Pharmagreen Biotech Inc. - Quarter Report: 2021 December (Form 10-Q)

PHARMAGREEN BIOTECH INC.

(Exact name of registrant as specified in its charter)

Nevada

98-0491567

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2987 Blackbear Court, Coquitlam, BC

V3E 3A2

(Address of principal executive offices) 

(Zip Code)

Large accelerated filer

☐

Non-accelerated Filer

☒

Accelerated filer

☐

Smaller reporting company

☒

Emerging Growth

☒

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

3

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

19

Item 4.

Controls and Procedures.

19

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings.

 20

Item 1A.

Risk Factors.

 20

Item 2.

Unregistered Sales of Securities and Use of Proceeds.

 20

Item 3.

Defaults Upon Senior Securities.

 20

Item 4.

Mine Safety Disclosure.

 20

Item 5.

Other Information.

 20

Item 6.

Exhibits.

21

SIGNATURES

22

Assets

Current assets

Cash

Amounts receivable

Prepaid expenses and deposits (Note 11)

Total assets

Liabilities and Stockholders’ Deficit

Current liabilities

Accounts payable and accrued liabilities (Notes 3 and 7)

Advances from Alliance Growers Corp. (Note 12(a))

Loans payable (Note 4)

Convertible notes – current portion (Note 5)

Derivative liabilities (Note 6)

Due to related parties (Note 7)

Total current liabilities

Loan payable (Note 4)

Convertible notes, net of unamortized discount of $17,434 and $19,233, respectively (Note 5)

Total liabilities

Stockholders’ deficit

Preferred stock

Authorized: 1,000,000 shares, $0.001 par value;

10,000 and nil shares issued and outstanding, respectively

Common stock

Authorized: 2,000,000,000 shares, $0.001 par value;

385,171,269 and 381,171,269 shares issued and outstanding, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Deficit

Total Pharmagreen Biotech Inc. stockholders’ deficit

Non-controlling interest

Total stockholders’ deficit

Total liabilities and stockholders’ deficit

Nature of business and continuance of operations (Note 1)

Contingency (Note 4)

Commitments (Note 12)

Subsequent event (Note 13)

Expenses

Consulting fees (Note 7)

Foreign exchange loss (gain)

General and administrative

Professional fees

Salaries and wages

Total expenses

Net loss before other income (expense)

Other income (expense)

Accretion of discount on convertible notes (Note 5)

Interest and finance costs (Notes 4 and 5)

Gain (loss) on change in fair value of derivative liabilities (Note 6)

Gain on settlement on convertible notes

Total other income (expense)

Net income (loss)

Less: net loss attributable to non-controlling interest

Net income (loss) attributable to Pharmagreen Biotech Inc.

Comprehensive loss

Foreign currency translation loss

Comprehensive income (loss) attributable to Pharmagreen Biotech Inc.

Basic and diluted income (loss) per share attributable to Pharmagreen Biotech Inc. stockholders

Weighted average number of shares outstanding used in the calculation of net loss per share attributable to Pharmagreen Biotech Inc.

Balance, September 30, 2020

Issuance of units for cash

Issuance of preferred shares for cash

Issuance of common stock pursuant to the conversion of convertible notes

Issuance of common stock for services

Foreign currency translation loss

Net loss for the period

Balance, December 31, 2020

Balance, September 30, 2021

Issuance of shares for cash, net of issuance costs

Foreign currency translation loss

Net income for the period

Balance, December 31, 2021

OPERATING ACTIVITIES

Net income (loss)

Adjustments to reconcile net loss to net cash used in operating activities:

Accretion of discount on convertible notes

(Gain) loss on change in fair value of derivative liabilities

Gain on settlement of convertible note

Shares issued for services

Changes in non-cash operating assets and liabilities:

Amounts receivable

Prepaid expenses and deposits

Accounts payable and accrued liabilities

Due to related parties

Net cash used in operating activities

FINANCING ACTIVITIES

Proceeds from issuance of units

Proceeds from issuance of preferred shares

Proceeds from issuance of shares, net of issuance costs

Proceeds from loans from related parties

Repayment of loans from related parties

Net cash provided by financing activities

Effect of foreign exchange rate changes on cash

Change in cash

Cash, beginning of period

Cash, end of period

Non-cash investing and financing activities:

Common stock issuable pursuant to conversion of convertible notes

Supplemental disclosures:

Interest paid

Income taxes paid

1.

