UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☒
ANNUAL REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2018
OR
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________ to
_____________.
Commission file number
000-53727
WEED, INC.
(Exact name of registrant as specified in its charter)
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Nevada
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83-0452269
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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4920 N. Post Trail
Tucson, AZ
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85750
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number,
including area code
(520) 818-8582
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of each class
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Name of
each exchange on which registered
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None
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None
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Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, par value $0.001
(Title
of class)
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes
☐
No
☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the
Act. Yes
☐
No
☒
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 Website, 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 and post such files). Yes
☐
No
☒
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated
filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
☐
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1
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 Act). Yes
☐
No
☐
Aggregate
market value of the voting stock held by non-affiliates:
$101,344,700 as based on last reported sales price of such stock on
June 30, 2018. The voting stock held by non-affiliates on that date
consisted of 22,774,090 shares of common stock the closing stock
price was $4.45.
Applicable Only to Registrants Involved in Bankruptcy Proceedings
During the Preceding Five Years:
Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by Sections
12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes
☐
No
☐
Indicate the number of shares outstanding of each
of the registrant’s classes of common stock, as of the latest
practicable date. As of
April 5, 2019
there were
106,410,685
shares of common stock, $0.001 par value, issued
and outstanding.
Documents Incorporated by Reference
List hereunder the following documents if
incorporated by reference and the Part of the Form 10-K (e.g., Part
I, Part II, etc.) into which the document is incorporated: (1) Any
annual report to security holders; (2) Any proxy or information
statement; and (3) Any prospectus filed pursuant to rule 424(b) or
(c) of the Securities Act of 1933. The listed documents should be
clearly described for identification purposes (e.g., annual report
to security holders for fiscal year ended December 24,
1980).
None.
2
WEED, Inc.
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ITEM
1
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BUSINESS
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4
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ITEM
1A
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RISK
FACTORS
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14
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ITEM
1B
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UNRESOLVED
STAFF COMMENTS
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18
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ITEM
2
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PROPERTIES
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18
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ITEM
3
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LEGAL
PROCEEDINGS
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19
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ITEM
4
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MINE
SAFETY DISCLOSURES
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20
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PART II
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ITEM
5
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MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
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21
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ITEM
6
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SELECTED
FINANCIAL DATA
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23
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ITEM
7
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
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23
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ITEM
7A
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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30
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ITEM
8
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
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30
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ITEM
9
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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30
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ITEM
9A
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CONTROLS
AND PROCEDURES
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30
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ITEM
9B
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OTHER
INFORMATION
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32
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PART III
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ITEM
10
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DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNACE
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33
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ITEM
11
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EXECUTIVE
COMPENSATION
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36
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ITEM
12
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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39
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ITEM
13
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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40
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ITEM
14
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PRINCIPAL
ACCOUNTING FEES AND SERVICES
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43
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PART IV
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ITEM
15
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EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
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44
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3
PART
I
Explanatory Note
Forward Looking Statements
This
Annual Report includes forward-looking statements within the
meaning of the Securities Exchange Act of 1934 (the “Exchange
Act”). These statements are based on management’s
beliefs and assumptions, and on information currently available to
management. Forward-looking statements include the information
concerning possible or assumed future results of operations of the
Company set forth under the heading “Management's Discussion
and Analysis of Financial Condition or Plan of Operation.”
Forward-looking statements also include statements in which words
such as “expect,” “anticipate,”
“intend,” “plan,” “believe,”
“estimate,” “consider,” or similar
expressions are used.
Forward-looking
statements are not guarantees of future performance. They involve
risks, uncertainties, and assumptions. The Company's future results
and shareholder values may differ materially from those expressed
in these forward-looking statements. Readers are cautioned not to
put undue reliance on any forward-looking statements.
ITEM
1 – BUSINESS
Corporate History
We were
originally incorporated under the name Plae, Inc., in the State of
Arizona on August 20, 1999. At the time we operated under the name
Plae, Inc., no business was conducted. No books or records were
maintained and no meetings were held. In essence, nothing was done
after incorporation until Glenn E. Martin took possession of Plae,
Inc. in January 2005. On February 18, 2005, the corporate name was
changed to King Mines, Inc. and then subsequently changed to its
current name, United Mines, Inc., on March 30, 2005. No shares were
issued until the Company became United Mines, Inc. From 2005 until
2015, we were an exploration stage mineral exploration company that
owned a number of unpatented BLM mining claims and Arizona State
Land Department exploration leases.
On
November 26, 2014, our Board of Directors approved the
redomestication of our company from Arizona to Nevada (the
“Articles of Domestication”), and approved Articles of
Incorporation in Nevada, which differed from then-Articles of
Incorporation in Arizona, primarily by (a) changing our name from
United Mines, Inc. to WEED, Inc., (b) authorizing Twenty Million
(20,000,000) shares of preferred stock, with blank check rights
granted to our Board of Directors, and (c) authorizing Two Hundred
Million (200,000,000) shares of common stock (the “Nevada
Articles of Incorporation”). On December 19, 2014, the
holders of a majority of our outstanding common stock approved the
Articles of Domestication and the Nevada Articles of Incorporation
at a Special Meeting of Shareholders. On January 16, 2015, the
Articles of Domestication and the Nevada Articles of Incorporation
went effective with the Secretary of State of the State of Nevada.
On February 2, 2015, our name change to WEED, Inc., and a
corresponding ticker symbol change to “BUDZ” went
effective with FINRA and was reflected on the quotation of our
common stock on OTC Markets.
These
changes were effected in order to make our corporate name and
ticker symbol better align with our short-term and long-term
business focus, which in the short-term is to conduct a Cannabis
Genomic Study over the next 5 years, process those results, and in
the long-term to be an international cannabis research and product
development company, with a globally-recognized brand focusing on
building and purchasing labs, land and building commercial grade
“Cultivation Centers” to consult, assist, manage &
lease to universities, state governments, licensed dispensary
owners and worldwide organic grow operators on a contract basis,
with a concentration on the legal and medical Cannabis sector.
These operations are being conducted through our primary
wholly-owned subsidiary, Sangre AT, LLC, a Colorado limited
liability company (“Sangre”). Our long-term plan is to
become a True “Seed-to-Sale” global holding company
providing infrastructure, financial solutions, product development
and real estate options in this new emerging market. Our long term
plans may also include acquisitions of synergistic businesses, such
as distilleries to make infused beverages and/or super oxygenated
water with CBD and THC.
4
ITEM 1 – BUSINESS
(CONTINUED)
As of
December 31, 2018, in addition to Sangre, we had two other
wholly-owned subsidiaries, namely WEED Australia Ltd., an
Australian corporation, and WEED Israel Cannabis Ltd., an Israeli
corporation. WEED Australia is registered as an unlisted public
company in Australia. Both subsidiaries were formed to address
future anticipated global demand and to take advantage of countries
that have more developed laws related to cannabis.
Our
corporate offices are located at 4920 N. Post Trail, Tucson, AZ
85750, telephone number (520) 818-8582.
Business Overview
General
We are
an early stage holding company currently focused on the development
and application of cannabis-derived compounds for the treatment of
human disease. Our wholly-owned subsidiary, Sangre, has begun a
planned five-year Cannabis Genomic Study, to complete a genetic
blueprint of the Cannabis plant genus, by creating a global genomic
classification of the entire plant. By targeting cannabis-derived
molecules that stimulate the endocannabinoid system, Sangre’s
research team plans to develop scientifically-valid and
evidence-based cannabis strains for the production of
disease-specific medicines. The goal of the research is to
identify, collect, patent, and archive a collection of
highly-active medicinal strains. We plan to conduct this study only
in states where cannabis has been legalized for medicinal
purposes.
Using
annotated genomic data and newly generated phenotypic data, Sangre
plans to identify and isolate regions of the plant genome which are
related to growth, synthesis of desired molecules, and drought and
pest resistance. This complex data set would then be utilized in a
breeding program to generate and establish new hybrid cultivars
which exemplify the traits that are desired by the medical and
patient community. This breeding program would produce new seed
stocks and clones, which we plan on patenting. If successful this
intellectual property should generate immense value for the
Company. After developing a comprehensive understanding of the
annotated genome of a variety of cannabis strains, and obtaining
intellectual property protection over the most promising strains,
we plan to move forward either independently or with strategic
partners to develop medicinal products for the treatment of a
multitude of human diseases.
Our
current, short-term goals relate to the Cannabis Genomic Study and
the resulting development of a variety of new cannabis strains,
and, over the next 5 years, we plan to process those results in
order to become an international cannabis research and product
development company, with a globally-recognized brand focusing on
building and purchasing labs, land and building commercial grade
“Cultivation Centers” to consult, assist, manage &
lease to universities, state governments, licensed dispensary
owners and organic grow operators on a contract basis with a
concentration on the legal and medical cannabis
sector.
Our
long-term plan is to become a true “Seed-to-Sale”
global holding company providing infrastructure, financial
solutions, product development, and real estate options in this new
emerging market. Our long term growth may also come from the
acquisition of synergistic businesses, such as distilleries, to
make anything from infused beverages to super oxygenated water with
CBD and THC. Currently, WEED, Inc. has formed WEED Australia Ltd.,
registered as an unlisted public company in Australia to address
this global demand. We have also formed WEED Israel Cannabis Ltd.,
an Israeli corporation, to address future global demand, and in
March 2019, WEED Israel Cannabis Ltd. was involved in the
transaction with Yissum discussed herein. In 2018, we formed a
non-profit company in Australia called Cannabis Institute of
Australia Limited. To date this company has been
dormant.
As of
December 31, 2018, the original Sangre’s research team is no
longer with the Company, and the new research team consists of
individuals who reside throughout the country. The property manager
is the only individual who is currently located at the site in La
Veta.
5
ITEM 1 – BUSINESS
(CONTINUED)
Our
website is www.WEEDincUSA.com.
Cannabis Genomic Study
After
more than 40 years of illicit, underground breeding programs, the
genetic integrity of Cannabis has been significantly degraded.
Our subsidiary, Sangre
AT, LLC (“Sangre”) plans to use a gene-based breeding
program to root out inferior cultivars and replace them with
fully-validated and patentable cultivars which produce consistent
plant products for the medicinal markets. We believe our unique
gene-based breeding program will improve cultivars and introduce
integrity, stability, and quality to the market in the following
ways:
●
Accelerated and optimized growth
rates; modern genomic resources will enhance traditional breeding
methods
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Generation of new cultivars,
accelerating and perfecting the art of selective
breeding
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Provide the ability to assay for
specific genes within the crop, which is critical to strain
tracking and market quality assurance
●
Improve disease and drought
resistance
We
believe our gene-based breeding program will facilitate and
accelerate:
●
Improved therapeutic
properties
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New therapies for migraines/chronic
pain, epilepsy, cancer, PTSD, chronic head injury, and
others
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Enhanced opportunities for new drug
discovery through collaborations with national medical research and
treatment centers and Bio-pharma companies
●
Development and protection of
intellectual property
The Research Plan
In
order to achieve the desired results outlined above, Sangre has
developed a
research plan entitled the
“Cannabis Genomic Study.” The goal of the study is to
complete a global genomic classification of the Cannabis plant
genus. Once the classification is complete, the research team plans
to develop new cannabis strains that show the highest likelihood of
being successful in the treatment of a variety of human diseases,
test those strains and then work to produce those strains in a
medicinal form for the treatment of disease. The research plan will
be conducted using the following steps: Extraction, Purification,
Sequencing. Annotation, and Cloning
(micro-propagation).
Extraction
:
The extraction of genomic DNA from cannabis is a complex process of
cell lysis and DNA recovery. Sangre has evaluated, updated, and
validated new methods for DNA recovery.
Purification
:
Using next generation purification chemistries, the DNA is cleaned
and concentrated for downstream applications.
Sequencing
:
The Cannabis DNA is sequenced using both the Illumina MiSeq and
MinIon instruments.
Annotation
:
The genomic data is assembled and annotated using proprietary
bioinformatic systems and the data provided to the Sangre AgroTech
genetic breeders and cellular cloners.
Cloning
:
Through this process, new, high-value cannabis strains are
developed.
6
ITEM 1 – BUSINESS
(CONTINUED)
The
objectives of the research plan are as follows:
Technical Objective
1
: Using two next generation
sequencing platforms and proprietary bioinformatics programs, we
will sequence five cultivars of Cannabis, and generate fully
annotated genomic data.
Technical Objective
2
: Using the selected cultivars, backcross and forward
hybridization studies
will be
performed to produce a new generation of stock. The progeny of
these crosses will be grown, genetically finger-printed, and
introduced to the market under patent protection. Up-selection and
cultivation of cultivars for quality assurance.
Technical Objective
3
: Genotypic and phenotypic measurements of the offspring
will be
performed using Next
Generation Sequence Analysis, Genotyping, and Phenotyping analysis.
Product focus groups will evaluate new cultivars. Patent protection
will be initiated for new cultivars which meet product development
criteria.
Technical Objective
4
:
Utilize gene-driven breeding
of up-selected cultivars to initiate the generation of
“designer” cultivars for clinical
research.
Technical Objective
5
: Market placement of selected, genetically enhanced
cultivars for the medicinal and bio-pharma markets.
Where We Are in the Research Plan
As
noted above, phase one of our planned five year “Cannabis
Genomic Study” is “extraction”. On April 20,
2017, Sangre initiated the genomic study by extracting DNA from
seven cannabis strains in Tucson, Arizona. Sangre followed the
initial extraction with a second round of extractions in July 2017.
The extracted DNA is currently being sequenced by the Sangre team
using a binary sequencing approach based on the use of two distinct
sequencing technologies and a proprietary bioinformatics database.
Following the generation of genomic data, the sequences will be
annotated (compared) against over 300,000 plant genes to elucidate
specific de novo pathways responsible for the synthesis of specific
compounds and classes of compounds.
As
noted herein, on July 26, 2017, we acquired property located in La
Veta, Colorado in order for Sangre to complete its 5-Year, $15+
million Cannabis Genomic Study. The acquisition of this property
was not essential for the Sangre team to begin the extraction and
sequencing phases, however, once completed, the property will allow
Sangre to expand the genomic study. The facility is currently under
re-design and renovation to convert the existing structures into a
world-class genetics research center. Additionally, under the
genome project directives, additional strains are slated for
sequencing and annotation as part of the overall expansion of this
research project. An integral part of this expansion is the
acquisition of additional DNA extraction, amplification, and
sequencing technologies. The expansion also includes the
installation of high-level IT networks for data acquisition,
analysis, and storage. The La Veta property, when completed will
allow us to expand the scope of the study, as well as, complete the
future steps in the study. Once completed, the La Veta facility
will also contain laboratories for cellular cloning, in vitro
protoplast fusions, and plant developmental studies.
Competitive
Advantages
Sangre’s
research and development team works with next generation sequencing
(NGS) and emerging third generation instruments, and has developed
the most advanced proprietary bioinformatics data systems
available. Sangre uses a unique two sequencing approach. One system
provides DNA reads of up to 300,000 base pair reads and an NGS
system which provides highly accurate short reads. This allows the
genomic data to be assembled in a scaffold construct; the long
reads forming the scaffold and the short reads providing highly
accurate verification and quality assurance of the genomic data.
This approach, together with the bioinformatics program,
facilitates a highly accurate construct of the Cannabis genome
which can be annotated and facilitate gene discovery and gene
location. Sangre combination of personnel, skill-sets, and data
analytics capabilities will allow us to accomplish our goals in
months, rather than years.
7
ITEM 1 – BUSINESS
(CONTINUED)
Using
annotated genomic data and newly generated phenotypic data, we plan
to identify and isolate regions of the genome which are related to
growth, synthesis of desired molecules, and environmental
compatibility. This complex data set will be utilized in a breeding
program to generate and establish new hybrid cultivars which
exemplify the traits that are desired by the medical community.
This breeding program will produce new seed stocks, clones,
cultivars, and intellectual property which will generate value for
the business organization.
Sangre
will develop a translational breeding program to establish a new
collection of Cannabis cultivars for the national market. Using
genetic screening technology and micro-propagation, cultivars can
be up-selected for specific traits and grown to address the needs
of consumers in the medicinal and drug discovery markets. The
combination of next generation genomics, selective hybridization,
and In Vitro cloning provide us with the tools to enhance new
cultivars of patentable Cannabis.
Marketing
We have
not developed a marketing plan and do not intend to until we are in
the latter stages of the Cannabis Genomic Study and believe we have
strains that are marketable for the treatment of disease. At that
time we plan to develop a marketing plan for our newly-developed
strains of Cannabis. We believe that if we are successful in
developing strains of Cannabis that effectively treat human
diseases then the market for our products will be a vibrant
market.
Manufacturing
We are
not currently manufacturing any products and do not intend to do so
until we are in the latter stages of the Cannabis Genomic Study and
believe we have strains that are marketable for the treatment of
disease such that we could begin the manufacturing of such
products, either in-house or through relationships with third party
companies. We do not currently have any relationships with third
party companies for the manufacturing of any products.
Competition
The
cannabis industry, taken as a whole, is an emerging industry with
many new entrants, with some of them focused on research, some on
medicinal cannabis and others focused on cannabis for legal, adult
use, i.e. “recreational” use. We are focused solely on
the research and medicinal cannabis part of the industry.
Additionally, many cannabis companies are international companies
due to the restrictions on the cannabis industry in the
U.S.
At this
point in our development, we believe our competitors are those
companies that are attempting study and sequence cannabis DNA with
the goal of creating medicines from that research. We do not view
ourselves in competition with those companies currently growing
and/or selling cannabis for medicinal or recreational use since we
are a research company. We are aware of companies that supply
synthetic cannabinoids and cannabis extracts to researchers for
pre-clinical and clinical investigation. We are also aware of
various companies that cultivate cannabis plants with a view to
supplying herbal cannabis or non-pharmaceutical cannabis-based
formulations to patients. These activities have not been approved
by the FDA.
8
ITEM 1 – BUSINESS
(CONTINUED)
We have
never endorsed or supported the idea of distributing or legalizing
crude herbal cannabis, or preparations derived from crude herbal
cannabis for medical use and do not believe our research to
hopefully create prescription cannabinoids are the same, and
therefore competitive, with crude herbal cannabis. We believe that
only a cannabinoid medication, one that is standardized in
composition, formulation and dose, administered by means of an
appropriate delivery system, and tested in properly controlled
pre-clinical and clinical studies, can meet the standards of
regulatory authorities around the world, including those of the
FDA. We believe that any cannabinoid medication must be subjected
to, and satisfy, such rigorous scrutiny through proper accredited
education and federal regulations.
As
Cannabis has moved through the legalization process in North
America, research groups in Canada and the Unites States have
initiated work on understanding the Cannabis genome.
The
methods of competition for companies in the cannabis research
market segment revolve around a variety of factors, including, but
not limited to, experience of the company’s research team,
the facilities used by the company to conduct research, the
instrumentation used to sequence DNA, the company’s internal
research protocols, and the company’s relationship with those
in the scientific community.
Applying
those competitive factors to WEED, Inc.: our research team averages
over 15 years of experience (including peer-reviewed publications
and conference presentations), we have dedicated over 14,000 square
feet of research space to the resolution of cannabis genomics and
the development of new strains, our instrumentation is designed to
sequence large pieces of DNA (>25,000 bp - 10 times larger than
our typical competitors), and we use custom bioinformatics (DNA
sequence analysis software) not available to any other competitor
in the industry. We believe these factors, along with our strong
relationships in the industry and our unique validation protocols,
will allow us to measure up favorably when compared to our
competition.
Next Generation Sequencing
Next-generation
sequencing (NGS), introduced nearly ten years ago, is the catch-all
term used to describe several sequencing technologies
including:
●
Illumina (Solexa)
sequencing
●
Roche 454 sequencing
●
Ion torrent: Proton / PGM
sequencing
●
SOLiD sequencing
These
recent sequencing technologies allow scientists to sequence DNA and
RNA much more quickly and cheaply than the previously used Sanger
sequencing, and as such, have greatly expanded the study of
genomics and molecular biology. Numerous laboratories within the
Cannabis community are currently employing this
technology.
Colorado State University – Boulder
To the
best of our knowledge, Colorado State University – Boulder is
conducting a Cannabis Genomic Research Initiative, which is
currently seeking to describe the Cannabis genome. The data
generated through this effort is provided through the public domain
to growers in an effort to stimulate the production of new,
high-value stains of Cannabis.
Anandia Labs
Anandia
Labs is conducting work in the area of Cannabis genomics based on
sequence work which was completed in 2011. The sequencing work
conducted was based on “next generation sequencing”
technology and resulted in the generation of tens-of-thousands of
DNA segments that have yet to be completely and correctly
reassembled. Much of the sequence data that was generated through
their sequencing efforts has been placed into the public domain and
shared with other laboratories. In some instances, the data has
been found to be less than accurate.
9
ITEM 1 – BUSINESS
(CONTINUED)
Phylos Biosciences
Phylos
Biosciences is currently using DNA-based genetic fingerprinting to
establish relationships between strains and to assist in the
development of phenotypic databases to accelerate traditional
breeding programs. Phylos Biosciences has a primary goal of
bringing clarity to the Cannabis market and promote the generation
of IP held by individual growers. To the best of our knowledge,
Phylos Biosciences is not engaged in whole genome sequencing and is
not engaged in any genetic enhancements of the Cannabis strains.
They simply supply genetic
data to their customer base to more effectively drive the
traditional breeding process.
New West Genetics
New
West Genetics aims to improve and develop industrial hemp as a
viable crop for the United States. New West Genetics seeks to
exploit the diverse end uses of hemp and optimize the genetics of
hemp to create a lucrative crop to add to the rotation of US
farmers. Industrial hemp’s uses and potential are as great as
many major crops, if not more. We believe NWG is utilizing modern
sequencing technology and statistical genomics approaches to
understand these factors as they apply to hemp production in states
where it is legal to grow. Understanding the genotype to phenotype
map will be increasingly useful for expanding production of
hemp.
While
we do not believe any of the above companies or universities are
direct competitors of ours based on what we believe about their
work in the industry, they could be competitors for research
funding dollars. We are not aware of the financial situation of
many of the above companies and universities, but we will need to
raise substantial additional capital in order to fully-fund the
five year genomic study and the facilities to complete the study.
