WEED, INC. - Quarter Report: 2020 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

 

For the quarterly period ended March 31, 2020

 

 

For the transition period from _______________ to _______________.

 

Commission file number: 333-219922

 

WEED, INC.

(Exact name of registrant as specified in its charter)

 

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

 

(520) 818-8582

Registrant’s telephone number, including area code

____________________________________  (Former address, if changed since last report)

______________________________________ (Former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		None		None

  

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock, $0.001 par value

(Title of class)

 

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.

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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 ☒
		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 May 15, 2020, there were 110,722,685 shares of common stock, $0.00001 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	23
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	28
ITEM 4	Controls and Procedures	28
PART II – OTHER INFORMATION		29
ITEM 1	Legal Proceedings	29
ITEM 1A	Risk Factors	30
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	30
ITEM 3	Defaults Upon Senior Securities	30
ITEM 4	Mine Safety Disclosures	30
ITEM 5	Other Information	31
ITEM 6	Exhibits	32

 

 

 

 

 

 

 

 

  

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The consolidated balance sheets as of March 31, 2020 (unaudited) and December 31, 2019, the consolidated statements of operations for the three months ended March 31, 2020 and 2019, the consolidated statement of stockholders equity (deficit) for the three months ended March 31, 2020, and the consolidated statements of cash flows for the three months ending March 31, 2020 and 2019, 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
March 31, 2020
TABLE OF CONTENTS
	Page No.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets	7
Condensed Consolidated Statements of Operations	8
Condensed Consolidated Statements of Changes in Stockholders' Equity	9
Condensed Consolidated Statements of Cash Flows	10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEED, INC.
CONSOLIDATED BALANCE SHEETS
	March 31,	December 31,
	2020	2019
ASSETS	(unaudited)
CURRENT ASSETS:
Cash	$5,404	$2,509
Accounts Receivable	822	822
Prepaid expenses	27,148	30,979
Deposits	122,000	92,000
TOTAL CURRENT ASSETS	155,374	126,310
Land	136,400	136,400
Building	1,887,802	1,887,802
Computers & Equipment	73,681	73,681
Leasehold improvements	5,000	5,000
	2,102,883	2,102,883
Less: Accumulated depreciation	(357,347)	(322,498)
Property and equipment, net	1,745,536	1,780,385
Trademark	50,000	50,000
Less: Accumulated amortization	(4,733)	(4,083)
Trademark, net	45,267	45,917
TOTAL ASSETS	$1,946,177	$1,952,612
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$238,257	$212,181
Accrued expense	11,500	10,000
Accrued officer compensation	161,750	122,250
Accrued interest	19,514	16,453
Notes payable, related parties	246,100	224,100
Notes payable	154,529	167,263
Due to officer	723	723.00
TOTAL CURRENT LIABILITIES	832,373	752,970
TOTAL LIABILITIES	832,373	752,970
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 200,000,000 authorized,
110,722,685 and 109,262,685 issued and outstanding, respectively	110,723	109,263
Additional paid-in capital	79,622,863	76,660,712
Subscription payable	411,250	356,250
Accumulated deficit	(79,030,309)	(75,925,974)
Accumulated other comprehensive loss:
Foreign currency translation	(723)	(609)
TOTAL STOCKHOLDERS' EQUITY	1,113,804	1,199,642
TOTAL LIABILITIES & STOCKERHOLDERS' EQUITY	$1,946,177	$1,952,612

 

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

 

 

 

WEED, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
	For the Three Months
	Ended March 31,
	2020	2019
REVENUE	$-	-
OPERATING EXPENSES
General and administrative expenses	75,596	185,760
Professional fees	2,988,649	10,909,326
Depreciation & amortization	35,499	40,660
Total operating expenses	3,099,744	11,135,746
NET OPERATING LOSS	(3,099,744)	(11,135,746)
OTHER INCOME (EXPENSE)
Interest income	-	-
Interest expense	(4,591)	(249)
Other income	0	1,000
Loss on deposit	0	-
Loss on extinguishment of debt	-	-
Gain on extinguishment of debt	-	-
Other expense	0	(1,480)
TOTAL OTHER EXPENSE, NET	(4,591)	(729)
NET LOSS	$(3,104,335)	(11,136,475)
OTHER COMPREHENSIVE LOSS	(723)	(609)
COMPREHENSIVE LOSS	(3,105,058)	(11,137,084)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
Outstanding - basic and fully diluted	110,156,839	106,169,574
Net loss per share - basic and fully diluted	$(0.03)	(0.10)