Nature of Business and Continuance of Operations

Pharmagreen Biotech Inc. (“the Company”) was incorporated under the laws of the State of Nevada, U.S. on November 26, 2007, under the name Azure International, Inc. On October 30, 2008, and effective as of the same date, the Company filed Articles of Merger (“Articles”) with the Secretary of State of the State of Nevada, to effect a merger by and between Air Transport Group Holdings, Inc., a Nevada corporation and Azure International, Inc. As a result of the merger, the Company changed its name to Air Transport Group Holdings, Inc. The Company was previously in the business of providing technical advisory and appraisals to the aircraft and aviation business as well as providing sourcing for aircraft leases and parts. Pursuant to a Share Exchange Agreement with WFS Pharmagreen Inc. (“WFS”) on May 2, 2018, the Company changed its name to Pharmagreen Biotech Inc. and changed its principal business to the production of starter plantlets for the North American high CBD hemp and medical cannabis industries through the application of the proprietary plant tissue culture in vitro process called “Chibafreen”. This proprietary process will produce plantlets that will be genetically identical and free of pests and disease free with consistent and certifiable constituent properties.

Going Concern

These condensed consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As at December 31, 2021, the Company has not earned any revenues from operations, has a working capital deficit of $1,543,202, and has an accumulated deficit of $11,680,693. During the three months ended December 31, 2021, the Company used cash flows for operations of $148,530. Furthermore, the Company has defaulted on convertible notes. These factors raise substantial doubt upon the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern.

The outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the U.S. and global economies, disruptions of financial markets, and created uncertainty regarding potential impacts to the Company’s supply chain, operations, and customer demand. The COVID-19 pandemic has impacted and could further impact the Company’s operations and the operations of the Company’s suppliers and vendors as a result of quarantines, facility closures, and travel and logistics restrictions. Specifically, the Company attributes the pandemic to a delay in a planned financing which was to be used for the construction of the biotech complex, resulting in an impairment of the capitalized construction-in-progress at September 30, 2020. The extent to which the COVID-19 pandemic further impacts the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on the Company’s customers, suppliers, and vendors and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume. The management team is closely following the progression of COVID-19 and its impact on the Company. Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future. Therefore, the Company cannot reasonably estimate the impact at this time our business, liquidity, capital resources, and financial results.

2.

Significant Accounting Policies

(a)

Interim Financial Statements

These condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

(b)

Basis of Presentation

The accompanying condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. These condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, WFS Pharmagreen Inc. (“WFS”), and its 89.7% owned subsidiary 1155097 B.C. Ltd. (“115BC”), companies incorporated in British Columbia, Canada. All inter-company accounts and transactions have been eliminated. The Company’s fiscal year-end is September 30.

(c)

Use of Estimates and Judgments

The preparation of these condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the equity component of convertible notes, fair value of derivative liabilities, fair value of stock-based payments, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

The Company applies judgment in the application of the going concern assumption which requires management to take into account all available information about the future, which is at least, but not limited to, 12 months from the end of the reporting period.

(d)

Recently Adopted Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its condensed consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

3.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consists of the following:

Accounts payable

Accrued interest payable

4.