Most of the above companies and universities are likely better
financed than we are and we will need to raise substantial funds in
order to compete in the cannabis research industry.
Intellectual Property
On
March 1, 2019, we entered into an Exclusive License and Assignment
Agreement (the “Technology Agreement”) with Yissum
Research Development Company of the Hebrew University of Jerusalam,
Ltd., an entity organized in Israel (“Yissum”). Under
the terms of the Technology Agreement, Yissum agreed to grant an
exclusive license, and eventually assign, to us certain platform
technologies relating to different formulations for administration
and delivery of lipophilic compositions, (including cannabinoids)
(collectively, the “Technology”) invented and/or
developed by Prof. Elka Touitou at The Hebrew University of
Jerusalem, which technologies are more fully described in the
patent applications and/or patents listed in Appendix A to the
Technology Agreement.
Under
the Agreement, in exchange for an exclusive license to use the
Existing Technologies, we will pay Yissum a total of USD$1,000,000
as follows: (i) $100,000 within three (3) business days of signing
the Technology Agreement (which amount has been paid), (ii)
$400,000 on or before May 1, 2019, and (iii) $500,000 on or before
December 31, 2019 (together, the “License Payments”).
The grant of the exclusive license and the transfer to us of the
responsibility for the administration and control of patent
activities and patent expenses related to the Existing Technologies
occurs after the USD$400,000 payment due May 1, 2019.
The
intent of the parties is that we will have the exclusive license
until such time as the Existing Technologies are assigned to WEED,
Inc.. In order to receive the assignments and own the five (5)
patents and the Technologies, in addition to the License Payments
we must pay Yissum a total of USD$1,000,000, with $300,000 due on
or before June 1, 2020 and $700,000 on or before September 1, 2020.
Additionally, we will owe Yissum an additional USD$1,500,000 upon
the earlier of the following events: (i) the first commercial sale
of a pharmaceutical product based on the Technology, or (ii) the
later of: (a) the first commercial sale of any product based on the
Technology, and (b) when we receive an aggregate of USD$1,500,000
in gross revenue from all sales of products based on the
Technology.
10
ITEM 1 – BUSINESS
(CONTINUED)
The
description of the Technology Agreement set forth in this report is
qualified in its entirety by reference to the full text of that
document, which is attached as Exhibit 10.1 to our Current Report
on Form 8-K filed with the Commission on March 7, 2019 and is
incorporated herein by reference.
Additionally, we
consider certain elements of our Cannabis Genomic Study to be trade
secrets and we protect it as our intellectual property. In the
future, if we are successful in identifying certain Cannabis
strains as promising for the treatment of diseases we will seek to
patent those strains.
Government Regulation
As
of the end of February 2017, 28 states and the District of Columbia
allow its citizens to use medical marijuana. Voters in the states
of Colorado, Washington, Alaska, Oregon and the District of
Columbia have approved ballot measures to legalize cannabis for
adult use. The state laws are in conflict with the Federal
Controlled Substances Act, which makes marijuana use and possession
illegal on a national level. The prior administration (President
Obama) effectively stated that it is not an efficient use of
resources to direct law federal law enforcement agencies to
prosecute those lawfully abiding by state-designated laws allowing
the use and distribution of medical marijuana. However, the Trump
administration has indicated the potential for stricter enforcement
of the marijuana industry at the federal level, but to date there
has been very little in terms of action. There is no guarantee that
the Trump administration or future administrations will maintain
the low-priority enforcement of federal laws in the marijuana
industry that was adopted by the Obama administration. The Trump
administration or any new administration that follows could change
this policy and decide to enforce the federal laws strongly. Any
such change in the federal government’s enforcement of
current federal laws could cause significant financial damage to
our business and our shareholders.
Further,
and while we do not intend to harvest, distribute or sell cannabis,
if we conduct research with the cannabis plant or lease buildings
to growers of marijuana, etc., we could be deemed to be
participating in marijuana cultivation, which remains illegal under
federal law, and exposes us to potential criminal liability, with
the additional risk that our properties could be subject to civil
forfeiture proceedings.
Currently,
there are no approvals needed in order to sequence the cannabis
genome, which is what is currently being conducted by Sangre.
However, prior to doing any research into the medical applications
of the cannabis plant once the study is completed, we will need to
obtain medicinal cannabis and hemp research licenses from the State
of Colorado. Additionally, if we ever cultivate and process
cannabis plants, we will need cultivation and processing licenses
from the State of Colorado, which covers cannabis and hemp. These
licenses will cost approximately $1,000 to $5,000 per license, and
likely take approximately six months to obtain.
Sangre Agreement
On
April 20, 2017, we entered into a Share Exchange Agreement with
Sangre AT, LLC, a Wyoming limited liability company, under which we
acquired all of the issued and outstanding limited liability
company membership units of Sangre in exchange for Five Hundred
Thousand (500,000) shares of our common stock, restricted in
accordance with Rule 144. As a result of this agreement, Sangre is
a wholly-owned subsidiary of WEED, Inc.
Employees
As of
December 31, 2018, we employed two people on a full time basis,
namely Glenn E. Martin and Nicole M. Breen.
We also contract with John Irvin, Thomas Perry,
Andrew Defries, Jerrell Shaw, and Tom Pool on a full-time basis who
work with Sangre. As of December 31, 2018, WEED Israel Cannabis
Ltd. had one consultant. As of December 31, 2018, WEED Australia
Ltd. had two consultants.
11
ITEM 1 – BUSINESS
(CONTINUED)
Le Veta, Colorado Properties
On July
26, 2017, we acquired property located in La Veta, Colorado in
order for Sangre to complete its 5-Year, $15+ million Cannabis
Genomic Study.
The site includes a
10,000+ sq. ft. building that will house Sangre’s genomic
research facility, a 4,000+ square foot building for plant product
analytics and plant product extraction, a 3,500 sq. ft. corporate
office center, and 25 RV slots with full water and electric, which
we plan to convert into a series of small research pods. Under the
terms of the purchase agreement, we paid $525,000 down, including
25,000 shares of our common stock, and Sangre took immediate
possession of the property. Under the terms of the purchase we were
obligated to pay an additional $400,000 in cash and issue an
additional 75,000 shares of our common stock over the next two
years in order to pay the entire purchase price.
On January
12, 2018, we entered into an Amendment No. 1 to the $475,000
principal amount promissory note issued by us to the seller of the
property, under which both parties agreed to amend the purchase and
the promissory note to allow us to payoff the note in full if we
paid $100,000 in cash on or before January 15, 2018 and issued the
seller 125,000 shares of common stock, restricted in accordance
with Rule 144, on before January 20, 2018. Through an escrow
process, we paid the seller $100,000 in cash and issued him 125,000
shares of common stock in accordance with the Amendment No. 1, in
exchange for a full release of the deed of trust that was securing
the promissory note, on January 17, 2018. As a result, the $475,000
principal promissory note issued to the seller is deemed
paid-in-full and fully satisfied and we own the property without
encumbrances.
To date we have spent
$354,000 renovating the property and an additional $400,000 on
extraction and analytical lab equipment. We plan to complete the
property renovations by Q3 of 2019, at an estimated cost of
$300,000. We will need additional extraction equipment and
analytical lab equipment, totaling approximately $700,000. We will
need to raise additional funds in order to complete the planned
renovations and pay the purchase price for the
equipment.
On
January 3, 2018, Sangre closed on the purchase of a condominium in
La Veta, Colorado. Sangre paid $140,000 in cash for the condominium
which is a three story condominium, with three bedrooms and three
bathrooms and is approximately 1,854 square feet. In February 2018,
we closed on the purchase of property, consisting of a home in La
Veta, Colorado to house company personnel and consultants for total
consideration approximating $1,200,000. The home has 5 bedrooms and
3 bathrooms. Under the terms of the purchase agreement, we paid
$150,000 down, entered into a note payable in the amount of
approximately $1,041,000. We secured a below-market interest rate
of 1.81% based on the short-term nature of the term. This note was
repaid on October 5, 2018. Sangre took immediate possession of the
property. We acquired these properties for the purpose of housing
personnel we believe are vital to the 5-year Cannabis Genomic
Study. La Veta, Colorado is a small town without many rentals, so
it became necessary to find more permanent housing in La Veta,
Colorado for those that will be working with Sangre on the
study.
New York Property
On
October 24, 2017, we entered into an amended Purchase and Sale
Agreement with Greg DiPaolo’s Pro Am Golf, LLC
(“DiPaolo”), under which we agreed to purchase certain
improved property located in Westfield, New York from DiPaolo for a
total purchase price of Eight Hundred Thousand Dollars ($800,000).
Under the terms of the agreement, we paid a Ten Thousand Dollar
($10,000) deposit on October 26, 2017, with the remaining purchase
price to be paid on or before the date closing date, which was
originally scheduled for February 1, 2018. On February 19, 2018, we
entered into a Second Addendum to the Purchase and Sale Agreement
extending the closing date to May 1, 2018 in exchange for payment
of $8,750.
On May 1, 2018, we entered
into a Fourth Addendum and a Fifth Addendum to agreement amending
the “Closing Date” under the Agreement to August 1,
2018, in exchange for our payment of $50,000 as a non-refundable
deposit to be applied against the purchase price when the property
sale is completed and $10,000 for maintenance, tree removal and
other grounds keeping in order to prepare the golf course for the
2018 season.
The property is approximately 43 acres and has
unlimited water extraction rights from the State of New York. We
plan to use this property as our inroads to the New York hemp and
infused beverage markets in the future. There are no current plans
or budget to proceed with operations in New York, and there will
not be until proper funding is secured after acquiring this
property. The acquisition of this property has been delayed by
extensions granted to certain parties by the Bankruptcy Court,
which is governing the disposition of this property. Currently,
there will be an open bid for the property, and there is no
guarantee the Company will win the bid or ever complete the
acquisition. As a result, the $110,000 non-refundable deposit was
recorded as a loss on deposit at the end of December 31,
2018.
12
ITEM 1 – BUSINESS
(CONTINUED)
Employees
As of
December 31, 2018, we employed two people on a full time basis,
namely Glenn E. Martin and Nicole M. Breen.
We also contract with John Irvin, Thomas Perry,
Andrew Defries, Jerrell Shaw, and Tom Pool on a full-time basis who
work with Sangre. As of December 31, 2018, WEED Israel Cannabis
Ltd. had one consultant. As of December 31, 2018, WEED Australia
Ltd. had two consultants.
Available Information
We are
a fully reporting issuer, subject to the Securities Exchange Act of
1934. Our Quarterly Reports, Annual Reports, and other filings can
be obtained from the SEC’s Public Reference Room at 100 F
Street, NE., Washington, DC 20549, on official business days during
the hours of 10 a.m. to 3 p.m. You may also obtain information on
the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet
site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with
the Commission at
http://www.sec.gov
.
13
ITEM
1A. – RISK FACTORS.
As
a smaller reporting company we are not required to provide a
statement of risk factors. However, we believe this information may
be valuable to our shareholders for this filing. We reserve the
right to not provide risk factors in our future filings. Our
primary risk factors and other considerations include:
We have
a limited operating history and historical financial information
upon which you may evaluate our performance.
You
should consider, among other factors, our prospects for success in
light of the risks and uncertainties encountered by companies that,
like us, are in their early stages of development. We may not
successfully address these risks and uncertainties or successfully
complete our studies and/or implement our existing and new
products. If we fail to do so, it could materially harm our
business and impair the value of our common stock. Even if we
accomplish these objectives, we may not generate the positive cash
flows or profits we anticipate in the future. We were incorporated
in the State of Arizona on August 20, 1999. From 2005 until 2015,
we were an exploration stage mineral exploration company that owned
a number of unpatented mining claims and Arizona State Land
Department claims. On November 26, 2014, our Board of Directors
approved the redomestication of our company from Arizona to Nevada
and we shifted our business focus to a company concentrating on the
development and application of cannabis-derived compounds for the
treatment of human disease. Although our subsidiary, Sangre, has
begun its planned five-year Cannabis Genomic Study to complete a
global genomic classification of the Cannabis plant genus the
completion of the study is likely years away. Unanticipated
problems, expenses and delays are frequently encountered in
establishing a new business, conducting research, and developing
new products. These include, but are not limited to, inadequate
funding, unforeseen research issues, lack of consumer acceptance,
competition, product development, and inadequate sales and
marketing. The failure by us to meet any of these conditions would
have a materially adverse effect upon us and may force us to reduce
or curtail operations. No assurance can be given that we can or
will ever operate profitably.
We may not be able to meet our future capital needs.
To
date, we have not generated any revenue and we have limited cash
liquidity and capital resources. Our future capital requirements
will depend on many factors, including the progress and results of
our Cannabis Genomic Study, our ability to develop products, cash
flow from operations, and competing market developments. We
anticipate the Cannabis Genomic Study will cost approximately
$15,000,000 to complete. We will need additional capital in the
near future. Any equity financings will result in dilution to our
then-existing stockholders. Although we currently do not have any
debt financing, any sources of debt financing in the future may
result in a high interest expense. Any financing, if available, may
be on unfavorable terms. If adequate funds are not obtained, we
will be required to reduce or curtail operations.
If we cannot obtain additional funding, our research and
development efforts may be reduced or discontinued and we may not
be able to continue operations.
We
have historically experienced negative cash flows from operations
since our inception and we expect the negative cash flows from
operations to continue for the foreseeable future. Unless and until
we are able to generate revenues, we expect such losses to continue
for the foreseeable future. As discussed in our financial
statements, there exists substantial doubt regarding our ability to
continue as a going concern.
Research
and development efforts are highly dependent on the amount of cash
and cash equivalents on hand combined with our ability to raise
additional capital to support our future operations through one or
more methods, including but not limited to, issuing additional
equity or debt.
14
ITEM 1A. – RISK FACTORS
(CONTINUED)
In
addition, we may also raise additional capital through additional
equity offerings, and licensing our research and/or future products
in development. While we will continue to explore these potential
opportunities, there can be no assurances that we will be
successful in raising sufficient capital on terms acceptable to us,
or at all, or that we will be successful in licensing our future
products. Based on our current projections, we believe we have
insufficient cash on hand to meet our obligations as they become
due based on current assumptions. The uncertainties surrounding our
future cash inflows have raised substantial doubt regarding our
ability to continue as a going concern.
Any disruption and/or instability in economic conditions and
capital markets could adversely affect our ability to access the
capital markets, and thus adversely affect our business and
liquidity.
Economic
conditions and issues with the financial markets have had, and will
continue to have, a negative impact on our ability to access the
capital markets, and thus have a negative impact on our business
and liquidity. The shortage of liquidity and credit combined with
the substantial losses in worldwide equity markets could lead to an
extended worldwide recession. We may face significant challenges if
conditions in the capital markets do not improve. Our ability to
access the capital markets has been and continues to be severely
restricted at a time when we need to access such markets, which
could have a negative impact on our business plans. Even if we are
able to raise capital, it may not be at a price or on terms that
are favorable to us. We cannot predict the occurrence of future
disruptions or how long the current conditions may
continue.
Our proposed business is dependent on laws pertaining to the
cannabis industry
.
Continued
development of the cannabis industry is dependent upon continued
legislative authorization of marijuana at the state level. Any
number of factors could slow or halt progress in this area.
Further, progress for the industry, while encouraging, is not
assured. While there may be ample public support for legislative
action, numerous factors impact the legislative process. Any one of
these factors could slow or halt use of marijuana, which would
negatively impact our business.
As
of the end of February 2017, 28 states and the District of Columbia
allow its citizens to use medical marijuana. Voters in the states
of Colorado, Washington, Alaska, Oregon and the District of
Columbia have approved ballot measures to legalize cannabis for
adult use. The state laws are in conflict with the Federal
Controlled Substances Act, which makes marijuana use and possession
illegal on a national level. The prior administration (President
Obama) effectively stated that it is not an efficient use of
resources to direct law federal law enforcement agencies to
prosecute those lawfully abiding by state-designated laws allowing
the use and distribution of medical marijuana. However, the Trump
administration has indicated the potential for stricter enforcement
of the marijuana industry at the federal level, but to date there
has been very little in terms of action. There is no guarantee that
the Trump administration or future administrations will maintain
the low-priority enforcement of federal laws in the marijuana
industry that was adopted by the Obama administration. The Trump
administration or any new administration that follows could change
this policy and decide to enforce the federal laws strongly. Any
such change in the federal government’s enforcement of
current federal laws could cause significant financial damage to
our business and our shareholders.
Further,
and while we do not intend to harvest, distribute or sell cannabis,
if we conduct research with the cannabis plant or lease buildings
to growers of cannabis, etc., we could be deemed to be
participating in marijuana cultivation, which remains illegal under
federal law, and exposes us to potential criminal liability, with
the additional risk that our properties could be subject to civil
forfeiture proceedings.
The
cannabis industry faces strong opposition
.
It
is believed by many that large well-funded businesses may have a
strong economic opposition to the cannabis industry. We believe
that the pharmaceutical industry clearly does not want to cede
control of any product that could generate significant revenue. For
example, medical cannabis will likely adversely impact the existing
market for the current “marijuana pill” sold by
mainstream pharmaceutical companies. Further, the medical cannabis
industry could face a material threat from the pharmaceutical
industry, should cannabis displace other drugs or encroach upon the
pharmaceutical industry’s products. The pharmaceutical
industry is well funded with a strong and experienced lobby that
eclipses the funding of the medical cannabis movement. Any inroads
the pharmaceutical industry could make in halting or impeding the
cannabis industry could have a detrimental impact on our proposed
business.
15
ITEM 1A. – RISK FACTORS
(CONTINUED)
Cannabis
remains illegal under Federal law
.
Cannabis
is a schedule-I controlled substance and is illegal under federal
law. Even in those states in which the use of cannabis has been
legalized, its production and use remains a violation of federal
law. Since federal law criminalizing the use of cannabis preempts
state laws that legalize its use, strict enforcement of federal law
regarding marijuana would likely result in our inability to proceed
with our business plan.
Laws and regulations affecting the medical cannabis industry are
constantly changing, which could detrimentally affect our proposed
operations.
Local,
state and federal medical cannabis laws and regulations are broad
in scope and subject to evolving interpretations, which could
require us to incur substantial costs associated with compliance or
alter our business plan. In addition, violations of these laws, or
allegations of such violations, could disrupt our business and
result in a material adverse effect on our operations. In addition,
it is possible that regulations may be enacted in the future that
will be directly applicable to our proposed business. We cannot
predict the nature of any future laws, regulations, interpretations
or applications, nor can we determine what effect additional
governmental regulations or administrative policies and procedures,
when and if promulgated, could have on our business.
If we are unable to recruit and retain qualified personnel, our
business could be harmed.
Our
growth and success highly depend on qualified personnel.
Competition in the industry could cause us difficulty in recruiting
or retaining a sufficient number of qualified technical personnel,
which could harm our ability to develop new products. Also, the
fact cannabis remains illegal at the federal level may dissuade
qualified personnel from working in the cannabis industry, thus
limiting the pool of qualified individuals to run our business. If
we are unable to attract and retain necessary key talents, it would
harm our ability to develop competitive product and retain good
customers and could adversely affect our business and operating
results.
We may be unable to adequately protect our proprietary
rights.
Our
ability to compete partly depends on the superiority, uniqueness
and value of our intellectual property. To protect our proprietary
rights, we will rely on a combination of patent, copyright and
trade secret laws, confidentiality agreements with our employees
and third parties, and protective contractual provisions. Despite
these efforts, any of the following occurrences may reduce the
value of our intellectual property:
●
Our applications for patents relating to our business may not be
granted and, if granted, may be challenged or
invalidated;
●
Issued patents may not provide us with any competitive
advantages;
●
Our efforts to protect our intellectual property rights may not be
effective in preventing misappropriation of our
technology;
●
Our efforts may not prevent the development and design by others of
products or technologies similar to or competitive with, or
superior to those we develop;
●
Another party may obtain a blocking patent and we would need to
either obtain a license or design around the patent in order to
continue to offer the contested feature or service in our products;
or
●
The fact cannabis is illegal at the federal level may impact our
ability to secure patents from the United States Patent and
Trademark Office, and other intellectual property protections may
not be available to us.
16
ITEM 1A. – RISK FACTORS
(CONTINUED)
We may become involved in lawsuits to protect or enforce our
patents that would be expensive and time consuming.
In
order to protect or enforce our patent rights, we may initiate
patent litigation against third parties. In addition, we may become
subject to interference or opposition proceedings conducted in
patent and trademark offices to determine the priority and
patentability of inventions. The defense of intellectual property
rights, including patent rights through lawsuits, interference or
opposition proceedings, and other legal and administrative
proceedings, would be costly and divert our technical and
management personnel from their normal responsibilities. An adverse
determination of any litigation or defense proceedings could put
our pending patent applications at risk of not being
issued.
Furthermore,
because of the substantial amount of discovery required in
connection with intellectual property litigation, there is a risk
that some of our confidential information could be compromised by
disclosure during this type of litigation. For example, during the
course of this kind of litigation, confidential information may be
inadvertently disclosed in the form of documents or testimony in
connection with discovery requests, depositions or trial testimony.
This disclosure could have a material adverse effect on our
business and our financial results.
We are currently involved in litigation and may be involved in
additional litigation at some in the future.
In
the ordinary course of business, we are from time to time involved
in various pending or threatened legal actions. The litigation
process is inherently uncertain and it is possible that the
resolution of such matters might have a material adverse effect
upon our financial condition and/or results of
operations.
Because we are subject to the “penny stock” rules, the
level of trading activity in our stock may be reduced.
Our
common stock is traded on the OTC Markets’
“OTCQB” tier. Broker-dealer practices in connection
with transactions in “penny stocks” are regulated by
certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks, like shares of our common stock,
generally are equity securities with a price of less than $5.00,
other than securities registered on certain national securities
exchanges or quoted on NASDAQ. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks
and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and, if the
broker-dealer is the sole market maker, the broker-dealer must
disclose this fact and the broker-dealer's presumed control over
the market, and monthly account statements showing the market value
of each penny stock held in the customer's account. In addition,
broker-dealers who sell these securities to persons other than
established customers and “accredited investors” must
make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. Consequently, these
requirements may have the effect of reducing the level of trading
activity, if any, in the secondary market for a security subject to
the penny stock rules, and investors in our common stock may find
it difficult to sell their shares.