 

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

 

 

WEED, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months ended March 31, 2020
(UNAUDITED)
						Accumulated
	Common Stock					Other	Total
			Additional	Subscriptions	Accumulated	Comprehensive	Stockholders'
	Shares	Amount	Paid-In Capital	Payable	Deficit	loss	Equity
Balance, December 31, 2019	109,262,685	109,263	76,660,712	356,250	(75,925,974)	(609.00)	1,199,642
Common stock sold for cash	150,000	150	39,850	55,000			95,000
							-
Common stock returned							-
							-
Common stock issued for services	1,310,000	1,310	906,390				907,700
							-
Vesting of employee stock options			2,015,911				2,015,911
							-
Vesting of employee stock comp							-
							-
Sale of Audi
Audit Adjustment							-
							-
Net loss					(3,104,335)		(3,104,335)
							-
Other comprehensive income, net						(114)	(114)
Balance, March 31, 2020	110,722,685	110,723	79,622,863	411,250	(79,030,309)	(723)	1,113,804

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEED, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2020 and March 31, 2019
(UNAUDITED)
	For the Three
	Months Ended
	2020	2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$(3,104,335)	$(11,136,475)
Adjustments to reconcile net loss
used in operating activities:
Depreciation and amortization	35,499	40,660
Gain on settlement of debt	-	-
Loss on deposit	-	-
Impairment of CIP	-	-
Estimated fair value of stock based compensation	2,015,911	9,680,572
Estimated fair value of shares issued for services	907,700	802,050
Loss on debt extinguishment	-	-
Decrease (increase) in assets
Accounts Receivable	-	(378)
Prepaid expenses and other assets	(26,169)	250,754
Increase (decrease) in liabilities
Accounts Payable	26,076	21,482
Accrued expenses	44,061	8,249
NET CASH USED IN OPERATING ACTIVITIES	(101,257)	(333,086)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	-	(2,979)
Purchase of intangible assets	-	-
NET CASH USED IN INVESTING ACTIVITIES	-	(2,979)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock Payable	55,000	150,000
Proceeds from notes payable - related party	22,000	-
Proceeds from the sale of common stock	40,000	200,000
Proceeds on notes payable	1,306	-
Repayments on notes payable	(14,040)	-
NET CASH PROVIDED BY FINANCING ACTIVITIES	104,266	350,000
NET CHANGE IN CASH	3,009	13,935
EFFECT OF EXCHANGE RATE ON CASH	(114)	-
CASH, BEGINNING OF PERIOD	2,509	70,608
CASH, END OF PERIOD	$5,404	$84,543
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year ended December 31:
Income taxes	$-	$-
Interest paid	$-	$-
Non-cash investing and financing activities:
Gain on sale of fixed asset	-	-
Gain on related party transaction	$-	$-
Mortgage issued for acquisition of land and property	$-	$-
Shares issued from subscription payable	$-	$-
Values of shares issued o pay off note payable	$-	$-

 

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

 

 

WEED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2020

(UNAUDITED)

Note 1 – Nature of Business and Significant Accounting Policies

 

Nature of Business

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

 

On April 20, 2017, the Company acquired Sangre AT, LLC, a Wyoming company doing business as Sangre AgroTech. (“Sangre”). Sangre is a plant genomic research and breeding company comprised of top-echelon scientists with extensive expertise in genomic sequencing, genetics-based breeding, plant tissue culture, and plant biochemistry, utilizing the most advanced sequencing and analytical technologies and proprietary bioinformatics data systems available. No work is being conducted now until further funds are available.

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.

 

The Company has a calendar year end for reporting purposes.

 

Basis of Presentation:

The accompanying condensed consolidated balance sheet at December 31, 2019, has been derived from audited consolidated financial statements and the unaudited condensed consolidated financial statements as of March 31, 2020 and 2019 ( the “financial statements”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and related footnotes included in our Registration Statement on Form S-1 for the year ended December 31, 2019 (the “2019 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”). It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The condensed consolidated financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed consolidated financial statements not misleading as required by Regulation S-X, Rule 10-01.

