WEED, INC. - Quarter Report: 2019 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

 

For the quarterly period ended June 30, 2019

 

 

For the transition period from _______________ to _______________.

 

Commission file number: 333-219922

 

WEED, INC.

(Exact name of registrant as specified in its charter)

 

Nevada	83-0452269
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4920 N. Post Trail Tucson, AZ	85750
(Address of principal executive offices)	(Zip Code)

 

(520) 818-8582

Registrant’s telephone number, including area code

 

 

 

  (Former fiscal year, if changed since last report) 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐               

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
(Do not check if a smaller reporting company)
		Emerging growth company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

 

Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:

 

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

 

Applicable only to corporate issuers:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 14, 2019, there were 107,943,685 shares of common stock, $0.001 par value, issued and outstanding.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEED, INC.

 

 

TABLE OF CONTENTS

 

 

PART I – FINANCIAL INFORMATION		4
ITEM 1	Condensed Consolidated Financial Statements	5
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	30
ITEM 4	Controls and Procedures	31
PART II – OTHER INFORMATION		32
ITEM 1	Legal Proceedings	33
ITEM 1A	Risk Factors	33
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	33
ITEM 3	Defaults Upon Senior Securities	33
ITEM 4	Mine Safety Disclosures	33
ITEM 5	Other Information	34
ITEM 6	Exhibits	35

 

 

 

PART I – FINANCIAL INFORMATION

 

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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. Our 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                      Condensed Consolidated Financial Statements

 

The consolidated balance sheets as of June 30, 2019 (unaudited) and December 31, 2018, the consolidated statements of operations for the three months and six months ended June 30, 2019 and 2018, the consolidated statement of stockholders equity (deficit) for the six months ended June 30, 2019, and the consolidated statements of cash flows for the six months ending June 30, 2019 and 2018, follow. The unaudited interim condensed financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. All such adjustments are of a normal and recurring nature.

 

 

 

WEED, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
TABLE OF CONTENTS
	Page No.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets	6
Condensed Consolidated Statements of Operations	7
Condensed Consolidated Statements of Cash Flows	8
Condensed Consolidated Statements of Changes in Stockholders' Equity	9
Notes to Consolidated Financial Statements	10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  WEED, INC.

CONSOLIDATED BALANCE SHEETS

 

	June 30,	December 31,
	2019	2018
ASSETS	(unaudited)
CURRENT ASSETS:
Cash	$3,664	$70,608
Accounts Receivable	822	21
Prepaid expenses	24,253	71,290
Deposits	172,000	350,020
TOTAL CURRENT ASSETS	200,739	491,939
Land	136,400	136,400
Building	1,887,802	1,887,802
Computers & Equipment	573,376	570,397
Vehicle	105,132	105,132
Leasehold improvements	5,000	5,000
	2,571,310	2,568,331
Less: Accumulated depreciation	(304,314)	(224,198)
Property and equipment, net	2,266,996	2,344,133
Trademark	50,000	50,000
Less: Accumulated amortization	(2,783)	(1,483)
Trademark, net	47,217	48,517
TOTAL ASSETS	$2,651,352	$3,020,989
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$319,416	$240,459
Accrued Expense	4,000	0
Accrued officer compensation	39,500	0
Accrued interest	9,292	6,903
Notes payable, related parties	246,000	12,000
Notes payable	-	0
Due to Officer	723	0
TOTAL CURRENT LIABILITIES	618,931	259,362
TOTAL LIABILITIES	618,931	259,362
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 200,000,000 authorized,
107,667,685 and 105,950,685 issued and outstanding, respectively	107,668	105,951
Unamortized Stock Based Compensation	(78,750)	(200,400)
Additional paid-in capital	68,245,603	50,896,121
Subscription payable	463,850	356,250
Accumulated deficit	(66,705,429)	(48,396,295)
Accumulated other comprehensive loss:
Foreign currency translation	(521)	-
TOTAL STOCKHOLDERS' EQUITY	2,032,421	2,761,627
TOTAL LIABILITIES & STOCKERHOLDERS' EQUITY	$2,651,352	$3,020,989

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

WEED, INC.

COSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

 

	For the Three Months		For the Six Months
	Ended June 30,		Ended June 30,
	2019	2018	2019	2018
REVENUE	$-	$-	$-	$-
OPERATING EXPENSES
General and administrative expenses	124,928	405,666	310,688	777,643
Professional fees	7,004,377	8,930,451	17,913,703	12,892,210
Depreciation & amortization	40,756	44,171	81,416	85,329
Total operating expenses	7,170,061	9,380,288	18,305,807	13,755,182
NET OPERATING LOSS	(7,170,061)	(9,380,288)	(18,305,807)	(13,755,182)
OTHER INCOME (EXPENSE)
Interest income	-	-	0	9,338
Interest expense	(2,140)	(5,148)	(2,389)	(7,807)
Other income	17	-	1,017	-
Loss on extinguishment of debt	-	-	0	(1,064,720)
Other expense	(476)	(1,976)	(1,956)	(4,731)
TOTAL OTHER EXPENSE, NET	(2,599)	(7,124)	(3,328)	(1,067,920)
NET LOSS	$(7,172,660)	$(9,387,412)	$(18,309,135)	$(14,823,102)
OTHER COMPREHENSIVE LOSS	(521)	-	(521)	-
COMPREHENSIVE INCOME	(7,173,181)	(9,387,412)	(18,309,656)	(14,823,102)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
Outstanding - basic and fully diluted	107,274,850	102,362,597	107,667,685	101,859,793
Net loss per share - basic and fully diluted	$(0.07)	$(0.09)	$(0.17)	$(0.15)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

 

WEED, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

	For the Six
	Months Ended
	2019	2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$(18,309,135)	$(14,823,102)
Adjustments to reconcile net loss
used in operating activities:
Depreciation and amortization	81,416	85,329
Estimated fair value of stock based compensation	15,413,319	9,387,000
Estimated fair value of shares issued for services	1,709,530	2,737,900
Loss on debt extinguishment	-	1,064,720
Decrease (increase) in assets
Accounts Receivable	(801)	-
Prepaid expenses and other assets	225,057	(112,358)
Increase (decrease) in liabilities
Accounts Payable	78,958	(66,691)
Accrued expenses	46,612	(165,405)
NET CASH USED IN OPERATING ACTIVITIES	(755,044)	(1,892,607)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(2,979)	(350,720)
Purchase of intangible assets	-	(40,000)
NET CASH USED IN INVESTING ACTIVITIES	(2,979)	(390,720)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock payable	107,600	-
Proceeds from notes payable - related party	234,000	7,000
Repayments on notes payable	-	(113,788)
Proceeds from the sale of common stock	350,000	3,023,550
NET CASH PROVIDED BY FINANCING ACTIVITIES	691,600	2,916,762
NET CHANGE IN CASH	(66,423)	633,435
EFFECT OF EXCHANGE RATE ON CASH	(521)	-
CASH, BEGINNING OF PERIOD	70,608	161,178
CASH, END OF PERIOD	$3,664	$794,613
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year ended December 31:
Income taxes	$-	$-
Interest paid	$-	$-
Non-cash investing and financing activities:
Mortgage issued for acquisition of land and property	-	1,040,662
Shares issued from subscription payable	-	200,770
Extinguishment of notes payable and accrued interest	-	385,281

 

  

WEED, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

 

	Common Stock						Other	Total
			Additional	Subscriptions	Unamortized Stock	Accumulated	Comprehensive	Stockholders'
	Shares	Amount	Paid-In Capital	Payable	Based Compensation	Deficit	loss	Equity
Balance, December 31, 2018	105,950,685	105,951	50,896,121	356,250	(200,400)	(48,396,295)		2,761,627
Common stock sold for cash	250,000	250	199,750	150,000		-		350,000
Common stock returned	(200,000)	(200)	200					-
Common stock issued for settlement of debt	-	-	-	-		-		-
Common stock issued for services	410,000	410	679,990		121,650	-		802,050
								-
Vesting of employee stock options	-	-	9,680,572	-		-		9,680,572
Net loss	-	-	-	-		(11,136,474)		(11,136,474)
Balance, March 31, 2019	$106,410,685	$106,411	$61,456,633	$506,250	(78,750)	(59,532,769)		$2,457,775
Common stock sold for cash	300,000	300	149,700	(90,000)				60,000
Common stock returned		-						-
Common stock issued for services	957,000	957	906,523	47,600				854,020
Vesting of employee stock options			5,732,747					11,402,497
Vesting of employee stock comp								-
								-
Audit Adjustment								-
Net loss						(7,172,660)		(7,172,660)
Other comprehensive income, net							(521)
Balance, June 30, 2019	107,667,685	107,668	68,245,603	463,850	(78,750)	(66,705,429)	(521)	2,032,421