17
ITEM
1B – UNRESOLVED STAFF COMMENTS
This
Item is not applicable to us as we are not an accelerated filer, a
large accelerated filer, or a well-seasoned issuer; however, we
have not received written comments from the Commission staff
regarding our periodic or current reports under the Securities
Exchange Act of 1934 within the last 180 days before the end of our
last fiscal year.
ITEM
2 – PROPERTIES
Le Veta, Colorado Properties
On July
26, 2017, we acquired property located in La Veta, Colorado in
order for Sangre to complete its 5-Year, $15+ million Cannabis
Genomic Study.
The site includes a
10,000+ sq. ft. building that will house Sangre’s genomic
research facility, a 4,000+ square foot building for plant product
analytics and plant product extraction, a 3,500 sq. ft. corporate
office center, and 25 RV slots with full water and electric, which
we plan to convert into a series of small research pods. Under the
terms of the purchase agreement, we paid $525,000 down, including
25,000 shares of our common stock, and Sangre took immediate
possession of the property. Under the terms of the purchase we were
obligated to pay an additional $400,000 in cash and issue an
additional 75,000 shares of our common stock over the next two
years in order to pay the entire purchase price.
On January
12, 2018, we entered into an Amendment No. 1 to the $475,000
principal amount promissory note issued by us to the seller of the
property, under which both parties agreed to amend the purchase and
the promissory note to allow us to payoff the note in full if we
paid $100,000 in cash on or before January 15, 2018 and issued the
seller 125,000 shares of common stock, restricted in accordance
with Rule 144, on before January 20, 2018. Through an escrow
process, we paid the seller $100,000 in cash and issued him 125,000
shares of common stock in accordance with the Amendment No. 1, in
exchange for a full release of the deed of trust that was securing
the promissory note, on January 17, 2018. As a result, the $475,000
principal promissory note issued to the seller is deemed
paid-in-full and fully satisfied and we own the property without
encumbrances.
To date we have spent
$354,000 renovating the property and an additional $400,000 on
extraction and analytical lab equipment. We plan to complete the
property renovations by Q3 of 2019, at an estimated cost of
$300,000. We will need additional extraction equipment and
analytical lab equipment, totaling approximately $700,000. We will
need to raise additional funds in order to complete the planned
renovations and pay the purchase price for the
equipment.
On
January 3, 2018, Sangre closed on the purchase of a condominium in
La Veta, Colorado. Sangre paid $140,000 in cash for the condominium
which is a three story condominium, with three bedrooms and three
bathrooms and is approximately 1,854 square feet. In February 2018,
we closed on the purchase of property, consisting of a home in La
Veta, Colorado to house company personnel and consultants for total
consideration approximating $1,200,000. The home has 5 bedrooms and
3 bathrooms. Under the terms of the purchase agreement, we paid
$150,000 down, entered into a note payable in the amount of
approximately $1,041,000. We secured a below-market interest rate
of 1.81% based on the short-term nature of the term (due on August
15, 2018). Sangre took immediate possession of the property. We
acquired these properties for the purpose of housing personnel we
believe are vital to the 5-year Cannabis Genomic Study. La Veta,
Colorado is a small town without many rentals, so it became
necessary to find more permanent housing in La Veta, Colorado for
those that will be working with Sangre on the study.
18
ITEM 2 – PROPERTIES
(CONTINUED)
New York Property
On
October 24, 2017, we entered into an amended Purchase and Sale
Agreement with Greg DiPaolo’s Pro Am Golf, LLC
(“DiPaolo”), under which we agreed to purchase certain
improved property located in Westfield, New York from DiPaolo for a
total purchase price of Eight Hundred Thousand Dollars ($800,000).
Under the terms of the agreement, we paid a Ten Thousand Dollar
($10,000) deposit on October 26, 2017, with the remaining purchase
price to be paid on or before the date closing date, which was
originally scheduled for February 1, 2018. On February 19, 2018, we
entered into a Second Addendum to the Purchase and Sale Agreement
extending the closing date to May 1, 2018 in exchange for payment
of $8,750.
On May 1, 2018, we entered
into a Fourth Addendum and a Fifth Addendum to agreement amending
the “Closing Date” under the Agreement to August 1,
2018, in exchange for our payment of $50,000 as a non-refundable
deposit to be applied against the purchase price when the property
sale is completed and $10,000 for maintenance, tree removal and
other grounds keeping in order to prepare the golf course for the
2018 season.
The property is approximately 43 acres and has
unlimited water extraction rights from the State of New York. We
plan to use this property as our inroads to the New York hemp and
infused beverage markets in the future. There are no current plans
or budget to proceed with operations in New York, and there will
not be until proper funding is secured after acquiring this
property. Currently, there will be an open bid for the property,
and there is no guarantee the Company will win the bid or ever
complete the acquisition. As a result, the $110,000 non-refundable
deposit was recorded as a loss on deposit at the end of December
31, 2018.
ITEM 3 - LEGAL PROCEEDINGS
William Martin v. WEED, Inc. et al
On January 19, 2018, we were sued in the United
States District Court for the District of Arizona
(
William
Martin v. WEED, Inc.
., Case No.
4:18-cv-00027-RM) by the listed Plaintiff. We were served with the
Verified Complaint on January 26, 2018. The Complaint alleges
claims for breach of contract-specific performance, breach of
contract-damages, breach of the covenant of good faith and fair
dealing, conversion, and injunctive relief. In addition to the
Verified Complaint, we were served with an application to show
cause for a temporary restraining order. The Verified Complaint
alleges we entered into a contract with the Plaintiff on October 1,
2014 for the Plaintiff to perform certain consulting services for
the company in exchange for 500,000 shares of our common stock up
front and an additional 700,000 shares of common stock to be issued
on May 31, 2015. The Plaintiff alleges he completed the requested
services under the agreement and received the initial 500,000
shares of common stock, but not the additional 700,000 shares. The
request for injunctive relief asks the Court to Order us to issue
the Plaintiff 700,000 shares of our common stock, and possibly
include them in our previously-filed Registration Statement on Form
S-1, or, in the alternative, issue the shares and have them held by
the Court pending resolution of the litigation, or, alternatively,
sell the shares and deposit the sale proceeds in an account that
the Court will control. The hearing on the Temporary Restraining
Order occurred on January 29, 2018. On January 30, 2018, the Court
issued its ruling denying the application for a Temporary
Restraining Order. Currently, there is no further hearing scheduled
in this matter.
On
February 13, 2018, we filed an Answer to the Verified Complaint and
a Counterclaim. In the original Counterclaim we named William
Martin as the sole counter-defendant, and alleged, that based upon
William Martin’s representations and recommendation, WEED,
Inc. hired Michael Ryan as a consultant. We allege that William
Martin misrepresented, failed to disclose, and concealed facts from
us concerning the relationship between him and Michael Ryan. We are
seeking compensatory damages caused by William Martin’s
misrepresentation, failure to disclose, and
concealment.
19
ITEM 3 - LEGAL PROCEEDINGS
(CONTINUED)
On
February 15, 2018, we filed a Motion to Dismiss the Verified
Complaint. On February 23, 2018, we filed a Motion to Amend
Counterclaim to add W. Martin’s wife, Joanna Martin as a
counterdefendant. On March 9, 2018, William Martin filed a Motion
to Dismiss the Counterclaim. On March 12, 2018, William Martin
filed a Motion to Amend the Verified Complaint to, among other
things, add claims against Glenn Martin and Nicole and Ryan Breen.
On March 27, 2018, the Court granted both William Martin and WEED,
Inc.’s Motions to Amend. On March 27, 2018, we filed an
Amended Counterclaim adding Joanna Martin. On April 2, 2018, we
filed a Motion to Amend our Counterclaim to add a breach of
contract claim. On April 10, 2018, we filed an Answer to First
Amended Verified Complaint. On April 23, 2018, Glenn Martin and
Nicole and Ryan Breen filed their Answer to the First Amended
Complaint. On May 31, 2018, the Court issued an Order: (a) granting
our Motion to Dismiss thereby dismissing the claims for breach of
the covenant of good faith and fair dealing and the claim for
conversion, (b) denying William Martin’s Motion to Dismiss
the counterclaim as to the claims for fraudulent concealment and
fraudulent misrepresentation, but granting the Motion to Dismiss
only as to the claim for fraudulent nondisclosure, and (c) granting
our Motion to Amend our Counterclaim to add a breach of contract
claim. In our breach of contract claim, we allege William Martin
breached his Consulting Agreement with us by failing to perform
consulting services to us in a professional and timely manner using
the highest degree of skill, diligence, and expertise pursuant to
the Consulting Agreement. We are seeking an award of compensatory
damages caused by the breach of the Consulting Agreement, together
with attorney’s fees and costs. On June 1, 2018, William
Martin and his wife filed their Answer to the First Amended
Counterclaim. On June 1, 2018, William Martin and his wife filed
their Answer to the Second Amended Counterclaim.
The
parties have conducted discovery and disclosure, including the
production by WEED, Inc. of voluminous electronically stored
information and the depositions of William, Martin, Glenn E.
Martin, Michael Ryan, and Chris Richardson. No other depositions
are presently anticipated.
On
September 14, 2018, we filed, on behalf of the Corporation, Glenn
Martin, and Nicole and Ryan Breen, a motion for partial summary
judgment on all remaining claims in plaintiff’s First Amended
Complaint. On November 26, 2018, plaintiff filed an opposition to
the motion for partial summary judgment, together with a
cross-motion for summary judgment on both plaintiff’s claims
and the Corporation’s counterclaims. Those motions have been
fully briefed. Although the parties requested oral argument, the
court has not yet granted oral argument.
No trial date has been set. We deny the
Plaintiff’s allegations in the Amended Complaint in their
entirety and plan to vigorously defend against this lawsuit.
Due to the loss not being probable, no accrual has been recorded
for the 700,000 shares of common stock the Plaintiff alleges he was
owed under his agreement with us.
Travis Nelson v. WEED, Inc.
On
February 5, 2018, we were sued in Huerfano County, Colorado
District Court (
Travis Nelson v.
WEED, Inc.
, et al., Case No. 18CV30003) by the listed
Plaintiff. After we successfully pursued motions to dismiss
Plaintiff’s two initial Complaints, the Court issued an Order
on October 1, 2018 granting Plaintiff permission to file a Second
Amended Complaint, which was then filed on October 22, 2018. The
Second Amended Complaint includes three claims: 1) breach of
fiduciary duty/shareholder derivative action; 2) a claim under
Colorado’s Organized Crime Control Act; and 3) a wrongful
discharge claim. We have answered the Second Amended Complaint,
denying all allegations and alleging that the decision not to offer
employment to Nelson, the core factual dispute in this case, was
the result of pre-employment background checks that showed Nelson
had an extensive, violent criminal history. The parties exchanged
Initial Disclosures on November 11, 2018. We still have a motion
pending with the Court that seeks attorneys’ fees in the
amount of $53,000 for the expense of defending the first two
Complaints. On January 31, 2019, Plaintiff submitted an Offer of
Judgment under Colorado Statute §13-17-202 offering to dismiss
the case in exchange for payment of $100,000. The Company has
rejected this offer. Plaintiff served us with written discovery
that we responded to in March 2019. The current Case Management
Order requires the parties to arrange mediation by April 1, 2019.
The parties are currently looking for available mediators and dates
in April 2019. We believe that the Plaintiff’s allegations
are baseless and plan to vigorously defend against this lawsuit. We
not accrued any expenses related to this lawsuit due to the loss
not being probable.
In the
ordinary course of business, we are from time to time involved in
various pending or threatened legal actions. The litigation process
is inherently uncertain and it is possible that the resolution of
such matters might have a material adverse effect upon our
financial condition and/or results of operations. However, in the
opinion of our management, other than as set forth herein, matters
currently pending or threatened against us are not expected to have
a material adverse effect on our financial position or results of
operations.
ITEM 4 – MINE SAFETY DISCLOSURES
There
is no information required to be disclosed under this
Item.
20
PART II
ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market Information
Our
common stock is currently quoted on the OTCQB-tier of OTC Markets
under the symbol “BUDZ.” We were originally quoted
over-the-counter on November 2009. We started being quoted on the
OTCQB-tier of OTC Markets on September 13, 2018. As of March 27,
2019, we had 106,410,685 shares of our common stock outstanding.
The following table sets forth the high and low bid information for
each quarter within the two most recent fiscal years, as estimated
based on information on OTC Markets. The information reflects
prices between dealers, and does not include retail markup,
markdown, or commission, and may not represent actual
transactions.
|
|
|
Bid Prices
|
|
|
Fiscal
Year
Ended
December
31,
|
Period
|
High
|
Low
|
|
|
|
|
|
|
2017
|
First
Quarter
|
$
5.05
|
$
1.67
|
|
|
Second
Quarter
|
$
2.25
|
$
0.41
|
|
|
Third
Quarter
|
$
1.20
|
$
0.88
|
|
|
Fourth
Quarter
|
$
6.10
|
$
1.15
|
|
|
|
|
|
|
2018
|
First
Quarter
|
$
14.71
|
$
3.43
|
|
|
Second
Quarter
|
$
6.04
|
$
4.45
|
|
|
Third
Quarter
|
$
4.23
|
$
2.81
|
|
|
Fourth
Quarter
|
$
2.64
|
$
1.05
|
The
Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in
connection with trades in any stock defined as a penny stock. The
Commission has adopted regulations that generally define a penny
stock to be any equity security that has a market price of less
than $5.00 per share, subject to a few exceptions which we do not
meet. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks
associated therewith.
We have
not adopted any stock option or stock bonus plans.
Holders
As of
December 31, 2018, there were 105,950,685 shares of our common
stock outstanding held by 261 holders of record and numerous shares
held in brokerage accounts. As of March 27, 2019, there were
106,410,685 shares of our common stock outstanding held by 252
holders of record. Of these shares, 26,158,610 were held by
non-affiliates. As of June 30, 2018, we had 22,774,090 shares held
by non-affiliates. On the cover page of this filing we value the
22,182,390 shares held by non-affiliates as of June 30, 2018 at
$101,344,700. These shares were valued at $4.45 per share, based on
our closing share price on June 30, 2018.
As of
December 31, 2018, we did not have any shares of preferred stock
issued or outstanding.
21
ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(CONTINUED)
Warrants and Other Convertible Instruments
We
currently have 3,278,833 warrants outstanding to purchase our
common stock:
During
the quarter ended March 31, 2018, we issued warrants to purchase an
aggregate of 477,500 shares of our common stock. The warrants to
purchase 262,500 shares have an exercise price of $5.00 per share,
exercisable on various dates through March 2019 and warrants to
purchase 215,000 shares have an exercise price of $12.50 per share
and are exercisable on various dates through January 2020. The
issuance of the warrants was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933. The investor was
sophisticated, familiar with our operations, and there was no
solicitation.
During
the three months ended June 30, 2018, we issued warrants to
purchase an aggregate of 1,450,000 shares of our common stock.
Warrants to purchase have exercise prices ranging from $5.00 -
$6.00 per share, immediately exercisable through June 2019. The
issuance of the warrants was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933. The investor was
sophisticated, familiar with our operations, and there was no
solicitation.
Dividends
There
have been no cash dividends declared on our common stock, and we do
not anticipate paying cash dividends in the foreseeable future.
Dividends are declared at the sole discretion of our Board of
Directors.
Securities Authorized for Issuance Under Equity Compensation
Plans
There
are no outstanding options or warrants to purchase shares of our
common stock under any equity compensation plans.
Currently, we do not have any equity compensation
plans.
As a result, we did not have any options, warrants or
rights outstanding under equity compensation plans as of December
31, 2018.
Recent Issuance of Unregistered Securities
During
the three months ended December 31, 2018, we issued the following
unregistered securities.
All such
securities were issued pursuant exemptions from registration under
Section 4(a)(2) of the Securities Act of 1933, as amended, as a
transaction by an issuer not involving any public offering, as
noted below.
During
the three months ended December 31, 2018, we issued an aggregate of
900,000 shares of our common stock to non-affiliate investors for
an aggregate of $1,000,000. We sold these shares in the three
months ended September 30, 2018, but they were not issued until the
three months ended December 31, 2018. The issuances of the shares
were exempt from registration pursuant to Section 4(a)(2) of the
Securities Act of 1933. The investors were sophisticated, familiar
with our operations, and there was no solicitation.
During
the three months ended December 31, 2018, we issued an aggregate of
1,000,000 shares of our common stock to non-affiliate investors for
an aggregate of $1,000,000. The issuances of the shares were exempt
from registration pursuant to Section 4(a)(2) of the Securities Act
of 1933. The investors were sophisticated, familiar with our
operations, and there was no solicitation.
During
the three months ended December 31, 2018, we issued an aggregate of
238,000 shares of common stock to consultants for services
performed. The total fair value of the common stock was $672,000
based on the closing price of our common stock on the measurement
date. The issuances of the shares were exempt from registration
pursuant to Section 4(a)(2) of the Securities Act of 1933. The
investors were sophisticated, familiar with our operations, and
there was no solicitation.
22
ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
(CONTINUED)
If
our stock is listed on an exchange we will be subject to the
Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in
connection with trades in any stock defined as a penny stock. The
Commission has adopted regulations that generally define a penny
stock to be any equity security that has a market price of less
than $5.00 per share, subject to a few exceptions which we do not
meet. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks
associated therewith.
ITEM 6 – SELECTED FINANCIAL DATA
As a
smaller reporting company we are not required to provide the
information required by this Item.
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Disclaimer Regarding Forward Looking Statements
Our
Management’s Discussion and Analysis or Plan of Operations
contains not only statements that are historical facts, but also
statements that are forward-looking. Forward-looking statements
are, by their very nature, uncertain and risky. These risks and
uncertainties include international, national and local general
economic and market conditions; demographic changes; our ability to
sustain, manage, or forecast growth; our ability to successfully
make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing
government regulations and changes in, or the failure to comply
with, government regulations; adverse publicity; competition; the
loss of significant customers or suppliers; fluctuations and
difficulty in forecasting operating results; changes in business
strategy or development plans; business disruptions; the ability to
attract and retain qualified personnel; the ability to protect
technology; and other risks that might be detailed from time to
time in our filings with the Securities and Exchange
Commission.
Although
the forward-looking statements in this Registration Statement
reflect the good faith judgment of our management, such statements
can only be based on facts and factors currently known by them.
Consequently, and because forward-looking statements are inherently
subject to risks and uncertainties, the actual results and outcomes
may differ materially from the results and outcomes discussed in
the forward-looking statements. You are urged to carefully review
and consider the various disclosures made by us in this report and
in our other reports as we attempt to advise interested parties of
the risks and factors that may affect our business, financial
condition, and results of operations and prospects.
Overview
We
are an early stage holding company currently focused on the
development and application of cannabis-derived compounds for the
treatment of human disease. Our wholly-owned subsidiary, Sangre AT,
LLC (“Sangre”), has begun a planned five-year Cannabis
Genomic Study to complete a genetic blueprint of the Cannabis plant
genus, by creating a global genomic classification of the entire
plant. By targeting cannabis-derived molecules that stimulate the
endocannabinoid system, Sangre’s research team plans to
develop scientifically-valid and evidence-based cannabis strains
for the production of disease-specific medicines. The goal of the
research is to identify, collect, patent, and archive a collection
of highly-active medicinal strains. We plan to conduct this study
only in states where cannabis has been legalized for medicinal
purposes.
Using
annotated genomic data and newly generated phenotypic data, Sangre
plans to identify and isolate regions of the plant genome which are
related to growth, synthesis of desired molecules, and drought and
pest resistance. This complex data set would then be utilized in a
breeding program to generate and establish new hybrid cultivars
which exemplify the traits that are desired by the medical and
patient community. This breeding program would produce new seed
stocks and clones, which we plan on patenting. If successful this
intellectual property should generate immense value for the
Company. After developing a comprehensive understanding of the
annotated genome of a variety of cannabis strains, and obtaining
intellectual property protection over the most promising strains,
we plan move forward either independently or with strategic
partners to develop medicinal products for the treatment of a
multitude of human diseases.
23
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(CONTINUED)
Our
current, short-term goals relate to the Cannabis Genomic Study and
the resulting development of a variety of new cannabis strains,
and, over the next 5 years, we plan to process those results in
order to become an international cannabis research and product
development company, with a globally-recognized brand focusing on
building and purchasing labs, land and building commercial grade
“Cultivation Centers” to consult, assist, manage &
lease to universities, state governments, licensed dispensary
owners and organic grow operators on a contract basis with a
concentration on the legal and medical cannabis
sector..
Our
long-term plan is to become a true “Seed-to-Sale”
global holding company providing infrastructure, financial
solutions, product development, and real estate options in this new
emerging market. Our long term growth may also come from the
acquisition of synergistic businesses, such as distilleries, to
make anything from infused beverages to super oxygenated water with
CBD and THC. Currently, we have formed WEED Australia Ltd.,
registered as an unlisted public company in Australia to address
this Global demand. We have also formed WEED Australia Ltd.,
registered as an unlisted public company in Australia, to address
future global demand, however the entity has been dormant since its
inception. We will look to conduct future research, marketing,
import/exporting, and manufacturing of our proprietary products on
an international level.
In
furtherance of our current, short terms goals, Sangre initiated the
cannabis genome project in April 2017, by extracting DNA from seven
cannabis strains in Tucson, Arizona. Sangre followed the initial
extraction with a second round of extractions in July 2017. The
extracted DNA is currently being sequenced by the Sangre team using
a binary sequencing approach based on the use of two distinct
sequencing technologies and a proprietary bioinformatics database.
Following the generation of genomic data, the sequences will be
annotated (compared) against over 300,000 plant genes to elucidate
specific de novo pathways responsible for the synthesis of specific
compounds and classes of compounds.
Under
the genome project directives, additional strains are slated for
sequencing and annotation as part of the overall expansion of this
research project. An integral part of this expansion is the
acquisition of additional DNA extraction, amplification, and
sequencing technologies. The expansion also includes the
installation of high-level IT networks for data acquisition,
analysis, and storage.
