UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q 

 

(Mark One)

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

 

For the quarterly period ended March 31, 2021

 

OR

 

TRANSITION REPORT PURSUANT TO 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)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None

  

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 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

 

The number of shares of the issuer’s common stock, $0.001 par value per share, outstanding at May 19, 2021 was 4,856,957,259. 

 

 

 

1 
 
 

Table of Contents

 

    Page No.
PART I. FINANCIAL INFORMATION 1
     
Item 1. Financial Statements  
     
  Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020 (Audited) 4
     
  Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (Unaudited) 5
     
  Condensed Consolidated Statements of Stockholders’ Deficit for the Three Months Ended March 31, 2021 and 2020 (Unaudited) 6
     
  Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (Unaudited) 8
     
  Notes to the Condensed Consolidated Financial Statements (Unaudited) 9
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 44
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 51
     
Item 4. Controls and Procedures 51
     
PART II. OTHER INFORMATION 52
     
Item 1. Legal Proceedings 52
     
Item 1A. Risk Factors 53
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 54
     
Item 3. Defaults Upon Senior Securities 55
     
Item 4. Mine Safety Disclosure 55
     
Item 5. Other Information 55
     
Item 6. Exhibits 56
     
Signatures 57

  

 

2 
 
 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

 

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 as amended (the “Exchange Act”). Any statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common shares and future management and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement.

 

Any forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout our most recent Annual Report on Form 10-K as may be amended, supplemented or superseded from time to time by other reports we file with the U.S. Securities and Exchange Commission (the “SEC”). You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed as exhibits to the reports we file with the SEC completely and with the understanding that our actual future results may be materially different from what we expect.  You should assume that the information appearing in this Quarterly Report on Form 10-Q is accurate as of the date hereof.  Because the risk factors in our SEC reports could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise.  In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.  We qualify all of the information presented in this Quarterly Report on Form 10-Q, and particularly our forward-looking statements, by these cautionary statements.

 

 

 

3 
 
 

PART I — FINANCIAL INFORMATION 

ITEM 1. FINANCIAL STATEMENTS.

 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
    
    (Unaudited)    (Audited) 
    

March 31,

2021

    

December 31,

2020

 
           
ASSETS          
Current assets:          
Cash  $639,983   $74,503 
Short-term Investments   859,197    239,063 
Accounts receivable, net   6,807    8,640 
Inventory   91,271    103,483 
Prepaid Insurance   46,156    55,783 
Other current assets   95,564    56,121 
  Total current assets   1,738,978    537,593 
           
Property and equipment, net   7,182    6,542 
           
Other assets:          
Long-term Investments   2,202,001    1,552,001 
Right-of-use-assets   3,978    7,858 
Security deposit   2,500    2,500 
           
Total assets   3,954,639    2,106,494 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current liabilities:          
Accounts payable   488,995    480,877 
Accrued compensation   24,000    79,214 
Accrued liabilities   27,352    401,461 
Notes payable, related parties   20,000    40,000 
Loans payable PPP Stimulus   35,500    35,500 
Convertible notes payable, net of debt discount of $773,797 and $808,980, respectively   258,878    1,426,894 
Right-of-use liabilities - current portion   3,978    7,858 
Subscriptions payable   669,783    670,000 
Derivative liability   3,580,915    4,426,057 
  Total current liabilities   5,109,401    7,567,861 
           
Total liabilities   5,109,401    7,567,861 
           
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 March 31, 2021 and December 31, 2020   10,000    10,000 
Class B preferred stock, $0.001 par value, 5,000,000 shares designated, 2,000,000 shares issued and outstanding as of March 31, 2021 and December 31, 2020   2,000    2,000 
Common stock, $0.001 par value; 15,000,000,000 shares authorized; 4,780,073,945 and 3,136,774,861 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively   4,780,074    3,136,775 
Common stock to be issued, 1,000,000 and 11,892,411 shares, respectively   1,000    11,892 
Additional paid in capital   84,019,749    77,687,561 
Accumulated deficit   (89,967,585)   (86,309,595)
  Total stockholders' deficit   (1,154,762)   (5,461,367)
           
Total liabilities and stockholders' deficit  $3,954,639   $2,106,494 

 

 

 

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

4 
 
 

 

 MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES

 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

UNAUDITED

 

       
  
   2021  2020
REVENUES:      
Sales  $34,930   $78,647 
Related party Sales   —      3,172 
Total Revenues   34,930    81,819 
           
Cost of sales   25,180    34,205 
           
Gross Profit   9,750    47,614 
           
OPERATING EXPENSES:          
Depreciation   1,391    1,746 
Selling and marketing   107,549    126,455 
Payroll and related   138,145    101,199 
Stock-based compensation   19,900    6,000 
General and administrative   525,682    204,371 
  Total operating expenses   792,667    439,771 
           
Net loss from operations   (782,917)   (392,157)
           
OTHER INCOME (EXPENSES):          
Interest expense, net   (1,100,962)   (890,151)
Impairment gain (Loss) on Joint Ventures   —      (268,002)
Income (loss) on equity investment   —      (126,845)
Loss on change in fair value of derivative liabilities   (2,326,018)   (430,692)
Unrealized Gain (loss) on trading securities   620,134    (13,945)
(Loss) Gain on settlement of debt   (68,227)   3,490 
Total other income (expense)   (2,875,073)   (1,726,145)
           
Net loss before income taxes   (3,657,990)   (2,118,302)
           
Income taxes (benefit)   —      —   
           
NET INCOME (LOSS)  $(3,657,990)  ($2,118,302)
           
