UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

  x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

  o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                          to                       

 

Commission file number: 000-27039

 

MARIJUANA COMPANY OF AMERICA, INC.

(Exact name of registrant as specified in its charter)

 

Utah   98-1246221
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

 

1340 West Valley Parkway

Suite 205

Escondido, CA 92029

(Address of principal executive offices) (zip code)

 

(888) 777-4362

(Registrant’s telephone number, including area code)

 

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 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      

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

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 

 

As of September 30, 2020, and November 16, 2020, there were 1,913,880,887 and 2,053,481,896 shares of registrant’s common stock issued and outstanding respectively.

 

 

 
 
 

 

 

TABLE OF CONTENTS

 

PART I.   FINANCIAL INFORMATION  
       
  ITEM 1. Financial Statements  
       
    Condensed consolidated balance sheets as of September 30, 2020 (unaudited)
and December 31, 2019 (audited)
3
       
    Condensed consolidated statements of operations for the three and nine months ended
September 30, 2020 and 2019 (unaudited)
4
       
    Condensed consolidated statement of stockholders’ deficit for the nine months ended September 30, 2020 and 2019 (unaudited) 5
       
    Condensed consolidated statements of cash flows for the nine months ended
September 30, 2020 and 2019 (unaudited)
7
       
    Notes to condensed consolidated financial statements (unaudited) 8
       
  ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34
  ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 41
  ITEM 4. Controls and Procedures 41
       
PART II.   OTHER INFORMATION  
       
  ITEM 1. Legal Proceedings 42
  ITEM 1A. Risk Factors 42
  ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 50
  ITEM 3. Defaults Upon Senior Securities 53
  ITEM 4. Mine Safety Disclosures 53
  ITEM 5. Other Information 53
  ITEM 6. Exhibits 53
       
  SIGNATURES 54

 

 

2 
 
 

 

ITEM 1. FINANCIAL STATEMENTS 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   Sept 30, 2020  Dec 31, 2019
    (Unaudited)    (Audited) 
ASSETS          
Current assets:          
Cash  $149,477   $211,765 
Short-term Investments   130,060    27,403 
Accounts receivable, net   8,563    18,317 
Inventory   145,523    149,175 
Prepaid Insurance   66,131    —   
Investment receivable   54,940    —   
Notes receivable   75,000    —   
Other current assets   22,508    11,034 
Total current assets   652,202    417,694 
           
Property and equipment, net   3,028    7,512 
           
Other assets:          
Long-term Investments   1,343,915    693,915 
Right-of-use-assets   11,642    22,101 
Security deposit   2,500    2,500 
           
Total assets   2,013,287    1,143,722 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current liabilities:          
Accounts payable   696,010    797,789 
Accrued compensation   125,738    4,875 
Accrued liabilities   522,014    522,258 
Notes payable, related parties   40,000    40,000 
Loans payable PPP Stimulus   35,500    —   
Convertible notes payable, net of debt discount of $334,980 and $808,980, respectively   2,181,571    3,193,548 
Right-of-use liabilities - current portion   3,784    14,361 
Warrant liability to be settled   —      192,115 
Contingency Liability   —      956,251 
Subscriptions payable   650,000    330,797 
Derivative liability   3,426,888    5,693,071 
Total current liabilities   7,681,505    11,745,065 
           
Non-Current Liabilities          
Right-of-use liabilities   7,858    7,858 
           
Total liabilities   7,689,363    11,752,923 
           
Stockholders' deficit:          
Preferred stock, $0.001 par value, 50,000,000 shares authorized          
Class A preferred stock, $0.001 par value, 10,000,000 shares designated, 10,000,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019   10,000    10,000 
Class B preferred stock, $0.001 par value, 5,000,000 shares designated, 0 shares issued and outstanding as of September 30, 2020 and December 31, 2019   —      —   
Common stock, $0.001 par value; 5,000,000,000 shares authorized; 1,913,880,887 and 77,958,081 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively   1,913,881    77,958 
Common stock to be issued, 1,000,000 and 0 shares, respectively   1,000    —   
Additional paid in capital   70,740,648    63,467,054 
Accumulated deficit   (78,341,604)   (74,164,213)
Total stockholders' deficit   (5,676,075)   (10,609,201)
           
Total liabilities and stockholders' deficit  $2,013,287   $1,143,722 

 

 

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

3 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 and 2019

(UNAUDITED)

 

 

  

Three months ended

September 30,

 

Nine months ended

September 30,

   2020  2019  2020  2019
REVENUES:            
Sales  $49,933   $225,356   $206,407   $540,398 
Related party Sales   3,262    4,015    11,565    12,363 
Total Revenues   53,195    229,371    217,972    552,761 
                     
Cost of sales   37,170    90,843    110,563    159,859 
                     
Gross Profit   16,025    138,528    107,409    392,902 
                     
OPERATING EXPENSES:                    
Depreciation   1,374    1,696    4,702    5,087 
Selling and marketing   125,942    376,342    326,608    1,462,104 
Payroll and related   62,000    90,000    258,842    310,000 
Stock-based compensation   123,000    —      665,767    100,350 
General and administrative   294,921    295,113    710,094    1,353,757 
  Total operating expenses   607,237    763,151    1,966,013    3,231,298 
                     
Net loss from operations   (591,212)   (624,623)   (1,858,604)   (2,838,396)
                     
OTHER INCOME (EXPENSES):                    
Interest expense, net   (688,090)   (1,559,720)   (2,460,185)   (3,001,972)
Legal Contingency expense   —      (1,497,674)   —      (1,497,674)
Gain (Loss) on joint venture   238,296    —      (22,658)   —   
Gain (Loss) on equity investment   240,198    122,864    106,305    (107,961)
Loss on change in fair value of derivative liabilities   (1,454,903)   (1,668,112)   (312,631)   (2,148,262)
Unrealized Loss on trading securities   —      (362,625)   (13,945)   (647,625)
Loss on sale of trading securities   —      (24,698)   (2,603)   (24,698)
Gain on settlement of joint venture   383,440    —     386,930    —  
Loss on settlement of debt   —     (612,034)   —     (612,034)
Total other income (expense)   (1,281,059)   (5,601,999)   (2,318,787)   (8,040,226)
                     
Net loss before income taxes   (1,872,271)   (6,226,622)   (4,177,391)   (10,878,622)
                     
Income taxes (benefit)   0    0    0    0 
                     
NET INCOME (LOSS)  $(1,872,271)  $(6,226,622)  $(4,177,391)  ($10,878,622)
                     
                     
Loss per common share, basic and diluted  $(0.00)  $(0.13)  $(0.01)  $(0.26)
                     
Weighted average number of common shares outstanding, basic and diluted (after stock-split)   1,178,860,134    49,686,994    518,261,567    41,726,239 

 

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

4 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

FOR THE NINE MONTHS SEPTEMBER 30, 2020 AND 2019  (UNAUDITED)

 

                                   
   Class A Preferred Stock  Class B Preferred Stock  Common Stock  Common Stock to be issued 

Common

Stock

 