Note and Loan Payable

(a)

On November 22, 2019, the Company entered into a promissory note with an unrelated party for $40,000 in connection with an equity purchase agreement (Refer to Note 12(b)). The promissory note is unsecured, was due on November 30, 2020, and bears interest on the unpaid principal balance at a rate of 10% per annum. At December 31, 2021, the Company has recorded accrued interest payable of $8,415 (September 30, 2021 - $7,410) and the promissory note is in default.  On March 10, 2021, this noteholder filed a Notice of Motion for Summary Judgement in Lieu of Complaint (the “Notice”) with the State of New York Supreme Court, County of New York for $40,504 plus interest at the rate of 10% per annum from January 6, 2021, plus costs. On July 31, 2021, the Notice was dismissed without prejudice by the State of New York Supreme Court. On September 23, 2021, the noteholder filed a new Notice of Motion for Summary Judgement in Lieu of Complaint with the State of New York Supreme Court, County of New York for $44,504 plus interest at the rate of 10% per annum from January 6, 2021, plus costs. The Company believes that the claim has no merit and intends to defend its position vigorously.

(b)

On April 22, 2020, the Company received a loan for Cdn$40,000 from the Government of Canada under the Canada Emergency Business Account program (“CEBA”). As at December 31, 2021, the balance owing is $31,604 (Cdn$40,000) (September 30, 2021 - $31,532 (Cdn$40,000)). These funds are interest free until December 31, 2023, at which time the remaining balance will convert to a 2-year term loan at an interest rate of 5% per annum. If the Company repays the loan prior to December 31, 2023, there will be loan forgiveness of 25% of the principal balance repaid, up to a maximum of Cdn$10,000.

5.

Convertible Notes

(a)

On April 4, 2018, the amount of $32,485 owed to related parties was converted to Series A convertible notes, which are unsecured, non-interest bearing, and due on April 4, 2023. These notes are convertible in whole or in part, at any time until maturity, to common shares of the Company at $0.0001 per share. The outstanding balance remaining at maturity shall bear interest at 12% per annum until fully paid. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 Debt with Conversion and Other Options. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $32,485 as additional paid-in capital and reduced the carrying value of the convertible note to $nil. The carrying value will be accreted over the term of the convertible notes up to their face value of $32,485.

During the year ended September 30, 2018, the Company issued 31,745,000 shares of common stock upon the conversion of $3,175 of Series A convertible notes, which included 18,000,000 common shares to the President of the Company and 5,320,000 common shares to family members of the President of the Company. Upon conversion, the Company immediately recognized the related remaining debt discount of $3,112 as accretion expense.

During the year ended September 30, 2019, the Company issued 3,900,000 shares of common stock upon the conversion of $390 of Series A convertible notes. Upon conversion, the Company immediately recognized the related remaining debt discount of $375 as accretion expense.

During the year ended September 30, 2020, the Company issued 18,525,000 shares of common stock upon the conversion of $1,853 of Series A convertible notes. Upon conversion, the Company immediately recognized the related remaining debt discount of $1,670 as accretion expense.

As at December 31, 2021, the carrying value of the convertible notes was $9,633 (September 30, 2021 – $7,834) and had an unamortized discount of $17,434 (September 30, 2021 - $19,233). During the three months ended December 31, 2021, the Company recorded accretion expense of $1,799 (2020 - $793).

5.

Convertible Notes (continued)

(b)

On January 14, 2020, the Company entered into a convertible note with an unrelated party for $78,000, of which $3,000 was paid for financing costs, resulting in net proceeds to the Company of $75,000. The note is due on January 14, 2021, and bears interest on the unpaid principal balance at a rate of 12% per annum, which increases to 15% per annum upon default of the note. The note may be converted at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to lower of: (i) 65% of the lowest trading price during the 20-trading day period prior to the issuance date; or (ii) 65% of the lowest trading price during the 20-trading day period prior to the conversion date. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, and determined the note and conversion feature qualified as derivatives. The Company classified the conversion feature as a derivative liability at fair value. The initial fair value of the conversion feature was determined to be $76,330. The Company recognized the maximum intrinsic value of the embedded beneficial conversion feature of $74,500, resulting in a loss on change in fair value of derivative liabilities of $1,830, and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible note up to its face value of $78,000.