Loss per common share, basic and diluted  $(0.00)  $(0.02)
           
Weighted average number of common shares outstanding, basic and diluted (after stock-split)   4,028,293,332    94,235,680 

 

 

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

5 
 
 

 MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES

 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

 FOR THE THREE MONTHS ENDED MARCH  31, 2021 AND 2020

UNAUDITED

 
   Class A Preferred Stock  Class B Preferred Stock  Common Stock  Common Stock to be issued  Stock  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   —      —      —      —      8,333    8    —      —      —      306    —      314 
Common stock issued in settlement of convertible notes payable and accrued interest   —      —      —      —      32,805,286    32,805    —      —      —      600,895    —      633,700 
Common stock issued in exchange for exercise of warrants on a cashless basis   —      —      —      —      12,244,897    12,245    1,000,000    1,000    —      342,755    —      356,000 
Common shares issued in settlement of legal case   —      —      —      —      3,677,889    3,678    —      —      —      952,573    —      956,251 
Reclassification of derivative liabilities to additional paid in capital   —      —      —      —      —      —      —      —      —      659,160    —      659,160 
Net Loss   —      —      —      —      —      —      —      —      —      —      (2,118,302)   (2,118,302)
Balance, March 31, 2020   10,000,000   $10,000    —     $—      126,702,819   $126,702    1,000,000   $1,000   $—     $66,029,435   $(76,282,515)  $(10,115,378)
                                                             

 

 

6 
 
 

 

 

 

                                     
   Class A Preferred Stock  Class B Preferred Stock  Common Stock  Common Stock to be issued  Stock  Paid In  Accumulated   
   Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Subscriptions  Capital  Deficit  Total
Balance, December 31, 2020   10,000,000   $10,000    2,000,000   $2,000    3,136,774,841   $3,136,775    11,892,411   $11,892   $—     $77,687,561   $(86,309,595)  $(5,461,367)
Common stock issued for services rendered   —      —      —      —      1,000,020    1,000    —      —      —      9,900    —      10,900 
Common stock issued in settlement of convertible notes payable and accrued interest   —      —      —      —      621,622,284    621,622    —      —      —      952,534    —      1,574,156 
Issuance of common stock for settlement of liabilities   —      —      —      —      3,027,031    3,027    (10,892,411)   (10,892)   —      16,488    —      8,623 
Common stock issued in exchange for exercise of warrants on a cashless basis   —      —      —      —      400,000,000    400,000    —      —      —      (400,000)   —      —   
Sale of common stock   —      —      —      —      575,714,285    575,714    —      —      —      669,286    —      1,245,000 
Issuance of common stock for investments   —      —      —      —      41,935,484    41,936    —      —      —      608,065    —      650,000 
Reclassification of derivative liabilities to additional paid in capital   —      —      —      —      —      —      —      —      —      4,475,915    —      4,475,916 
Net Loss   —      —      —      —      —      —      —      —      —      —      (3,657,990)   (3,657,990)
Balance, March 31, 2021   10,000,000   $10,000    2,000,000   $2,000    4,780,073,945   $4,780,074    1,000,000   $1,000   $—     $84,019,749   $(89,967,585)  $(1,154,762)

 

 

 

 

See the accompanying notes to these unaudited condensed consolidated financial statements 

 

7 
 
 

 MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

UNAUDITED

 

  
   2020  2019
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Income (Loss)  $(3,657,990)  $(2,118,302)
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization of debt discount   311,710    436,593 
Depreciation and amortization   1,391    1,746 
Impairment Loss on equity method investee   —      268,002 
Impairment loss on equity investment   —      126,845 
Loss on change in fair value of derivative liability   2,326,018    430,692 
Interest expense recognized for the excess of fair value of derivative liability over net book value of notes payable at issuance   694,755    206,094 
Loss on share inducement and settlement of warrant liability   —      138,885 
Stock-based compensation   10,900    6,000 
Unrealized (Gain) Loss on trading securities   (620,134)   13,946 
Loss on settlement of liabilities   71,647    —   
Changes in operating assets and liabilities:          
Accounts receivable   1,833    5,443 
Inventories   12,212    12,787 
Prepaid expenses and other current assets   (29,816)   (34,329)
Accounts payable   74,178    (78,764)
Accrued expenses and other current liabilities   (159,063)   (12,881)
Right-of-use assets   3,880    3,399 
Right-of-use liabilities   (3,880)   (3,399)
Accrued compensation   —      —   
Net cash provided by (used in) operating activities   (962,359)   (597,243)
           
Cash flows from investing activities:          
Purchases of property and equipment   (2,031)   (1,271)
Net cash provided by (used in) investing activities   (2,031)   (1,271)
           
Cash flows from financing activities:          
Proceeds from issuance of notes payable   535,000    442,000 
Repayments of notes payable   (230,130)   —   
Repayments to related parties   (20,000)   —   
Proceeds from sale of common stock   1,245,000    —   
Net cash provided by (used in) financing activities   1,529,870    442,000 
           
Net increase (decrease) in cash   565,480    (156,514)
           
Cash at beginning of period   74,503    211,765 
           
Cash at end of period  $639,983   $55,251 
           
           
Supplemental disclosure of cash flow information:          
Cash paid for interest   —      —   
Cash paid for taxes   —      —   
           
Non cash financing activities:          
Common stock issued in settlement of convertible notes payable  $1,574,156   $633,700 
Reclassification of derivative liabilities to additional paid-in capital  $4,475,915   $659,160 
Common stock issued for investment  $650,000   $—   
Common stock issued to settle liabilities  $8,622   $—   
Common shares issued in settlement of legal case  $—     $956,251 

 

 

See the accompanying notes to these unaudited condensed consolidated financial statements 

 

8 
 
 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

(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 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 100% 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, the Company operated primarily in the mining exploration business.