 

Principles of Consolidation

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

 

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

  

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

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

 

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

 

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

 

 

Use of Estimates

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

 

Fair Value of Financial Instruments

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

 

Impairment of Long-Lived Assets

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

 

Basic and Diluted Loss Per Share

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

 

Stock-Based Compensation

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

 

Revenue Recognition

On January 1, 2018, the Company adopted the new revenue recognition standard ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, using the cumulative effect (modified retrospective) approach. Modified retrospective adoption requires entities to apply the standard retrospectively to the most current period presented in the financial statements, requiring the cumulative effect of the retrospective application as an adjustment to the opening balance of retained earnings at the date of initial application. No cumulative-effect adjustment in retained earnings was recorded as the Company’s has no historical revenue. The impact of the adoption of the new standard was not material to the Company’s condensed consolidated financial statements for the three months ended March 31, 2020. The Company expects the impact to be immaterial on an ongoing basis.

 

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

 

The Company operates as one reportable segment.

 

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

 

Advertising and Promotion

All costs associated with advertising and promoting products are expensed as incurred. These expenses were $0 and $1,247 for the three months ended March 31, 2020 and 2019.

 

 

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-15 Accounting for Implementation Costs Related to Cloud Computing or Hosting Arrangements. This standard provides authoritative guidance intended to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance also requires presentation of the capitalized implementation costs in the statement of financial position and in the statement of cash flows in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented, and the expense related to the capitalized implementation costs to be presented in the same line item in the statement of operations as the fees associated with the hosting element (service) of the arrangement. This guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption permitted. We are currently evaluating the potential impact on our financial position, results of operations and statement of cash flows upon adoption of this guidance. We do not expect this guidance to have a significant impact, or potential significant impact, to our unaudited condensed consolidated interim financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases. The standard requires lessees to recognize lease assets and lease liabilities on the consolidated balance sheet and requires expanded disclosures about leasing arrangements. We adopted the standard, effective January 1, 2019, and the new standard has no material impact on our consolidated financial statements. We are currently assessing the impact that the new standard will have on our consolidated financial statements, which will consist primarily of a balance sheet gross up of our operating leases to show equal and offsetting lease assets and lease liabilities.

 

The Company adopted the new lease guidance effective January 1, 2019 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. As of December 31, 2019, the adoption of the standard had no impact on the Company, as there were no leases in place longer than 12 months.

 

In June 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-07, Compensation – Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting. This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this ASU became effective beginning January 1, 2019, and it does not have a material effect on our consolidated financial statements.

 

Note 2 – Going Concern

 

As shown in the accompanying financial statements, the Company has no revenues, incurred net losses from operations resulting in an accumulated deficit of $79,030,309 and negative working capital of 676,999 at March 31, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new products and services to begin generating revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful; therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.

 

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

  

Note 3 – Related Party

 

Notes Payable

From time to time, the Company has received short term loans from officers and directors as disclosed in Note 7 below. The Company has a total of $246,100 and $224,100 of note payable on the consolidated balance sheet as of March 31, 2020 and December 31, 2019, respectively. On October 28, 2019, the Company transferred the ownership of the 2017 Audi Q7 and Audi A4, valued at $46,609, to Nicole Breen as a repayment for her loans. $93,000 was recorded as a forgiveness on notes payable, and $46,391 recorded to additional paid-in capital.

 

Services

Nicole M. Breen receives $1,500 a week in cash compensation for her services rendered to the Company.

 

 

Glenn E. Martin receives $8,000 a month in cash compensation for his services rendered to the Company.

 

Capital Contributions

The Company imputed interest on non-interest bearing, related party loans, resulting in a total of $0 and $0 of contributed capital during the three months ended March 31, 2020 and 2019, respectively.

 

Common Stock Issued for Bartered Assets

On January 18, 2017, the Company exchanged 66,000 units, consisting of 66,000 shares of common stock and warrants to purchase 66,000 shares of common stock at an exercise price of $3.00 per share, exercisable until January 18, 2018, in exchange for a 2017 Audi Q7 and a 2017 Audi A4 driven by the Officers. The total fair value received, based on the market price of the stock at $4.02 per share, was allocated to the $105,132 purchase price of the vehicles and the $160,188 excess value of the common stock and warrants was expensed as stock-based compensation. On October 28, 2019, the Company transferred the ownership of the two Audi vehicles, valued at $46,609, to Nicole Breen as a repayment for her loans. $93,000 was recorded as a forgiveness on notes payable, and $46,391 recorded to additional paid-in capital.