Additional

Paid In

  Accumulated   
   Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Subscriptions  Capital  Deficit  Total
Balance, December 31, 2018   10,000,000   $10,000    —     $—      42,687,301   $42,687    —     $—     $90,000   $50,707,103   $(53,983,895)  $(3,134,105)
Common stock issued for services rendered   —      —      —      —      552,054    552    —      —      —      553,815    —      554,367 
Common stock issued in settlement of convertible notes payable and accrued interest   —      —      —      —      5,208,063    5,208    —      —      —      3,551,615    —      3,556,823 
Reclassification of derivative liabilities to additional paid in capital   —      —      —      —      —     —      —          —      462,714     —      462,714  
Conversion of related party notes payable   —      —      —      —      2,394,565    2,395    —      —      —      1,730,119    —      1,732,514 
Common stock issued in exchange for exercise of warrants on a cashless basis   —      —      —      —      655,556    656    27,778    28    (40,000)   95,139    —      55,823 
Sale of common stock   —      —      —      —     531,699    532     —      —    (50,000)   203,522    —      154,054  
Net Loss   —      —      —      —      —      —      —      —      —      —      (10,878,622)   (10,878,622)
Balance, September 30, 2019   10,000,000   $10,000   $—     $—      52,029,238   $52,029    27,778   $28   $—     $57,304,027   $(64,862,517)  $(7,496,433)

 

 

 

5 
 
 

 

 

                                   
   Class A Preferred Stock  Class B Preferred Stock  Common Stock  Common Stock to be issued 

Common

Stock

 

Additional

Paid In

  Accumulated   
   Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Subscriptions  Capital  Deficit  Total
Balance, December 31, 2019   10,000,000   $10,000    —     $—      77,958,081   $77,958    —     $—     $—     $63,467,054   $(74,164,213)  $(10,609,201)
Common stock issued to settle amounts previously accrued   —      —      —      —      8,333    8    —      —          6,692          6,700  
Common stock issued for services rendered   —      —      —      —      156,444,047    156,444    —      —      —      509,323    —      665,767 
Common stock issued in settlement of convertible notes payable and accrued interest   —      —      —      —      1,469,725,298    1,469,725    —      —      —      1,165,922    —      2,635,647 
Conversion of related party notes payable   —      —      —      —      21,384,103    21,384    —      —      —      29,229    —      50,613 
Common stock issued in exchange for exercise of warrants on a cashless basis   —      —      —      —      51,054,214    51,054    1,000,000    1,000    —      375,446    —      427,500 
Sale of common stock   —      —      —      —      127,012,847    127,013    —      —          26,673         153,686  
Common shares issued in settlement of legal case   —      —      —      —      10,293,843     10,294      —      —      —      1,273,338     —      1,283,632 
Reclassification of derivative liabilities to additional paid in capital   —      —      —      —      —      —     —     —      —      3,886,971     —      3,886,971  
Net Loss   —      —      —      —      —      —      —      —      —      —      (4,177,391)   (4,177,391)
Balance, September 30, 2020   10,000,000   $10,000    —     $—      1,913,880,766   $1,913,881    1,000,000   $1,000   $—     $70,740,648   $(78,341,604)  $(5,676,075)

 

 

 

 

 

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

6 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(UNAUDITED)

 

 

   2020  2019
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Income (Loss)  $(4,177,391)  $(10,878,622)
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization of debt discount   1,373,575    2,172,936 
Depreciation and amortization   4,702    5,087 
Bad debt expense   —      15,000 
Non cash interest   —      1,886,837 
Impairment Loss on equity method investee   22,658      
(Gain) Loss on equity investment, net of debt settlement   (106,305)   107,961 
Loss on change in fair value of derivative liability   312,631    2,148,262 
Loss on share inducement and settlement of warrant liability   427,500    —   
Stock-based compensation   665,767    100,350 
Unrealized Loss on trading securities   13,945    647,625 
Realized Loss on trading securities   —      41,667 
Gain on settlement of joint venture   (386,930)     
Loss on settlement of debt   —    612,034 
Changes in operating assets and liabilities:          
Accounts receivable   9,754    (31,597)
Inventories   3,652    (17,052)
Prepaid expenses and other current assets   (77,605)   (17,707)
Accounts payable   205,061    206,926 
Accrued expenses and other current liabilities   325,883    (348)
Right-of-use assets   10,459    —   
Right-of-use liabilities   (10,577)   —   
Accrued compensation   120,863    (381,038)
Contingency liability   —      1,497,675 
Net cash provided by (used in) operating activities   (1,262,358)   (1,884,004)
           
Cash flows from investing activities:          
Purchases of property and equipment   (1,271)   (2,703)
Investment in joint venture   125,000    (685,049)
Net cash provided by (used in) investing activities   123,729   (687,752)
           
Cash flows from financing activities:          
Proceeds from issuance of notes payable   876,302    2,257,000 
Proceeds from PPP loan payable   35,500    —   
Proceeds from sales of trading securities   10,854    —   
Proceeds from sale of common stock   153,685    —   
Net cash provided by (used in) financing activities   1,076,342    2,257,000 
           
Net increase (decrease) in cash   (62,288)   (314,756)
           
Cash at beginning of period   211,765    359,577 
           
Cash at end of period  $149,477   $44,821 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest   —      —   
Cash paid for taxes   —      —   
           
Non cash transactions:          
Common stock issued in settlement of convertible notes payable  $2,635,647   $3,556,823 
Common stock issued in settlement of related party notes payable and accrued compensation  $50,613   $1,732,514 
Reclassification of derivative liabilities to additional paid-in capital  $3,886,971   $462,714 
Investment in joint venture  $—     $2,650,000 
Gain on settlement of JV investment   386,930    —   
Common shares issued in settlement of legal case  $1,283,632   $—   

 

 

See the accompanying notes to these unaudited condensed consolidated financial statements 

7 
 
 

 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

Marijuana Company of America, Inc. (The “Company”) was incorporated under the laws of the State of Utah in October 1985 under the name Mormon Mint, Inc. The corporation was originally a startup company organized to manufacture and market commemorative medallions related to the Church of Jesus Christ of Latter Day Saints. On January 5, 1999, Bekam Investments, Ltd. acquired one hundred percent of the common shares of the Company and spun the Company off changing its name Converge Global, Inc. From August 13, 1999 until November 20, 2002, the Company focused on the development and implementation of Internet web content and e-commerce applications. In October 2009, in a 30 for 1 exchange, the Company merged with Sparrowtech, Inc. for the purpose of exploration and development of commercially viable mining properties. From 2009 to 2014, we operated primarily in the mining exploration business.

 

In 2015, the Company changed its business model to a marketing and distribution company for medical marijuana. In conjunction with the change, the Company changed its name to Marijuana Company of America, Inc. At the time of the transition in 2015, there were no remaining assets, liabilities or operating activities of the mining business.

 

On September 21, 2015, the Company formed H Smart, Inc., a Delaware corporation as a wholly owned subsidiary for the purpose of operating the hempSMART™ brand.

 

On February 1, 2016, the Company formed MCOA CA, Inc., a California corporation as a wholly owned subsidiary to facilitate mergers, acquisitions and the offering of investments or loans to the Company.

 

On May 3, 2017, the Company formed Hempsmart Limited, a United Kingdom corporation as a wholly owned subsidiary for the purpose of future expansion into the European market.

 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: H Smart, Inc., Hempsmart Limited and MCOA CA, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

 

The unaudited condensed interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

 

The condensed balance sheet as of December 31, 2019 has been derived from audited financial statements.