 

In 2015, the Company changed its business model to a marketing and distribution company for medical marijuana, and 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. in the State of Delaware as a wholly-owned subsidiary of the Company for the purpose of operating the hempSMART™ brand.

 

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

 

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

 

The condensed 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 condensed consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements [set forth in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 14, 2021 (the “Annual Report”)].

 

Operating results for the three months ended March 31, 2021 are not necessarily indicative of results that may be expected for the year ending December 31, 2021. These condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020.

 

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 the three months ended March 31, 2021, the Company incurred net losses from operations of $782,917 and used cash in operations of $962,359. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.

 

The Company's primary source of operating funds for the three months ended March 31, 2021 has been from revenue generated from the proceeds related to the issuance of common stock, convertible and other debt. The Company has experienced net losses from operations since inception, but expects these conditions to improve in 2021 and beyond as it continues to develop its direct sales and marketing programs; however, no assurance can be provided that the Company will not continue to experience losses in the future. The Company has stockholders' deficiencies at March 31, 2021 and requires additional financing to fund future operations.

 

 

9 
 
 

 

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. There can be no assurance that the Company will be successful in developing profitable operations or that it will be able to obtain financing on favorable terms, if at all. 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

 

Interim Financial Statements

 

The unaudited condensed consolidated 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.

 

Revenue Recognition

 

For annual reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective Accounting Standards Updates (“ASU”) 2014-09 “Revenue from Contracts with Customers,” to supersede previous revenue recognition guidance under current GAAP. Revenue is now recognized in accordance with FASB Accounting Standards Codification (“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 principle 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. The Company adopted FASB ASC Topic 606 for its reporting period as of the year ended December 31, 2017, which made its implementation of FASB ASC Topic 606 effective in the first quarter of 2018. The Company 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, the Company applied the new standards to all new contracts initiated on or after the effective date. The Company also decided to apply this method to any incomplete contracts that it determines are subject to FASB ASC Topic 606 prospectively. For the quarter ended March 31, 2021, there were no incomplete contracts. As more fully discussed below, the Company is of the opinion that none of its contracts for services or products contain significant financing components that require revenue adjustment under FASB ASC Topic 606.

 

Contracts included in its application of FASB ASC Topic 606, for the quarter ended March 31, 2021, consisted solely of sales of the Company’s hempSMART™ products made by its sales associates and by the Company directly through its website. Regarding its offered financial accounting, bookkeeping and/or real property management consulting services, to date no contracts have been entered into, and thus no reportable revenues have resulted for the fiscal years ended 2020 and, 2019, or for the quarter ended March 31, 2021.

 

In accordance with FASB ASC Topic 606, Revenue Recognition, the Company is of the opinion that none of its hempSMART™ product sales or offered consulting service, each of which are discussed below, have a significant financing component. The Company’s opinion is based upon the transactional basis for its product sales, with revenue recognized upon customer order, payment and shipment, which occurs concurrently. The Company’s evaluation of the length of time between the customer order, payment and shipping is not a significant financing component, because shipment occurs the same day as the order is placed and payment made by the customer. The Company’s evaluation of its consulting services is based upon recognizing revenue as the services are performed for a determinable price per hour. The Company only recognizes revenues as it incurs and charges billable hours. Because the Company’s hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual performance, the Company is 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 the Company recognizes under the contract or would otherwise contain a significant financing component under FASB ASC Topic 606.

 

 

10 
 
 

 

Product Sales

 

Revenue from product sales, including delivery fees, is recognized when (1) an order is placed by the customer; (2) the price is fixed and determinable when the order is placed; (3) the customer is required to and concurrently pays for the product upon order; and, (4) the product is shipped. The evaluation of the Company’s recognition of revenue after the adoption of FASB ASC 606 did not include any judgments or changes to judgments that affected the Company’s reporting of revenues, since its 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 (1) the Company’s customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in the Company’s product sales is fixed and determinable at the time the customer places the order, and there is no delay in shipment, the Company is of the opinion that its 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 the Company or the customer under FASB ASC Topic 606.

 

Consulting Services

 

The Company also offers professional services for financial accounting, bookkeeping or real property management consulting services based on consulting agreements. As of the date of this filing, the Company has not entered into any contracts for any financial accounting, bookkeeping and/or real property management consulting services that have generated reportable revenues for the years ended 2020 and 2019 or for the quarter ended March 31, 2021. The Company intends and expects these arrangements to be entered into on an hourly fixed fee basis.

 

For hourly based fixed fee service contracts, the Company intends 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, the Company will calculate the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable. The Company only recognizes revenues as the Company incurs and charges billable hours. Because the Company’s hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual performance, the Company 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 the Company recognizes 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 adjustments converting from ASC 605 to ASC 606 because product sales revenue is recognized upon customer order, payment and shipment, which occurs concurrently, and its consulting services 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.

 

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 in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management.

 

 

11 
 
 

 

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 March 31, 2021 and December 31, 2020, 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. 

 

Earnings per Share

 

Basic earnings per share are calculated by dividing net income (loss) by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if the Company’s share-based awards and convertible securities were exercised or converted into common stock. The dilutive effect of the Company’s share-based awards is computed using the treasury stock method, which assumes all share-based awards are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted earnings per share calculation. The dilutive effect of the Company’s convertible preferred stock and convertible debentures is computed using the if-converted method, which assumes conversion at the beginning of the year.