 

Common Stock

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

 

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

 

A total of $161,750 and $8,000 of officer compensation was unpaid and outstanding at March 31, 2020 and 2019, respectively.

 

Stock Options Issued for Services – related party

On February 1, 2018, in connection with executive employment agreements, the Company granted non-qualified options to purchase an aggregate of 6,000,000 shares of the Company’s common stock at the exercise price of $10.55 per share. The options shall become exercisable at the rate of 1/3 upon the six-month anniversary, 1/3 upon the one-year anniversary and 1/3 upon the second anniversary of the grant. The options were valued at $45,987,970 using the Black-Scholes option pricing model. The Company recognized expense of approximately, $2,015,911 relating to these options during the three months ended March 31, 2020.

 

Note 4 – Fair Value of Financial Instruments

 

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

 

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

 

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

 

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

 

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

 

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of March 31, 2020 and 2019, respectively:

 

 

Fair Value Measurements at December 31, 2019

 

	Level 1	Level 2	Level 3
Assets
Cash	$2,509	$-	$-
Total assets	$2,509	$-	$-
Liabilities
Notes payable, related parties		224,100
Notes payable	$-	$167,263	$-
Total liabilities	$-	$391,363	$-
	$2,509	$391,363	$-

 

Fair Value Measurements at March 31, 2020

 

	Level 1	Level 2	Level 3
Assets
Cash	$5,404	$-	$-
Total assets	5,404	$-	$-
Liabilities
Notes payable, related parties		$246,100
Notes payable	$-	$154,529	$-
Total liabilities	$-	$400,629	$-
	$5,404	$400,629	$-

 

The fair values of our related party debts are deemed to approximate book value and are considered Level 2 inputs as defined by ASC Topic 820-10-35.

 

There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the three months ended March 31, 2020 and the year ended December 31, 2019.

 

Note 5 – Investment in Land and Property

 

On July 26, 2017, the Company closed on the purchase of property, consisting of a home, recreational facility and RV park located at 5535 State Highway 12 in La Veta, Colorado to be developed into a bioscience center. The home has 4 Bedrooms and 2 Baths, and the recreational facility has showers, laundry, and reception area with an additional equipment barn attached, in addition to another facility with 9,500 square feet. The RV Park has 24 sites with full hook-ups including water, sewer, and electric, which the Company plans to convert into a series of small research pods. Under the terms of the purchase agreement, the Company paid $525,000 down, including 25,000 shares of our common stock, and Sangre took immediate possession of the property. Under the terms of the original purchase agreement, the Company was obligated to pay an additional $400,000 in cash and issue an additional 75,000 shares of our common stock over the next two years in order to pay the entire purchase price. On January 12, 2018, the Company entered into an Amendment No. 1 to the $475,000 principal amount promissory note issued by the Company to the seller of the property, under which both parties agreed to amend the purchase and the promissory note to allow the Company to pay off the note in full if it paid $100,000in cash on or before January 15, 2018 and issued the seller 125,000 shares of common stock, restricted in accordance with Rule 144, on before January 20, 2018. Through an escrow process, the Company paid the seller $100,000 in cash and issued him 125,000 shares of common stock in accordance with the Amendment No. 1, in exchange for a full release of the deed of trust that was securing the promissory note, on January 17, 2018. As a result, the $475,000 principal promissory note issued to the seller was deemed paid-in-full and fully satisfied and the Company owned the property without encumbrances as of that date. The Company recorded a loss on extinguishment of debt of approximately $1,065,000 based on the fair value of the consideration paid and the carrying value of the note payable on the settlement date. The total purchase price was as follows: 

  

	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

 

 

 

 

 

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

currently vacant.

 

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

 

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

 

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

 

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

 

On September 25, 2019, the Company received $20,000 from Lex Seabre in exchange for 100,000 shares of common stock of the Company. The $20,000 was paid as a deposit for the additional 60-day extension for the Sugar Hill golf course property purchase.

 

The Company entered into Memorandum of Sale agreement for the Sugar Hill property with M&T Bank and the Referee to make payment of $10,000 per month commencing on February 1, 2020 and continuing on the 1st of each month until July 1, 2020 with a balloon payment of $332,167.73 on August 3, 2020.