 

 The accompanying notes are an integral part of these unaudited consolidated financial statements.

   

 

WEED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(UNAUDITED)

Note 1 – Nature of Business and Significant Accounting Policies

 

Nature of Business

WEED, Inc. (the “Company”), (formerly United Mines, Inc.) was incorporated under the laws of the State of Arizona on August 20, 1999 (“Inception Date”) as Plae, Inc. to engage in the exploration of gold and silver mining properties. On November 26, 2014, the Company was renamed from United Mines, Inc. to WEED, Inc. and was repurposed to pursue a business involving the purchase of land, and building Commercial Grade “Cultivation Centers” to consult, assist, manage & lease to Licensed Dispensary owners and organic grow operators on a contract basis, with a concentration on the legal and medical marijuana sector. The Company’s plan is to become a True “Seed-to-Sale” company providing infrastructure, financial solutions and real estate options in this new emerging market. The Company, under United Mines, was formerly in the process of acquiring mineral properties or claims located in the State of Arizona, USA. The name was previously changed on February 18, 2005 to King Mines, Inc. and then subsequently changed to United Mines, Inc. on March 30, 2005. The Company trades on the OTC Pink Sheets under the stock symbol: BUDZ.

 

On April 20, 2017, the Company acquired Sangre AT, LLC, a Wyoming company doing business as Sangre AgroTech. (“Sangre”). Sangre is a plant genomic research and breeding company comprised of top-echelon scientists with extensive expertise in genomic sequencing, genetics-based breeding, plant tissue culture, and plant biochemistry, utilizing the most advanced sequencing and analytical technologies and proprietary bioinformatics data systems available. Sangre is working on a cannabis genomic study to complete a global genomic classification of the cannabis plant genus.

 

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, 2018, has been derived from audited consolidated financial statements and the unaudited condensed consolidated financial statements as of June 30, 2019 and 2018 ( 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, 2018 (the “2018 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”). It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The condensed consolidated financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed consolidated financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the six months ended June 30, 2019, are not necessarily indicative of the results of operations expected for the year ending December 31, 2019.

 

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the following entities, all of which are under common control and ownership:

 

		State of				Abbreviated
Name of Entity		Incorporation		Relationship (1)		Reference
WEED, Inc.		Nevada		Parent		WEED
Sangre AT, LLC (2)		Wyoming		Subsidiary		Sangre

(1) Sangre is a wholly-owned subsidiary of WEED, Inc.

(2) Sangre AT, LLC is doing business as Sangre AgroTech.

 

The consolidated financial statements herein contain the operations of the wholly-owned subsidiary listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements. The parent company, WEED and subsidiary, Sangre will be collectively referred to herein as the “Company”, or “WEED”. The Company's headquarters are located in Tucson, Arizona and its operations are primarily within the United States, with minimal operations in Australia.

 

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.

 

 

   

Note 1 – Nature of Business and Significant Accounting Policies (Continued)

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, prepaid expenses and accrued expenses reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments.

 

Impairment of Long-Lived Assets

Long-lived assets held and used by the Company are reviewed for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable or is impaired. Recoverability is assessed using undiscounted cash flows based upon historical results and current projections of earnings before interest and taxes. Impairment is measured using discounted cash flows of future operating results based upon a rate that corresponds to the cost of capital. Impairments are recognized in operating results to the extent that carrying value exceeds discounted cash flows of future operations.