The financing costs were netted against the convertible note and are being amortized over the term using the effective interest rate method. During the year ended September 30, 2020, the Company recognized accretion expense of $16,447.

During the year ended September 30, 2021, the Company issued 2,600,000 shares of common stock upon the conversion of $18,923 of the convertible note and $4,500 of conversion fees. On January 14, 2021, the Company failed to repay the note upon maturity and recorded additional default principal of $53,007. As at December 31, 2021, the carrying value of the convertible note was $112,084 (September 30, 2021 - $112,084), and the fair value of the derivative liability was $132,829 (September 30, 2021 - $264,481).

(c)

On January 22, 2020, the Company entered into a convertible note with an unrelated party for $78,750, of which $9,750 was paid directly to third parties for financing costs, resulting in proceeds to the Company of $69,000. The note is due on January 22, 2021, and bears interest on the unpaid principal balance at a rate of 10% per annum, payable in common stock, which increases to 24% per annum upon default of the note. The note may be converted at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to 65% of the lowest trading price during the 20-trading day period ending on the latest complete trading day prior to the conversion date. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, and determined the note and conversion feature qualified as derivatives. The Company classified the conversion feature as a derivative liability at fair value. The initial fair value of the conversion feature was determined to be $75,179. The Company recognized the maximum intrinsic value of the embedded beneficial conversion feature of $68,500, resulting in a loss on change in fair value of derivative liabilities of $6,679, and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible note up to its face value of $78,750.

The financing costs were netted against the convertible note and are being amortized over the term using the effective interest rate method. During the year ended September 30, 2020, the Company defaulted on the convertible note and recognized accretion expense of $78,250. On January 22, 2021, the Company failed to repay the note upon maturity. As at December 31, 2021, the carrying value of the convertible note was $78,750 (September 30, 2021 - $78,750) and the fair value of the derivative liability was $104,900 (September 30, 2021 - $207,522).

6.

Derivative Liabilities

The embedded conversion option of the Company’s convertible notes described in Note 5 contain a conversion feature that qualifies for embedded derivative classification. The fair value of this liability will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on change in fair value of derivative liabilities. The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities:

Balance, September 30, 2021

Change in fair value of embedded conversion option

Balance, December 31, 2021

The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair values were determined by using a binomial model based on various assumptions. Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:

As at December 31, 2021

7.

Related Party Transactions

(a)

As at December 31, 2021, the Company owed $565,608 (Cdn$715,868) (September 30, 2021 - $547,079 (Cdn$693,998)) to the President of the Company, which is non-interest bearing, unsecured, and due on demand. During the three months ended December 31, 2021, the Company incurred consulting fees of $23,808 (2020 - $23,018) to the President of the Company.

(b)

As at December 31, 2021, the Company owed $108,072 (Cdn$136,783) (September 30, 2021 - $57,940 (Cdn$73,500)) to the father of the President of the Company, which is non-interest bearing, unsecured, and due on demand. 

(c)

As at December 31, 2021, the Company owed $27,021 (Cdn$34,200) (September 30, 2021 – $26,960 (Cdn$34,200)) to a company owned by the father of the President of the Company, which is included in accounts payable and accrued liabilities. The amount due is non-interest bearing, unsecured, and due on demand.

(d)

As at December 31, 2021, the Company owed $469,870 (Cdn$594,697) (September 30, 2021 – $445,591 (Cdn$565,256)) to a company controlled by the Chief Financial Officer of WFS, which is included in accounts payable and accrued liabilities. The amount due is non-interest bearing, unsecured, and due on demand. During the three months ended December 31, 2021, the Company incurred consulting fees of $23,808 (2020 - $23,018) to the company controlled by the Chief Financial Officer of WFS.

8.

Common Stock

Three months ended December 31, 2021

On October 21, 2021, the Company issued 4,000,000 shares of common stock at $0.025 per common stock for proceeds of $100,000. In connection with the financing, the Company incurred commission fees of $8,000.