  

Note 6 – Property and Equipment

 

Property and equipment consist of the following at March 31, 2020 and December 31, 2019, respectively:

 

	March 31,	December 31,
	2020	2019
Property improvements	$5,000	$5,000
Automobiles	0	0
Office equipment	4,933	4,933
Furniture & Fixtures	2,979	2,979
Lab equipment	65,769	65,769
Construction in progress	0	0
Property (1)	1,887,802	1,887,802
Property and equipment, gross	1,966,483	1,966,483
Less accumulated depreciation	(357,347)	(322,498)
Property and equipment, net	$1,609,136	$1,643,985

 

(1)	In 2018, the Company purchased two properties in La Veta, Colorado. The property located on 169 Valley Vista was purchased for $140,000, and the property located on 1390 Mountain Valley Road was purchased for $1,200,000 (see Note 8).

 

 

Depreciation and amortization expense totaled $35,499 and $40,660 for the years ended March 31, 2020 and 2019, respectively.

 

On October 28, 2019, the Company transferred the ownership of the 2017 Audi Q7 and Audi A4, valued at $46,609, to Nicole Breen as a repayment for her loans. $93,000 was recorded as a forgiveness on notes payable, and $46,391 recorded to additional paid-in capital.

 

Construction in progress in the amount of $499,695 was fully impaired due to the Company may not receive funds to complete the research facility center project. There was no work performed in 2019.

 

Note 7 – Intangible Assets

 

In accordance with FASB ASC 350, “Intangibles-Goodwill and Other”, the Company evaluates the recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The US and Europe trademarks were acquired for $40,000 and $50,000, respectively, for the year ended December 31, 2018. Trademarks are initially measured based on their fair value and amortized by 10 and 25 years.

 

Amortization expense totaled $650 and $650 for the three months ended March 31, 2020 and 2019, respectively.

  

Note 8 – Notes Payable, Related Parties

 

Notes payable, related parties consist of the following at March 31, 2020 and December 31, 2019, respectively:

  

	March 31, 2020	December 31, 2019
On April 12, 2010, the Company received an unsecured, non-interest-bearing loan in the amount of $2,000, due on demand from Robert Leitzman. Interest is being imputed at the Company’s estimated borrowing rate, or 10% per annum. The largest aggregate amount outstanding was $2,000 during the periods ended December 31, 2019 and December 31, 2018. Mr. Leitzman owns less than 1% of the Company’s common stock, however, the Mr. Leitzman is deemed to be a related party given the non-interest-bearing nature of the loan and the materiality of the debt at the time of origination.	2,000	2,000
Over various dates in 2011 and 2012, the Company received unsecured loans in the aggregate amount of $10,000, due on demand, bearing interest at 10%, from Sandra Orman. The largest aggregate amount outstanding was $10,000 during the periods ended December 31, 2019 and December 31, 2018. Mrs. Orman owns less than 1% of the Company’s common stock, however, Mrs. Orman is deemed to be a related party given the nature of the loan and the materiality of the debt at the time of origination.	10,000	10,000
Over various dates from April 2019 to March2020, the company received a total of $327,100 of advances, bearing interest at 5%, from Nicole Breen. A detailed list of advances and repayments follows. On October 28, 2019, the company’s vehicles valued at $93,000 were used as a repayment.	234,100	212,100
Notes payable, related parties	$246,100	$224,100

 

The Company recorded interest expense in the amount of $2,979 and $249 for the three months ended March 31, 2020 and 2019, respectively, including imputed interest expense in the amount of $0 and $0 during such periods related to notes payable, related parties.

 

 

 

 

 

Note 9 – Notes Payable

 

Note payable consist of the following at March 31, 2020 and December 31, 2019, respectively:

 