 

Basic and Diluted Loss Per Share

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

 

Stock-Based Compensation

Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

 

Revenue Recognition

On January 1, 2018, the Company adopted the new revenue recognition standard ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, using the cumulative effect (modified retrospective) approach. Modified retrospective adoption requires entities to apply the standard retrospectively to the most current period presented in the financial statements, requiring the cumulative effect of the retrospective application as an adjustment to the opening balance of retained earnings at the date of initial application. No cumulative-effect adjustment in retained earnings was recorded as the Company’s has no historical revenue. The impact of the adoption of the new standard was not material to the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2019. The Company expects the impact to be immaterial on an ongoing basis.

 

The primary change under the new guidance is the requirement to report the allowance for uncollectible accounts as a reduction in net revenue as opposed to bad debt expense, a component of operating expenses. The adoption of this guidance did not have an impact on our condensed consolidated financial statements, other than additional financial statement disclosures. The guidance requires increased disclosures, including qualitative and quantitative disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

 

The Company operates as one reportable segment.

 

Sales on fixed price contracts are recorded when services are earned, the earnings process is complete or substantially complete, and the revenue is measurable and collectability is reasonably assured. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue from sales in which payment has been received, but the earnings process has not occurred. Sales have not yet commenced.

 

Advertising and Promotion

All costs associated with advertising and promoting products are expensed as incurred. These expenses were $3,441 and $800 for the six months ended June 30, 2019 and 2018, respectively.

 

 

 

  

Note 1 – Nature of Business and Significant Accounting Policies (Continued)

 

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes nearly all existing revenue recognition guidance, including industry-specific guidance. Subsequent to the issuance of ASU No. 2014-09, the FASB clarified the guidance through several Accounting Standards Updates; hereinafter the collection of revenue guidance is referred to as “Topic 606.” Topic 606 is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. The Company adopted Topic 606 on January 1, 2018 using the modified retrospective transition method; accordingly, Topic 606 has been applied to the fiscal 2018 financial statements and disclosures going forward, but the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of Topic 606 to be immaterial to our operating results on an ongoing basis.

 

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 plan to adopt the standard on January 1, 2019. 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 June 30, 2019, the adoption of the standard had no impact on the Company, as there were no leases in place longer than 12 months.

 

In June 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-07, Compensation – Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting. This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this ASU will become effective for us beginning January 1, 2019, and early adoption is permitted. We do not anticipate that this ASU will 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 $66,705,429 and had limited working capital at June 30, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new products and services to begin generating revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful; therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.

 

The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

As of December 31, 2018, the non-refundable deposit amount of $110,000 for the property located in Westfield, New York was recorded as a loss on deposit due to the uncertainty of the acquisition. As of March 31, 2019, the refundable deposit amount of $350,000 related to the purchase of the Sugar Hill golf course property was returned by the Law Office of Biltekoff.

 

As of June 28, 2019, a total deposit amount of $72,000 was transferred to Law Office of Biltekoff for the Sugar Hill golf course auction.

 

 

 

 

 

 

 

 

 

   

Note 3 – Related Party

 

Notes Payable

From time to time, the Company has received short term loans from officers and directors as disclosed in Note 7 below. The Company has a total of $246,000 and $12,000 of note payable on the consolidated balance sheet as of June 30, 2019 and 2018, respectively.

 

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 six months ended June 30, 2019 and 2018, 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.

    

Common Stock

On August 1, 2017, the Company granted 150,000 shares of common stock to Mary Williams, a principal of Sangre AT, LLC, for services performed. The fair value of the common stock was $154,500 based on the closing price of the Company’s common stock on the date of grant.

 

On January 7, 2017, the Company granted 50,000 shares of common stock to Pat Williams. PhD, a principal of Sangre AT, LLC, for services performed. The total fair value of the common stock was $210,250 based on the closing price of the Company’s common stock on the date of grant.

 

A total of $39,500 and $0 of officer compensation was unpaid and outstanding at June 30, 2019 and 2018, respectively.