On
July 26, 2017, we acquired a property located in La Veta, Colorado
in order for Sangre to complete its 5-Year, $15+ million Cannabis
Genomic Study. The site includes a 10,000+ sq. ft. building that
will house Sangre’s genomic research facility, a 4,000+
square foot building for plant product analytics and plant product
extraction, a 3,500 sq. ft. corporate office center, and 25 RV
slots with full water and electric, which we plan to convert into a
series of small research pods. Under the terms of the purchase
agreement, we paid $525,000 down, along with 25,000 shares of our
common stock, and Sangre took immediate possession of the property.
We were obligated to pay an additional $400,000 in cash and issue
an additional 75,000 shares of our common stock over the two next
years in order to pay the entire purchase price. To date we have
spent $354,000 renovating the property and an additional $400,000
on extraction and analytical lab equipment. We plan to complete the
property renovations by Q3 of 2019, at an estimated cost of
$300,000. We will need additional extraction equipment and
analytical lab equipment, totaling approximately $700,000. We will
need to raise additional funds in order to complete the planned
renovations and pay the purchase price for the
equipment.
24
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(CONTINUED)
WEED
Inc. acquired the property in La Veta, Colorado in order to
facilitate the expansion of the genomic studies and the development
of new hybrid strains. The facility is currently under re-design
and renovation to convert the existing structures into a
world-class genetics research center.
A
gene-based breeding program will allow us to root out inferior
cultivars and replace them with fully-validated and patentable
cultivars which produce consistent plant products for the medicinal
markets. The gene-based breeding program will improve cultivars and
introduce integrity, stability, and quality to the market in the
following ways:
●
accelerated
and optimized growth rates; modern genomic resources will enhance
traditional breeding methods
●
generate new
cultivars, accelerating and perfecting the art of selective
breeding
●
provide the ability
to assay for specific genes within the crop, establish strain
tracking, and promote market quality assurance
●
improved disease,
pest, and drought resistance of the Cannabis plant
We believe the gene-based breeding program will facilitate and
accelerate:
●
improved
therapeutic properties, i.e., increased THC/CBD concentration and
the production of specific classes of oils and
terpenses
●
enhanced
opportunities for new drug discovery
●
accelerated
breeding of super-cultivars: drought, pest, and mold resistant,
increased %THC
●
revenue generation
through our unique ability to breed and genetically fingerprint
new, super-cultivars: establish strong patent protection; and
provide these cultivars to the market on a favorable cost and
royalty basis.
Our
goal with this program is to develop a translational breeding
program to establish a new collection of Cannabis cultivars for the
Colorado, national, and international markets. Through the use of
genetic screening technology, cultivars can be up-selected for
specific traits and grown to address the needs of consumers in the
medicinal market.
Corporate Overview
We
were originally incorporated under the name Plae, Inc., in the
State of Arizona on August 20, 1999. At the time we operated under
the name Plae, Inc., no business was conducted. No books or records
were maintained and no meetings were held. In essence, nothing was
done after incorporation until Glenn E. Martin took possession of
Plae, Inc. in January 2005. On February 18, 2005, the corporate
name was changed to King Mines, Inc. and then subsequently changed
to its current name, United Mines, Inc., on March 30, 2005. No
shares were issued until the Company became United Mines, Inc. From
2005 until 2015, we were an exploration stage mineral exploration
company that owned a number of unpatented mining claims and Arizona
State Land Department claims.
On
November 26, 2014, our Board of Directors approved the
redomestication of our company from Arizona to Nevada (the
“Articles of Domestication”), and approved Articles of
Incorporation in Nevada, which differed from then-Articles of
Incorporation in Arizona, primarily by (a) changing our name from
United Mines, Inc. to WEED, Inc., (b) authorizing Twenty Million
(20,000,000) shares of preferred stock, with blank check rights
granted to our Board of Directors, and (c) authorizing Two Hundred
Million (200,000,000) shares of common stock (the “Nevada
Articles of Incorporation”). On December 19, 2014, the
holders of a majority of our outstanding common stock approved the
Articles of Domestication and the Nevada Articles of Incorporation
at a Special Meeting of Shareholders. On January 16, 2015, the
Articles of Domestication and the Nevada Articles of Incorporation
went effective with the Secretary of State of the State of Nevada.
On February 2, 2015, our name change to WEED, Inc., and a
corresponding ticker symbol change to “BUDZ” went
effective with FINRA and was reflected on the quotation of our
common stock on OTC Markets.
25
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(CONTINUED)
These
changes were affected in order to make our corporate name and
ticker symbol better align with our short-term and long-term
business focus. Our current, short-term goals relate to the
Cannabis Genomic Study and the resulting development of a variety
of new cannabis strains, and, over the next 5 years, we plan to
process those results in order to become an international cannabis
research and product development company, with a
globally-recognized brand focusing on building and purchasing labs,
land and building commercial grade “Cultivation
Centers” to consult, assist, manage & lease to
universities, state governments, licensed dispensary owners and
organic grow operators on a contract basis with a concentration on
the legal and medical cannabis sector.
Our
long-term plan is to become a true “Seed-to-Sale”
global holding company providing infrastructure, financial
solutions, product development, and real estate options in this new
emerging market. Our long term growth may also come from the
acquisition of synergistic businesses, such as distilleries, to
make anything from infused beverages to super oxygenated water with
CBD and THC. Currently, we have formed WEED Australia Ltd.,
registered as an unlisted public company in Australia to address
this Global demand. We have also formed WEED Israel Cannabis Ltd.,
an Israeli corporation, to address future global demand, and in
March 2019, WEED Israel Cannabis Ltd. was involved in the
transaction with Yissum discussed herein. We will look to conduct
future research, marketing, import/exporting, and manufacturing of
our proprietary products on an international level.
On
April 20, 2017, we entered into a Share Exchange Agreement with
Sangre AT, LLC, a Wyoming limited liability company, under which we
acquired all of the issued and outstanding limited liability
company membership units of Sangre in exchange for Five Hundred
Thousand (500,000) shares of our common stock, restricted in
accordance with Rule 144. As a result of this agreement, Sangre is
a wholly-owned subsidiary of WEED, Inc.
This
discussion and analysis should be read in conjunction with our
financial statements included as part of this Annual
Report.
Results of Operations for the Years Ended December 31, 2018 and
2017
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2018
|
2017
|
|
|
|
|
|
Revenue
|
$
-
|
$
-
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
General and
administrative
|
1,036,564
|
671,679
|
|
Professional
fees
|
26,866,800
|
1,667,804
|
|
Depreciation and
amortization
|
180,640
|
44,654
|
|
Total operating
expenses
|
28,084,004
|
2,384,137
|
|
|
|
|
|
Loss from
operations
|
(28,084,004
)
|
(2,384,137
)
|
|
|
|
|
|
Other
expense
|
|
|
|
Goodwill
impairment
|
-
|
(1,015,910
)
|
|
Interest
income
|
9,338
|
-
|
|
Interest
expense
|
(12,179
)
|
(13,865
)
|
|
Other
income
|
268,172
|
-
|
|
Loss on
deposit
|
(110,000
)
|
-
|
|
Loss on
extinguishment of debt
|
(1,064,720
)
|
(67,983
)
|
|
Impairment
expense
|
(321,614
)
|
-
|
|
Total other
expense, net
|
(1,231,003
)
|
(1,097,758
)
|
|
|
|
|
|
Net income
(loss)
|
$
(29,315,007
)
|
$
(3,481,895
)
|
26
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(CONTINUED)
Operating Loss; Net Loss
Our
net loss increased by $25,833,112, from ($3,481,895) to
($29,315,007), from the year ended 2017 compared to 2018. Our
operating loss increased by $25,699,867, from ($2,384,137) to
($28,084,004) for the same period. The increase in operating loss
is primarily a result of our significant increase in our
professional fees and increase in our general and administrative
expenses. The increase in our net loss is also a result of our
operating loss, plus an increase in our loss on extinguishment of
debt and an impairment expense, partially offset by increases in
our interest income and other income. These changes are detailed
below.
Revenue
We
have not had any revenues since our inception. Prior to October 1,
2014, we were an exploration stage mineral exploration company that
owned a number of unpatented mining claims and Arizona State Land
Department claims. In late 2014, we changed our short-term and
long-term business focus to the medical cannabis sector. In the
short-term we plan to conduct Sangre’s Cannabis Genomic Study
over the next 5 years and process those result, and in the
long-term is to be a company focused on purchasing land and
building commercial grade “Cultivation Centers” to
consult, assist, manage & lease to licensed dispensary owners
and organic grow operators on a contract basis, with a
concentration on the legal and medical marijuana (Cannabis) sector.
Our long-term plan is to become a True “Seed-to-Sale”
company providing infrastructure, financial solutions and real
estate options in this new emerging market, worldwide. We plan to
make our brand global and therefore we will look for opportunities
to conduct future research, marketing, import and exporting, and
manufacturing of any proprietary products on an international
level.
General and Administrative Expenses
General and administrative expenses increased by
$364,885, from $671,679 for the year ended December 31, 2017 to
$1,036,564 for the year ended December 31, 2018, primarily due
to
in
creases in our staff wages, travel expenses and
facility maintenance expenses.
Professional Fees
Our
professional fees increased during the year ended December 31, 2018
compared to the year ended December 31, 2017. Our professional fees
were $26,866,800 for the year ended December 31, 2018 and
$1,667,804 for the year ended December 31, 2017. These fees are
largely related to fees paid for legal and accounting services,
along with compensation to independent contractors, and increased
significantly primarily as a result of increased stock-based
compensation awards and the value attributed to those shares of
stock. We expect the amount of professional fees we pay in cash to
grow steadily as our business expands. However, the amount
attributed to the stock-based compensation could decrease in
periods when our stock price is lower, if we continue to use
stock-based compensation. In the event we undertake an unusual
transaction, such as an acquisition, securities offering, or file a
registration statement, we would expect these fees to substantially
increase during that period.
Depreciation and Amortization
During the year ended December 31, 2018, we had depreciation and
amortization of $180,640, compared to $44,654 in the year ended
December 31, 2017. The depreciation and amortization expense in
2018 was related to the purchases of a house and condominium in La
Veta, Colorado and two trademarks acquired from Copalix (PTY) LTD.
The depreciation and amortization expense in 2017 was related to
the purchases of two Audi vehicles and a recreational facility
located in La Veta, Colorado.
27
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(CONTINUED)
Loss on Extinguishment of Debt
During
the year ended December 31, 2018, we had a loss on extinguishment
of debt of $1,064,720, compared to $67,983 in the year ended
December 31, 2017. The loss on extinguishment of debt in 2018 was
related to the $475,000 principle amount promissory note issued by
us to the seller of property that was paid in full. The loss on
extinguishment of debt was recorded based on the fair value of the
consideration paid and the carrying value of the note payable on
the settlement date of January 17, 2018. The loss on extinguishment
of debt in 2017 was entirely related to the fact that during 2017
we issued 70,000 shares of our common stock in satisfaction of a
$35,000 principal amount promissory note, plus $33,250 in interest
due under the note.
Gain on Extinguishment of Debt
In
2018, we had a gain on extinguishment of debt of $121,475, compared
to $0 in 2017. The gain on extinguishment of debt in 2018 was
related to a loan discount of $121,475 on the settlement between
Sangre AT, LLC and Craig W. Clark.
Interest Income
Interest
income increased from $0 to $9,338 for the year ended December 31,
2017 compared to the same period in 2018. Our interest income
increased from 2017 to 2018 primarily as a result of a credit
received at closing for the purchase of the property located in La
Veta, Colorado.
Interest Expense
Interest expense decreased slightly from ($13,865)
to ($12,179) for the year ended December 31, 2017 compared to the
same period in 2018. Our interest expense primarily relates to
interest on a convertible note and short
-
term loans.
Other Income
In
2018, we had other income of $268,172, compared to $0 in 2017. The
other income in 2018 was related primarily to settlement payment of
$155,000 we received from an insurance company related to a fire
near one of our properties in La Veta, Colorado.
Impairment Expense
In
2018, we had impairment expense of $321,614, compared to $0 in
2017. The impairment expense in 2018 was related to the appraised
value of the property located at 1390 Mountain Valley Road
purchased for $1,200,000 on February 16, 2018.
Loss on Deposit
In
2018, we had loss on deposit of $110,000, compared to $0 in 2017.
The deposit of loss in 2018 was related to the payments of
non-refundable deposits for the Lake Erie Project in Westfield, New
York.
Liquidity and Capital Resources
Introduction
During
the years ended December 31, 2018 and 2017, because of our
operating losses, we did not generate positive operating cash
flows. Our cash on hand as of December 31, 2018 was $70,608 and our
monthly cash flow burn rate was approximately $60,000. Our cash on
hand was primarily proceeds from the sales of our securities. We
currently do not believe we will be able to satisfy our cash needs
from our revenues for many years to come.
28
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(CONTINUED)
Our
cash, current assets, total assets, current liabilities, and total
liabilities as of December 31, 2018 and 2017, respectively, are as
follows:
|
|
December 31, 2018
|
December 31, 2017
|
Change
|
|
|
|
|
|
|
Cash
|
$
70,608
|
$
161,178
|
$
(90,570
)
|
|
Total
Current Assets
|
491,939
|
194,177
|
297,762
|
|
Total
Assets
|
3,020,989
|
1,308,339
|
1,712,650
|
|
Total
Current Liabilities
|
259,362
|
948,128
|
(688,766
)
|
|
Total
Liabilities
|
$
259,362
|
$
948,128
|
$
(688,766
)
|
Our current assets increased by $297,762 as of
December 31, 2018 as compared to December 31, 2017, primarily due
to deposits of $350,020, which related to the purchase for the
Sugar Hill golf course property, compared to $0 as of December 31,
2017 and an increase in our prepaid expenses, partially offset by
less cash on hand as of December 31, 2018 compared to December 31,
2017. The increase in our total assets between the two periods was
primarily attributed to a significant increase in our land and
property and equipment, net as of December 31, 2018 compared to
December 31, 2017, as well as increases in our deposits, prepaid
expenses, and intellectual property,
partially offset by less cash on hand as of
December 31, 2018 compared to December 31,
2017.
Our
current liabilities and total liabilities decreased by $688,766, as
of December 31, 2018 as compared to December 31, 2017. This
decrease in liabilities as of December 31, 2018 was primarily
related to decreases in our accrued officer compensation and notes
payable, compared to December 31, 2017.
In
order to repay our obligations in full or in part when due, we will
be required to raise significant capital from other sources. There
is no assurance, however, that we will be successful in these
efforts.
Cash Requirements
We
had cash available as of December 31, 2018 of $70,608 and $161,178
on December 31, 2017. Based on our revenues, cash on hand and
current monthly burn rate of approximately $60,000, we will need to
continue borrowing from our shareholders and other related parties,
and/or raise money from the sales of our securities, to fund
operations.
Sources and Uses of Cash
Operations
We had net cash used in operating activities of
$3,181,303 for the year ended December 31, 2018, as compared to
$670,201 for the year ended December 31, 2017. In 2018, the net
cash used in operating activities consisted primarily of our net
loss of ($29,315,007) and gain of settlement of debt of ($121,475),
offset by estimated fair value of stock-based compensation of
$21,201,397, estimated fair of shares issued for services of
$4,041,575, impairment of property of $321,614, loss on debt
extinguishment of $1,064,720, loss of deposit of $110,000, and
depreciation and amortization of $180,640, adjusted by an increases
in prepaid expenses and other assets of $498,311, accounts
receivable of $21, accounts payable of $11,849, and a decrease in
accrued expenses of $178,335. In 2017, the net cash used in
operating activities consisted primarily of our net loss of
($3,481,895), shares issued for services of $1,144,399, shares
issued for services, related parties of $364,750, goodwill
impairment of $1,015,910, loss on extinguishment of debt of
$67,983, and depreciation of $44,654, adjusted by an
increase
in prepaid expenses of $27,946,
accrued compensation of $21,826 accrued interest of $12,678, and
accounts payable of $167,019.
Investments
In
2018, we had net cash used in investing activities of $876,481,
consisting of purchases of property and equipment of $826,481 and
purchase of intangible assets of $50,000. In 2017, we had net cash
used in investing activities of $534,551, consisting of purchases
of land and equipment of $534,605 and cash received in acquisition
of $54.
29
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(CONTINUED)
Financing
Our
net cash provided by financing activities for the year ended
December 31, 2018 was $3,967,214, compared to $1,365,699 for the
year ended December 31, 2017. For the period in 2018, our financing
activities related to proceeds from the sale of common stock of
$5,023,401 and proceeds from notes payable of $7,000, offset by
repayments on notes payable of ($1,063,187). For the period in
2017, our financing activities related to proceeds from the sale of
common stock of $1,332,999 and proceeds from notes payable, related
parties of $46,000, offset by repayments on notes payable, related
parties of ($13,300).
Off Balance Sheet Arrangements
We have no off
-
balance sheet arrangements.
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
As a
smaller reporting company we are not required to provide the
information required by this Item.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For a
list of financial statements and supplementary data filed as part
of this Annual Report, see the Index to Financial Statements
beginning at page F-1 of this Annual Report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There
are no items required to be reported under this Item.
ITEM 9A - CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
We
carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer (our Principal Accounting
Officer), of the effectiveness of our disclosure controls and
procedures (as defined) in Exchange Act Rules 13a – 15(c) and
15d – 15(e)). Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer, who are our principal
executive officer and principal financial officers, respectively,
concluded that, as of the end of the period ended December 31,
2018, our disclosure controls and procedures were not effective (1)
to ensure that information required to be disclosed by us in
reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms and (2) to ensure that
information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is accumulated and
communicated to us, including our chief executive and chief
financial officers, as appropriate to allow timely decisions
regarding required disclosure.
Our
Chief Executive Officer and Chief Financial Officer (our Principal
Accounting Officer) do not expect that our disclosure controls or
internal controls will prevent all error and all fraud. No matter
how well conceived and operated, our disclosure controls and
procedures can provide only a reasonable level of assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Further,
the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur
because of a simple error or mistake. Additionally, controls can be
circumvented if there exists in an individual a desire to do so.
There can be no assurance that any design will succeed in achieving
its stated goals under all potential future
conditions.
30
ITEM 9A - CONTROLS AND PROCEDURES
(CONTINUED)
Furthermore,
smaller reporting companies face additional limitations. Smaller
reporting companies employ fewer individuals and find it difficult
to properly segregate duties. Often, one or two individuals control
every aspect of the company's operation and are in a position to
override any system of internal control. Additionally, smaller
reporting companies tend to utilize general accounting software
packages that lack a rigorous set of software
controls.
(b)
Management’s Annual
Report on Internal Control Over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over
financial reporting is defined in Rules 13a-15(f) and 15d-15(f)
promulgated under the Exchange Act, as amended, as a process
designed by, or under the supervision of, our Chief Executive
Officer and Chief Financial Officer (our Principal Financial
Officer), and effected by our board of directors, management and
other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles in the United States and includes
those policies and procedures that:
|
●
|
Pertain
to the maintenance of records that in reasonable detail accurately
and fairly reflect our transactions and any disposition of our
assets;
|
|
|
|
|
●
|
Provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with authorizations
of our management and directors; and
|
|
|
|
|
●
|
We have no formal
process related to the identification and approval of related-party
transactions.
|
|
●
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial
statements.
|
A
material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented
or detected on a timely basis. Our management assessed the
effectiveness of our internal control over financial reporting as
of December 31, 2018. In making this assessment, our management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Based on this assessment, Management
has identified the following three material weaknesses that have
caused management to conclude that, as of December 31, 2018, our
disclosure controls and procedures, and our internal control over
financial reporting, were not effective at the reasonable assurance
level:
1.
We do not have sufficient segregation of duties within accounting
functions, which is a basic internal control. Due to our size and
nature, segregation of all conflicting duties may not always be
possible and may not be economically feasible. However, to the
extent possible, the initiation of transactions, the custody of
assets and the recording of transactions should be performed by
separate individuals. Management evaluated the impact of our
failure to have segregation of duties on our assessment of our
disclosure controls and procedures and has concluded that the
control deficiency that resulted represented a material
weakness.
2.
We have not documented our internal controls. We have limited
policies and procedures that cover the recording and reporting of
financial transactions and accounting provisions. As a result we
may be delayed in our ability to calculate certain accounting
provisions. While we believe these provisions are accounted for
correctly in the attached audited financial statements our lack of
internal controls could lead to a delay in our reporting
obligations. We are required to provide written documentation of
key internal controls over financial reporting. Management
evaluated the impact of our failure to have written documentation
of our internal controls and procedures on our assessment of our
disclosure controls and procedures and has concluded that the
control deficiency that resulted represented a material
weakness.
31
ITEM 9A - CONTROLS AND PROCEDURES
(CONTINUED)
3.
Effective controls over the control environment were not
maintained. Specifically, a formally adopted written code of
business conduct and ethics that governs our employees, officers,
and directors was not in place. Additionally, management has not
developed and effectively communicated to our employees its
accounting policies and procedures. This has resulted in
inconsistent practices. Further, our Board of Directors does not
currently have any independent members and no director qualifies as
an audit committee financial expert as defined in Item
407(d)(5)(ii) of Regulation S-K. Since these entity level programs
have a pervasive effect across the organization, management has
determined that these circumstances constitute a material
weakness.
To
address these material weaknesses, management performed additional
analyses and other procedures to ensure that the financial
statements included herein fairly present, in all material
respects, our financial position, results of operations and cash
flows for the periods presented. Accordingly, we believe that the
consolidated financial statements included in this report fairly
present, in all material respects, our financial condition, results
of operations and cash flows for the periods
presented.
(c) Remediation of Material Weaknesses
In
order to remediate the material weakness in our documentation,
evaluation and testing of internal controls, we hope to hire
additional qualified and experienced personnel to assist us in
remedying this material weakness.
(d) Changes in Internal Control over Financial
Reporting
There
are no changes to report during our fiscal quarter ended December
31, 2018.
ITEM
9B – OTHER INFORMATION
There
are no events required to be disclosed by the Item.