	March 31, 2020	December 31, 2019
On July 26, 2017, the Company issued a $475,000 note payable, bearing interest at 5% per annum, to A.R. Miller (“Miller Note”) pursuant to the purchase of land and property in La Veta, Colorado. The note is to be paid in four consecutive semi-annual installments in the amount of $118,750 plus accrued interest commencing on January 26, 2018 and continuing on the 26th day of July and the 26th day of January each year until the debt is repaid on July 26, 2019. The note carries a late fee of $5,937.50 in the event any installment payment is more than 30 days late, and upon default the interest rate shall increase to 12% per annum. During the three months ended March 31, 2018, the Company issued 125,000 shares of common stock, valued at $1,450,000 based on the closing price on the measurement date. Accordingly, the Company recorded a loss on extinguishment of $1,064,719.	$-	$-
On February 16, 2018, the Company issued a $1,040,662 note payable, bearing interest at 1.81% per annum (the low interest rate was due to the short-term nature of the note – six months. See Note 6), to Craig and Carol Clark (“Clark Note”) pursuant to the purchase of land and property in La Veta, Colorado. The note is to be paid in consecutive monthly installments in the amount of $5,000, including accrued interest commencing on March 15, 2018 and continuing through August 15, 2018. The note carries a late fee of 3% in the event any installment payment is more than 10 days late, and upon default the interest rate shall increase to 10% perannum. As of September 12, 2018, a total of $171,300 was paid to the note holder. On October 9, 2018, the Company entered into a settlement agreement with the note holder to pay the settlement payment of $750,000. The Company had already paid $650,000 by September 27, 2018 and made the remaining payment of $100,000 on October 10, 2018. The Company recorded a gain on extinguishment of $121,475.   On August 5, 2019, the Company entered into a promissory note, whereby the Company promises to pay Snell & Wilmer L.L.P the principal amount of $250,000, bearing interest at 2.5% per annum. The note is to be paid in consecutive monthly installments in the amount of $25,000, including accrued interest commencing on August 30, 2019, until the final balloon payment is paid on January 30, 2020. The promissory note is secured by the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing with respect to the real property owned by Sangre located on 1390 Mountain Valley Road, La Veta, Colorado 81055. As of March 31, 20120, $97,629 has been paid to Snell & Wilmer.	$152,372	166,412
On various dates, the Company received advances from consultant, Patrick Brodnik, bearing 0% interest.	$2,157	850
	$154,529	$167,262

 

The Company recognized interest expense of $1,041 and $0 related to the note payables for the three months ended March 31, 2020 and 2019, respectively.

  

Note 10 – Commitments and Contingencies

 

On November 8, 2016, the Company entered into an agreement with Gregory DiPaolo’s Pro Am Golf, LLC to acquire improved property located in Westfield, New York. The total purchase price of $1,600,000 is to be paid with a deposit of 50,000 shares of common stock, followed by cash of $1,250,000 and 300,000 shares of the Company’s common stock to be delivered at closing. The deposit of 50,000 shares issued as a deposit was $42,500 based on the closing price of the Company’s common stock on the date of grant. Subsequently, we entered into an amended Purchase and Sale Agreement on October 24, 2017, under which we amended the total purchase price to Eight Hundred Thousand Dollars ($800,000) and forfeited our previous deposit of stock. Under the terms of the amended agreement, we paid an additional Ten Thousand Dollar ($10,000) deposit on October 26, 2017, with the remaining purchase price to be paid on or before the date closing date, which was scheduled on May 1, 2018. The property is approximately 43 acres and has unlimited water extraction rights from the State of New York. We had planned to use this property as our inroads to the New York hemp and infused beverage markets in the future. Since the property was in foreclosure it was put up for auction, which occurred on July 1, 2019. At the auction, we were the winning bidder with a bid of $597,000. Our prior deposit payment of $120,000 was credited towards the purchase price, and the remaining $477,000, was finally due on November 30, 2019, after several extensions (which cost us total of $40,000 to obtain). At the end of December 31, 2019, a total of $92,00 was issued as a deposit for the property. We were not able to meet that deadline, but in January 2020 we worked out an additional extension with the bank. Under the terms of the new agreement, we still owe approximately $392,000 to acquire the property. We have agreed to pay that amount in installment payments of $10,000 per month for six months beginning February 2020, with a balloon payment of approximately $332,000 due on or before August 3, 2020. To date we have paid the $10,000 payments for February 2020, March 2020, April 2020 and May 2020, and plan to pay the June 2020 payment on time. We need to raise funds in order to make the remaining scheduled payments.