9.

Preferred Stock

On October 13, 2020. The Company filed a certificate of amendment to its articles of incorporation, whereby it increased the authorized capital to 2,000,000,000 shares of common stock with a par value of $0.001 per share and 1,000,000 preferred shares with a par value of $0.001. On October 14, 2020, the Company designated 10,000 preferred shares as Series A Super Voting Preferred Stock.

The Series A Super Voting Preferred Stock has the following rights and restrictions:

Dividends - Initially, there will be no dividends due or payable on the Series A Super Voting Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.

Liquidation and Redemption Rights - Upon the occurrence of a Liquidation Event, the holders of Series A Super Voting Preferred Stock are entitled to receive net assets on a pro-rata basis. Each holder of Series A Super Voting Preferred Stock is entitled to receive ratably any dividends declared by the Board, if any, out of funds legally available for the payment of dividends.

Rank - All shares of the Series A Super Voting Preferred Stock shall rank (i) senior to the Corporation’s (A) Common Stock, par value $0.001 per share ( “Common Stock” ), and any other class or series of capital stock of the Corporation hereafter created, except as otherwise provided in clauses (ii) and (iii) of this Section 4, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series A Super Voting Preferred-Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series A Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

Voting Rights - If at least one share of Series A Super Voting Preferred Stock is issued and outstanding, then the total aggregate issued shares of Series A Super Voting Preferred Stock at any given time, regardless of their number, shall have voting rights equal to 20 times the sum of: i) the total number of shares of Common stock which are issued and outstanding at the time of voting, plus ii) the total number of shares of all Series of Preferred stocks which are issued and outstanding at the time of voting.

Each individual share of Series A Super Voting Preferred Stock shall have the voting rights equal to:

·

[twenty times the sum of: {all shares of Common stock issued and outstanding at the time of voting + all shares of Series A, Series A and any newly designated Preferred stock issued and outstanding at the time of voting}] Divided by:

·

[the number of shares of Series A Super Voting Preferred Stock issued and outstanding at the time of voting]

With respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Series A Super Voting Preferred Stock shall vote together with the holders of Common Stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Certificate of Incorporation or By-laws.

9.

Preferred Stock (continued)

Protective Provisions - So long as any shares of Series A Super Voting Preferred Stock are outstanding, the Corporation shall not, without first obtaining the unanimous written consent of the holders of Series A Super Voting Preferred Stock, alter or change the rights, preferences or privileges of the Series A Super Voting Preferred so as to affect adversely the holders of Series A Super Voting Preferred Stock.

On October 14, 2020, the Company issued 10,000 shares of Series A Super Voting Preferred Stock to a Director of the Company for proceeds of $10. In connection with the issuance of the Series A Super Voting Preferred Stock, the Company evaluated whether the preferred stock should be classified as a liability based on the guidance under ASC 480, Distinguishing Liabilities from Equity. The Series A Super Voting Preferred Stock are not considered mandatorily redeemable, are not settleable in a variable number of shares, and do not contain any features embedded that required a separate assessment. As a result, the Company determined the Series A Super Voting Preferred Stock were not a liability and classified the preferred stock within equity in the amount of the aggregate par value of the issued shares of preferred stock, with any excess attributed to additional paid-in capital.

10.

Share Purchase Warrants

The following table summarizes the continuity of the Company’s share purchase warrants:

Balance, September 30, 2021 and December 31, 2021

Number of warrants

Exercise price

Expiry date

114,286

$

0.55

July 16, 2022

400,000

$

0.05

December 2, 2022

3,000,000

$

0.05

December 11, 2022

2,000,000

$

0.05

December 30, 2022

2,300,000

$

0.05

January 11, 2023

13,500,000

$

0.05

January 30, 2023

1,000,000

$

0.05

February 16, 2023

611,250

$

0.05

March 1, 2023

6,961,250

$

0.05

May 14, 2023

6,100,000

$

0.05

August 25, 2023

2,000,000

$

0.05

September 24, 2023

37,986,786

15

11.