 

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.

 

 

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Investments

 

The Company follows ASC 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 (See Note 6).

 

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 March 31, 2021 and December 31, 2020. 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 because 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 $69,868 and $26,277 as advertising costs for the three months ended March 31, 2021 and 2020, respectively.

 

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.

 

 

13 
 
 

 

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 condensed 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 March 31, 2021, and 2020, the Company has not recorded any unrecognized tax benefits.

 

Segment Information

 

ASC 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, hempSMART.

 

   For the Three Months Ended March 31,
   2021  2020
Revenues  $34,930   $81,819 
Cost of Sales   25,180    34,205 
Gross profit   9,750    47,614 
           
Operating Expenses          
  Depreciation expense   1,391    1,746 
  Payroll and related   53,947    18,749 
  Selling and Marketing expenses   107,549    101,897 
  General and administrative expenses   55,801    67,949 
Total Expenses   218,688    190,341 
           
Net Loss from Operations  $(208,938)  $(142,727)

 

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.

 

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.

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 and no options to extend. 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 its facility lease.

Consistent with ASC 842-20-50-4, for the Company's quarterly financial statements for the period ended March 31, 2021 , 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. The Company’s 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 the Company’s results of operations or cash flows.

 

 

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COVID-19 – Going Concern

 

In March 2020, the World Health Organization declared the global emergence of the COVID-19 pandemic. The impact of COVID-19 on the Company’s business is currently unknown. The Company will continue to monitor guidance and orders issued by federal, state, and local authorities with respect to COVID-19. As a result, the Company may take actions that alter its business operations as may be required by such guidance and orders or take other steps that the Company determines are in the best interest of its employees, customers, partners, suppliers and stockholders.

Any such alterations or modifications could cause substantial interruption to the Company’s business and could have a material adverse effect on the Company’s business, operating results, financial condition, and the trading price of the Company’s common stock, and could include temporary closures of one or more of the Company’s facilities; temporary or long-term labor shortages; temporary or long-term adverse impacts on the Company’s supply chain and distribution channels; and the potential of increased network vulnerability and risk of data loss resulting from increased use of remote access and removal of data from the Company’s facilities. In addition, COVID-19 could negatively impact capital expenditures and overall economic activity in the impacted regions or depending on the severity, globally, which could impact the demand for the Company’s products and services.

It is unknown whether and how the Company may be impacted if the COVID-19 pandemic persists for an extended period of time or if there are increases in its breadth or in its severity, including as a result of the waiver of regulatory requirements or the implementation of emergency regulations to which the Company is subject. The COVID-19 pandemic poses a risk that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period.

The Company may incur expenses or delays relating to such events outside of its control, which could have a material adverse impact on its business, operating results, financial condition and the trading price of its common stock. The COVID-19 pandemic made our hempSMART products, which are considered a supplement, not as attractive to clients struggling to survive financially with less disposable income. Additionally, our staff were unable to work from our office. This created a less efficient environment for the sales team and our ability to fulfill orders.

 

 

 

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NOTE 4 – OPERATING LEASE

 

On July 1, 2019, the Company entered into an amendment to its lease pursuant to which the Company extended the term of its office lease located in Escondido, California  for two years such that the lease will expire on June 30, 2021. Pursuant to the lease, the Company shall pay a base monthly lease of $1,309 per month through June 30, 2020 and $1,348 to June 30, 2021. 

 

To evaluate the impact on adoption of ASC 842 – Leases, on the accounting treatment for leasing of real office property referred to as the “Premises,” the Company utilizes the incremental borrowing rate in determining the present value of lease payments, unless the implicit rate is readily determinable. The Company used an estimated incremental borrowing rate of 10% to estimate the present value of the right-of-use liability.

 

The Company has right-of-use assets of $3,978 and operating lease liabilities of $3,978 as of March 31, 2021. Operating lease expense for the year ended December 31, 2020 was $51,526. The Company used cash of $14,243 in operating activities related to leases during the year ended December 31, 2020.

 

The following table provides the maturities of lease liabilities at March 31, 2021:

 

Maturity of Lease Liabilities at March 31, 2021   
2021   4,044 
2022 and thereafter   —   
    —   
Total future undiscounted lease payments     
Less: Interest   (66)
Present value of lease liabilities  $3,978 

 

Minimum lease payments under the Company’s operating lease under ASC 840 for the three months ended March 31, 2021 and 2020 are $3,978 and $12,015, respectively.

  

NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and equipment as of March 31, 2021 and December 31, 2020 is summarized as follows:

 

  

March 31,

2021

 

December 31,

2020

Computer equipment  $22,174   $20,143 
Furniture and fixtures   5,140    5,140 
Subtotal   27,314    25,283 
Less accumulated depreciation   (20,132)   (18,741)
Property and equipment, net  $7,182   $6,542 

 

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 $1,391 and $1,746 for the three months ended March 31, 2021 and 2020, respectively.