32
PART III
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Directors and Executive Officers
The
following table sets forth the names and ages of the current
directors and executive officers of the Company, the principal
offices and positions with the Company held by each person and the
date such person became a director or executive officer of the
Company. The executive officers of the Company are elected annually
by the Board of Directors. The directors serve one-year terms until
their successors are elected. The executive officers serve terms of
one year or until their death, resignation or removal by the Board
of Directors. Unless described below, there are no family
relationships among any of the directors and officers.
|
Name
|
Age
|
Position(s)
|
|
|
|
|
|
Glenn E. Martin
|
63
|
President, Chief Executive Officer, Chief Financial Officer and a
Director
|
|
|
|
|
|
Nicole M. Breen
|
41
|
Secretary, Treasurer and a Director
|
Glenn E. Martin
was appointed
as our President, Chief Executive Officer and Chief Financial
Officer on September 30, 2014. Mr. Martin has been a Director since
January 1, 2005. Mr. Martin was our President from 2005 until 2012.
Prior to joining United Mines, Mr. Martin has served in an
executive capacity with several different companies. From 1988
through the fall of 1992, Mr. Martin was Executive Director of
World Trade Center, Tucson, a subsidiary of the former Twin Towers
in New York City. In this position he oversaw the day to day
operation, including projects, programs, and seminars for the U.S.
Dept. of Commerce associate office in the W.T.C., Tucson promoting
D.O.C. programs, servicing clients for both the D.O.C. and Small
Business administration. During his tenure with World Trade Center
he served as speaker for international trade seminars and the
AIESEC (U.S) National Leadership Seminars. Member; Hong Kong Trade
Association 1988 to present. Member; Society of Mining, Metallurgy
& Exploration (2008). Guest speaker at Inaugural HKBAH Annual
Event in May 2010 & member of Hong Kong Business Association of
Hawaii (2010)
During our fiscal years ended December 31, 2018 and December 31,
2017, Mr. Martin received $254,331 and $78,000, respectively, in
cash compensation for his services. Mr. Martin did not receive
shares of our common stock as compensation for the years ended
December 31, 2018 and December 31, 2017. As of December 31, 2018,
Mr. Martin owned or controlled an aggregate of 55,841,078 shares of
our common stock.
Nicole M. Breen
, was appointed
as our Secretary and Treasurer on September 30, 2014. Ms. Breen has
been a Director since January 1, 2005. Ms. Breen was our Secretary
and Treasurer from 2005 until 2012. From June 2000 to 2012 she
served as the Managing Associate of GEM Management Group, LLC
specializing in acquiring mineral rights and mining properties,
along with servicing administration requirements for the company.
All Ms. Breen’s current work in the Cannabis industry is done
on our behalf. In this position, she oversees as corporate
secretary, recording secretary and the day-to-day treasury
operations of the company. Ms. Breen received her Bachelor of
Science in Physical Education in Education, with a minor in
Elementary Education, from the University of
Arizona.
During our fiscal years ended December 31, 2018 and December 31,
2017, Ms. Breen received $57,000 in cash compensation for her
services in addition to a total of 180,505 shares of our common
stock as compensation for the years ended December 31, 2018 and
December 31, 2017. As of December 31, 2018, Ms. Breen owned or
controlled an aggregate of 25,128,022 shares of our common
stock.
33
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
(CONTINUED)
Nicole Breen is Glenn Martin’s daughter.
Term of Office
Our
directors hold office until the next annual meeting or until their
successors have been elected and qualified, or until they resign or
are removed. Our board of directors appoints our officers, and our
officers hold office until their successors are chosen and qualify,
or until their resignation or their removal.
Family Relationships
Nicole
Breen is Glenn Martin’s daughter.
Involvement in Certain Legal Proceedings
Our
directors and executive officers have not been involved in any of
the following events during the past ten years:
|
1.
|
No
bankruptcy petition has been filed by or against any business of
which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that
time;
|
|
|
|
|
2.
|
any
conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
|
|
|
|
|
3.
|
being
subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities;
|
|
|
|
|
4.
|
being
found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended,
or vacated;
|
|
|
|
|
5.
|
being
the subject of, or a party to, any federal or state judicial or
administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of: (i) any federal or state securities or commodities
law or regulation; or (ii) any law or regulation respecting
financial institutions or insurance companies including, but not
limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order;
or (iii) any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity; or
|
|
6.
|
being
the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Securities
Exchange Act of 1934), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act), or any equivalent
exchange, association, entity or organization that has disciplinary
authority over its members or persons associated with a
member.
|
Committees
Our
Board of Directors held a special meeting on January 23, 2018. All
other proceedings of the board of directors for the year ended
December 31, 2018 were conducted by resolutions consented to in
writing by the board of directors and filed with the minutes of the
proceedings of our board of directors. Our company currently does
not have nominating, compensation or audit committees or committees
performing similar functions nor does our company have a written
nominating, compensation or audit committee charter. Our board of
directors does not believe that it is necessary to have such
committees because it believes that the functions of such
committees can be adequately performed by the board of
directors.
34
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
(CONTINUED)
We
do not have any defined policy or procedural requirements for
shareholders to submit recommendations or nominations for
directors. The board of directors believes that, given the stage of
our development, a specific nominating policy would be premature
and of little assistance until our business operations develop to a
more advanced level. Our company does not currently have any
specific or minimum criteria for the election of nominees to the
board of directors and we do not have any specific process or
procedure for evaluating such nominees. The board of directors will
assess all candidates, whether submitted by management or
shareholders, and make recommendations for election or
appointment.
A
shareholder who wishes to communicate with our board of directors
may do so by directing a written request addressed to our president
at the address appearing on the first page of this annual
report.
Audit Committee Financial Expert
Our
board of directors has determined that it does not have an audit
committee member that qualifies as an “audit committee
financial expert” as defined in Item 407(d)(5)(ii) of
Regulation S-K. We believe that the audit committee members are
collectively capable of analyzing and evaluating our financial
statements and understanding internal controls and procedures for
financial reporting. In addition, we believe that retaining an
independent director who would qualify as an “audit committee
financial expert” would be overly costly and burdensome and
is not warranted in our circumstances given the early stages of our
development and the fact that we have not generated revenues to
date.
Nomination Procedures For Appointment of Directors
As
of December 31, 2018, we did not affect any material changes to the
procedures by which our stockholders may recommend nominees to our
board of directors.
Code of Ethics
We
do not have a code of ethics.
Section 16(a) Beneficial Ownership
Section
16(a) of the Securities Exchange Act of 1934 requires the
Company’s directors and executive officers and persons who
own more than ten percent of a registered class of the
Company’s equity securities to file with the SEC initial
reports of ownership and reports of changes in ownership of common
stock and other equity securities of the Company. Officers,
directors and greater than ten percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
During
the fiscal year ended December 31, 2018, to the Company’s
knowledge, the following delinquencies occurred:
|
Name
|
No. of Late Reports
|
No. of Transactions Reported Late
|
No. of Failures to File
|
|
Glenn E. Martin
|
0
|
0
|
0
|
|
Nicole M. Breen
|
0
|
0
|
0
|
35
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
(CONTINUED)
Indemnification of Directors and Officers
Section
15 of our Articles of Incorporation provides that, to the fullest
extent permitted by law, no director or officer shall be personally
liable to the corporation or its shareholders for damages for
breach of any duty owed to the corporation or its
shareholders.
Section
16 of our Articles of Incorporation provides that, to the fullest
extent permitted by the General Corporation Law of the State of
Nevada we will indemnify our officers and directors from and
against any and all expenses, liabilities, or other
matters.
Article
IX of our Bylaws further addresses indemnification of our directors
and officers and allows us to indemnify our directors in the event
they meet certain criteria in terms of acting in good faith and in
an official capacity within the scope of their duties, when such
conduct leads them to be involved in a legal action.
Insofar
as indemnification for liabilities arising under the Securities Act
of 1933 (the “Act”) may be permitted to directors,
officers and controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable.
ITEM 11 - EXECUTIVE COMPENSATION
The
particulars of compensation paid to the following
persons:
|
(a)
|
all
individuals serving as our principal executive officer during the
year ended December 31, 2018;
|
|
|
|
|
(b)
|
each of
our two most highly compensated executive officers other than our
principal executive officer who were serving as executive officers
at December 31, 2018 who had total compensation exceeding $100,000;
and
|
|
|
|
|
(c)
|
up to
two additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not
serving as our executive officer at December 31, 2018,
|
who we will collectively refer to as the named executive officers,
for the years ended December 31, 2018 and 2017, and 2016, are set
out in the following summary compensation table:
Summary Compensation
The
following table provides a summary of the compensation received by
the persons set out therein for each of our last three fiscal
years:
|
SUMMARY COMPENSATION TABLE
|
|||||||||
|
Name
and Principal
Position
|
Year
|
Salary
($)
|
Bonus ($)
|
Stock Awards ($)
|
Option Awards ($)
|
Non-Equity Incentive
Plan
Compensation
($)
|
Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
Glenn
E. Martin
President,
CEO, CFO
(1)
|
2018
2017
2016
|
80,000
56,174
7,995
|
-0-
-0-
-0-
|
-0-
-0-
2,100,000
|
-0-
-0-
-0-
|
-0-
-0-
-0-
|
-0-
-0-
-0-
|
-0-
-0-
-0-
|
80,000
56,174
2,107,995
|
|
Nicole
M. Breen, Secretary and Treasurer
(2)
|
2018
2017
2016
|
52,000
23,000
5,000
|
5,000
-0-
-0-
|
-0-
-0-
1,200,000
|
-0-
-0-
-0-
|
-0-
-0-
-0-
|
-0-
-0-
-0-
|
-0-
-0-
-0-
|
57,000
23,000
1,205,000
|
|
(1)
|
Mr.
Martin was appointed President, Chief Executive Officer, and Chief
Financial Officer on September 30, 2014.
|
|
(2)
|
Ms.
Breen was appointed Secretary and Treasurer on September 30,
2014.
|
36
ITEM 11 - EXECUTIVE COMPENSATION
(CONTINUED)
Employment Contracts
In
2014 and 2016 we entered into employment agreements with Glenn E.
Martin, our Chief Executive Officer and Chief Financial Officer,
Nicole Breen, our Secretary and Treasurer and Ryan Breen, our Vice
President and Social Media Officer.
Under
the terms of our agreement with Mr. Martin dated October 1, 2016,
he serves as our President and Chief Executive Officer. The
agreement was for a two-year term and Mr. Martin received Seven
Million (7,000,000) shares of our common stock, restricted in
accordance with Rule144, and was to receive Seven Million
(7,000,000) additional shares as his annual salary for agreeing to
serve as our President and Chief Executive Officer. Additionally,
Mr. Martin was entitled to One Million (1,000,000) shares of a
yet-to-be-created class of Series B Preferred Stock if we regained
“fully-reporting” status with the Securities and
Exchange Commission. We are obligated to maintain and pay the
premiums for “key man” life insurance in the amount of
$1,000,000. Our agreement with Mr. Martin also contained various
provisions related to his termination without cause and in the
event we undergo a change of control transaction. To date, no
“key man” insurance has been obtained.
On
January 23, 2018, our Board of Directors agreed to enter into an
Amended and Restated Employment Agreement with Glenn E. Martin.
Under the new agreement, Mr. Martin will serve as our President and
Chief Executive Officer for a five (5) year term in exchange for a
base salary of $1,500 per week, which will be increased to $120,000
annually in the event we raise an aggregate of $2,000,000 during
the term of the agreement. The agreement went effective beginning
February 1, 2018. Additionally, we agreed to grant Mr. Martin One
Million (1,000,000) shares of our restricted common stock on
February 1, 2018 pursuant to the terms of a Restricted Stock
Agreement, with the shares subject to certain restrictions on
transfer which expire on 33% of the shares on February 1, 2019, 66%
of the shares on February 1, 2020 and 100% of the shares on
February 1, 2021. We also agreed to issue Mr. Martin a
Non-Qualified Stock Option on February 1, 2018 to purchase up to
Four Million (4,000,000) shares of our common stock at $10.55 per
share, with the options vesting 33 1/3% on August 1, 2018, 33 1/3%
on February 1, 2019 and 33 1/3rd % on February 1, 2020. The options
expire ten years from the date of grant. As a result of the Amended
and Restated Employment Agreement with Mr. Martin, he is no longer
entitled to the Seven Million (7,000,000) shares of our common
stock as annual salary, or the One Million (1,000,000) shares of a
yet-to-be-created class of Series B Preferred Stock if we become
fully-reporting, which were both set forth in his prior employment
agreement. On December 19, 2018, Mr. Martin requested termination
of his Restricted Stock Agreement dated February 1, 2018 and
requested that the grants of restricted stock therein be forfeited.
As a result, we terminated his Restricted Stock Agreement and the
grants of stock thereunder immediately. At the time of the
termination none of the transfer restrictions on the shares had
been lifted and Mr. Martin never received the shares.
Under
the terms of our agreement with Mrs. Breen dated October 1, 2016,
she serves as our Secretary and Treasurer. The agreement was for a
two-year term and Ms. Breen received Four Million (4,000,000)
shares of our common stock, restricted in accordance with Rule 144,
and was to receive Four Million (4,000,000) additional shares as
her annual salary for agreeing to serve as our Secretary and
Treasurer. Additionally, Ms. Breen was entitled to One Hundred
Thousand (100,000) shares of a yet-to-be-created class of Series B
Preferred Stock if we regained “fully-reporting” status
with the Securities and Exchange Commission. Our agreement with Ms.
Breen also contained various provisions related to her termination
without cause and in the event we undergo a change of control
transaction.
On
January 23, 2018, our Board of Directors agreed to enter into an
Amended and Restated Employment Agreement with Nicole M. Breen.
Under the new agreement, Ms. Breen will serve as our Secretary and
Treasurer for a five (5) year term in exchange for a base salary of
$1,000 per week. The agreement went effective beginning February 1,
2018. Additionally, we agreed to grant Ms. Breen Five Hundred
Thousand (500,000) shares of our restricted common stock on
February 1, 2018 pursuant to the terms of a Restricted Stock
Agreement, with the shares subject to certain restrictions on
transfer which expire on 33% of the shares on February 1, 2019, 66%
of the shares on February 1, 2020 and 100% of the shares on
February 1, 2021. We also agreed to issue Ms. Breen a Non-Qualified
Stock Option on February 1, 2018 to purchase up to Two Million
(2,000,000) shares of our common stock at $10.55 per share, with
the options vesting 33 1/3% on August 1, 2018, 33 1/3% on February
1, 2019 and 33 1/3rd % on February 1, 2020. The options expire ten
years from the date of grant. As a result of the Amended and
Restated Employment Agreement with Ms. Breen, she is no longer
entitled to the One Million (1,000,000) shares of our common stock
as annual salary, or the One Hundred Thousand (100,000) shares of a
yet-to-be-created class of Series B Preferred Stock if we become
fully-reporting, which were both set forth in her prior employment
agreement. On December 19, 2018, Ms. Breen requested termination of
her Restricted Stock Agreement dated February 1, 2018 and requested
that the grants of restricted stock therein be forfeited. As a
result, we terminated her Restricted Stock Agreement and the grants
of stock thereunder immediately. At the time of the termination
none of the transfer restrictions on the shares had been lifted and
Ms. Breen never received the shares.
37
ITEM 11 - EXECUTIVE COMPENSATION
(CONTINUED)
Long-Term Incentive
Plans. We do not provide its officers or employees with pension,
stock appreciation rights, long-term incentive or other plans and
has no intention of implementing any of these plans for the
foreseeable future.
Employee Pension,
Profit Sharing or other Retirement Plans. We do not have a defined
benefit, pension plan, profit sharing or other retirement plan,
although it may adopt one or more of such plans in the
future.
Director Compensation
The
following table sets forth director compensation for
2018:
|
Name
|
Fees
Earned or Paid in Cash($)
|
Stock
Awards($)
|
Option
Awards($)
|
Non-Equity
Incentive Plan Compensation($)
|
Nonqualified
Deferred Compensation Earnings($)
|
All
Other Compensation($)
|
Total($)
|
|
|
|
|
|
|
|
|
|
|
Glenn
E. Martin
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|
Nicole
M. Breen
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
No
director received compensation for the fiscal years December 31,
2018 and December 31, 2017. We have no formal plan for compensating
our directors for their service in their capacity as directors,
although such directors are expected in the future to receive stock
options to purchase common shares as awarded by our board of
directors or (as to future stock options) a compensation committee
which may be established. Directors are entitled to reimbursement
for reasonable travel and other out-of-pocket expenses incurred in
connection with attendance at meetings of our board of directors.
Our board of directors may award special remuneration to any
director undertaking any special services on our behalf other than
services ordinarily required of a director.
Outstanding Equity Awards at Fiscal Year-End
The
following table sets forth certain information concerning
outstanding stock awards held by the Named Executive Officers on
December 31, 2018:
|
|
Option Awards
|
Stock Awards
|
|||||||
|
Name
|
Number of Securities Underlying Unexercised Options (#)
Exercisable
|
Number of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity Incentive Plan Awards: Number of Securities Underlying
Unexercised Unearned Options (#)
|
Option Exercise Price ($)
|
Option
Expiration
Date
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or
Other Rights That Have Not Vested (#)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned
Shares, Units or Other Rights That Have Not Vested ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn
E. Martin
|
1,333,333
|
2,666,667
|
-0-
|
10.55
|
2/1/2028
|
-0-
|
-0-
|
-0-
|
-0-
|
|
Nicole
M. Breen
|
666,666
|
1,333,334
|
-0-
|
10.55
|
2/1/2028
|
-0-
|
-0-
|
-0-
|
-0-
|
38
ITEM 11 - EXECUTIVE COMPENSATION
(CONTINUED)
Outstanding Equity Awards at Fiscal Year-End
On
February 1, 2018, we granted Mr. Glenn Martin a Non-Qualified Stock
Option to purchase up to Four Million (4,000,000) shares of our
common stock at $10.55 per share, with the options vesting 33 1/3%
on August 1, 2018, 33 1/3% on February 1, 2019 and 33 1/3rd % on
February 1, 2020. The options expire ten years from the date of
grant.
On
February 1, 2018, we granted Ms. Nicole Breen a Non-Qualified Stock
Option to purchase up to Two Million (2,000,000) shares of our
common stock at $10.55 per share, with the options vesting 33 1/3%
on August 1, 2018, 33 1/3% on February 1, 2019 and 33 1/3rd % on
February 1, 2020. The options expire ten years from the date of
grant.
Aggregated Option Exercises
There
were no options exercised by any officer or director of our company
during our twelve month period ended December 31,
2018.
Long-Term Incentive Plan
Currently,
our company does not have a long-term incentive plan in favor of
any director, officer, consultant or employee of our
company.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth, as of March 27, 2019, certain
information with respect to our equity securities owned of record
or beneficially by (i) each Officer and Director of the Company;
(ii) each person who owns beneficially more than 5% of each class
of the Company’s outstanding equity securities; and (iii) all
Directors and Executive Officers as a group.
Common Stock
|
Title of Class
|
Name and Address
of Beneficial Owner
(2)
|
Nature of
Beneficial Ownership
|
Amount
|
|
Percent of Class
(1)
|
|
|
|
|
|
|
|
|
Common
Stock
|
Glenn
E. Martin
(3)
|
President,
CEO, CFO, and Director
|
58,507,744
|
(4)
|
53.7%
|
|
|
|
|
|
||
|
Common
Stock
|
Nicole
M. Breen
(3)
|
Secretary,
Treasurer, and Director
|
25,474,329
|
(4)
|
23.6%
|
|
|
|
|
|
||
|
Common
Stock
|
All
Officers and Directors as a Group (2 people)
|
|
83,982,073
|
(4)(5)
|
76.1%
|
|
(1)
|
Unless
otherwise indicated, based on 106,410,685 shares of common stock
issued and outstanding. Shares of common stock subject to options
or warrants currently exercisable, or exercisable within 60 days,
are deemed outstanding for purposes of computing the percentage of
the person holding such options or warrants, but are not deemed
outstanding for the purposes of computing the percentage of any
other person.
|
|
(2)
|
Unless
indicated otherwise, the address of the shareholder is 4920 N. Post
Trail, Tucson, AZ 85750.
|
|
(3)
|
Indicates
one of our officers or directors.
|
|
(4)
|
Includes
80,666 shares of common stock held in the name of Tanque Verde
Valley Missionary Society, an entity controlled by Mr. Martin, as
well as options to acquire 2,666,666 shares of our common stock at
an exercise price of $10.55 per share. The options are exercisable
at the discretion of the holder and expire 10 years from the date
of grant.
|
39
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
(CONTINUED
)
|
(5)
|
Includes
305,505 shares of common stock held in the name of GEM Management
Group, LLC, an entity controlled by Ms. Breen, an aggregate of
15,927 shares of common stock held in the name of Ms. Breen’s
children, and 4,012,972 held in the name of Ryan Breen, Ms.
Breen’s husband. Also includes options to acquire 1,333,332
shares of our common stock at an exercise price of $10.55, which
options expire ten years from the date of grant.
|
The
issuer is not aware of any person who owns of record, or is known
to own beneficially, ten percent or more of the outstanding
securities of any class of the issuer, other than as set forth
above. The issuer is not aware of any person who controls the
issuer as specified in Section 2(a)(1) of the 1940 Act. There are
no classes of stock other than common stock issued or outstanding.
The Company does not have an investment advisor.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
Employment Contracts
In
2014 and 2016 we entered into employment agreements with Glenn E.
Martin, our Chief Executive Officer and Chief Financial Officer,
Nicole Breen, our Secretary and Treasurer and Ryan Breen, our Vice
President and Social Media Officer.
Under
the terms of our agreement with Mr. Martin dated October 1, 2016,
he serves as our President and Chief Executive Officer. The
agreement was for a two-year term and Mr. Martin received Seven
Million (7,000,000) shares of our common stock, restricted in
accordance with Rule144, and was to receive Seven Million
(7,000,000) additional shares as his annual salary for agreeing to
serve as our President and Chief Executive Officer. Additionally,
Mr. Martin was entitled to One Million (1,000,000) shares of a
yet-to-be-created class of Series B Preferred Stock if we regained
“fully-reporting” status with the Securities and
Exchange Commission. We are obligated to maintain and pay the
premiums for “key man” life insurance in the amount of
$1,000,000. Our agreement with Mr. Martin also contained various
provisions related to his termination without cause and in the
event we undergo a change of control transaction. To date, no
“key man” insurance has been obtained.