Memorandum of Understanding

On July 25 2021, the Company entered into a Memorandum of Understanding (“MOU”) to acquire all the assets and cannabis business operation, including 12 acres of property, structure and cannabis licenses, existing sales channels and distribution networks, from a private company situated in Northern California. Upon reaching a definitive agreement, the Company intends to further develop a state-of-the-art flowering greenhouse of approximately 12,000 square feet or the maximum allowed by California State and Regional County. The acquisition price is $2,400,000 to be paid through a combination of cash and shares. The Company also has an option from the seller to acquire an additional 120 acres or more of land for business expansion and development. As at December 31, 2021, the Company has advanced $33,100 under the MOU, which will be applied against the final purchase price upon completion of a definitive agreement. This amount has been included in prepaid expenses and deposits. The Company currently lacks funds with which to consummate the contemplated transaction and has not negotiated a definitive agreement with respect to the contemplated transaction. Thus, there is no assurance that the Company will ever enter into, and consummate, a definitive agreement with respect to the contemplated transaction.

12.

Commitments

(a)

Effective December 11, 2017, the Company entered into a binding Letter of Intent (“LOI”) with Alliance Growers Corp. (“Alliance”), whereby the Company will build a new cannabis biotech complex located in Deroche, British Columbia, through their subsidiary, 115BC. On January 25, 2019, the Company’s subsidiaries WFS and 115BC entered into an option agreement with Alliance, which superseded the LOI entered into on December 11, 2017. The option agreement grants an option to Alliance to purchase 10% equity interest in 115BC for Cdn$1,350,000 and previously granted a second option to purchase an additional 20% equity interest in 115BC for funding of 30% of the total construction and equipment costs for the biotech complex less Cdn$1,350,000. On January 25, 2019, 115BC issued 8 shares of common stock to Alliance upon exercise of the first option for consideration of $1,018,182 (Cdn$1,350,008), which was recognized as additional paid-in capital. The second option expired unexercised. As at December 31, 2021, the Company received advances of $59,258 (Cdn$75,000) (September 30, 2021 - $59,122 (Cdn$75,000)) from Alliance, which is unsecured, non-interest bearing, and due on demand.

(b)

On November 22, 2019, the Company entered into an equity purchase agreement with an unrelated party, whereby the third party is to purchase up to $10,000,000 of the Company’s common stock. The equity purchase agreement is effective for a term of 2 years from the effective date of the registration statement. The purchase price would be 85% of the market price. In return, the Company issued a promissory note of $40,000 (Refer to Note 4(a)). In addition, the third party is required to pay an additional commitment fee of $10,000, of which $5,000 was paid upon signing the term sheet and the remaining $5,000 is due upon completion of the first tranche of the financing.

(c)

Effective May 14, 2021, the Company entered into a Software as a Service Agreement with Novation Solutions Inc. (“DealMaker”) to effect the Company’s planned Regulation A offering, including the set-up of an automated tracking, signing, and reconciliation portal.The Company will pay DealMaker $3,000 upon signing the agreement, $7,000 30 days prior to launching the portal, and a post launch monthly fee of $1,000.

(d)

Effective August 23, 2021, the Company entered into an infomercial production and broadcast agreement with New to the Street Group LLC. Pursuant to the terms of the agreement, New to the Street Group LLC will provide investor relations and consulting services for a period of 12 months. Pursuant to the agreement, the Company agreed to pay New to the Street Group LLC 6,000,000 shares of common stock for the first 3 months of the term, and $40,000 per month for the remaining 9 months, which can be paid in cash or shares of common stock at the Company’s discretion. On September 22, 2021, the Company issued 6,000,000 shares of common stock with a fair value of $210,000.