 

 

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NOTE 6 – INVESTMENTS

 

MoneyTrac

 

On March 13, 2017, we entered into a stock purchase agreement with MoneyTrac Technology, Inc. (“MoneyTrac”), a California corporation, to purchase a 15% equity position in MoneyTrac. On July 27, 2017, the Company completed tender of the purchase price of $250,000. On June 12, 2018 Global Payout, Inc. (“Global”) entered into a Reverse Triangular Merger (the “Merger”) with MoneyTrac and MTrac Tech Corporation, a Nevada corporation and wholly-owned subsidiary of Global (“Merger Sub”), pursuant to which MoneyTrac was merged into Merger Sub, the surviving corporation of the Merger, and thereafter the separate existence of MoneyTrac ceased, and all rights, privileges, powers and property, including, without limitation, all rights, privileges, franchise, patents, trademarks, licenses, registrations, bank accounts, contracts, patents, copyrights, and other assets of every kind and description of MoneyTrac, were assumed by Merger Sub. Additionally, Merger Sub assumed all of the obligations and liabilities of MoneyTrac and the rights of MoneyTrac arising out of the executed Merger. Pursuant to the terms of the Merger , Global issued 1,100,000,000 shares of its common stock to MoneyTrac as consideration for the purchase of MoneyTrac. In addition, pursuant to the terms of the Merger , each 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 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. The Company acquired 150,000,000 shares of common stock of Global for its original consideration of $250,000, representing approximately 15% ownership. In April 2020, Global changed its name to Global Trac Solutions, Inc. Global’s common stock is traded on the OTC Markets under the symbol “PSYC.” The Company realized $51,748 from the sales of all of its shares of Global common stock, and as of March 31, 2021, owns no additional shares of common stock of Global.

Benihemp

 

On July 19, 2017, the Company loaned $50,000 evidenced by a promissory note. The note provided that in lieu of receiving repayment, the Company could convert the loaned amount into a payment towards the purchase of a 25% interest in Benihemp, subject to its payment of an additional $50,000, for an aggregate 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 the Company a credit in the amount of $100,000, a portion of  which the Company used toward the purchase of raw material related to its hempSMART products. The Company determined that as of December 31, 2019, approximately $41,000 of this credit was impaired and not usable.

 

Global Hemp Group, Inc. New Brunswick Joint Venture

 

On September 5, 2017, the Company announced its agreement to participate in a joint venture agreement  with Global Hemp Group Inc., a Canadian corporation, as part of a multi-phase industrial hemp project on the Acadian peninsula of New Brunswick, Canada. The Company’s participation included providing one-half, or $10,775, of the funding for the phase one work. On January 10, 2018, phase-one was completed by successfully cultivating industrial hemp during the 2017 growing season for research purposes. The Company’s costs incurred by the Company’s interest was $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.

 

17 
 
 

 

Global Hemp Group Joint Venture/Scio Oregon Hemp Project

 

On May 8, 2018, the Company, Global Hemp Group, Inc., a Canadian corporation, and TTO Enterprises, Ltd., an Oregon corporation entered into a joint venture agreement to develop a project to commercialize the cultivation of industrial hemp on a 109 acre parcel of real property owned by the Company and Global Hemp Group, Inc. in Scio, Oregon, and operating under the Oregon corporation Covered Bridges, Ltd. On May 30, 2018, the joint venture purchased TTO Enterprises, Ltd.’s 15% interest in the joint venture for $30,000. The Company and Global Hemp Group, Inc. each have a 50% interest in the joint venture. The joint venture agreement commits the Company to provide a cash contribution of $600,000 payable on the following funding schedule: $200,000 which was paid upon execution of the joint venture agreement; $238,780 which was paid on July 31, 2018; $126,445 which was paid on October 31, 2018; and, $34,775 which was paid on January 31, 2019.

 

As of December 31, 2019, the combined balance of the Covered Bridge, Ltd. investment and the investment related to the 41389 Farm, an operating subsidiary of Global Hemp Group formed for this joint venture, was $0. This investment in the joint venture was written off as a loss for the period ended December 31, 2019. The debt obligation related to this joint venture of $262,414 was also written off to $0 as of the year ended December 31, 2019. The debt obligation related to the joint venture for the three months ended March 31, 2020 was $394,848. 

 

Bougainville Ventures, Inc. Joint Venture

 

On March 16, 2017, the Company entered into a joint venture agreement with Bougainville Ventures, Inc. (“Bougainville”), a Canadian corporation, to (i) 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 I-502 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 BV-MCOA Management, LLC, a limited liability company organized in the State of Washington on May 17, 2017 .

 

Pursuant to the joint venture agreement, the Company committed to raise not less than $1,000,000 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.

 

The joint venture agreement provided that funding provided by the Company would contribute 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 in the Company’s Current Report on Form 8-K filed with the SEC 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 from $1,000,000 to $800,000, and also required the Company to issue Bougainville 15 million 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.

 

 

18 
 
 

 

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 of contract for non-payment. Bougainville also did not possess an agreement with a Tier 3 I-502 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, but did not deed the real property to the joint venture. Bougainville failed to pay delinquent property taxes to Okanogan County, and as a result, as further discussed below, to date, the property has not been deeded to the joint venture.

 

To clarify the respective contributions and roles of the parties, the Company offered to enter into good faith negotiations to revise and restate the joint venture agreement with Bougainville. The Company diligently attempted to communicate with Bougainville to enter into an amended and restated joint venture agreement, and efforts towards satisfying the 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.

 

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 $800,000 contributed by the Company to the joint venture. 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 I-502 cannabis license holder to grow cannabis on the real property; and (iii) that clear title to the real property associated with the Tier 3 I-502 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 a lawsuit against Bougainville, BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court, case number 18-2-0045324. The Company 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, the appointment of a receiver, the return to treasury of 15 million shares of restricted common stock issued by the Company to Bougainville and treble damages pursuant to the Consumer Protection Act. The Company has filed a lis pendens on the real property. The case is currently in litigation.

 

In connection with the joint venture agreement, the Company recorded a cash investment of $1,188,500 to the joint venture during 2017. This was comprised of a 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 quarters ended March 31, 2018 and June 30, 2018, 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 and resulting litigation, as discussed above.