 

Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, 2020. These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2019.

 

NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements for nine months ended September 30, 2020, the Company had a net loss of $4,177,391 and used cash in operations of $1,263,358. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.

 

8 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

The Company's primary source of operating funds in 2020 has been from funds generated from proceeds from the issuance of convertible and other debt and issuance of stock through private placements. With the exception of the current quarter, the Company has experienced net losses from operations since inception, but expects these conditions to improve as its business develops. The Company has stockholders' deficiencies at September 30, 2020 and requires additional financing to fund future operations.

 

The Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems discussed in this filing. The accompanying statements do not include any adjustments that might result, should the Company be unable to continue as a going concern.

 

NOTE 3 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Revenue Recognition

 

For annual reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from Contracts with Customers,” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The objective of the guidance is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. The core principal is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Two options were made available for implementation of the standard: the full retrospective approach or modified retrospective approach. The guidance became effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. We adopted FASB ASC Topic 606 for our reporting period as of the year ended December 31, 2017, which made our implementation of FASB ASC Topic 606 effective in the first quarter of 2018. We decided to implement the modified retrospective transition method to implement FASB ASC Topic 606, with no restatement of the comparative periods presented. Using this transition method, we applied the new standards to all new contracts initiated on/after the effective date. We also decided to apply this method to any incomplete contracts we determine are subject to FASB ASC Topic 606 prospectively. For the year ended December 31, 2018, and for the quarter ended September 30, 2019, there were no incomplete contracts. As is more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant financing components that require revenue adjustment under FASB ASC Topic 606.

Identification of Our Contracts with Our Customers.

Contracts included in our application of FASB ASC Topic 606, consist completely of sales contracts between us and our customers that create enforceable rights and obligations. For the year ended December 31, 2019, and for the three and nine months ended September 30, 2020, our sales contracts included the following parties: us, our sales associates and our customers. Our sales contracts were offered by us and our sales associates to our customers directly through our web site. Our sales contracts, and those formalized by our sales associates, are represented by an electronic order form, which contains the contractual elements of offer for sale, acceptance and the provision of consideration consisting of the buyer’s payment, and the concurrent delivery of our hempSMART™ product. Since our hempSMART™ product sales contracts are consummated upon (i) receipt of the customer’s acceptance of our offer; (ii) our concurrent receipt of our customers payment; and, (iii) our delivery of the agreed to hempSMART™ product, all parties are equally committed to fulfilling their respective obligations under the sales contracts. Further, the sales contracts specifically identify (i) parties; (ii) quantity and type of hempSMART™ product ordered; (iii) price; and, (iv) subject, and so each respective party’s rights are identifiable and the payment terms are defined. Since the sales contracts are consummated concurrent with offer, acceptance, payment and delivery of the hempSMART™ product ordered, we recognize principal revenue and cash flows as the respective sales contract transactions are completed. Further, because our sales contracts are offered, accepted and consummated concurrently, our ability to collect revenue is immediate. We receive no payments for agreements that do not qualify as a contract. If customers agree to multiple sales contracts when they are entered into at or near the same time, our policy is to combine those contracts if: (i) the sales contracts are negotiated as a single package; (ii) the payment amount of one sales contract is dependent upon another sales contract; (iii) our performance obligations of delivering multiple hempSMART™ products can be determined to be part of a single transaction. Since the nature of the entry into and consummation of our sales contracts occurs concurrently, there are no changes or modifications to the terms of the sales contracts that would modify the enforceable rights and performance obligations of the parties, and/or materially alter the timing of our receipt of revenue from our sales contracts.

9 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

  

Identifying the Performance Obligations in Our Sales Contracts.

In analyzing our sales contracts, our policy is to identify the distinct performance obligations in a sales contract arrangement. In determining our performance obligations under our sales contracts, we consider that the terms and conditions of sales are explicitly outlined in our sales contracts, and are so distinct and identifiable within the context of each sales contract, and so are not integrated with other goods, or constitute a modification or customization of other goods in our contracts, or are highly dependent or highly integrated with other goods in our sales contracts. Thus, our performance obligations are singularly related to our promise to provide the hempSMART™ products upon receipt of payment. We offer an assurance warranty on our hempSMART™ products that allows a customer to return any hempSMART™ products within thirty days if not satisfied for any reason. Assurance warranties are not identifiable performance obligations, since they are electable at the whim of the customer for any reason. However, we do account for returns of purchase prices if made.

Determination of the Price in Our Sales Contracts.

The transaction prices in our sales contract is the amount of consideration we expect to be entitled to for transferring promised hempSMART™ products. The consideration amount is fixed and not variable. The transaction price is allocated to the identified performance obligations in the contract. These allocated amounts are recognized as revenue when or as the performance obligations are fulfilled, which is concurrently upon receipt of payment. There are no future options for a contract when considering and determining the transaction price. We exclude amounts third parties will eventually collect, such as sales tax, when determining the transaction price. Since the timing between receiving consideration and transferring goods or services is immediate, our sales contracts do not have significant financing components, i.e., recognizing revenue at the amount that reflects the cash payment that the customer would have made at the time the goods or services were transferred to them (cash selling price), rather than significantly before or after the goods or services are provided.

Allocation of the Transaction Price of Our Sales Contracts.

Our sales contracts are not considered multi-element arrangements which require the fulfillment of multiple performance obligations. Rather, our sales contracts include one performance obligation in each contract. As such, from the outset, we allocate the total consideration to each performance obligation based on the fixed and determinable standalone selling price, which we believe is an accurate representation of what the price is in each transaction.

Recognition of Revenue when the Performance Obligation is Satisfied.

A performance obligation is satisfied when or as control of the good or service is transferred to the customer. The standard defines control as “the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.” (ASC 606-10-20). For performance obligations that are fulfilled at a point in time, revenue is recognized at the fulfillment of the performance obligation. As noted above, our single performance obligation sales contracts are singularly related to our promises to provide the hempSMART™ products to the customer upon receipt of payment, which occurs concurrently and when completed, allows us under our revenue recognition policy to realize revenue.

10 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

Product Sales

Revenue from product sales, including delivery fees, is recognized when (i) an order is placed by the customer; (ii) the price is fixed and determinable when the order is placed; (iii) the customer is required to and concurrently pays for the product upon order; and, (iv) the product is shipped. The evaluation of our recognition of revenue after the adoption of FASB ASC 606 did not include any judgments or changes to judgments that affected our reporting of revenues, since our product sales, both pre and post adoption of FASB ASC 606, were evaluated using the same standards as noted above, reflecting revenue recognition upon order, payment and shipment, which all occurs concurrently when the order is placed and paid for by the customer, and the product is shipped. Further, given the facts that (i) our customers exercise discretion in determining the timing of when they place their product order; and, (ii) the price negotiated in our product sales is fixed and determinable at the time the customer places the order, and there is no delay in shipment, we are of the opinion that our product sales do not indicate or involve any significant customer financing that would materially change the amount of revenue recognized under the sales transaction, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606.

Consulting Services

We also offer professional services for financial accounting, bookkeeping or real property management consulting services based on consulting agreements. As of the date of this filing, we have not entered into any contracts for any financial accounting, bookkeeping and/or real property management consulting services that have generated reportable revenues as of the year ended 2019 or the three and nine months ended September 30, 2020. We intend and expect these arrangements to be entered into on an hourly fixed fee basis.