 

Stock Options Issued for Services – related party (2019)

On February 1, 2018, in connection with executive employment agreements, the Company granted non-qualified options to purchase an aggregate of 6,000,000 shares of the Company’s common stock at the exercise price of $10.55 per share. The options shall become exercisable at the rate of 1/3 upon the six-month anniversary, 1/3 upon the one-year anniversary and 1/3 upon the second anniversary of the grant. The options were valued at $45,987,970 using the Black-Scholes option pricing model. The Company recognized expense of approximately, $15,413,319 relating to these options during the six months ended June 30, 2019.

 

Note 4 – Fair Value of Financial Instruments

 

Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

 

 

 

  

  

Note 4 – Fair Value of Financial Instruments (Continued)

 

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of June 30, 2019 and 2018, respectively:

 

Fair Value Measurements at December 31, 2018

 

	Level 1	Level 2	Level 3
Assets
Cash	$70,608	$-	$-
Total assets	$70,608	$-	$-
Liabilities
Notes payable, related parties
Notes payable	$-	$12,000	$-
Total liabilities	$-	$12,000	$-
	$70,608	$12,000	$-

 

Fair Value Measurements at June 30, 2019

 

	Level 1	Level 2	Level 3
Assets
Cash	$3,664	$-	$-
Total assets	$3,664	$-	$-
Liabilities
Notes payable, related parties
Notes payable	$-	$246,000	$-
Total liabilities	$-	$246,000	$-
	$3,664	$246,000	$-

 

 

 

 

 

 

 

 

 

 

  

Note 4 – Fair Value of Financial Instruments (Continued)

 

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 six months ended June 30, 2019 and the year ended December 31, 2018.

 

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 Company’s common stock valued at $30,000 based on the closing price of the Company’s common stock on the July 18, 2017 date of grant.

 

 

 

 

Note 5 – Investment in Land and Property (Continued)

 

(2) Purchaser’s shares of closing costs, including the seller’s prepaid property taxes.

 

(3) As noted above, the note was settled with a payment of $100,000 and the issuance of 125,000 shares of common stock.

 

In January 2018, the Company closed on the purchase of property, consisting of a condominium in La Veta, Colorado to house Company personnel and consultants for total consideration approximating $140,000, which was paid in cash at the time of closing. The home has 3 bedrooms and 2.5 baths.   Sangre took immediate possession of the property. La Veta, Colorado is a small town and rental or short-term housing is very difficult to obtain. The Company personnel and consultants are no longer residing at the property, and it is

currently vacant.

 

In February 2018, the Company closed on the purchase of property, consisting of a home in La Veta, Colorado to house Company personnel and consultants for total consideration approximating $1,200,000. The home has 5 Bedrooms and 3 Baths. Under the terms of the purchase agreement, the Company paid $150,000 down, entered into a note payable in the amount of approximately $1,041,000 (see Note 8). The Company secured a below-market interest rate of 1.81% based on the short-term nature of the term (due on August 15, 2018). Sangre took immediate possession of the property. La Veta, Colorado is a small town and rental or short-term housing is very difficult to obtain. The Company personnel and consultants are no longer residing at the property, and it is currently vacant. On October 10, 2018, a payment of $750,000 was made to Craig W. Clark to pay off the note payable, and a loan discount of $125,475 was given to the Company which was recorded as a gain.

 

A settlement payment of $155,000 was received from an insurance company related to a fire near one of our properties in La Veta, Colorado.

 

On June 25, 2019, the Company received $60,000 from Lex Seabre in exchange for 120,000 shares of common stock of the Company. The $60,000 was paid as a deposit for the Sugar Hill golf course property auction.

 

On June 28, 2019, the Company received a loan of $12,000 from Nicole Breen. The $12,000 was paid as a deposit for the Sugar Hill golf course property auction.

 

Note 6 – Property and Equipment

 

Property and equipment consist of the following at June 30, 2019 and December 31, 2018, respectively: 

 

	June 30,	December 31,
	2019	2018
Property improvements	$5,000	$5,000
Automobiles	105,132	105,132
Office equipment	4,933	4,933
Furniture & Fixtures	2,979	0
Lab equipment	65,769	65,769
Construction in progress (2)	499,695	499,695
Property (1)	1,887,802	1,887,802
Property and equipment, gross	2,571,310	2,568,331
Less accumulated depreciation	(304,314)	(224,198)
Property and equipment, net	$2,266,996	2,344,133

 

(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).