 

Natural Plant Extract

 

On April 15, 2019, the Company entered into a joint venture agreement with Natural Plant Extract of California, Inc. and its   subsidiaries (collectively, “NPE”), to operate a licensed psychoactive cannabis distribution service in California. California legalized THC psychoactive cannabis for medicinal and recreational use on January 1, 2018. On February 3, 2020, the parties terminated the joint venture and entered into a settlement and release agreement (the “Settlement Agreement”). In exchange for a complete release of all claims, the Company and NPE (1) agreed that the Company would reduce its interest in NPE from 20% to 5%; (2) the Company agreed to pay NPE a total of $85,000 as follows: $35,000 concurrent with the execution of the Settlement Agreement, and $25,000 no later than the fifth calendar day for each of the two months following execution of Settlement Agreement; and, (3) to retire the balance of the Company’s original valuation obligation from the material definitive agreement, representing a shortfall of $56,085, in a convertible promissory note, with terms allowing NPE to convert the note into shares of the Company’s common stock of at a 50% discount to the closing price of the Company’s common stock as of the maturity date. The note was satisfied in full during the year ended December 31, 2020.

 

As of the date of this filing, the Company owes $0 and is in compliance with the terms of the Settlement Agreement . On February 3, 2020, the Company issued NPE a convertible promissory note in the principal amount of $56,085. Additionally, as a result of the Settlement Agreement, the Company became liable to pay NPE its 5% portion equal to $25,902 of the regulatory charges to the City of Lynwood and the State of California to transfer the cannabis licenses back to NPE.

 

 

19 
 
 

 

Brazilian Joint Ventures

 

On September 30, 2020, the Company entered into two joint venture agreements (the “Joint Venture Agreements”) with Marco Guerrero, a director of the Company (“Guerrero”) and related party, to form joint venture operations in Brazil and in Uruguay to produce, manufacture, market and sell the Company’s hempSMART™ products in Latin America 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”).

 

Pursuant to the Joint Venture Agreements, the Company acquired a 70% equity interest in both HempSmart Brazil and HempSmart Uruguay, with a minority 30% equity interest in both HempSmart Brazil and HempSmart Uruguay being held by newly formed entities controlled by Guerrero. Pursuant to the Joint Venture Agreements, the Company agreed to provide capital in the amount of $50,000 to both HempSmart Brazil and HempSmart Uruguay, 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.

 

The boards of directors of HempSmart Brazil and HempSmart Uruguay will consist of three directors, elected by the joint venture partners. Pursuant to the Joint Venture Agreements, the Company agreed to license, on a royalty-free basis, certain of its intellectual property regarding its existing products to HempSmart Brazil and HempSmart Uruguay to enable the joint ventures to manufacture and sell its products in Brazil, Uruguay, and for export to other Latin American countries, the United States, and globally in accordance with the terms of the Joint Venture Agreements.

 

In addition, as majority partner, the Company may trigger a compulsory buy-sell procedure in the event a joint venture is frustrated in its intent or purpose, pursuant to which the Company could pursue a sale of all or substantially all of the joint venture. Subject to certain exceptions, the joint venture partners may not transfer their interests in HempSmart Brazil and HempSmart Uruguay. The Joint Venture Agreements contain customary terms, conditions, representations, warranties and covenants of the parties for like transactions.

 

 

20 
 
 

 

MARIJUANA COMPANY OF AMERICA, INC.

INVESTMENT ROLL-FORWARD

AS OF MARCH 31, 2021

                                        
   INVESTMENTS  SHORT-TERM INVESTMENTS
                                
  

TOTAL

INVESTMENTS

 

Global

Hemp

Group

 

Cannabis

Global Inc.

  ECOX  Benihemp  MoneyTrac 

Bougainville

Ventures, Inc.

 

Gate C

Research Inc.

 

Natural

Plant

Extract

  Vivabuds 

TOTAL

Short-Term

Investments

 

Global

Hemp

Group

  MoneyTrac
Beginning balance @12-31-16  $—     $—      —      —     $—     $—     $—     $—      —      —     $—      —     $—   
                                                                  
Investments made during 2017   3,049,275    10,775    —      —      100,000    250,000    1,188,500    1,500,000    —      —      —      —      —   
                                                                  
Quarter 03-31-17 equity method Loss   —      —      —      —      —      —      —      —      —      —      —      —      —   
                                                                  
Quarter 06-30-17 equity method Loss   —      —      —      —      —      —      —      —      —      —      —      —      —   
                                                                  
Quarter 09-30-17 equity method Loss   (375,000)   —      —      —      —      —      (375,000)   —      —      —      —      —      —   
                                                                  
Quarter 12-31-17 equity method accounting   313,702    —      —      —      —      —      313,702    —      —      —      —      —      —   
                                                                  
Impairment of Investment in 2017   (2,292,500)   —      —      —      —      —      (792,500)   (1,500,000)   —      —      —      —      —   
Balances as of 12/31/17  $695,477.00   $10,775.00   $—     $—     $100,000.00   $250,000.00   $334,702.00   $—     $—     $—     $—     $—     $—  s 

 

 

 

 

 

21 
 
 

                                        
   INVESTMENTS  SHORT-TERM INVESTMENTS
                                
  

TOTAL

INVESTMENTS

 

Global

Hemp

Group

 

Cannabis

Global Inc.

  ECOX  Benihemp  MoneyTrac 

Bougainville

Ventures, Inc.

 

Gate C

Research Inc.