For hourly based fixed fee service contracts, we intend to utilize and rely upon the proportional performance method, which recognizes revenue as services are performed. Under this method, in order to determine the amount of revenue to be recognized, we will calculate the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable. We will only recognize revenues as we incur and charge billable hours. Because our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing, that would materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing component under FASB ASC Topic 606.

The Company determined that upon adoption of ASC 606 there were no quantitative adjustments converting from ASC 605 to ASC 606 respecting the timing of our revenue recognition because product sales revenue is recognized upon customer order, payment and shipment, which occurs concurrently, and our consulting services offered are fixed and determinable and are only earned and recognized as revenue upon actual performance.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. Significant estimates include the fair value of the Company’s stock, stock-based compensation, fair values relating to derivative liabilities, debt discounts and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

 

Cash

 

The Company considers cash to consist of cash on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.

 

 

11 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

 

Concentrations of credit risk

 

The Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s cash and cash equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management.

 

Accounts Receivable

 

Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus, trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition.

 

Allowance for Doubtful Accounts

 

Any charges to the allowance for doubtful accounts on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired. As of September 30, 2020, and December 31, 2019, allowance for doubtful accounts was $0 and $0, respectively. 

 

Inventories

 

Inventories are stated at the lower of cost or market with cost being determined on a first-in, first-out (FIFO) basis. The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. During the periods presented, there were no inventory write-downs.

 

Cost of sales

 

Cost of sales is comprised of cost of product sold, packaging, and shipping costs.

 

Stock Based Compensation

 

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements of operations, as if such amounts were paid in cash.

 

 

12 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

 

Net Loss per Common Share, basic and diluted

 

The Company computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year.  Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.  

 

The computation of basic and diluted income (loss) per share as of September 30, 2020 and 2019 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

 

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:

 

 

September 30,

2020

 

September 30,

2019

Convertible notes payable   5,281,668,086    52,346,160 
Options to purchase common stock   —      —   
Warrants to purchase common stock   292,054,702    3,602,160 
Restricted stock units   —      —   
  Total   5,573,722,788    55,948,320 

 

Property and Equipment

 

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years.

 

Investments

 

The Company follows Accounting Standards Codification subtopic 321-10, Investments-Equity Securities (“ASC 321-10”) which requires the accounting for equity security to be measured at fair value with changes in unrealized gains and losses are included in current period operations. Where an equity security is without a readily determinable fair value, the Company may elect to estimate its fair value at cost minus impairment plus or minus changes resulting from observable price changes.

 

As a smaller reporting company, the company is subject to provisions of Rule 8-03(b)(3) of Regulation S-X which requires the disclosure of certain financial information for equity investees that constitute 20% of more of the Company’s consolidated net income (loss).

 

 

13 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

Derivative Financial Instruments

 

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.

The Company’s free-standing derivatives consisted of conversion options embedded within its issued convertible debt and warrants with anti-dilutive (reset) provisions. The Company evaluated these derivatives to assess their proper classification in the balance sheet using the applicable classification criteria enumerated under GAAP.  The Company determined that certain conversion and exercise options do not contain fixed settlement provisions.  The convertible notes contain a conversion feature and warrants have a reset provision such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.

As such, the Company was required to record the conversion feature and the reset provision which does not have fixed settlement provisions as liabilities and mark to market all such derivatives to fair value at the end of each reporting period.   

The Company has adopted a sequencing policy that reclassifies contracts (from equity to assets or liabilities) with the most recent inception date first. Thus, any available shares are allocated first to contracts with the most recent inception dates.

 

Fair Value of Financial Instruments

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2020 and December 31, 2019. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash, accounts payables and short-term notes, as they are short term in nature.

 

Advertising

 

The Company follows the policy of charging the costs of advertising to expense as incurred. The Company charged to operations $59,752 and $104,411 for the three and nine months ended September 30, 2020 and $159,428 and $550,544 for the three and nine months ended September 30, 2019, respectively, as advertising costs.

 

Income Taxes

 

Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized.

 

 

 

14 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of September 30, 2020, and 2019, the Company has not recorded any unrecognized tax benefits.

 

Segment Information

 

Accounting Standards Codification subtopic Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information related to the Company's only material principal operating segment.

 

The following table represents the Company’s hempSMART business, which is its sole operating segment as of September 30, 2020:

 

hempSMART                
STATEMENT OF OPERATIONS                

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2020

   

 

  For the three months ended September 30,  For the nine months ended September 30,
   2020  2019  2020  2019
Revenues  $53,195   $229,371   $217,972   $552,761 
Cost of Sales   37,170    90,843    110,563    159,860 
Gross profit   16,025    138,528    107,409    392,901 
Expenses                    
  Depreciation expense   1,374    1,696    4,702    5,087 
  Payroll and related expenses   26,394    —      77,256      
  General and admin expenses   55,672    137,146    169,707    1,028,401 
  Selling and marketing   117,978    262,516    294,231    583,180 
Total Expenses   201,418    401,358    575,221    1,616,668 
Net Loss from Operations  $(185,393)  $(262,830)  $(467,812)  $(1,223,767)

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability, on a discounted basis, and a right-of-use asset for substantially all leases, as well as additional disclosures regarding leasing arrangements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), which provides an optional transition method of applying the new lease standard. Topic 842 can be applied using either a modified retrospective approach at the beginning of the earliest period presented, or as permitted by ASU 2018-11, at the beginning of the period in which it is adopted.

 

 

15 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

 

We adopted this standard using a modified retrospective approach on January 1, 2019. The modified retrospective approach includes a number of optional practical expedients relating to the identification and classification of leases that commenced before the adoption date; initial direct costs for leases that commenced before the adoption date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset.

The Company elected the package of practical expedients permitted under ASC 842 allowing it to account for its existing operating lease that commenced before the adoption date as an operating lease under the new guidance without reassessing (i) whether the contract contains a lease; (ii) the classification of the lease; or, (iii) the accounting for indirect costs as defined in ASC 842. The Company negotiated a 2 year extension on its current office lease.

On July 1, 2019, the Company entered into an amendment and extension of its one applicable lease for office space until June 30, 2021. The extension requires the Company to pay monthly rent of $1,308.88 from July 1, 2019 to June 30, 2020; and, $1,348.14 from July 1, 2020 to June 30, 2021. In considering its qualitative disclosure obligations under ASC 842-20-50-3, the Company examined its one lease for office space that has a fixed monthly rent with no variable lease payments. The lease is for an office space with no right of use assets. The lease does not provide for terms and conditions granting residual value guarantees by the Company, or any restrictions or covenants imposed by the lease for dividends or incurring additional financial obligations by the Company. The Company also elected a short-term lease exception policy and an accounting policy to not separate non-lease components from lease components for our facility lease, as we determined our right of use asset to be zero.

Consistent with ASC 842-20-50-4, for the Company's September 30, 2020, quarterly financial statements, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. Our office lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average discount rate.