On
January 23, 2018, our Board of Directors agreed to enter into an
Amended and Restated Employment Agreement with Glenn E. Martin.
Under the new agreement, Mr. Martin will serve as our President and
Chief Executive Officer for a five (5) year term in exchange for a
base salary of $1,500 per week, which will be increased to $120,000
annually in the event we raise an aggregate of $2,000,000 during
the term of the agreement. The agreement went effective beginning
February 1, 2018. Additionally, we agreed to grant Mr. Martin One
Million (1,000,000) shares of our restricted common stock on
February 1, 2018 pursuant to the terms of a Restricted Stock
Agreement, with the shares subject to certain restrictions on
transfer which expire on 33% of the shares on February 1, 2019, 66%
of the shares on February 1, 2020 and 100% of the shares on
February 1, 2021. We also agreed to issue Mr. Martin a
Non-Qualified Stock Option on February 1, 2018 to purchase up to
Four Million (4,000,000) shares of our common stock at $10.55 per
share, with the options vesting 33 1/3% on August 1, 2018, 33 1/3%
on February 1, 2019 and 33 1/3rd % on February 1, 2020. The options
expire ten years from the date of grant. As a result of the Amended
and Restated Employment Agreement with Mr. Martin, he is no longer
entitled to the Seven Million (7,000,000) shares of our common
stock as annual salary, or the One Million (1,000,000) shares of a
yet-to-be-created class of Series B Preferred Stock if we become
fully-reporting, which were both set forth in his prior employment
agreement. On December 19, 2018, Mr. Martin requested termination
of his Restricted Stock Agreement dated February 1, 2018 and
requested that the grants of restricted stock therein be forfeited.
As a result, we terminated his Restricted Stock Agreement and the
grants of stock thereunder immediately. At the time of the
termination none of the transfer restrictions on the shares had
been lifted and Mr. Martin never received the shares.
40
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
(CONTINUED)
Under
the terms of our agreement with Mrs. Breen dated October 1, 2016,
she serves as our Secretary and Treasurer. The agreement was for a
two-year term and Ms. Breen received Four Million (4,000,000)
shares of our common stock, restricted in accordance with Rule 144,
and was to receive Four Million (4,000,000) additional shares as
her annual salary for agreeing to serve as our Secretary and
Treasurer. Additionally, Ms. Breen was entitled to One Hundred
Thousand (100,000) shares of a yet-to-be-created class of Series B
Preferred Stock if we regained “fully-reporting” status
with the Securities and Exchange Commission. Our agreement with Ms.
Breen also contained various provisions related to her termination
without cause and in the event we undergo a change of control
transaction.
On
January 23, 2018, our Board of Directors agreed to enter into an
Amended and Restated Employment Agreement with Nicole M. Breen.
Under the new agreement, Ms. Breen will serve as our Secretary and
Treasurer for a five (5) year term in exchange for a base salary of
$1,000 per week. The agreement went effective beginning February 1,
2018. Additionally, we agreed to grant Ms. Breen Five Hundred
Thousand (500,000) shares of our restricted common stock on
February 1, 2018 pursuant to the terms of a Restricted Stock
Agreement, with the shares subject to certain restrictions on
transfer which expire on 33% of the shares on February 1, 2019, 66%
of the shares on February 1, 2020 and 100% of the shares on
February 1, 2021. We also agreed to issue Ms. Breen a Non-Qualified
Stock Option on February 1, 2018 to purchase up to Two Million
(2,000,000) shares of our common stock at $10.55 per share, with
the options vesting 33 1/3% on August 1, 2018, 33 1/3% on February
1, 2019 and 33 1/3rd % on February 1, 2020. The options expire ten
years from the date of grant. As a result of the Amended and
Restated Employment Agreement with Ms. Breen, she is no longer
entitled to the One Million (1,000,000) shares of our common stock
as annual salary, or the One Hundred Thousand (100,000) shares of a
yet-to-be-created class of Series B Preferred Stock if we become
fully-reporting, which were both set forth in her prior employment
agreement. On December 19, 2018, Ms. Breen requested termination of
her Restricted Stock Agreement dated February 1, 2018 and requested
that the grants of restricted stock therein be forfeited. As a
result, we terminated her Restricted Stock Agreement and the grants
of stock thereunder immediately. At the time of the termination
none of the transfer restrictions on the shares had been lifted and
Ms. Breen never received the shares.
Long-Term Incentive
Plans. We do not provide its officers or employees with pension,
stock appreciation rights, long-term incentive or other plans and
has no intention of implementing any of these plans for the
foreseeable future.
Employee Pension,
Profit Sharing or other Retirement Plans. We do not have a defined
benefit, pension plan, profit sharing or other retirement plan,
although it may adopt one or more of such plans in the
future.
Share Issuances
On June 18, 2018, we issued an aggregate of 100,000 shares of our
common stock to Patrick E. Williams, who at the time was one of our
Directors and an officer of Sangre for services rendered. The total
fair value of the stock was $514,000 based on the closing price of
our common stock on the date of grant.
On
October 1, 2016, we granted 7,000,000 shares of common stock to
Glenn E. Martin, our Chief Executive Officer, as a bonus for
services to be performed from January 1, 2017 to December 31, 2018,
as our primary executive officer, pursuant to an amended employment
agreement. The total fair value of the common stock was $700,000
based on the closing price of our common stock on the date of
grant.
In
addition, on October 1, 2016, we granted a total of 14,000,000
shares of common stock to Glenn E. Martin, our Chief Executive
Officer, for services performed from January 1, 2015 to December
31, 2016, as our primary executive officer, pursuant to his
previous employment agreement. The total fair value of the common
stock was $1,400,000 based on the closing price of our common stock
on the date of grant.
41
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
(CONTINUED)
On
October 1, 2016, we granted 4,000,000 shares of common stock to
Nicole Breen, our Secretary and Treasurer, for services to be
performed from January 1, 2017 to December 31, 2018, in those
capacities, pursuant to an amended employment agreement. The total
fair value of the common stock was $400,000 based on the closing
price of our common stock on the date of grant.
In
addition, on October 1, 2016, we granted a total of 8,000,000
shares of common stock to Nicole, our Secretary and Treasurer, for
services performed from January 1, 2015 to December 31, 2016, in
those capacities, pursuant to their previous employment agreement.
The total fair value of the common stock was $800,000 based on the
closing price of our common stock on the date of
grant.
On
January 1, 2015, we granted 7,000,000 shares of common stock to our
Glenn E. Martin, our Chief Executive Officer, as a bonus for
services performed from January 1, 2015 to December 31, 2016, as
our primary executive officer. The total fair value of the common
stock was $490,000 based on the closing price of our common stock
on the date of grant. The shares were subsequently issued on June
29, 2015.
On
January 1, 2015, we granted 4,000,000 shares of common stock to
Nicole Breen, our Secretary and Treasurer, as a bonus for services
performed from January 1, 2015 to December 31, 2016, in those
capacities. The total fair value of the common stock was $280,000
based on the closing price of our common stock on the date of
grant. The shares were subsequently issued on June 29,
2015.
On
or about December 5, 2014, we issued 18,000,000 shares to Glenn
Martin, our Chief Executive Officer, at $0.05 per share, in
exchange for services rendered to the company from January 1, 2012
until December 31, 2014.
On
or about September 30, 2014, we issued: (i) an aggregate of
9,600,000 shares to Glenn Martin, Nicole Breen and Ryan Breen,
affiliates of the company, at $0.05 per share, in exchange for
services rendered to the company from July 2012 to September 30,
2014.
Notes Payable
On the following dates, we received advances in the amounts
indicated from our Chief Executive Officer, Glenn Martin. Mr.
Martin owns approximately 56% of our common stock. The unsecured
non-interest bearing loans are due on demand.
|
Date
|
Advances
|
Date
|
Repayments
|
|
March
14, 2016
|
$
10,000
|
March
15, 2016
|
$
(6,000
)
|
|
April
18, 2016
|
1,800
|
October
20, 2016
|
(3,000
)
|
|
June
16, 2016
|
1,100
|
October
27, 2016
|
(3,000
)
|
|
January
16, 2018
|
7,000
|
November
3, 2016
|
(900
)
|
|
January
19, 2018
|
20,000
|
|
|
|
January 22, 2018
|
5,000
|
|
|
|
|
$
44,900
|
|
$
(12,900
)
|
On
January 2, 2018, Dr. Pat Williams, at the time a member of our
Board of Directors, loaned us $37,000, at an interest rate of 2%
per annum, compounded annually and due on demand. The loan was for
the purpose of assisting us in purchasing the condominium in La
Veta, CO.
Lease of Real Property
We
lease our executive offices from Glenn E. Martin, our President, on
a month-to-month basis at a monthly rent of $1,000, which began on
April 1, 2017.
Corporate Governance
As
of December 31, 2018, our Board of Directors consisted of Glenn E.
Martin and Nicole M. Breen. As of December 31, 2018, we did not
have any directors that qualified as “independent
directors” as the term is used in NASDAQ rule
5605(a)(2).
Our
current Board of Directors consists of Glenn E. Martin and Nicole
M. Breen as our only directors.
42
ITEM
14 – PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit fees
The
aggregate fees billed for the two most recently completed fiscal
periods ended December 31, 2018 and December 31, 2017 for
professional services rendered by M&K CPAS, PLLC, for the audit
of our annual consolidated financial statements, quarterly reviews
of our interim consolidated financial statements and services
normally provided by the independent accountant in connection with
statutory and regulatory filings or engagements for these fiscal
periods were as follows:
|
|
Year Ended
December 31,
2018
|
Year Ended
December 31,
2017
|
|
Audit Fees and
Audit Related Fees
|
$
76,320
|
$
42,425
|
|
Tax
Fees
|
$
0
|
$
0
|
|
All Other
Fees
|
$
0
|
$
0
|
|
Total
|
$
76,320
|
$
42,425
|
In
the above table, “audit fees” are fees billed by our
company’s external auditor for services provided in auditing
our company’s annual financial statements for the subject
year. “Audit-related fees” are fees not included in
audit fees that are billed by the auditor for assurance and related
services that are reasonably related to the performance of the
audit review of our company’s financial statements.
“Tax fees” are fees billed by the auditor for
professional services rendered for tax compliance, tax advice and
tax planning. “All other fees” are fees billed by the
auditor for products and services not included in the foregoing
categories.
Policy on Pre-Approval by Audit Committee of Services Performed by
Independent Auditors
The
board of directors pre-approves all services provided by our
independent auditors. All of the above services and fees were
reviewed and approved by the board of directors before the
respective services were rendered.
The
board of directors has considered the nature and amount of fees
billed by M&K CPAS, PLLC and believes that the provision of
services for activities unrelated to the audit is compatible with
maintaining M&K CPAS, PLLC independence.
43
PART IV
ITEM
15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
(a)(1)
|
Financial Statements
|
For a
list of financial statements and supplementary data filed as part
of this Annual Report, see the Index to Financial Statements
beginning at page F-1 of this Annual Report.
|
(a)(2)
|
Financial Statement Schedules
|
We
do not have any financial statement schedules required to be
supplied under this Item.
|
(a)(3)
|
Exhibits
|
Refer
to (b) below.
|
Item No.
|
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
44
ITEM
15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS
**
|
|
XBRL
Instance Document
|
|
|
|
|
|
101.SCH
**
|
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
|
|
101.CAL
**
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
101.DEF
**
|
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
101.LAB
**
|
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
101.PRE
**
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
* Filed herewith
** XBRL (Extensible Business Reporting Language) information is
furnished and not filed or a part of a registration statement or
prospectus for purposes of Sections 11 or 12 of the Securities Act
of 1933, as amended, is deemed not filed for purposes of Section 18
of the Securities Exchange Act of 1934, as amended, and otherwise
is not subject to liability under these sections.
|
(1)
|
Incorporated
by reference from our Registration Statement on Form S-1 filed with
the Commission on August 11, 2017.
|
|
|
|
|
(2)
|
Incorporated
by reference from the Amendment No. 1 to our Registration Statement
on Form S-1 filed with the Commission on November 16,
2017.
|
|
|
|
|
(3)
|
Incorporated
by reference from the Amendment No. 2 to our Registration Statement
on Form S-1 filed with the Commission on February 1,
2018.
|
|
|
|
|
(4)
|
Incorporated
by reference from the Amendment No. 3 to our Registration Statement
on Form S-1 filed with the Commission on April 30,
2018.
|
|
|
|
|
(5)
|
Incorporated
by reference from the Current Report on Form 8-K filed with the
Commission on March 7, 2019.
|
45
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
|
WEED, Inc.
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
Dated:
April 15,
2019
|
/s/
Glenn E. Martin
|
||
|
|
By:
Glenn E.
Martin
|
||
|
|
Its:
Chief Executive Officer
(Principal Executive Officer), President, and Chief Financial
Officer (Principal Financial Officer)
|
||
|
|
|
|
|
|
|
|
|
|
|
Dated:
April 15,
2019
|
/s/
Nicole M. Breen
|
||
|
|
By:
Nicole M.
Breen
|
||
|
|
Its:
Secretary and
Treasurer
|
||
In
accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
|
|
|
|
|
|
Dated:
April 15,
2019
|
/s/
Glenn E. Martin
|
|
|
By:
Glenn E. Martin, Director
|
|
|
|
|
|
|
|
Dated:
April 15, 2019
|
/s/
Nicole M. Breen
|
|
|
By:
Nicole M. Breen, Director
|
46
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
|
Financial Statements:
|
Page
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
Consolidated
Balance Sheets for WEED, Inc. for the Years Ended December 31, 2018
and December 31, 2017
|
F-3
|
|
Consolidated
Statement of Operations for WEED, Inc. for the Years Ended December
31, 2018 and December 31, 2017
|
F-4
|
|
Consolidated
Statements of Changes in Stockholders' Equity for WEED, Inc. for
the Years Ended December 31, 2018 and 2017
|
F-5
|
|
Consolidated
Statement of Cash Flows for WEED, Inc. for the
Years Ended December
31, 2018 and December 31, 2017
|
F-6
|
|
Notes
to Consolidated Financial Statements for WEED, Inc. for the Years
Ended December 31, 2018 and 2017
|
F-7
|
Supplementary
Data
Not
applicable
ITEM 1 Consolidated Financial Statements
The
balance sheets as of December 31, 2018 and 2017, the statements of
operations for years ended December 31, 2018 and 2017, and
statements of cash flows for the years ending December 31, 2018 and
2017, follow. The audited condensed consolidated financial
statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the
interim periods presented. All such adjustments are of a normal and
recurring nature.
47
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of WEED, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
WEED, Inc. (the Company) as of December 31, 2018 and 2017, and the
related consolidated statements of income, stockholders’
equity, and cash flows for each of the years in the two-year period
ended December 31, 2018, and the related notes and schedules
(collectively referred to as the financial statements). In our
opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31,
2018 and 2017, and the results of its operations and its cash flows
for each of the years in the two-year period ended December 31,
2018, in conformity with accounting principles generally accepted
in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to
erroror fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 2 to the financial statements, the Company suffered a net loss
from operations and has a net capital deficiency, which raises
substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters are also described in
Note 2. The financial statements do not include any adjustments
that might result from the outcome of this
uncertainty.
|
/s/ M&K CPAS, PLLC
|
|
We have served as the Company’s auditor since
2017.
|
|
Houston, TX
|
|
April 15, 2019
|
F-1
|
WEED, INC. AND SUBSIDIARY
|
||
|
|
|
|
|
CONSOLIDATED BALANCE
SHEETS
|
||
|
December
31, 2018 and 2017
|
||
|
|
|
|
|
|
December
31,
|
December
31,
|
|
|
2018
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash
|
$
70,608
|
$
161,178
|
|
Accounts
receivable
|
21
|
0
|
|
Prepaid
expenses
|
71,290
|
32,999
|
|
Deposits
|
350,020
|
-
|
|
|
|
|
|
TOTAL CURRENT
ASSETS
|
491,939
|
194,177
|
|
|
|
|
|
Land
|
136,400
|
113,750
|
|
Property and
equipment, net
|
2,344,133
|
1,000,412
|
|
|
|
|
|
Trademark
|
50,000
|
-
|
|
Less: Accumulated
amortization
|
(1,483
)
|
-
|
|
Trademark,
net
|
48,517
|
-
|
|
|
|
|
|
TOTAL
ASSETS
|
$
3,020,989
|
$
1,308,339
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
Accounts
payable
|
$
240,459
|
$
228,609
|
|
Accrued officer
compensation
|
-
|
179,331
|
|
Accrued
interest
|
6,903
|
16,188
|
|
Notes payable,
related parties
|
12,000
|
49,000
|
|
Notes
payable
|
-
|
475,000
|
|
|
|
|
|
TOTAL CURRENT
LIABILITIES
|
259,362
|
948,128
|
|
|
|
|
|
TOTAL
LIABILITIES
|
259,362
|
948,128
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
Preferred stock,
$0.001 par value, 20,000,000 authorized,
None issued and
outstanding
|
-
|
-
|
|
Common stock,
$0.001 par value, 200,000,000 authorized,
|
|
|
|
105,950,685 and
100,861,235 issued and outstanding, respectively
|
105,951
|
100,861
|
|
Unamortized stock
based compensation
|
(200,400
)
|
-
|
|
Additional paid-in
capital
|
50,896,121
|
19,139,868
|
|
Subscriptions
payable
|
356,250
|
200,770
|
|
Accumulated
deficit
|
(48,396,295
)
|
(19,081,288
)
|
|
|
|
|
|
TOTAL STOCKHOLDERS'
EQUITY
|
2,761,627
|
360,211
|
|
|
|
|
|
TOTAL LIABILITIES
& STOCKERHOLDERS' EQUITY
|
$
3,020,989
|
$
1,308,339
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-2
|
WEED, INC. AND SUBSIDIARY
|
|
CONSOLIDATED STATEMENTS OF
OPERATIONS
For the Years Ended December 31,
2018 and 201
7
|
|
|
For the Years Ended December 31,
|
|
|
|
2018
|
2017
|
|
REVENUE
|
|
|
|
|
$
-
|
$
-
|
|
OPERATING
EXPENSES
|
|
|
|
General
and administrative expenses
|
1,036,564
|
671,679
|
|
Professional
fees
|
26,866,800
|
1,667,804
|
|
Depreciation
& amortization
|
180,640
|
44,654
|
|
|
|
|
|
Total
operating expenses
|
28,084,004
|
2,384,137
|
|
|
|
|
|
NET
OPERATING LOSS
|
(28,084,004
)
|
(2,384,137
)
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
Interest
income
|
9,338
|
-
|
|
Goodwill
impairment
|
-
|
(1,015,910
)
|
|
Interest
expense
|
(12,179
)
|
(13,865
)
|
|
Other
income
|
155,701
|
-
|
|
Impairment
expense
|
(321,614
)
|
-
|
|
Loss
on deposit
|
(110,000
)
|
-
|
|
Loss
on extinguishment of debt
|
(1,064,720
)
|
(67,983
)
|
|
Gain
on extinguishment of debt
|
121,475
|
-
|
|
Other
expense
|
(9004
)
|
-
|
|
|
|
|
|
Total other
expense, net
|
(1,231,003
)
|
(1,097,758
)
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
$
(29,315,007
)
|
$
(3,481,895
)
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
|
|
|
|
|
|
|
|
Outstanding
- basic and diluted
|
103,168,018
|
101,214,245
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
$
(0.28
)
|
$
(0.03
)
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-3
|
WEED, INC. AND SUBSIDIARY
|
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUIT
For the Years Ended December 31, 2017 and 2018
|
|
|
Common
Stock
|
|
|
|
|
Total
|
|
|
|
|
|
Additional
|
Subscriptions
|
Unamortized
Stock
|
Accumulated
|
Stockholders
|
|
|
Shares
|
Amount
|
Paid-In
Capital
|
Payable
|
Based
Compensation
|
Deficit
|
Equity
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2016
|
103,953,307
|
$
103,953
|
$
15,219,762
|
$
-
|
$
-
|
$
(15,599,393
)
|
$
(275,678
)
|
|
|
|
|
|
|
|
|
|
|
Common stock sold
for cash
|
1,903,333
|
1,903
|
1,327,097
|
|
|
|
1,329,000
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
for cash, exercise of warrants
|
2,666
|
3
|
3,996
|
|
|
|
3,999
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
for acquisition of Sangre AT, LLC
|
500,000
|
500
|
1,003,350
|
|
|
|
1,003,850
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
for acquisition of land and property
|
25,000
|
25
|
29,975
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
for services, related parties
|
200,000
|
200
|
364,550
|
|
|
|
364,750
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
for services
|
461,882
|
462
|
943,167
|
200,770
|
|
|
1,144,399
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
for bater of vehicles
|
66,000
|
66
|
105,066
|
|
|
|
105,132
|
|
|
|
|
|
|
|
|
|
|
Common stock and
warrants exchanged for debt
|
70,000
|
70
|
136,163
|
|
|
|
136,233
|
|
|
|
|
|
|
|
|
|
|
Sabres cancelled
for non-performance of services
|
(1,500,000
)
|
(1,500
)
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inputed interest on
non-interest bearing related party debts
|
|
|
421
|
|
|
|
421
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
(3,481,895
)
|
(3,481,895
)
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2017
|
100,861,235
|
$
100,861
|
$
19,139,868
|
$
200,770
|
$
-
|
$
(19,081,288
)
|
$
360,211
|
|
|
|
|
|
|
|
|
|
|
Common stock sold
for cash
|
3,899,450
|
3,900
|
4,794,651
|
-
|
|
|
4,798,551
|
|
|
|
|
|
|
|
|
-
|
|
Shares issued for
warrant exercises
|
150,000
|
150
|
224,850
|
-
|
|
|
225,000
|
|
|
|
|
|
|
|
|
-
|
|
Common stock issued
for debt settlement
|
125,000
|
125
|
1,449,875
|
-
|
|
|
1,450,000
|
|
|
|
|
|
|
|
|
-
|
|
Common stock issued
for services
|
915,000
|
915
|
3,133,105
|
155,480
|
(200,400
)
|
|
3,089,100
|
|
|
|
|
|
|
|
|
-
|
|
Vesting of employee
stock options
|
|
|
21,284,610
|
|
|
|
21,284,610
|
|
|
|
|
|
|
|
|
-
|
|
Vesting of employee
stock comp
|
|
|
869,162
|
|
|
|
869,162
|
|
|
|
|
|
|
|
|
-
|
|
Net
loss
|
|
|
|
|
|
(29,315,007
)
|
(29,315,007
)
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
105,950,685
|
$
105,951
|
$
50,896,121
|
$
356,250
|
$
(200,400
)
|
$
(48,396,295
)
|
$
2,761,627
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-4
|
WEED, INC. AND SUBSIDIARY
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
For the Years Ended December 31, 2018 and 2017
|
|
|
2018
|
2017
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
Net
loss
|
$
(29,315,007
)
|
$
(3,481,895
)
|
|
Adjustments
to reconcile net loss to
|
|
|
|
used
in operating activities:
|
|
|
|
Depreciation
and amortization
|
180,640
|
44,654
|
|
Goodwill
impairment
|
-
|
1,015,910
|
|
Gain on settlement
of debt
|
(121,475
)
|
-
|
|
Loss on
Deposit
|
110,000
|
-
|
|
Impairment
expense
|
321,614
|
-
|
|
Imputed
interest on non-interest bearing related party debts
|
-
|
421
|
|
Estimated
fair value of stock based compensation-
|
21,201,397
|
-
|
|
Estimated
fair value of shares issued for services
|
4,041,575
|
1,144,399
|
|
Estimated
fair value of shares issued for services, related
parties
|
-
|
364,750
|
|
Loss
on debt extinguishment
|
1,064,720
|
67,983
|
|
Decrease
(increase) in assets
|
|
|
|
Accounts
Receivable
|
(21
)
|
-
|
|
Prepaid
expenses and other assets
|
(498,311
)
|
(27,946
)
|
|
Increase
(decrease) in liabilities
|
|
|
|
Accounts
Payable
|
11,849
|
167,019
|
|
Accrued
expenses
|
(178,335
)
|
34,504
|
|
|
|
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
(3,181,303
)
|
(670,201
)
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
Cash
received in acquisition
|
-
|
54
|
|
Purchases
of property and equipment
|
(826,481
)
|
(534,605
)
|
|
Purchase
of intangible assets
|
(50,000
)
|
-
|
|
|
|
|
|
NET
CASH USED IN INVESTING ACTIVITIES
|
(876,481
)
|
(534,551
)
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Proceeds
from notes payable
|
7,000
|
46,000
|
|
Repayments
on notes payable
|
(1,063,187
)
|
(13,300
)
|
|
Proceeds
from the sale of common stock
|
5,023,401
|
1,332,999
|
|
|
|
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
3,967,214
|
1,365,699
|
|
|
|
|
|
NET
CHANGE IN CASH
|
(90,570
)
|
160,947
|
|
|
|
|
|
CASH,
BEGINNING OF YEAR
|
161,178
|
231
|
|
|
|
|
|
CASH,
END OF YEAR
|
$
70,608
|
$
161,178
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
|
||
|
|
|
|
|
Cash
paid during the year ended December 31:
|
|
|
|
|
|
|
|
Income
taxes
|
-
|
-
|
|
Interest
paid
|
-
|
-
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
Value
of shares issued for acquisition of Sangre AT, LLC
|
-
|
$
1,003,850
|
|
Value
of shares issued for acquisition of land and property
|
-
|
30,000
|
|
Mortgage
issued for acquisition of land and property
|
1,040,662
|
475,000
|
|
Value
of shares issued to pay off note payable
|
385,281
|
-
|
|
Value
of shares issued in exchange for settlement of convertible
debt
|
-
|
86,800
|
|
Value
of warrants issued in exchange for settlement of convertible
debt
|
-
|
49,433
|
|
Shares
issued for subscription payable
|
200,770
|
-
|
|
Value
of fixed assets acquired for stock
|
-
|
$
105,132
|
The
accompanying notes are an integral part of these unaudited
consolidated financial statements.