 

Natural

Plant

Extract

  Vivabuds 

TOTAL

Short-Term

Investments

 

Global

Hemp

Group

  MoneyTrac
Investments made during 2018   986,654    986,654    —      —      —      —      —      —      —      —      —      —      —   
                                                                  
Quarter 03-31-18 equity method Loss   (37,673)   —      —      —      —      —      (37,673)   —      —      —      —      —      —   
                                                                  
Quarter 06-30-18 equity method Loss   (11,043)   —      —      —      —      —      (11,043)   —      —      —      —      —      —   
                                                                  
Quarter 09-30-18 equity method Loss   (10,422)   —      —       —     (10,422)    —      —      —      —      —     —      —      —  
                                                                  
Quarter 12-31-18 equity method Loss   (31,721)   (31,721)   —      —      —      —      —      —      —      —      —      —      —   
                                                                  
Moneytrac investment reclassified to Short-Term investments   (250,000)   —      —      —      —      (250,000)   —      —      —      —      250,000    —      250,000 
                                                                  
Unrealized gains on trading securities - 2018   —      —      —      —      —      —      —      —      —      —      560,000    —      560,000 
                                                                  
Impairment of investment in 2018   (933,195)   (557,631)   —      —      (89,578)   —      (285,986)   —      —      —      —      —      —   
Balance @12-31-18  $408,077   $408,077   $—     $—     $—     $—     $—     $—     $—     $—     $810,000   $—     $810,000 

 

 

 

22 
 
 

 

 

                                        
   INVESTMENTS  SHORT-TERM INVESTMENTS
                                
  

TOTAL

INVESTMENTS

 

Global

Hemp

Group

 

Cannabis

Global Inc.

  ECOX  Benihemp  MoneyTrac 

Bougainville

Ventures, Inc.

 

Gate C

Research Inc.

 

Natural

Plant

Extract

  Vivabuds 

TOTAL

Short-Term

Investments

 

Global

Hemp

Group

  MoneyTrac
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   $—     $—     $—     $—     $—     $—     $—     $—     $675,000   $—     $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  $—      —      —      —      —      —      —      —      —      —      (150,000)   —     ($150,000)
Balance @06-30-19  $3,463,526   $419,352   $—     $—     $—     $—     $0   $—     $2,993,709   $50,465   $525,000   $—     $525,000 

 

 

 

 

23 
 
 

 

                                        
   INVESTMENTS  SHORT-TERM INVESTMENTS
                                
  

TOTAL

INVESTMENTS

 

Global

Hemp

Group

 

Cannabis

Global Inc.

  ECOX  Benihemp  MoneyTrac 

Bougainville

Ventures, Inc.

 

Gate C

Research Inc.

 

Natural

Plant

Extract

  Vivabuds 

TOTAL

Short-Term

Investments

 

Global

Hemp

Group

  MoneyTrac
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  $—      —      —      —      —      —      —      —      —      —      (362,625)   —     ($362,625)
Balance @09-30-19  $3,772,652   $682,141   $—     $—     $—     $—     $—     $—     $2,898,722   $191,789   $120,708   $—     $120,708 

 

 

 

24 
 
 

 

                                        
   INVESTMENTS  SHORT-TERM INVESTMENTS
                                
  

TOTAL

INVESTMENTS

 

Global

Hemp

Group

 

Cannabis

Global Inc.

  ECOX  Benihemp  MoneyTrac 

Bougainville

Ventures, Inc.

 

Gate C

Research Inc.

 

Natural

Plant

Extract

  Vivabuds 

TOTAL

Short-Term

Investments

 

Global

Hemp

Group

  MoneyTrac
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)  $—      —      —      —   
                                                                  
Loss on disposition of investment  ($389,664)   —      —      —      —      —      —      —      —     ($389,664)   —      —      —   
                                                                  
Sale of trading securities during quarter ended 12-31-19  $—      —      —      —      —      —      —      —      —      —     ($17,760)   —     ($17,760)
                                                                  
Unrealized gains on trading securities - quarter ended 12-31-19  $—      —      —      —      —      —      —      —      —      —      (75,545)   —     ($75,545)
Balance @12-31-19  $693,915   $—     $—     $—     $—     $—     $—     $—     $693,915   $—     $27,403   $—     $27,403 

 

 

 

25 
 
 

 

 

                                        
   INVESTMENTS  SHORT-TERM INVESTMENTS
                                
  

TOTAL

INVESTMENTS

 

Global

Hemp

Group

 

Cannabis

Global Inc.

  ECOX  Benihemp  MoneyTrac 

Bougainville

Ventures, Inc.

 

Gate C

Research Inc.

 

Natural

Plant

Extract

  Vivabuds 

TOTAL

Short-Term

Investments

 

Global

Hemp

Group

  MoneyTrac
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   $—     $—     $—     $—     $—     $—     $—     $693,915   $—     $13,458   $—     $13,458 

 

 

 

26 
 
 

 

                                        
   INVESTMENTS  SHORT-TERM INVESTMENTS
                                
  

TOTAL

INVESTMENTS

 

Global

Hemp

Group

 

Cannabis

Global Inc.

  ECOX  Benihemp  MoneyTrac 

Bougainville

Ventures, Inc.

 

Gate C

Research Inc.