The adoption of this guidance resulted in no significant impact to our results of operations or cash flows.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820).” This standard modifies disclosure requirements related to fair value measurement and is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. The standard also allows for early adoption of any removed or modified disclosures upon issuance while delaying adoption of the additional disclosures until their effective date. The Company is currently assessing the impact of adopting this standard on its consolidated financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740)”. This standard simplifies the accounting for income taxes. This standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently assessing the impact of adopting this standard on its consolidated financial statements.

 

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06 will have on its financial statements.

 

Subsequent Events

 

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.  Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed.

 

 

16 
 
 

  

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment as of September 30, 2020 and December 31, 2019 is summarized as follows:

 

 

September 30,

2020

 

December 31,

2019

Computer equipment  $15,398   $16,358 
Furniture and fixtures   5,140    5,140 
Subtotal   20,538    21,498 
Less accumulated depreciation   (17,510)   (13,986)
Property and equipment, net  $3,028   $7,512 

 

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are

removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

 

Depreciation expense was $1,374 and $4,702 for the three and nine months ended September 30, 2020; and $1,696 and $5,087 for the three and nine months ended September 30, 2019, respectively.

 

NOTE 5 – INVESTMENTS

 

MoneyTrac

 

We entered into a stock purchase agreement on March 13, 2017 with MoneyTrac Technology, Inc., a California stock corporation (“MoneyTrac”) to purchase a 15% equity position in MoneyTrac. On July 27, 2017, we completed tender of the purchase price of $250,000 pursuant to that stock purchase agreement. On June 12th, 2018, Global Payout, Inc. (“Global”) entered into a reverse triangular merger business combination (the “Merger”) with MoneyTrac and MTrac Tech Corporation, a Nevada corporation and wholly-owned subsidiary of Global (“Merger Sub”), whereby MoneyTrac was successfully merged into Merger Sub, the surviving corporation of the Merger. Thereafter, the separate existence of MoneyTrac ceased, and all rights, privileges, powers and property of MoneyTrac were assumed by Merger Sub. Additionally, Merger Sub assumed all of the financial obligations and liabilities of MoneyTrac, except minute books and stock records of MoneyTrac insofar as they relate solely to its organization and capitalization, and the rights of MoneyTrac arising out of the executed Merger. Pursuant to the terms of the Merger, Global issued 1,100,000,000 (one billion, one hundred million) shares of its common stock to MoneyTrac as consideration for the acquisition of MoneyTrac. Pursuant to the terms of the Merger, a conversion of issued MoneyTrac stock was completed whereby each one (1) share of MoneyTrac stock, issued and outstanding immediately prior to the effective date of the Merger, was canceled and extinguished and converted automatically into ten (10) shares of Global common stock. As of the effective date of the Merger, all shares of Global Preferred Stock issued prior to the effective date of the Merger were canceled and extinguished without any conversion thereof. We acquired 150,000,000 Global common shares for our purchase price of $250,000, representing ownership of approximately fifteen percent (15%) of the post-Merger issued and outstanding equity of Global. Global’s name changed in April, 2020 to Global Trac Solutions, Inc. Global’s common stock is traded on the OTC Markets under the symbol “PYSC.” We realized $51,748.17 from the sales of all of our Global securities, and as of September 30, 2020, have no remaining shares. We have a cash balance in the amount of $12,500 held in our brokerage account, a receivable resulting from the proceeds of our sale of our Global shares, that we have not collected.

 

Benihemp

On July 19, 2017, we agreed to lend $50,000 to Convenient Hemp Mart, LLC (“Benihemp”) based on a promissory note. The note provided that in lieu of receiving repayment, we could elect to exercise a right to convert the loaned amount into a payment towards the purchase of a 25% interest in Benihemp, subject to our payment of an additional $50,000, equaling a total purchase price of $100,000. The Company exercised this option on November 20, 2017 and made payment to Benihemp on November 21, 2017. On May 1, 2019, the Company and Benihemp agreed to cancel the Company’s 25% interest in Benihemp. Benihemp issued to the Company a credit memo equal to the Company’s $100,000 investment. The Company determined that as of December 31, 2019, this credit was impaired and not usable.

 

17 
 
 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

Global Hemp Group New Brunswick Joint Venture

On September 5, 2017, we announced our agreement to participate in a joint venture with Global Hemp Group, Inc., a Canadian corporation (“Global Hemp Group”), in a multi-phase industrial hemp project on the Acadian peninsula New Brunswick, Canada. Our participation included providing one-half, or $10,775, of the funding for the phase one work of the multi-phase industrial hemp project. On January 10, 2018, phase one of the project was completed by successfully cultivating industrial hemp during the 2017 growing season for research purposes. The Company’s project-related costs incurred according to the Company’s interest in the industrial hemp project were $0 and $10,775 for the years ended December 31, 2019 and 2018 respectively and was recorded as other income/expense in the Company’s Statement of Operations in the appropriate periods. As of December 31, 2019, and September 30, 2020, the balance of the New Brunswick industrial hemp joint venture investment reported on the balance sheet for the year ended December 31, 2019 was $0 as a result of the investment being deemed fully impaired and the Company withdrawing from the joint venture as of September 30, 2019. 

Global Hemp Group Oregon Joint Venture – Scio, OR

On May 8, 2018, the Company, Global Hemp Group, and TTO Enterprises, Ltd., an Oregon corporation (“TTO”) entered into a joint venture agreement. The purpose of the joint venture was to develop an Oregon-licensed industrial hemp project to commercialize the cultivation of industrial hemp biomass on a 109-acre parcel of farmland owned by the Company and Global Hemp Group in Scio, Oregon. The joint venture operated through the Oregon corporation Covered Bridges, Ltd. On May 30, 2018, the joint venture purchased TTO’s 15% interest in the joint venture for $30,000. The Company and Global Hemp Group then had equal interests as co-owners of the joint venture. The joint venture agreement committed the Company to a cash contribution of $600,000 payable on the following funding schedule: $200,000 upon execution of the joint venture agreement; $238,780 by July 31, 2018; $126,445 by October 31, 2018; and $34,775 by January 31, 2019. The Company performed these payment obligations pursuant to the joint venture agreement.

The 2018 crop of industrial hemp grown on the joint venture’s farmland consisted of 33 acres of high-yield CBD industrial hemp biomass grown in an orchard-style cultivation method on our farmland. The 33-acre 2018 harvest produced approximately 37,000 high CBD content industrial hemp plants, yielding a total of 24 tons of wet harvested industrial hemp biomass that resulted in a saleable harvest of 48,000 pounds of cured industrial hemp biomass. The joint venture partners prepared processing samples ranging in size from 100 to 2,000 lbs. for sample offers to licensed industrial hemp handlers and CBD extraction companies. This industrial hemp biomass was processed into a CBD crude oil concentrate with the option to refine it further into CBD isolate, or full spectrum oil, in order to increase its value on the market.

As of December 31, 2019, the combined balance of this joint venture investment and related farmland investment was $0, as the investment was written off as a loss as a result of its failure to generate any cash flow for the Company for the period ended December 31, 2019. The debt obligation of $262,414 related to this joint venture was also written off to $0 as of the year ended December 31, 2019. The debt obligation related to the joint venture for the nine months ended September 30, 2020 was $0.