 

(2)	HVAC/furnace system and research facility center are under construction.

 

Depreciation and amortization expense totaled $81,416 and $85,329 for the six months ended June 30, 2019 and 2018, respectively.

 

 

 

Note 7 – Notes Payable, Related Parties

 

Notes payable, related parties consist of the following at June 30, 2019 and December 31, 2018, respectively:

 

	June 30,2019	December 31,2018
On various dates, the Company received advances from the Company’s CEO, Glenn Martin. Mr. Martin owns approximately 56.2% of the Company’s common stock at March 31, 2018. Over various dates in 2017, the Company received a total of $9,000 of advances from Mr. Martin, and they were repaid by July 3, 2017. On January 19, 2018, the Company received an unsecured loan, bearing interest at 2%, in the amount of $25,000 from Mr. Martin, and the loan was paid off in full on February 2, 2018. The Company also repaid an advance of $7,000 on July 6, 2018 received from Mr. Martin on January 16, 2018.The unsecured non-interest-bearing loans were due on demand. A detailed list of advances and repayments follows:	$-	$-

 

On December 29, 2017, the Company received an unsecured loan, bearing interest at 2% in the amount of $37,000, due on demand from Dr. Pat Williams, PhD. The amount outstanding was $0 during the periods ended June 30, 2019 and December 31, 2018. Mr. Williams is a founding member and principal of our wholly-owned subsidiary, Sangre AT, LLC	-	-
On April 12, 2010, the Company received an unsecured, non-interest-bearing loan in the amount of $2,000, due on demand from Robert Leitzman. Interest is being imputed at the Company’s estimated borrowing rate, or 10% per annum. The largest aggregate amount outstanding was $2,000 during the periods ended June 30, 2019 and December 31, 2018. Mr. Leitzman owns less than 1% of the Company’s common stock, however, the Mr. Leitzman is deemed to be a related party given the non-interest-bearing nature of the loan and the materiality of the debt at the time of origination.	2,000	2,000
Over various dates in 2011 and 2012, the Company received unsecured loans in the aggregate amount of $10,000, due on demand, bearing interest at 10%, from Sandra Orman. The largest aggregate amount outstanding was $10,000 during the periods ended June 30, 2019 and December 31, 2018. Mrs. Orman owns less than 1% of the Company’s common stock, however, Mrs. Orman is deemed to be a related party given the nature of the loan and the materiality of the debt at the time of origination.	10,000	10,000
Over various dates from April to June 2019, the company received a total of $234,000 of advances, bearing interest at 5%, from Nicole Breen. A detailed list of advances and repayments follows. To date, no repayments have been made.	234,000	0
Notes payable, related parties	$246,000	$12,000

 

The Company recorded interest expense in the amount of $2,389 and $7,807 for the six months ended June 30, 2019 and 2018, respectively, including imputed interest expense in the amount of $2,489 and $0 during such periods related to notes payable, related parties.

 

 

 

Note 8 – Notes Payable

 

Note payable consist of the following at June 30, 2019 and December 31, 2018, respectively:

 

	June 30, 2019	December 31,2018
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.	-	-
	$-	$-

 

The Company recognized interest expense of $0 and $7,807 related to the note payables for the six months ended June 30, 2019 and 2018, respectively.

 

 

 

 

 

