332,000 to acquire the property. We agreed to pay that amount in installment payments of
$10,000 per month for six months beginning September 2020, with a balloon payment of approximately $272,000 due on or before February
1, 2021. We made the six $10,000 monthly payments but were not able to pay the balloon payment by the February 1, 2021 deadline,
but on January 18, 2021 we worked out an additional extension with the bank. Under the terms of that agreement, we agreed to pay
$10,000 per month beginning February 1, 2021 until November 1, 2021, and then pay a balloon payment of approximately $172,000
due on or before December 1, 2021. These payments are in addition to the approximately $540,000 in payments we have already made.
We made the $10,000 payments due on February 1, 2021 and March 1, 2021.
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.
Legal
Proceedings
The
Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary
course of business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution
could have a material adverse effect on its financial position, results of operations or liquidity.
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 year ended December 31, 2020, the Company issued 1,350,000 shares of common stock for proceeds of $295,000.
Common
Stock Issued for Services (2020)
During
the year ended December 31, 2020, the Company agreed to issue an aggregate of 2,710,000 shares of common stock to consultants
for services performed. The total fair value of common stock was $1,407,200 based on the closing price of the Companys
common stock earned on the measurement date.
Common
Stock Issued for Debt Settlement (2020)
During
the year ended December 31, 2020, the Company issued 50,000 shares of common stock to Pearl Cohen Zedek Latzer, valued at $10,000
based on the closing price on the measurement date, to settle the full outstanding debt of $15,277 Accordingly, the Company recorded
a gain on extinguishment of $5,277.
Common
Stock Cancellations
No
common stocks were cancelled during the year ended December 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 Companys
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 year ended December 31, 2020 and December 31, 2019.
Common
Stock Warrants Expired (2020)
A
total of 200,000 warrants expired during the year ended December 31, 2020.
Warrants
Exercised (2020)
No
warrants were exercised during the year ended December 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 Companys 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 and $2,015,911 during the year ended December 31, 2020.
The
assumptions used in the Black-Scholes model are as follows:
|
|
For
the period
ended
December 31,
2020
|
Risk-free
interest rate
|
|
1.75%
|
|
|
|
Expected
dividend yield
|
|
0%
|
|
|
|
Expected
lives
|
|
10.0
years
|
|
|
|
Expected
volatility
|
|
200%
|
A
summary of the Companys stock option activity and related information is as follows:
|
|
For
the Year Ended December 31,
2020 and 2019
|
|
|
|
Number
of
|
|
|
Average
|
|
|
|
Shares
|
|
|
Price
|
|
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 –Income Tax
The
Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides
that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes, referred to as temporary differences.
For
the years ended December 31, 2020 and 2019, the Company incurred a net operating loss and, accordingly, no provision for income
taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization
of any tax assets. At December 31, 2020 and December 31, 2019, the Company had approximately $4,065,077 and $27,529,679 of federal
net operating losses, respectively. The net operating loss carry forwards, if not utilized, will begin to expire in 2031.
The
components of the Companys deferred tax asset are as follows:
|
|
December 31, 2020
|
|
Deferred tax assets:
|
|
|
|
|
Net operating loss carry forwards as of 12/31/2019
|
|
|
33,345,704
|
|
Estimated Tax Loss 2020
|
|
|
4,065,077
|
|
Add back shares for services
|
|
|
(2,015,911
|
)
|
NOL Carry Forward Cumulative as of 12/31/2020
|
|
|
35,394,870
|
|
Statutory Tax Rate
|
|
|
21
|
%
|
Deferred Tax Asset
|
|
|
7,432,923
|
|
Valuation
|
|
|
(7,432,923
|
)
|
Net Deferred Tax Asset
|
|
|
-
|
|
Based
on the available objective evidence, including the Companys history of losses, management believes it is more likely than
not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance
against its net deferred tax assets at December 31, 2020 and 2019, respectively.
Note
14 – Subsequent Events
On
February 9, 2021 the Company issued 50,000 shares of common stock to Highland Business Services, Inc. for services performed.
On
February 18, 2021 the Company issued 200,000 shares of common stock to Feinstein Law PC for services performed.
On
February 23, 2021, the Company issued 150,000 shares of common stock to Lex Seabre in exchange for total proceeds of $45,000.
On
February 23, 2021, the Company issued 150,000 shares of common stock to Wendy Seabre in exchange for total proceeds of $45,000.
On
February 23, 2021 the Company issued 100,000 shares of common stock to Robert S. Wolkin for services performed.
On
February 23, 2021 the Company issued 120,000 shares of common stock to Laura Emerson for services performed.
On
February 23, 2021, the Company issued 120,000 shares of common stock to First Apex International for services performed.
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