On September 28, 2020, the Company and GHG entered into a Settlement and Mutual Release Agreement (the “Agreement”), pursuant to which the parties agreed to resolve a dispute among them regarding the joint venture agreement. Under the Agreement, GHG agreed to make a lump sum payment to the Company of $200,000, with $125,000 payable no later than September 30, 2020, and $75,000 payable no later than November 15, 2020, with applicable interest, and to issue GHG common stock to the Company equal in value to $185,000 as of the date of the Agreement, or September 28, 2020, subject to a non-dilutive protection provision, and additionally, to pay the Company $10,000 to cover the Company’s legal fees relating to the Agreement by September 30, 2020. In exchange for the settlement consideration, the Company has agreed to relinquish its ownership interest in the joint venture.

18 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

Bougainville Ventures, Inc. Joint Venture

On March 16, 2017, we entered into a joint venture agreement with Bougainville Ventures, Inc., a Canadian corporation. The purpose of the joint venture was for the Company and Bougainville to jointly engage in the development and promotion of products in the legalized cannabis industry in Washington State; (ii) utilize Bougainville’s high quality cannabis grow operations in the State of Washington, where it claimed to have an ownership interest in real property for use within the legalized cannabis industry; (iii) leverage Bougainville’s agreement with a I502 Tier 3 license holder to grow cannabis on the site; provide technical and management services

 

and resources including, but not limited to: sales and marketing, agricultural procedures, operations security and monitoring, processing and delivery, branding, capital resources and financial management; and, (iv) optimize collaborative business opportunities. The Company and Bougainville agreed to operate through a Washington State Limited Liability Company, and BV-MCOA Management, LLC was organized in the State of Washington on May 16, 2017.

 

As our contribution to the joint venture, the Company committed to raise not less than $1 million dollars to fund joint venture operations based upon a funding schedule. The Company also committed to providing branding and systems for the representation of cannabis related products and derivatives comprised of management, marketing and various proprietary methodologies directly tailored to the cannabis industry.

 

Bougainville represented that it had an ownership interest in real property located in Washington State used for growing cannabis, and possessed information primarily related to the management and control of cannabis grow operations as conducted in Washington State that included research, development and know how in the cannabis industry. Bougainville also represented that it had an agreement with a I502 Tier 3 license holder in Washington

State to operate on the land. The Company and Bougainville's agreement provided that funding provided by the Company would go, in part, towards the joint venture’s ultimate purchase of the land consisting of a one-acre parcel located in Okanogan County, Washington, for joint venture operations.

 

As disclosed on Form 8-K on December 11, 2017, the Company did not comply with the funding schedule for the joint venture. On November 6, 2017, the Company and Bougainville amended the joint venture agreement to reduce the amount of the Company's commitment to $800,000 and also required the Company to issue Bougainville 250,000 shares of the Company's restricted common stock. The Company completed its payments pursuant to the amended agreement on November 7, 2017, and on November 9, 2017, issued to Bougainville 15 million shares of restricted common stock. The amended agreement provided that Bougainville would deed the real property to the joint venture within thirty days of its receipt of payment.

 

Thereafter, the Company determined that Bougainville had no ownership interest in the property in Washington State, but rather was a party to a purchase agreement for real property that was in breach for non-payment. Bougainville also did not possess an agreement with a Tier 3 I502 license holder to grow Marijuana on the property. Nonetheless, as a result of funding arranged for by the Company, Bougainville and an unrelated third party, Green Ventures Capital Corp., purchased the land. The land is currently pending the payment of delinquent property taxes that would allow for the Okanogan County Assessor conditions to complete the subdivision of the land by the Okanogan County Assessor. However, Bougainville failed to cooperate or communicate with the Company in good faith, and failed to pay the delinquent taxes on the real property that would allow for sub-division and the deeding of the real property to the joint venture.

 

 

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MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

On August 10, 2018, the Company advised its independent auditor that Bougainville did not cooperate or communicate with the Company regarding its requests for information concerning the audit of Bougainville’s receipt and expenditures of funds contributed by the Company in the joint venture agreement. Bougainville had a material obligation to do so under the joint venture agreement. The Company believes that some of the funds it paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds. Additionally, the Company believes that Bougainville misrepresented material facts in the joint venture agreement, as amended, including, but not limited to, Bougainville’s representations that: (i) it had an ownership interest in real property that

 

was to be deeded to the joint venture; (ii) it had an agreement with a Tier 3 # I502 cannabis license holder to grow cannabis on the real property; and, (iii) that clear title to the real property associated with the Tier 3 # I502 license would be deeded to the joint venture thirty days after the Company made its final funding contribution. As a result, on September 20, 2018, the Company filed suit against Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court, case number 18-2- 0045324. The Company’s complaint seeks legal and equitable relief for breach of contract, fraud, breach of fiduciary duty, conversion, recession of the joint venture agreement, an accounting, quiet title to real property in the name of the Company, for the appointment of a receiver, the return to treasury of 15 million shares issued to Bougainville, and, for treble damages pursuant to the Consumer Protection Act in Washington State. The registrant has filed a lis pendens on the real property. The case is currently in litigation. The trial is set for January 26-28, 2021.

 

In connection with the agreement, the Company recorded a cash investment of $1,188,500 to the Joint Venture during 2017. This was comprised of 49.5% ownership of BV-MCOA Management LLC, and was accounted for using the equity method of accounting. The Company recorded an annual impairment in 2017 of $792,500, reflecting the Company’s percentage of ownership of the net book value of the investment. During 2018, the Company recorded equity losses of $37,673 and $11,043 for the first and second quarters respectively, and recorded an annual impairment of $285,986 for the year ended December 31, 2018, at which time the Company determined the investment to be fully impaired due to Bougainville’s breach of contract, including: (i) its failure to communicate and cooperate regarding the Company’s audit; (ii) its misrepresentations concerning its ownership interest in the real property in Okanogan County Washington; (iii) its failure to deed the property to the joint venture within thirty days of payment pursuant to the amended joint venture agreement; and, (iv) its misrepresentation that it possessed an agreement with a Tier 3 license holder to operate on the property.

 

The Company was able to obtain general loans from St. George Investments LLC, not specific to any of the company’s joint ventures. Therefore, accordingly, the impairment of this investment did not create any defaults to the loan agreements and covenants. The loan agreement established the lender’s option to convert the loans to common shares of the Company.

 

GateC Joint Venture

On March 17, 2017, the Company and GateC Research, Inc. (“GateC”) entered into a Joint Venture Agreement (“Agreement”) whereby the Company committed to raise up to one and one-half million dollars ($1,500,000) over a six-month period, with a minimum commitment of five hundred thousand dollars ($500,000) within a three (3) month period; and, information establishing brands and systems for the representation of cannabis related products and derivatives comprised of management, marketing and various proprietary methodologies, including but not limited to its affiliate marketing program, directly tailored to the cannabis industry.

GateC agreed to contribute its management and control services and systems related to cannabis grow operations in Adelanto County, California, and its permit to grow marijuana in an approved zone in Adelanto, California. GateC did not own a physical site for its operation in Adelanto County, California, and GateC’s permit to grow cannabis did not contain a conditional use permit.

On or about November 28, 2017, GateC and the Registrant orally agreed to suspend the Company’s funding commitment, pending the finalization of California State regulations governing the growth, cultivation and distribution of cannabis, which were expected to be completed in 2018.