On January 19, 2018, the Company was sued in the United States District Court for the District of Arizona ( William Martin v. WEED, Inc.. , Case No. 4:18-cv-00027-RM) by the listed Plaintiff. The Company was served with the Verified Complaint on January 26, 2018. The Complaint alleges claims for breach of contract-specific performance, breach of contract-damages, breach of the covenant of good faith and fair dealing, conversion, and injunctive relief. In addition to the Verified Complaint, the Company was served with an application to show cause for a temporary restraining order. The Verified Complaint alleges the Company entered into a contract with the Plaintiff on October 1, 2014 for the Plaintiff to perform certain consulting services for the Company in exchange for 500,000 shares of its common stock up front and an additional 700,000 shares of common stock to be issued on May 31, 2015. The Plaintiff alleges he completed the requested services under the agreement and received the initial 500,000 shares of common stock, but not the additional 700,000 shares. The request for injunctive relief asks the Court to Order the Company to issue the Plaintiff 700,000 shares of its common stock, and possibly include them in its Registration Statement on Form S-1, or, in the alternative, issue the shares and have them held by the Court pending resolution of the litigation, or, alternatively, sell the shares and deposit the sale proceeds in an account that the Court will control. The hearing on the Temporary Restraining Order occurred on January 29, 2018. On January 30, 2018, the Court issued its ruling denying the application for a Temporary Restraining Order. Currently, there is no further hearing scheduled in this matter . On February 13, 2018, the Company filed an Answer to the Verified Complaint and Counterclaim. On February 15, 2018, the Company filed a Motion to Dismiss the Verified Complaint. On February 23, 2018, the Company filed a Motion to Amend Counterclaim to add W. Martin’s wife, Joanna Martin as a counterdefendant. On March 9, 2018, William Martin filed a Motion to Dismiss the Counterclaim. On March 12, 2018, William Martin filed a Motion to Amend the Verified Complaint to, among other things, add claims against Glenn Martin and Nicole and Ryan Breen. On March 27, 2018, the Court granted both William Martin and WEED, Inc.’s Motions to Amend. On March 27, 2018, the Company filed an Amended Counterclaim adding Joanna Martin. On April 2, 2018, the Company filed a Motion to Amend our Counterclaim to add a breach of contract claim. On April 10, 2018, the Company filed an Answer to First Amended Verified Complaint. On April 23, 2018, Glenn Martin and Nicole and Ryan Breen filed their Answer to the First Amended Complaint. On May 31, 2018, the Court issued an Order: (a) granting the Company’s Motion to Dismiss thereby dismissing the Plaintiff’s claims for breach of the covenant of good faith and fair dealing and the claim for conversion, (b) denying William Martin’s Motion to Dismiss the counterclaim as to the claims for fraudulent concealment and fraudulent misrepresentation, but granting the Motion to Dismiss only as to the claim for fraudulent nondisclosure, and (c) granting the Company’s Motion to Amend its Counterclaim to add a breach of contract claim. On June 1, 2018, William Martin and his wife filed their Answer to the First Amended Counterclaim. On June 1, 2018, William Martin and his wife filed their Answer to the Second Amended Counterclaim. In addition to the above pleadings and motions, the parties have exchanged disclosure statements and served and responded to written discovery. The Company denies the Plaintiff’s allegations in the Verified Complaint in their entirety and plan to vigorously defend against this lawsuit. Due to the loss not being probable, no accrual has been recorded for the 700,000 shares of common stock the Plaintiff alleges he is owed under his agreement with the Company.

 

Material Definitive Agreements

On May 1, 2018, the Company entered into a Fourth Addendum and Fifth Addendum to that certain Purchase and Sale Agreement between the Company and Greg DiPaolo’s Pro Am Golf, LLC, amending the “Closing Date” under the Agreement to August 1, 2018, in exchange for the Company paying $50,000 as a non-refundable deposit to be applied against the purchase price once the property sale is completed and $10,000 for maintenance, tree removal and other grounds keeping in order to prepare the golf course for the 2018 season.

 

On July 23, 2018, the Company entered into a Sixth Addendum, extending the “Closing Date” to November 1, 2018, in exchange for the Company paying an additional $50,000 as a non-refundable deposit to be applied against the purchase price.

 

On May 21, 2018, the Company entered into a Trademark Purchase Agreement with Copalix Pty Ltd., a private South African company, to acquire U.S. Trademark Registration No. 4,927,872 for the WEED TM mark, in exchange for USD$40,000.

 

On July 27, 2018, the Company entered into a Trademark Purchase Agreement with Copalix Pty Ltd., to acquire European Community Trademark Registration No. 11953387 for WEED Registered Mark in exchange for USD$10,000.

 

 

 

 

 

 

 

 

 

Note 10 – 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.