 

Natural

Plant

Extract

  Vivabuds 

TOTAL

Short-Term

Investments

 

Global

Hemp

Group

  MoneyTrac
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   $—     $—     $—     $—     $—     $—     $—     $693,915   $—     $—     $—     $—   
                                                                  
Global Hemp Group trading securities issued   650,000    —     $650,000    —      —      —      —      —      —      —     $185,000   $185,000    —   
                                                                  
Investment in Cannabis Global   —      —      —      —      —      —      —      —      —      —      —      —      —   
                                                                  
Balance @09-30-20  $1,343,915   $—     $650,000   $—     $—     $—     $—     $—     $693,915   $—     $185,000   $185,000   $—   
                                                                  
Unrealized gain on Global Hemp Group securities - 4th Quarter 2020   —      —      —      —      —      —      —      —      —      —     $54,064   $54,064    —   
                                                                  
Unrealized gains on Cannabis Global Inc securities - 4th Quarter 2020   208,086    —     $208,086    —      —      —      —      —      —      —      —      —      —   
Balance @12-31-20  $1,552,001   $—     $858,086   $—     $—     $—     $—     $—     $693,915   $—    $239,064   $239,064   $—   
                                                                  
Investment in ECOX   650,000    —      —     $650,000    —      —      —      —      —      —     $620,133   $620,133    —   
                                                                  
Balance @03-31-21  $2,202,001   $—     $858,086   $650,000   $—     $—     $—     $—     $693,915   $—     $859,197   $859,197   $—   

 

 

 

27 
 
 

 

 

    Loan Payable
                                             
    

TOTAL

JV Debt

    

Global

Hemp

Group

    Benihemp    MoneyTrac    

Bougainville

 Ventures, Inc.

    

Gate C

 Research Inc.

    

Natural

Plant

 Extract

    

Robert L

 Hymers III

    Vivabuds    

General

Operating

Expense

 
Beginning balance @12-31-16  $—     $—     $—     $—     $—     $—      —      —      —     $—   
                                                   
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)  $2,067,411.00   $—     $—     $—     $394,555.00   $1,500,000.00   $—     $—     $—     $172,856.00 
                                                   
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   —      —      —      —      —      —      —      —      —      —   
                                                   
Quarter 12-31-18 loan borrowings   580,425    580,425    —      —      —      —      —      —      —      —   
Balance @12-31-18   (b)   1,422,410    1,027,855    —      —      394,555    —      —      —      —      —   

 

 

 

28 
 
 

 

 

    Loan Payable
                                             
    

TOTAL

JV Debt

    

Global

Hemp

Group

    Benihemp    MoneyTrac    

Bougainville

 Ventures, Inc.

    

Gate C

 Research Inc.

    

Natural

Plant

 Extract

    

Robert L

 Hymers III

    Vivabuds    

General

Operating

Expense

 
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    —      —      394,555    —      —      —      —      —   
                                                   
Quarter 03-31-19 loan borrowings   3,836,220   $161,220    —      —      —      —     $2,000,000    —     $—     $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    —      —      394,555    —      1,650,350    —      —      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    —      —      394,555    —      1,650,350    —      —      1,007,284 

 

 

 

 

29 
 
 

 

 

    Loan Payable
                                             
    

TOTAL

JV Debt

    

Global

Hemp

Group

    Benihemp    MoneyTrac    

Bougainville

 Ventures, Inc.

    

Gate C

 Research Inc.

    

Natural

Plant

 Extract

    

Robert L

 Hymers III

    Vivabuds    

General

Operating

Expense

 
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   $—     $—     $—     $—     $—     $56,085   $4,221   $—     $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   $—     $—     $—     $—     $56,085   $28,359   $—     $2,955,881 

 

 

 

 

30 
 
 

 

 

    Loan Payable
                                             
    

TOTAL

JV Debt

    

Global

Hemp

Group

    Benihemp    MoneyTrac    

Bougainville

 Ventures, Inc.

    

Gate C

 Research Inc.

    

Natural

Plant

 Extract

    

Robert L

 Hymers III

    Vivabuds    

General

Operating

Expense

 
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    —      —      —      —      —      —     ($27,715)   —     $433,461 
                                                   
Balance @06-30-20  (h)  $3,262,538   $478,495   $—     $—     $—     $—     $56,085   $65,735   $—     $2,662,224 
                                                   
Quarter 09-30-20 debt conversion to equity  ($606,472)   —      —      —      —      —     ($56,085)  ($65,735)   —     ($484,652)
                                                   
Debt Settlement during Q3 2020  ($474,495)  ($474,495)   —      —      —      —      —      —      —      —   
                                                   
Balance @09-30-20  (i)  $2,181,571   $4,000   $—     $—     $—     $—     $—     $—     $—     $2,177,572 

 

 

 

 

31 
 
 

 

 

    Loan Payable
                                             
    

TOTAL

JV Debt

    

Global

Hemp

Group

    Benihemp    MoneyTrac    

Bougainville

 Ventures, Inc.

    

Gate C

 Research Inc.

    

Natural

Plant

 Extract

    

Robert L

 Hymers III

    Vivabuds    

General

Operating

Expense

 
Quarter 12-31-20 loan borrowings, net  $309,675    —      —      —      —      —      —      —      —     $309,675 
                                                   
Quarter 12-31-20 Debt Discount adjustments  ($71,271)   —      —      —      —      —      —      —      —     ($71,271)
                                                   
Quarter 12-31-20 debt conversion to equity  ($993,081)   —      —      —      —      —      —      —      —     ($993,081)
Balance @12-31-20  (j)  $1,426,894   $4,000   $—     $—     $—     $—     $—     $—     $—     $1,422,895 
                                                   
Quarter 03-31-21 debt conversion to equity  ($1,313,016)  ($4,000)   —      —      —      —      —      —      —     ($1,309,016)
                                                   
Quarter 03-31-21 loan borrowings, net  $145,000    —      —      —      —      —      —      —      —     $145,000 
Balance @03-31-21  (k)  $258,878   $—    $—