(e)

Effective August 27, 2021, the Company entered into a consulting agreement for investor relations and consulting services for a period of 6 months. Pursuant to the agreement, the Company agreed to issue shares of common stock of the Company with a fair value of $100,000. On September 22, 2021, the Company issued 4,340,000 shares of common stock with a fair value of $147,560.

13.

Subsequent Events

(a)

On January 12, 2022, the Company entered into a consulting agreement with a six month term. Pursuant to the agreement, the Company will issue 1,000,000 shares of common stock in exchange for management consulting and strategic business advisory services. On January 21, 2022, the Company issued a total of 1,000,000 shares of common stock pursuant to the agreement.

(b)

On January 18, 2022, the Company entered into a consulting agreement with a six month term. Pursuant to the agreement, the Company will issue shares of common stock of the Company with a fair value of Cdn$100,000 in exchange for consultation communication and media services. In addition, the Company may choose to pay a bonus if certain predetermine milestones is met during the term of the agreement. On January 19, 2022, the Company issued a total of 6,800,000 shares of common stock pursuant to the agreement.

(c)

On January 18, 2022, the Company entered into a consulting agreement with a six month term. Pursuant to the agreement, the Company will issue 1,800,000 shares of common stock in exchange for strategic and business development advisory services. On January 19, 2022, the Company issued a total of 1,800,000 shares of common stock pursuant to the agreement.

(d)

On January 19, 2022, the Company issued 650,000 units at $0.01 per unit for proceeds of $6,500. Each unit is comprised of one share of common stock and one share purchase warrant exercisable at $0.05 per share of common stock expiring 24 months from the date of issuance.

(e)

On January 19, 2022, the Company issued 800,000 shares of common stock at $0.025 per share for proceeds of $20,000.

(f)

On February 7, 2022, the Company entered into a consulting agreement with a six month term. Pursuant to the agreement, the Company will issue 1,000,000 shares of common stock in exchange for market awareness services. On February 10, 2022, the Company issued a total of 1,000,000 shares of common stock pursuant to the agreement.

Exhibit
Number

Description

(3)

Articles of Incorporation; and (ii) Bylaws

3.1

Articles of Incorporation and Bylaws dated November 26, 2007, as previously filed with the SEC on March 20, 2019.

3.2

Articles of Merger dated, October 30, 2008 (Azure International, Inc./ Air Transport Group Holding, Inc. as previously filed with the SEC on March 20, 2019.

3.3

Securities Exchange Agreement dated April 12, 2018, by and among Air Transport Group Holdings Inc. and WFS Pharmagreen Inc., as previously filed with the SEC on March 20, 2019.

3.4

Articles of Incorporation and Bylaws dated December 19, 2013 for WFS Pharmagreen Inc. as previously filed with the SEC on March 20, 2019.

3.5

Articles of Incorporation and Bylaws dated March 2, 2018 for BC1155097 as previously filed with the SEC on March 20, 2019.

3.6

Articles of Incorporation and Bylaws dated August 2, 2018 for BC1174505 as previously filed with the SEC on March 20, 2019.

(10)

Material Contracts

10.1

Option Agreement with Alliance Growers January 25, 2019 as previously filed with the SEC on March 20, 2019.

10.2

Equity Purchase Agreement with Oscaleta Partners LLC as previously filed with the SEC on December 2, 2019.

10.3

Registration Rights Agreement with Oscaleta Partners LLC as previously filed with the SEC on December 2, 2019.

(31)

Rule 13a-14(a)/15d-14(a) Certifications

31.1

Certification of Chief Executive Officer Pursuant to Rule 13a–14(a) or 15d-14(a) of the Securities Exchange Act of 1934.

31.2

Certification of Principle Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.*

(32)

Section 1350 Certifications

32.1

Certification of Chief Executive Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Principle Financial Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

Pharmagreen Biotech Inc.

Dated February 22, 2022

By:

/s/ Peter Wojcik

Peter Wojcik

President and Director

Principal Executive Officer

By:

/s/ Terry Kwan

Terry Kwan

Principal Accounting Officer

22