F-5
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018 and 2017
Note 1 – Nature of Business and Significant Accounting
Policies
Nature of Business
WEED,
Inc. (the “Company”), (formerly United Mines, Inc.) was
incorporated under the laws of the State of Arizona on August 20,
1999 (“Inception Date”) as Plae, Inc. to engage in the
exploration of gold and silver mining properties. On November 26,
2014, the Company was renamed from United Mines, Inc. to WEED, Inc.
and was repurposed to pursue a business involving the purchase of
land, and building Commercial Grade “Cultivation
Centers” to consult, assist, manage & lease to Licensed
Dispensary owners and organic grow operators on a contract basis,
with a concentration on the legal and medical marijuana sector. The
Company’s plan is to become a True “Seed-to-Sale”
company providing infrastructure, financial solutions and real
estate options in this new emerging market. The Company, under
United Mines, was formerly in the process of acquiring mineral
properties or claims located in the State of Arizona, USA. The name
was previously changed on February 18, 2005 to King Mines, Inc. and
then subsequently changed to United Mines, Inc. on March 30, 2005.
The Company trades on the OTC Pink Sheets under the stock symbol:
BUDZ.
On
April 20, 2017, the Company acquired Sangre AT, LLC, a Wyoming
company doing business as Sangre AgroTech. (“Sangre”).
Sangre is a plant genomic research and breeding company comprised
of top-echelon scientists with extensive expertise in genomic
sequencing, genetics-based breeding, plant tissue culture, and
plant biochemistry, utilizing the most advanced sequencing and
analytical technologies and proprietary bioinformatics data systems
available. Sangre is working on a cannabis genomic study to
complete a global genomic classification of the cannabis plant
genus.
The
accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States
of America. These statements reflect all adjustments, consisting of
normal recurring adjustments, which in the opinion of management
are necessary for fair presentation of the information contained
therein.
The
Company has a calendar year end for reporting
purposes.
Principles of Consolidation
The
accompanying consolidated financial statements include the accounts
of the following entities, all of which are under common control
and ownership:
|
|
|
State
of
|
|
|
|
Abbreviated
|
|
Name of
Entity
|
|
Incorporation
|
|
Relationship
(1)
|
|
Reference
|
|
WEED,
Inc.
|
|
Nevada
|
|
Parent
|
|
WEED
|
|
Sangre
AT, LLC (2)
|
|
Wyoming
|
|
Subsidiary
|
|
Sangre
|
(1)
Sangre is a wholly-owned subsidiary of WEED, Inc.
(2)
Sangre AT, LLC is doing business as Sangre AgroTech.
The
consolidated financial statements herein contain the operations of
the wholly-owned subsidiary listed above. All significant
inter-company transactions have been eliminated in the preparation
of these financial statements. The parent company, WEED and
subsidiary, Sangre will be collectively referred to herein as the
“Company”, or “WEED”. The Company's
headquarters are located in Tucson, Arizona and its operations are
primarily within the United States, with minimal operations in
Australia.
These
statements reflect all adjustments, consisting of normal recurring
adjustments, which in the opinion of management are necessary for
fair presentation of the information contained
therein.
F-6
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 1 – Nature of Business and Significant Accounting
Policies (continued)
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States
(“GAAP”) requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, and the disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
Under
ASC 820-10-05, the Financial Accounting Standards Board
(“FASB”) establishes a framework for measuring fair
value in GAAP and expands disclosures about fair value
measurements. This Statement reaffirms that fair value is the
relevant measurement attribute. The adoption of this standard did
not have a material effect on the Company’s financial
statements as reflected herein. The carrying amounts of cash,
prepaid expenses and accrued expenses reported on the balance sheet
are estimated by management to approximate fair value primarily due
to the short term nature of the instruments.
Impairment of Long-Lived Assets
Long-lived
assets held and used by the Company are reviewed for possible
impairment whenever events or circumstances indicate the carrying
amount of an asset may not be recoverable or is impaired.
Recoverability is assessed using undiscounted cash flows based upon
historical results and current projections of earnings before
interest and taxes. Impairment is measured using discounted cash
flows of future operating results based upon a rate that
corresponds to the cost of capital. Impairments are recognized in
operating results to the extent that carrying value exceeds
discounted cash flows of future operations.
Basic and Diluted Loss Per Share
The
basic net loss per common share is computed by dividing the net
loss by the weighted average number of common shares outstanding.
Diluted net loss per common share is computed by dividing the net
loss adjusted on an “as if converted” basis, by the
weighted average number of common shares outstanding plus potential
dilutive securities. For the periods presented, potential dilutive
securities had an anti-dilutive effect and were not included in the
calculation of diluted net loss per common share.
Stock-Based Compensation
Under
FASB ASC 718-10-30-2, all share-based payments to employees,
including grants of employee stock options, to be recognized in the
income statement based on their fair values.
Revenue Recognition
On
January 1, 2018, the Company adopted the new revenue recognition
standard ASU 2014-09, “Revenue from Contracts with Customers
(Topic 606)”, using the cumulative effect (modified
retrospective) approach. Modified retrospective adoption requires
entities to apply the standard retrospectively to the most current
period presented in the financial statements, requiring the
cumulative effect of the retrospective application as an adjustment
to the opening balance of retained earnings at the date of initial
application. No cumulative-effect adjustment in retained earnings
was recorded as the Company’s has no historical revenue. The
impact of the adoption of the new standard was not material to the
Company’s consolidated financial statements for year ended
December 31, 2018. The Company expects the impact to be immaterial
on an ongoing basis.
The
primary change under the new guidance is the requirement to report
the allowance for uncollectible accounts as a reduction in net
revenue as opposed to bad debt expense, a component of operating
expenses. The adoption of this guidance did not have an impact on
our condensed consolidated financial statements, other than
additional financial statement disclosures. The guidance requires
increased disclosures, including qualitative and quantitative
disclosures about the nature, amount, timing and uncertainty of
revenue and cash flows arising from contracts with
customers.
The
Company operates as one reportable segment.
Advertising and Promotion
All
costs associated with advertising and promoting products are
expensed as incurred. These expenses were $998 and $4,139 for the
years ended December 31, 2018 and 2017, respectively.
F-7
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 1 – Nature of Business and Significant Accounting
Policies (continued)
Recently Issued Accounting Pronouncements
In May
2014, the FASB issued Accounting Standards Update ASU 2014-09,
“Revenue from Contracts with Customers (Topic 606),”
which supersedes nearly all existing revenue recognition guidance,
including industry-specific guidance. Subsequent to the issuance of
ASU No. 2014-09, the FASB clarified the guidance through several
Accounting Standards Updates; hereinafter the collection of revenue
guidance is referred to as “Topic 606.” Topic 606 is
based on the principle that an entity should recognize revenue to
depict the transfer of goods or services to customers in an amount
that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. Topic 606 also
requires additional disclosures about the nature, amount, timing
and uncertainty of revenue and cash flows arising from customer
contracts, including significant judgments and changes in judgments
and assets recognized from costs incurred to fulfill a contract.
The Company adopted Topic 606 on January 1, 2018 using the modified
retrospective transition method; accordingly, Topic 606 has been
applied to the fiscal 2018 financial statements and disclosures
going forward, but the comparative information has not been
restated and continues to be reported under the accounting
standards in effect for those periods. We expect the impact of the
adoption of Topic 606 to be immaterial to our operating results on
an ongoing basis.
In
February 2016, the FASB issued ASU 2016-02, Leases. The standard
requires lessees to recognize lease assets and lease liabilities on
the consolidated balance sheet and requires expanded disclosures
about leasing arrangements. We planned to adopt the standard on
January 1, 2019, and it did not have a significant impact on the
Company.
In June 2018, the FASB issued Accounting Standards Update
(“ASU”) 2018-07,
Compensation – Stock
Compensation (Topic 718) Improvements to Nonemployee Share-Based
Payment Accounting
. This ASU
expands the scope of Topic 718 to include share-based payment
transactions for acquiring goods and services from nonemployees.
The amendments in this ASU became effective for us beginning
January 1, 2019. The adoption of this ASU did not have a material
effect on our consolidated financial
statements.
Note 2 – Going Concern
As
shown in the accompanying consolidated financial statements, the
Company has no revenues, incurred net losses from operations
resulting in an accumulated deficit of $48,396,295 and had limited
working capital at December 31, 2018. These factors raise
substantial doubt about the Company’s ability to continue as
a going concern. Management is actively pursuing new products and
services to begin generating revenues. In addition, the Company is
currently seeking additional sources of capital to fund short term
operations. The Company, however, is dependent upon its ability to
secure equity and/or debt financing and there are no assurances
that the Company will be successful; therefore, without sufficient
financing it would be unlikely for the Company to continue as a
going concern.
The
financial statements do not include any adjustments that might
result from the outcome of any uncertainty as to the
Company’s ability to continue as a going concern. The
financial statements also do not include any adjustments relating
to the recoverability and classification of recorded asset amounts
or amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going
concern.
As of
December 31, 2018, the non-refundable deposit amount of $110,000
for the property
located
in Westfield, New York
was recorded as a loss on deposit due
to the uncertainty of the acquisition. The remaining refundable
deposit amount of $350,020 is related to the purchase of the Sugar
Hill golf course property and is being held by the Law Office of
Biltekoff.
F-8
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 3 – Related Party
Notes Payable
From
time to time, the Company has received short term loans from
officers and directors as disclosed in Note 8 below. The Company
has a total of $12,000 and $49,000 of note payable on the
consolidated balance sheet as of December 31, 2018 and 2017,
respectively.
Services
Nicole
M. Breen receives $1,000 a week in cash compensation for her
services rendered to the Company.
Glenn
E. Martin receives $6,000 a month in cash compensation for his
services rendered to the Company.
Capital Contributions
The
Company imputed interest on non-interest bearing, related party
loans, resulting in a total of $0 and $421 of contributed capital
during the years ended December 31, 2018 and 2017,
respectively.
Common Stock Issued for Bartered Assets
On
January 18, 2017, the Company exchanged 66,000 units, consisting of
66,000 shares of common stock and warrants to purchase 66,000
shares of common stock at an exercise price of $3.00 per share,
exercisable until January 18, 2018, in exchange for a 2017 Audi Q7
and a 2017 Audi A4 driven by the Officers. The total fair value
received, based on the market price of the stock at $4.02 per
share, was allocated to the $105,132 purchase price of the vehicles
and the $160,188 excess value of the common stock and warrants was
expensed as stock-based compensation.
Common Stock
On
August 1, 2017, the Company granted 150,000 shares of common stock
to Mary Williams, a principal of Sangre AT, LLC, for services
performed. The fair value of the common stock was $154,500 based on
the closing price of the Company’s common stock on the date
of grant.
On
January 7, 2017, the Company granted 50,000 shares of common stock
to Pat Williams. PhD, a principal of Sangre AT, LLC, for services
performed. The total fair value of the common stock was $210,250
based on the closing price of the Company’s common stock on
the date of grant.
A total
of $0 and $179,331 of officer compensation was unpaid and
outstanding at December 31, 2018 and 2017,
respectively.
Stock Options Issued for Services – related party
(2018)
On
February 1, 2018, in connection with executive employment
agreements, the Company granted non-qualified options to purchase
an aggregate of 6,000,000 shares of the Company’s common
stock at the exercise price of $10.55 per share. The options shall
become exercisable at the rate of 1/3 upon the six-month
anniversary, 1/3 upon the one-year anniversary and 1/3 upon the
second anniversary of the grant. The options were valued at
$45,987,970 using the Black-Scholes option pricing model. The
Company recognized expense of $21,201,397 relating to these options
for the year ended December 31, 2018.
Note 4 – Fair Value of Financial Instruments
Under
FASB ASC 820-10-5, fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date (an exit price). The standard outlines a valuation framework
and creates a fair value hierarchy in order to increase the
consistency and comparability of fair value measurements and the
related disclosures. Under GAAP, certain assets and liabilities
must be measured at fair value, and FASB ASC 820-10-50 details the
disclosures that are required for items measured at fair
value.
The
Company has certain financial instruments that must be measured
under the new fair value standard. The Company’s financial
assets and liabilities are measured using inputs from the three
levels of the fair value hierarchy. The three levels are as
follows:
Level 1
- Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to
access at the measurement date.
Level 2
- Inputs include quoted prices for similar assets and liabilities
in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than
quoted prices that are observable for the asset or liability (e.g.,
interest rates, yield curves, etc.), and inputs that are derived
principally from or corroborated by observable market data by
correlation or other means (market corroborated
inputs).
Level 3
- Unobservable inputs that reflect our assumptions about the
assumptions that market participants would use in pricing the asset
or liability.
F-9
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 4 – Fair Value of Financial Instruments
(continued)
The
following schedule summarizes the valuation of financial
instruments at fair value on a recurring basis in the balance
sheets as of December 31, 2018 and 2017, respectively:
Fair Value Measurements at December 31, 2017
|
|
Level 1
|
Level 2
|
Level 3
|
|
Assets
|
|
|
|
|
Cash
|
$
161,178
|
$
-
|
$
-
|
|
Total
assets
|
$
161,178
|
$
-
|
$
-
|
|
Liabilities
|
|
|
|
|
Notes payable,
related parties
|
$
-
|
49,000
|
$
-
|
|
Notes
payable
|
$
-
|
$
475,000
|
$
-
|
|
Total
liabilities
|
$
-
|
$
524,000
|
$
-
|
|
|
$
161,178
|
$
524,000
|
$
-
|
Fair Value Measurements at December 31, 2018
|
|
Level 1
|
Level 2
|
Level 3
|
|
Assets
|
|
|
|
|
Cash
|
$
70,608
|
$
-
|
$
-
|
|
Total
assets
|
$
70,608
|
$
-
|
$
-
|
|
Liabilities
|
|
|
|
|
Notes payable,
related parties
|
$
-
|
$
12,000
|
$
-
|
|
Total
liabilities
|
$
-
|
$
12,000
|
$
-
|
|
|
$
70,608
|
$
12,000
|
$
-
|
F-10
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 4 – Fair Value of Financial Instruments
(continued)
The
fair values of our related party debts are deemed to approximate
book value and are considered Level 2 inputs as defined by ASC
Topic 820-10-35.
There
were no transfers of financial assets or liabilities between Level
1, Level 2 and Level 3 inputs for the years ended December 31, 2018
and 2017, respectively.
Note 5 – Investment in Land and Property
On July
26, 2017, the Company closed on the purchase of property,
consisting of a home, recreational facility and RV park located at
5535 State Highway 12 in La Veta, Colorado to be developed into a
bioscience center. The home has 4 Bedrooms and 2 Baths, and the
recreational facility has showers, laundry, and reception area with
an additional equipment barn attached, in addition to another
facility with 9,500 square feet. The RV Park has 24 sites with full
hook-ups including water, sewer, and electric, which the Company
plans to convert into a series of small research pods. Under the
terms of the purchase agreement, the Company paid $525,000 down,
including 25,000 shares of our common stock, and Sangre took
immediate possession of the property. Under the terms of the
original purchase agreement, the Company was obligated to pay an
additional $400,000 in cash and issue an additional 75,000 shares
of our common stock over the next two years in order to pay the
entire purchase price. On January 12, 2018, the Company entered
into an Amendment No. 1 to the $475,000 principal amount promissory
note issued by the Company to the seller of the property, under
which both parties agreed to amend the purchase and the promissory
note to allow the Company to pay off the note in full if it paid
$100,000 in cash on or before January 15, 2018 and issued the
seller 125,000 shares of common stock, restricted in accordance
with Rule 144, on before January 20, 2018. Through an escrow
process, the Company paid the seller $100,000 in cash and issued
him 125,000 shares of common stock in accordance with the Amendment
No. 1, in exchange for a full release of the deed of trust that was
securing the promissory note, on January 17, 2018. As a result, the
$475,000 principal promissory note issued to the seller was deemed
paid-in-full and fully satisfied and the Company owned the property
without encumbrances as of that date. The Company recorded a loss
on extinguishment of debt of approximately $1,065,000 based on the
fair value of the consideration paid and the carrying value of the
note payable on the settlement date. The total purchase price was
as follows:
|
|
July
26, 2017
|
|
Consideration:
|
|
|
Common stock
payment of 25,000 shares (1)
|
$
30,000
|
|
Cash payment of
down payment
|
50,000
|
|
Cash paid at
closing
|
444,640
|
|
Short term
liabilities assumed and paid at closing (2)
|
5,360
|
|
Note payable
(3)
|
475,000
|
|
Total
purchase price
|
$
1,005,000
|
|
(1)
|
Consideration
consisted of an advance payment of 25,000 shares of the
Company’s common stock valued at $30,000 based on the closing
price of the Company’s common stock on the July 18, 2017 date
of grant.
|
(2)
Purchaser’s shares of closing costs, including the
seller’s prepaid property taxes.
(3) As
noted above, the note was settled with a payment of $100,000 and
the issuance of 125,000 shares of common stock.
In
January 2018, the Company closed on the purchase of property,
consisting of a condominium in La Veta, Colorado to house Company
personnel and consultants for total consideration approximating
$140,000, which was paid in cash at the time of closing. The home
has 3 bedrooms and 2.5 baths.
Sangre took immediate possession
of the property. La Veta, Colorado is a small town and rental or
short-term housing is very difficult to obtain. The Company
personnel and consultants are no longer residing at the property,
and it is currently vacant.
In
February 2018, the Company closed on the purchase of property,
consisting of a home in La Veta, Colorado to house Company
personnel and consultants for total consideration approximating
$1,200,000. The home has 5 Bedrooms and 3 Baths. Under the terms of
the purchase agreement, the Company paid $150,000 down, entered
into a note payable in the amount of approximately $1,041,000 (see
Note 8). The Company secured a below-market interest rate of 1.81%
based on the short-term nature of the term (due on August 15,
2018). Sangre took immediate possession of the property. La Veta,
Colorado is a small town and rental or short-term housing is very
difficult to obtain. The Company personnel and consultants are no
longer residing at the property, and it is currently vacant. On
October 10, 2018, a payment of $750,000 was made to Craig W. Clark
to pay off the note payable, and a loan discount of $125,475 was
given to the Company which was recorded as a gain.