 

2019 Common Stock Activity

 

Common Stock Sales (2019)

 

During the quarter ended March 31, 2019, the Company issued 250,000 shares of common stock for proceeds of $200,000. 300,000 shares valued at $150,000 were not issued at March 31, 2019 and such amount has been included in subscriptions payable.

 

During the three months ended June 30, 2019, the Company issued 300,000 shares of common stock for proceeds of $150,000. 120,000 shares valued at $60,000 were not issued at June 30, 2019 and such amount has been included in subscriptions payable.

  

Common Stock Issued for Services (2019)

 

During the three months ended March 31, 2019, the Company agreed to issue an aggregate of 410,000 shares of common stock to consultants for services performed. 400,000 shares valued at $668,000 were based on the closing price of the agreement date, and 10,000 shares valued at $12,400 were based on the closing price of the Company’s common stock earned on the measurement date.

 

During the three months ended June 30, 2019, the Company agreed to issue an aggregate of 957,000 shares of common stock to consultants for services performed. The total fair value of the common stock was $907,480 based on the closing price of the Company’s common stock earned on the agreement date. 70,000 shares valued at $47,600 were not issued at June 30, 2019, and such amount has been included in subscriptions payable.

 

Common Stock Cancellations

 

On January 31, 2019, the Company cancelled a total of 200,000 shares of common stock valued at $0 previously granted to a consultant, David Johnson, for non-performance of services. The cancellation was accounted as a repurchase for no consideration.

  

2018 Common Stock Activity

 

Common Stock Sales (2018)

 

During the year ended December 31, 2018, the Company issued 3,899,450 shares of common stock for proceeds of $4,798,550. In connection with certain of the share issuances, the Company issued warrants to purchase an aggregate of $1,927,500 shares of the Company’s common stock. The warrants to purchase 462,500 shares have an exercise price of $5.00 per share, exercisable on various dates through March 2019. Warrants to purchase 215,000 shares have an exercise price of $12.50 per share and are exercisable on various dates through January 2020. The warrants to purchase $1,250,000 shares have an exercise price of $6.00 per share, exercisable on various dates through June 2019. The proceeds received were allocated $3,361,832 to common stock and $1,436,718 to warrants on a relative fair value basis. On January 12, 2018, a warrant holder exercised warrants to purchase 150,000 shares of common stock at a price of $1.50 in exchange for proceeds of $225,000.

 

 

   

Note 10 – Stockholders’ Equity (Continued) 

 

Common Stock Issued for Services (2018)

 

During the year ended December 31, 2018, the Company agreed to issue an aggregate of 915,000 shares of common stock to consultants for services performed. The total fair value of common stock was $3,042,940 based on the closing price of the Company’s common stock earned on the measurement date. Shares valued at $200,400 were issued at December 31, 2018 and services will be performed in 2019 and has been included in unamortized stock-based compensation.

 

Note 11 – Common Stock Warrants and Options

 

Common Stock Warrants Granted (2019)

 

No common stock warrants were granted during the six months ended June 30, 2019.

 

Common stock warrants granted consist of the following at June 30, 2019 and December 31, 2018, respectively:

 

June 30, 2019					December 31, 2018
Issuance	Warrant	Name	# of Common		Issuance	Warrant	Name	# of Common
Date	#		Stock Warrants		Date	#		Stock Warrants
					1/5/2018	1029	Lex Seabre	100,000.00
Total			-		1/21/2018	1031	Roger Forsyth	100,000.00
					1/23/2018	1032	Roger Forsyth	100,000.00
					2/9/2018	1033	Lawrence Wesigal	15,000.00
					3/19/2018	1034	Donald Steinberg	150,000.00
					3/15/2018	1035	Donald Harrington	12,500.00
					4/26/2018	1036	Roger Seabre	100,000.00
					4/26/2018	1037	Michael Kirk Wines	100,000.00
					5/7/2018	1038	Donald Steinberg	400,000.00
					5/15/2018	1039	Roger Seabre	200,000.00
					6/13/2018	1040	Blue Ridge Enterprises	450,000.00
					6/26/2018	1041	Dianna Steinberg	200,000.00
					Total			1,927,500.00