 

 

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

 

Travis Nelson v. Sangre AgroTech, LLC, et al. (Huerfeno County Colorado District Court, Case No. 2018CV30003, filed on February 5, 2018). Mr. Travis Nelson, formerly a member of the subsidiary Sangre AgroTech, LLC, filed this action alleging wrongful discharge in retaliation for whistleblower activity purportedly related to insider trading, fraud and unlawful interstate transportation of plant genetics. After a motion to dismiss was granted in part, Mr. Nelson filed a second amended complaint asserting revised claims for breach of fiduciary duty, wrongful discharge, and violation of the Colorado organized crime control act. Mr. Nelson has alleged lost wages in the amount of $600,000, unspecified losses related to whistleblower allegations, plus costs and attorneys’ fees. In his initial disclosures, Mr. Nelson alleges damages of $10,000,000. On January 31, 2019, Mr. Nelson submitted an offer of judgement in the amount of $100,000. That offer was rejected by the Corporation. Court-ordered mediation was conducted on April 24, 2019, but the matter was not resolved. By order dated February 4, 2020, the court scheduled trial for October 5, 2020. The Corporation denies liability as to all claims. Inasmuch as an unfavorable outcome is neither probable nor remote within the meaning of the ABA Statement of Policy referred to in the last paragraph of this letter, we decline to express an opinion concerning the likely outcome of this matter or the liability of the Corporation, if any, associated therewith.

  

Material Definitive Agreements

 

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

 

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

 

On July 1, 2019, the Greg DiPaolo’s Pro Am Golf, LLC property was in foreclosure, and it was put up for auction. At the auction, we were the winning bidder with a bid of $597,000. Our prior deposit payment of $120,000 was credited towards the purchase price, and the remaining $477,000, was finally due on November 30, 2019, after several extensions (which cost us total of $40,000 to obtain). At the end of March 31, 2020, a total of $122,00 was issued as a deposit for the property. We were not able to meet that deadline, but in January 2020 we worked out an additional extension with the bank. Under the terms of the new agreement, we still owe approximately $392,000 to acquire the property. We have agreed to pay that amount in installment payments of $10,000 per month for six months beginning February 2020, with a balloon payment of approximately $332,000 due on or before August 3, 2020. To date we have paid the $10,000 payments for February 2020 and March 2020, and plan to pay the April 2020 payment on time. We need to raise funds in order to make the remaining scheduled payments.

 

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

 

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

 

Note 11 – Stockholders’ Equity

 

Preferred Stock

On December 5, 2014, the Company amended the Articles of Incorporation, pursuant to which 20,000,000 shares of “blank check” preferred stock with a par value of $0.001 were authorized. No series of preferred stock has been designated to date.

 

Common Stock

On December 5, 2014, the Company amended the Articles of Incorporation, and increased the authorized shares to 200,000,000 shares of $0.001 par value common stock.

 

2020 Common Stock Activity

 

Common Stock Sales (2020)

 

During the quarter ended March 31, 2020, the Company issued 150,000 shares of common stock for proceeds of $40,000. 200,000 shares valued at $55,000 were not issued at March 31, 2019, and such amount has been included in subscriptions payable.

 

Common Stock Issued for Services (2020)

 

During the three months ended March 31, 2020, the Company agreed to issue an aggregate of 1,310,000 shares of common stock to consultants for services performed. The total fair value of common stock was $907,700 based on the closing price of the Company’s common stock earned on the measurement date.

 

Common Stock Cancellations

 

No common stocks were cancelled during the quarter ended March 31, 2020.

 

2019 Common Stock Activity

 

Common Stock Sales (2019)

 

During the year ended December 31, 2019, the Company issued 1,065,000 shares of common stock for proceeds of $573,000

  

Common Stock Issued for Services (2019)

 

During the year ended December 31, 2019, the Company agreed to issue an aggregate of 2,467,000 shares of common stock to consultants for services performed. The total fair value of common stock was $2,578,250 based on the closing price of the Company’s common stock earned on the measurement date. Shares valued at $121,650 were issued at December 31, 2019 and services will be performed in 2020 and has been included in unamortized stock-based compensation.

 

Common Stock Cancellations (2019)

During the year ended December 31, 2019, the Company cancelled a total of 220,000 shares of common stock valued at $0 previously granted to consultants, David Johnson, and Avigor Gordon, for non-performance of services. The cancellation was accounted as a repurchase for no consideration.

  

Note 12 – Common Stock Warrants and Options

 

Common Stock Warrants Granted (2020)

 

No common stock warrants were granted during the three months ended March 31, 2020 and December 31, 2019.