On March 19, 2018, the Company and GateC rescinded the Agreement and concurrently released each other from any all any and all losses, claims, debts, liabilities, demands, obligations, promises, acts, omissions, agreements, costs and expenses, damages, injuries, suits, actions and causes of action, of whatever kind or nature, whether known or unknown, suspected or unsuspected, contingent or fixed, that they may have against each other and their Affiliates, arising out of the Agreement.

 

20 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

The Registrant incurred no termination penalties as the result of its entry into the Recession and Mutual Release Agreement.

In 2017, the Company recorded a debt obligation of $1,500,000 to the Joint Venture and a corresponding impairment charge of $1,500,000 during for year ended December 31, 2017. Upon termination of the material definitive agreement on March 19, 2018, the Company realized a gain on settlement of debt obligation of $1,500,000 during the six months ended June 30, 2018.

Natural Plant Extract (“NPE”)

On April 15, 2019, we entered into a joint venture with Natural Plant Extract of California, Inc. (“NPE”) to operate a licensed psychoactive cannabis distribution service in California to be named Viva Buds. California legalized psychoactive cannabis for medicinal and recreational use on January 1, 2018. On February 3, 2020, we terminated the NPE joint venture and entered into a Settlement and Release of All Claims Agreement with NPE. In exchange for that universal release, the Company and NPE (i) agreed to reduce the Company’s interest in NPE from 20% to 5%; (ii) agreed the Company would pay NPE a total of $85,000 as follows: $35,000 concurrent with the execution of the universal release, and $25,000 no later than the 5th calendar day for each of the two months following execution of Settlement and Release of All Claims Agreement; and, (iii) agreed to retire the balance of our original valuation obligation from the material definitive agreement, representing a shortfall of $56,085.15, in a convertible promissory note, with terms allowing NPE to convert the note into common stock of MCOA at a 50% discount to the closing price of MCOA’s common stock as of the maturity date.

Cannabis Global (“CBGL”)

On September 30, 2020, the Company entered into a Share Exchange Agreement with Cannabis Global, Inc., a Nevada corporation quoted on OTC Markets Pink (“CBGL”) dated September 30, 2020, to acquire the number of shares of CBGL’s common stock, par value $0.001, equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date, in exchange for the number of shares of Company common stock, par value $0.001, equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date (the “Share Exchange Agreement”). For both parties, the Share Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event that a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant to the Share Exchange Agreement to fall below $650,000.

Complementary to the Share Exchange Agreement, the Company and CBGL entered into a Lock-Up Agreement dated September 30, 2020, providing that the shares of common stock acquired pursuant to the Share Exchange Agreement shall be subject to a lock-up period preventing its sale for a period of 12 months following issuance, and limiting the subsequent sale to aggregate maximum sale value of $20,000 per week, or $80,000 per month.

Brazil and Uruguay Joint Ventures

On October 1, 2020, the Company entered into two Joint Venture Agreements with Marco Guerrero, a director of the Company (“Guerrero”) dated September 30, 2020, to form joint venture operations in Brazil and in Uruguay (the “Joint Venture Agreements”) to produce, manufacture, market and sell the Company’s hempSMART™ products in Latin America, and will also work to develop and sell hempSMART™ products globally. The Joint Venture Agreements contain equal terms for the formation of joint venture entities in Uruguay and Brazil. The Brazilian joint venture will be headquartered in São Paulo, Brazil, and will be named HempSmart Produtos Naturais Ltda. (“HempSmart Brazil”). The Uruguayan joint venture will be headquartered in Montevideo, Uruguay and will be named Hempsmart Uruguay S.A.S. (“HempSmart Uruguay”).

Under the Joint Venture Agreements, the Company will acquire a 70% equity interest in both HempSmart Brazil and HempSmart Uruguay. A minority 30% equity interest in both HempSmart Brazil and HempSmart Uruguay will be held by newly formed entities controlled by Guerrero, a director of the Company, who is a successful Brazilian entrepreneur. The Company will provide capital in the amount of $50,000 to both HempSmart Brazil and HempSmart Uruguay under the Joint Venture Agreements, for a total capital outlay obligation of $100,000. It is expected that the proceeds of the initial capital contribution will be used for contracting with third-party manufacturing facilities in Brazil and Uruguay, and related infrastructure and employment of key personnel. 

21 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

 

MARIJUANA COMPANY OF AMERICA, INC.
INVESTMENT ROLL-FORWARD
AS OF SEPTEMBER 30, 2020

 

   INVESTMENTS  SHORT-TERM INVESTMENTS
                                     
    TOTAL    Global Hemp    Cannabis Global              Bougainville Ventures,    Gate C Research    Natural Plant         TOTAL Short-Term    Global Hemp      
    INVESTMENTS    Group    Inc.    Benihemp    MoneyTrac    Inc.    Inc.    Extract    Vivabuds    Investments    Group    MoneyTrac 
Beginning balance @12-31-16  $0   $0        $0   $0   $0   $0             $0        $0 
                                                             
Investments made during 2017   3,049,275    10,775         100,000    250,000    1,188,500    1,500,000              0         0 
                                                             
Quarter 03-31-17 equity method Loss   0                                            0           
                                                             
Quarter 06-30-17 equity method Loss   0                                            0           
                                                             
Quarter 09-30-17 equity method Loss   (375,000)                       (375,000)                  0           
                                                             
Quarter 12-31-17 equity method accounting   313,702                        313,702                   0           
                                                             
Impairment of Investment in 2017   (2,292,500)   0                   (792,500)   (1,500,000)             0         0 
Balances as of 12/31/17   695,477    10,775    0    100,000    250,000    334,702    0    0    0    0    0    0 
                                                             
                                                             
Investments made during 2018   986,654    986,654                                       0           
                                                             
Quarter 03-31-18 equity method Loss   (37,673)                       (37,673)                  0           
                                                             
Quarter 06-30-18 equity method Loss   (11,043)                       (11,043)                  0           
                                                             
Quarter 09-30-18 equity method Loss   (10,422)             (10,422)                            0           
                                                             
Quarter 12-31-18 equity method Loss   (31,721)   (31,721)        0                             0           
                                                             
Moneytrac investment reclassified to Short-Term investments   (250,000)                  (250,000)                       250,000         250,000 
                                                             
Unrealized gains on trading securities - 2018   0                                            560,000         560,000 
                                                             
Impairment of investment in 2018   (933,195)   (557,631)        (89,578)        (285,986)                  0           
Balance @12-31-18  $408,077   $408,077   $0   $0   $0   $0   $0   $0   $0   $810,000   $0   $810,000 
                                                             
                                                             
Investments made during quarter ended 03-31-19   129,040    129,040                                                   
                                                             
Quarter 03-31-19 equity method Loss   (59,541)   (59,541)                                                  
                                                             
Unrealized gains on trading securities - quarter ended 03-31-19                                                (135,000)       $(135,000)
Balance @03-31-19  $477,576   $477,576   $0   $0   $0   $0   $0   $0   $0   $675,000   $0   $675,000 
                                                             
                                                             
Investments made during quarter ended 06-30-19  $3,157,234   $83,646                            $3,000,000   $73,588                
                                                             
Quarter 06-30-19 equity method Income (Loss)  $(171,284)  $(141,870)                           $(6,291)  $(23,123)               
                                                             