 

  

A summary of the Company’s outstanding common stock warrants is as follows as of March 31, 2020:

 

Issuance	Warrant			# of Common	Strike
Date	#	Name	Document	Stock Warrants	Price
12/31/2018				3,278,833
1/5/2018	1029	Expired - Lex Seabre	Subscription Agreement	-100,000	$5.00
2/9/2018	1033	Expired - Lawrence Wesigal	Subscription Agreement	-15,000	$12.50
3/19/2018	1034	Expired - Donald Steinberg	Subscription Agreement	-150,000	$5.00
3/15/2018	1035	Expired - Donald Harrington	Subscription Agreement	-12,500	$5.00
4/26/2018	1036	Expired -Roger Seabre	Subscription Agreement	-100,000	$5.00
4/26/2018	1037	Expired -Michael Kirk Wines	Subscription Agreement	-100,000	$5.00
5/7/2018	1038	Expired -Donald Steinberg	Subscription Agreement	-400,000	$6.00
5/15/2018	1039	Expired -Roger Seabre	Subscription Agreement	-200,000	$6.00
6/13/2018	1040	Expired -Blue Ridge Enterprises	Subscription Agreement	-450,000	$6.00
6/26/2018	1041	Expired -Dianna Steinberg	Subscription Agreement	-200,000	$6.00
5/25/2017	1016	Expired -Russ Karlen	Subscription Agreement	-100,000	$3.00
5/25/2017	1017	Expired -Eric Karlen	Subscription Agreement	-20,000	$3.00
5/31/2017	1018	Expired -Matt Turner	Subscription Agreement	-20,000	$3.00
5/31/2017	1022	Expired -Rodger Seabre	Subscription Agreement	-300,000	$3.00
7/7/2017	1021	Expired - Rodger Seabre	Subscription Agreement	-200,000	$3.00
8/2/2017	1026	Expired - Rodger Seabre	Subscription Agreement	-100,000	$3.00
9/5/2017	1023	Expired - Harry Methewson #1	Subscription Agreement	-40,000	$3.00
9/24/2017	1024	Expired - Harry Methewson #2	Subscription Agreement	-133,000	$3.00
9/29/2017	1025	Expired - A2Z Inc.	Subscription Agreement	-300,000	$3.00
10/24/2017	1027	Expired – Salvatore Rutigliano	Subscription Agreement	-13,3333	$3.00
11/10/2017	1028	Expired – Roger Seabre	Subscription Agreement	-125,000	$3.00
12/31/2019				3,078,833
1/21/2018	1031	Expired – Roger Forsyth	Subscription Agreement	-100,000	$12.50
1/23/2018	1032	Expired – Roger Forsyth	Subscription Agreement	-100,000	$12.50
3/31/2020				2,878,833

 

Common Stock Warrants Expired (2020)

 

A total of 200,000 warrants expired during the three months ended March 31, 2020.

 

Warrants Exercised (2020)

 

No warrants were exercised during the three months ended March 31, 2020.

 

2019 Common Stock Warrant Activity

 

Common Stock Warrants Granted (2019)

 

No common stock warrants were granted during the year ended December 31, 2019.

 

 

Common Stock Warrants Exercised (2019)

 

No warrants were exercised during the year ended December 31, 2019.

 

Common Stock Warrants Expired (2019)

 

A total of 3,078,833 warrants expired during the year ended December 31, 2019.

 

Common Stock Options (2019)

 

On February 1, 2018, in connection with executive employment agreements, the Company granted non-qualified options to purchase an aggregate of 6,000,000 shares of the Company’s common stock at the exercise price of $10.55 per share. The options shall become exercisable at the rate of 1/3 upon the six-month anniversary, 1/3 upon the one-year anniversary and 1/3 upon the second anniversary of the grant. The options expire ten years from the date of grant. The options were valued at $45,753,000 using the Black-Scholes option pricing model. The Company recognized expense of approximately $22,770,662 relating to these options during the year ended December 31, 2019.

 

The assumptions used in the Black-Scholes model are as follows:

 

	For the period ended March 31, 2020
Risk-free interest rate	1.75%
Expected dividend yield	0%
Expected lives	10.0 years
Expected volatility	200%

 

A summary of the Company’s stock option activity and related information is as follows:

 

	For the Three Months Ended March 31, 2020 and 2019
	Number of	Average
	Shares	Price
Outstanding at the beginning of period	$-	$-
Granted	6,000,000	10.55
Exercised/Expired/Cancelled	-	-
Outstanding at the end of period	6,000,000	$10.55
Exercisable at the end of period	1,250,000	$10.55