Unrealized gains on trading securities - quarter ended 06-30-19  $0                                            (150,000)       $(150,000)
Balance @06-30-19  $3,463,526   $419,352   $0   $0   $0   $0   $0   $2,993,709   $50,465   $525,000   $0   $525,000 
                                                             
                                                             
Investments made during quarter ended 09-30-19  $186,263                                      $186,263                
                                                             
Quarter 09-30-19 equity method Income (Loss)  $122,863   $262,789                            $(94,987)  $(44,939)               
                                                             
Sale of trading securities during quarter ended 09-30-19                                               $(41,667)       $(41,667)
                                                             
Unrealized gains on trading securities - quarter ended 09-30-19  $0                                            (362,625)       $(362,625)
Balance @09-30-19  $3,772,652   $682,141   $0   $0   $0   $0   $0   $2,898,722   $191,789   $120,708   $0   $120,708 
                                                             
                                                             
Investments made during quarter ended 12-31-19  $392,226   $262,414                                 $129,812                
                                                             
Quarter 12-31-19 equity method Income (Loss)  $(178,164)  $(75,220)                           $(23,865)  $(79,079)               
                                                             
Reversal of Equity method Loss for 2019  $272,285                                 $125,143   $147,142                
                                                             
Impairment of investment in 2019  $(3,175,420)  $(869,335)                           $(2,306,085)  $0                
                                                             
Loss on disposition of investment  $(389,664)                                     $(389,664)               
                                                             
Sale of trading securities during quarter ended 12-31-19  $0                                           $(17,760)       $(17,760)
                                                             
Unrealized gains on trading securities - quarter ended 12-31-19  $0                                            (75,545)       $(75,545)
Balance @12-31-19  $693,915   $(0)  $0   $0   $0   $0   $0   $693,915   $0   $27,403   $0   $27,403 
                                                             
                                                             
Equity Loss for Quarter ended 03-31-20   126,845    126,845                                                   
                                                             
Recognize Joint venture liabilities per JV agreement @03-31-20   394,848    394,848                                                   
                                                             
Impairment of Equity Loss for Quarter ended 03-31-20   (521,692)   (521,692)                                                  
                                                             
Unrealized gains on trading securities - quarter ended 03-31-19                                                (13,945)       $(13,945)
Balance @03-31-20  $693,915   $0   $0   $0   $0   $0   $0   $693,915   $0   $13,458   $0   $13,458 
                                                             
                                                             
Equity Loss for Quarter ended 06-30-20   (7,048)   (7,048)                                                  
                                                             
Impairment of Equity Loss for Quarter ended 06-30-20   7,048    7,048                                                   
                                                             
Sales of trading securities - quarter ended 06-30-20                                                (13,458)       $(13,458)
Balance @06-30-20  $693,915   $0   $0   $0   $0   $0   $0   $693,915   $0   $0   $0   $0 
                                                             
                                                             
Global Hemp Group trading securities issued   650,000        $650,000                                 $185,000   $185,000      
                                                             
Investment in Cannabis Global   0                                                        
Balance @09-30-20  $1,343,915   $0   $650,000   $0   $0   $0   $0   $693,915   $0   $185,000   $185,000   $0 
                                                             

 

22 
 
 

MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

 

 

Loan Payable
                           
   TOTAL 

Global

Hemp

        Bougainville Ventures, 

Gate C

Research

 

Natural

Plant

  Robert L. Hymers     General Operating
   JV Debt  Group  Benihemp  MoneyTrac  Inc.  Inc.  Extract  III  Vivabuds  Expense
Beginning balance @12-31-16  $0   $0   $0   $0   $0   $0                  $0 
                                                   
Quarter 03-31-17 loan borrowings   1,500,000                        1,500,000                     
                                                   
Quarter 06-30-17 loan activity                                                  
                                                   
Quarter 09-30-17 loan borrowings   725,000                   725,000                          
                                                   
Quarter 12-31-17 loan repayments   (330,445)                  (330,445)                         
                                                   
General operational expense   172,856                                            172,856 
                                                   
Balances as of 12/31/17 (a)   2,067,411    0    0    0    394,555    1,500,000    0    0    0    172,856 
                                                   
Quarter 03-31-18 loan borrowings (payments)   376,472    447,430                                       (70,958)
                                                   
Quarter 06-30-18 cancellation of JV debt obligation   (1,500,000)                       (1,500,000)                    
                                                   
Quarter 06-30-18 loan repayments   (101,898)                                           (101,898)
                                                   
Quarter 09-30-18 loan activity   0                                              
                                                   
Quarter 12-31-18 loan borrowings   580,425    580,425                                         
                                                   
Balance @12-31-18 (b)   1,422,410    1,027,855    0    0    394,555    0    0    0    0    0 
                                                   
Quarter 03-31-19 loan borrowings   649,575    649,575                                         
                                                   
Quarter 03-31-19 debt conversion to equity   (407,192)   (407,192)                                        
                                                   
Balance @03-31-19 (c)   1,664,793    1,270,238    0    0    394,555    0    0    0    0    0 
                                                   
Quarter 03-31-19 loan borrowings   3,836,220   $161,220                       $2,000,000        $0   $1,675,000 
                                                   
Quarter 03-31-19 debt conversion to equity   (1,572,971)  ($161,220)                      ($349,650)            ($1,062,101)
                                                   
Balance @06-30-19 (d)   3,928,042    1,270,238    0    0    394,555    0    1,650,350    0    0    612,899 
                                                   
Quarter 09-30-19 loan borrowings   582,000                                           $582,000 
                                                   
Quarter 09-30-19 debt conversion to equity   (187,615)                                          $(187,615)
                                                   
Balance @09-30-19 (e)   4,322,427    1,270,238    0    0    394,555    0    1,650,350    0    0    1,007,284 
                                                   
Quarter 12-31-19 loan borrowings   2,989,378   $262,414                       $596,784   $4,221        $2,125,959 
                                                   
Impairment of investment in 2019   (4,083,349)  $(1,532,652)            $(394,555)       $(2,156,142)               
                                                   
Loss on settlement of debt in 2019   50,093                            $50,093                
                                                   
Adjustment to reclassify amount to accrued liabilities   (85,000)                           $(85,000)               
                                                   
Balance @12-31-19 (f)  $3,193,548   $(0)  $0   $0   $0   $0   $56,085   $4,221   $0   $3,133,243 
                                                   
Quarter 03-31-20 loan borrowings  $441,638                                           $441,638 
                                                   
Quarter 03-31-20 debt conversion to equity  $(619,000)                                          $(619,000)
                                                   
Recognize Joint venture liabilities per JV agreement @03-31-20  $394,848   $394,848                                         
                                                   
Quarter 03-31-20 Debt Discount adjustments  $24,138                                 $24,138           
                                                   
Balance @03-31-20 (g)  $3,435,172   $394,848   $0   $0   $0   $0   $56,085   $28,359   $0   $2,955,881 
                                                   
Quarter 06-30-20 loan borrowings, net  $65,091                                 $65,091           
                                                   
Quarter 06-30-20 debt conversion to equity  $(727,118)                                          $(727,118)
                                                   
Quarter 06-30-20 reclass of liability  $83,647   $83,647                                         
                                                   
Quarter 06-30-20 Debt Discount adjustments  $405,746