A settlement payment of $155,000 was received from an insurance
company related to a fire near one of our properties in La Veta,
Colorado.
F-11
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 6 – Property and Equipment
Property
and equipment consist of the following at December 31, 2018 and
2017, respectively:
|
|
December
31,
|
December
31,
|
|
|
2018
|
2017
|
|
Property
improvements
|
$
5,000
|
$
28,934
|
|
Automobiles
|
105,132
|
105,132
|
|
Office
equipment
|
4,933
|
4,934
|
|
Lab
equipment
|
65,769
|
15,202
|
|
Construction in
progress (2)
|
499,695
|
0
|
|
Property
(1)
|
1,887,802
|
891,250
|
|
Property and
equipment, gross
|
2,568,331
|
1,045,452
|
|
Less accumulated
depreciation
|
(224,198
)
|
(45,040
)
|
|
Property and
equipment, net
|
$
2,308,133
|
1,000,412
|
|
(1)
|
During
the year ended December 31, 2018, the Company purchased two
properties in La Veta, Colorado. The property located on 169 Valley
Vista was purchased for $140,000, and the property located on 1390
Mountain Valley Road was purchased for $1,200,000 (see Note
8).
|
|
(2)
|
During the year ended December 31, 2018, HVAC/furnace system and
research facility center are under construction.
|
Depreciation
expense totaled $171,612 and $44,654 for the years ended December
31, 2018 and 2017, respectively.
Impairment
expense totaled $321,614 on 1390 Mountain Valley Rd. property for
the year ended December 31, 2018.
Note 7 – Intangible Assets
In
accordance with FASB ASC 350, “Intangibles-Goodwill and
Other”, the Company evaluates the recoverability of
identifiable intangible assets whenever events or changes in
circumstances indicate that an intangible asset’s carrying
amount may not be recoverable. The impairment loss would be
calculated as the amount by which the carrying value of the asset
exceeds its fair value. The US and Europe trademarks were acquired
for $40,000 and $10,000, respectively, for the year ended December
31, 2018. Trademarks are initially measured based on their fair
value and amortized by 10 and 25 years.
Amortization
expense totaled $1,484 and $0 for the years ended December 31, 2018
and 2017, respectively.
F-12
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 8 – Notes Payable, Related Parties
Notes
payable, related parties consist of the following at December 31,
2018 and 2017, respectively:
|
|
2018
|
2017
|
|
On various dates,
the Company received advances from the Company’s CEO, Glenn
Martin. Mr. Martin owns approximately 56.2% of the Company’s
common stock at March 31, 2018. Over various dates in 2017, the
Company received a total of $9,000 of advances from Mr. Martin, and
they were repaid by July 3, 2017. On January 19, 2018, the Company
received an unsecured loan, bearing interest at 2%, in the amount
of $25,000 from Mr. Martin, and the loan was paid off in full on
February 2, 2018. The Company also repaid an advance of $7,000 on
July 6, 2018 received from Mr. Martin on January 16, 2018. The
unsecured non-interest-bearing loans were due on demand. A detailed
list of advances and repayments follows:
|
$
-
|
$
-
|
|
On December 29,
2017, the Company received an unsecured loan, bearing interest at
2% in the amount of $37,000, due on demand from Dr. Pat Williams,
PhD. The largest aggregate amount outstanding was $37,000 during
the periods ended December 31, 2018 and December 31, 2017. Mr.
Williams is a founding member and principal of our wholly-owned
subsidiary, Sangre AT, LLC. Repayment was made to Mr. Williams on
July 6, 2018.
|
-
|
37,000
|
|
|
|
|
|
On April 12, 2010,
the Company received an unsecured, non-interest-bearing loan in the
amount of $2,000, due on demand from Robert Leitzman. Interest is
being imputed at the Company’s estimated borrowing rate, or
10% per annum. The largest aggregate amount outstanding was $2,000
during the periods ended December 31, 2018 and December 31, 2017.
Mr. Leitzman owns less than 1% of the Company’s common stock,
however, the Mr. Leitzman is deemed to be a related party given the
non-interest-bearing nature of the loan and the materiality of the
debt at the time of origination.
|
2,000
|
2,000
|
|
|
|
|
|
Over various dates
in 2011 and 2012, the Company received unsecured loans in the
aggregate amount of $10,000, due on demand, bearing interest at
10%, from Sandra Orman. The largest aggregate amount outstanding
was $10,000 during the periods ended December 31, 2018 and December
31, 2017. Mrs. Orman owns less than 1% of the Company’s
common stock, however, Mrs. Orman is deemed to be a related party
given the nature of the loan and the materiality of the debt at the
time of origination.
|
10,000
|
10,000
|
|
|
|
|
|
Notes payable,
related parties
|
$
12,000
|
$
49,000
|
The
Company recorded interest expense in the amount of $1,366 and $759
for the years ended December 31, 2018 and 2017, respectively,
including imputed interest expense in the amount of $0 and $421
during such periods related to notes payable, related
parties.
F-13
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 8 – Notes Payable
Note
payable consist of the following at December 31, 2018 and 2017,
respectively:
|
|
2018
|
2017
|
|
On July 26, 2017,
the Company issued a $475,000 note payable, bearing interest at 5%
per annum, to A.R. Miller (“Miller Note”) pursuant to
the purchase of land and property in La Veta, Colorado. The note is
to be paid in four consecutive semi-annual installments in the
amount of $118,750 plus accrued interest commencing on January 26,
2018 and continuing on the 26th day of July and the 26th day of
January each year until the debt is repaid on July 26, 2019. The
note carries a late fee of $5,937.50 in the event any installment
payment is more than 30 days late, and upon default the interest
rate shall increase to 12% per annum. During the three months ended
March 31, 2018, the Company paid $100,000 to A.R. Miller and issued
125,000 shares of common stock, valued at $1,450,000 based on the
closing price on the measurement date. Accordingly, the Company
recorded a loss on extinguishment of $1,064,719.
|
$
-
|
$
475,000
|
|
|
|
|
|
On February 16,
2018, the Company issued a $1,040,662 note payable, bearing
interest at 1.81% per annum (the low interest rate was due to the
short-term nature of the note – six months. See Note 6), to
Craig and Carol Clark (“Clark Note”) pursuant to the
purchase of land and property in La Veta, Colorado. The note is to
be paid in consecutive monthly installments in the amount of
$5,000, including accrued interest commencing on March 15, 2018 and
continuing through August 15, 2018. The note carries a late fee of
3% in the event any installment payment is more than 10 days late,
and upon default the interest rate shall increase to 10% per annum.
As of September 12, 2018, a total of $171,300 was paid to the note
holder. On October 9, 2018, the Company entered into a settlement
agreement with the note holder to pay the settlement payment of
$750,000. The Company had already paid $650,000 by September 27,
2018 and made the remaining payment of $100,000 on October 10,
2018. The Company recorded a gain on extinguishment of
$121,475.
|
-
|
-
|
|
|
|
|
|
|
$
-
|
$
475,000
|
The
Company recognized interest expense of $10,813 and $4,295 related
to the note payables for the years ended December 31, 2018 and
2017, respectively.
F-14
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 9 – Commitments and Contingencies
On
November 8, 2016, the Company entered into an agreement with
Gregory DiPaolo’s Pro Am Golf, LLC to acquire improved
property located in Westfield, New York. The total purchase price
of $1,600,000 is to be paid with a deposit of 50,000 shares of
common stock, followed by cash of $1,250,000 and 300,000 shares of
the Company’s common stock to be delivered at closing. The
deposit of 50,000 shares issued as a deposit was $42,500 based on
the closing price of the Company’s common stock on the date
of grant. Subsequently, we entered into an amended Purchase and
Sale Agreement on October 24, 2017, under which we amended the
total purchase price to Eight Hundred Thousand Dollars ($800,000)
and forfeited our previous deposit of stock. Under the terms of the
amended agreement, we paid an additional Ten Thousand Dollar
($10,000) deposit on October 26, 2017, with the remaining purchase
price to be paid on or before the date closing date, which was
scheduled on May 1, 2018. The property is approximately 43 acres
and has unlimited water extraction rights from the State of New
York. We plan to use this property as our inroads to the New York
hemp and infused beverage markets in the future. There are no
current plans or budget to proceed with operations in New York, and
there will not be until proper funding is secured after acquiring
this property. Currently, there will be an open bid for the
property, and there is no guarantee the Company will win the bid to
complete the acquisition. As a result, the $110,000 non-refundable
deposit for the property was recorded as a loss on deposit at the
end of December 31, 2018.
On
January 19, 2018, the Company was sued in the United States
District Court for the District of Arizona (
William Martin v. WEED, Inc..
, Case
No. 4:18-cv-00027-RM) by the listed Plaintiff. The Company was
served with the Verified Complaint on January 26, 2018. The
Complaint alleges claims for breach of contract-specific
performance, breach of contract-damages, breach of the covenant of
good faith and fair dealing, conversion, and injunctive relief. In
addition to the Verified Complaint, the Company was served with an
application to show cause for a temporary restraining order. The
Verified Complaint alleges the Company entered into a contract with
the Plaintiff on October 1, 2014 for the Plaintiff to perform
certain consulting services for the Company in exchange for 500,000
shares of its common stock up front and an additional 700,000
shares of common stock to be issued on May 31, 2015. The Plaintiff
alleges he completed the requested services under the agreement and
received the initial 500,000 shares of common stock, but not the
additional 700,000 shares. The request for injunctive relief asks
the Court to Order the Company to issue the Plaintiff 700,000
shares of its common stock, and possibly include them in its
Registration Statement on Form S-1, or, in the alternative, issue
the shares and have them held by the Court pending resolution of
the litigation, or, alternatively, sell the shares and deposit the
sale proceeds in an account that the Court will control. The
hearing on the Temporary Restraining Order occurred on January 29,
2018. On January 30, 2018, the Court issued its ruling denying the
application for a Temporary Restraining Order. Currently, there is
no further hearing scheduled in this matter. On February 13, 2018,
the Company filed an Answer to the Verified Complaint and
Counterclaim. On February 15, 2018, the Company filed a Motion to
Dismiss the Verified Complaint. On February 23, 2018, the Company
filed a Motion to Amend Counterclaim to add W. Martin’s wife,
Joanna Martin as a counterdefendant. On March 9, 2018, William
Martin filed a Motion to Dismiss the Counterclaim. On March 12,
2018, William Martin filed a Motion to Amend the Verified Complaint
to, among other things, add claims against Glenn Martin and Nicole
and Ryan Breen. On March 27, 2018, the Court granted both William
Martin and WEED, Inc.’s Motions to Amend. On March 27, 2018,
the Company filed an Amended Counterclaim adding Joanna Martin. On
April 2, 2018, the Company filed a Motion to Amend our Counterclaim
to add a breach of contract claim. On April 10, 2018, the Company
filed an Answer to First Amended Verified Complaint. On April 23,
2018, Glenn Martin and Nicole and Ryan Breen filed their Answer to
the First Amended Complaint. On May 31, 2018, the Court issued an
Order: (a) granting the Company’s Motion to Dismiss thereby
dismissing the Plaintiff’s claims for breach of the covenant
of good faith and fair dealing and the claim for conversion, (b)
denying William Martin’s Motion to Dismiss the counterclaim
as to the claims for fraudulent concealment and fraudulent
misrepresentation, but granting the Motion to Dismiss only as to
the claim for fraudulent nondisclosure, and (c) granting the
Company’s Motion to Amend its Counterclaim to add a breach of
contract claim. On June 1, 2018, William Martin and his wife filed
their Answer to the First Amended Counterclaim. On June 1, 2018,
William Martin and his wife filed their Answer to the Second
Amended Counterclaim. In addition to the above pleadings and
motions, the parties have exchanged disclosure statements and
served and responded to written discovery. The Company denies the
Plaintiff’s allegations in the Verified Complaint in their
entirety and plan to vigorously defend against this lawsuit. Due to
the loss not being probable, no accrual has been recorded for the
700,000 shares of common stock the Plaintiff alleges he is owed
under his agreement with the Company.
Material Definitive Agreements
On May
1, 2018, the Company entered into a Fourth Addendum and Fifth
Addendum to that certain Purchase and Sale Agreement between the
Company and Greg DiPaolo’s Pro Am Golf, LLC, amending the
“Closing Date” under the Agreement to August 1, 2018,
in exchange for the Company paying $50,000 as a non-refundable
deposit to be applied against the purchase price once the property
sale is completed and $10,000 for maintenance, tree removal and
other grounds keeping in order to prepare the golf course for the
2018 season.
On July
23, 2018, the Company entered into a Sixth Addendum, extending the
“Closing Date” to November 1, 2018, in exchange for the
Company paying an additional $50,000 as a non-refundable deposit to
be applied against the purchase price.
On May
21, 2018, the Company entered into a Trademark Purchase Agreement
with Copalix Pty Ltd., a private South African company, to acquire
U.S. Trademark Registration No. 4,927,872 for the WEED TM mark, in
exchange for USD$40,000.
On July
27, 2018, the Company entered into a Trademark Purchase Agreement
with Copalix Pty Ltd., to acquire European Community Trademark
Registration No. 11953387 for WEED Registered Mark in exchange for
USD$10,000
.
F-15
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 10 – Stockholders’ Equity
Preferred Stock
On
December 5, 2014, the Company amended the Articles of
Incorporation, pursuant to which 20,000,000 shares of “blank
check” preferred stock with a par value of $0.001 were
authorized. No series of preferred stock has been designated to
date.
Common Stock
On
December 5, 2014, the Company amended the Articles of
Incorporation, and increased the authorized shares to 200,000,000
shares of $0.001 par value common stock.
2018 Common Stock Activity
Common Stock Sales (2018)
During
the year ended December 31, 2018, the Company issued 3,899,450
shares of common stock for proceeds of $4,798,550. In connection
with certain of the share issuances, the Company issued warrants to
purchase an aggregate of $1,927,500 shares of the Company’s
common stock. The warrants to purchase 462,500 shares have an
exercise price of $5.00 per share, exercisable on various dates
through March 2019. Warrants to purchase 215,000 shares have an
exercise price of $12.50 per share and are exercisable on various
dates through January 2020. The warrants to purchase $1,250,000
shares have an exercise price of $6.00 per share, exercisable on
various dates through June 2019. The proceeds received were
allocated $3,361,832 to common stock and $1,436,718 to warrants on
a relative fair value basis.
On
January 12, 2018, a warrant holder exercised warrants to purchase
150,000 shares of common stock at a price of $1.50 in exchange for
proceeds of $225,000.
Common Stock Issued for Services (2018)
During
the year ended December 31, 2018, the Company agreed to issue an
aggregate of 915,000 shares of common stock to consultants for
services performed. The total fair value of common stock was
$3,042,940 based on the closing price of the Company’s common
stock earned on the measurement date. Shares valued at $200,400
were issued at December 31, 2018 and services will be performed in
2019 and has been included in unamortized stock-based
compensation.
2017 Common Stock Activity
Common Stock Sales
On
September 29, 2017, the Company sold 300,000 units at $0.50 per
unit, consisting of 300,000 shares of common stock and warrants to
purchase 300,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until September 29, 2019, in exchange
for total proceeds of $150,000. The proceeds received were
allocated $84,101 to common stock and $65,899 to warrants on a
relative fair value basis.
F-16
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 10 – Stockholders’ Equity (Continued)
On
September 24, 2017, the Company sold 133,000 units at $0.7519 per
unit, consisting of 133,000 shares of common stock and warrants to
purchase 133,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until September 24, 2019, in exchange
for total proceeds of $100,000. The proceeds received were
allocated between the common stock and warrants on a relative fair
value basis.
On
September 5, 2017, the Company sold 40,000 units at $0.50 per unit,
consisting of 40,000 shares of common stock and warrants to
purchase 40,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until September 5, 2019, in exchange
for total proceeds of $20,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On
August 2, 2017, the Company sold 100,000 units at $0.50 per unit,
consisting of 100,000 shares of common stock and warrants to
purchase 100,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until August 2, 2019, in exchange for
total proceeds of $50,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis. The shares were subsequently issued during the fourth
quarter. As such, the stock purchase was presented as Stock
Subscriptions Payable as of September 30, 2017.
On July
7, 2017, the Company sold 200,000 units at $0.50 per unit,
consisting of 200,000 shares of common stock and warrants to
purchase 200,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until July 7, 2019, in exchange for
total proceeds of $100,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May
31, 2017, the Company sold 20,000 units at $0.50 per unit,
consisting of 20,000 shares of common stock and warrants to
purchase 20,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 31, 2019, in exchange for
total proceeds of $10,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May 31, 2017, the Company sold 20,000 units at $0.50 per unit,
consisting of 20,000 shares of common stock and warrants to
purchase 20,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 31, 2019, in exchange for
total proceeds of $10,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May 31, 2017, the Company sold 300,000 units at $0.50 per unit,
consisting of 300,000 shares of common stock and warrants to
purchase 150,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 31, 2019, in exchange for
total proceeds of $150,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May 25, 2017, the Company sold 20,000 units at $0.50 per unit,
consisting of 20,000 shares of common stock and warrants to
purchase 20,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 25, 2019, in exchange for
total proceeds of $10,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May 25, 2017, the Company sold 20,000 units at $0.50 per unit,
consisting of 100,000 shares of common stock and warrants to
purchase 100,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 25, 2019, in exchange for
total proceeds of $50,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On April 20, 2017, the Company sold 500,000 units at $1.00 per
unit, consisting of 500,000 shares of common stock and warrants to
purchase 500,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until April 20, 2018, in exchange for
total proceeds of $500,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On
March 15, 2017 and March 31, 2017, the Company received an
aggregate $235,000 of advances on the subsequent sale on April 20,
2017 of 375,000 units at $1.00 per unit, consisting of 375,000
shares of common stock and warrants to purchase 375,000 shares of
common stock at an exercise price of $3.00 per share, exercisable
until April 20, 2018, in exchange for total proceeds of $375,000.
The proceeds received were allocated between the common stock and
warrants on a relative fair value basis. The $235,000 was presented
as a subscriptions payable at March 31, 2017.
On
January 23, 2017, the Company sold 2,000 units at $2.00 per unit,
consisting of 2,000 shares of common stock and warrants to purchase
2,000 shares of common stock at an exercise price of $3.00 per
share, exercisable until January 23, 2018, in exchange for total
proceeds of $4,000. The proceeds received were allocated between
the common stock and warrants on a relative fair value
basis.
F-17
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 10 – Stockholders’ Equity (Continued)
On
January 9, 2017, the Company sold 50,000 units at $1.00 per unit,
consisting of 50,000 shares of common stock and warrants to
purchase 50,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until January 9, 2018, in exchange for
total proceeds of $50,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
Common Stock Issued for Acquisition
On July
18, 2017, the Company issued 25,000 shares of common stock as a
good faith deposit toward the purchase of land and property located
in La Veta, CO that closed on July 26, 2017, which were valued at
$30,000 based on the closing price of the Company’s common
stock on the date of grant.
On April 20, 2017, the Company issued a total of 500,000 shares of
common to seven individuals pursuant to the closing of an
acquisition of Sangre AT, LLC, a Wyoming limited liability company
(“Sangre”) in exchange for 100% of the interests in
Sangre. The total fair value of the common stock was $1,003,850
based on the closing price of the Company’s common stock on
the date of grant.
Warrants Exercised
On
January 7, 2017, a warrant holder exercised warrants to purchase
2,666 shares of common stock at a strike price of $1.50 in exchange
for proceeds of $3,999.
Common Stock Issued for Bartered Assets
On
January 18, 2017, the Company exchanged 66,000 units, consisting of
66,000 shares of common stock and warrants to purchase 66,000
shares of common stock at an exercise price of $3.00 per share,
exercisable until January 18, 2018, in exchange for a 2017 Audi Q7
and a 2017 Audi A4. The total fair value received, based on the
market price of the stock at $4.02 per share, was allocated to the
$105,132 purchase price of the vehicles and the $160,188 excess
value of the common stock and warrants was expensed as stock-based
compensation.
Common Stock Issued for Services
On
August 1, 2017, the Company granted an aggregate of 349,000 shares
of common stock to eight consultants for services performed. The
aggregate fair value of the common stock was $359,470 based on the
closing price of the Company’s common stock on the date of
grant.
On April 20, 2017, the Company granted an aggregate of 116,000
shares of common stock to eleven consultants for services
performed. The aggregate fair value of the common stock was
$232,893 based on the closing price of the Company’s common
stock on the date of grant.
On
March 2, 2017, the Company granted 50,000 shares of common stock to
a consultant for services performed. The total fair value of the
common stock was $142,500 based on the closing price of the
Company’s common stock on the date of grant. The shares were
subsequently issued on April 28, 2017.
On
March 2, 2017, the Company granted 12,000 shares of common stock to
a consultant for services performed. The total fair value of the
common stock was $34,200 based on the closing price of the
Company’s common stock on the date of grant.
On
January 7, 2017, the Company granted 50,000 shares of common stock
to a consultant for services performed. The total fair value of the
common stock was $210,250 based on the closing price of the
Company’s common stock on the date of grant.
Common Stock Subscribed for Services
On April 20, 2017, the Company granted 50,000 shares of common
stock to each of two consultants for services performed. The
issuance of the shares has been deferred until January 1, 2018. The
aggregate fair value of the common stock was $200,770 based on the
closing price of the Company’s common stock on the date of
grant.
Common Stock Cancellations
On July
24, 2017, the Company cancelled a total of 500,000 shares of common
stock previously granted to a consultant for non-performance of
services.
On April 25, 2017, a total of 4,820,953 shares were cancelled and
returned to treasury pursuant to compliance with the September 30,
2014 approval by the majority of shareholders of the terms of a
Settlement Agreement dated December 11, 2013 and signed on August
19, 2014 pursuant to Case No. C20125545 in the Superior Court of
the State of Arizona, whereby among other provisions, the
Plaintiffs, consisting of United Mines, Inc. (“UMI”)
and its then principals, agreed to the cancellation of a total of
4,820,953 shares of common stock and control of the Company in
exchange for (i) sixty five (65) of the unpatented Bureau of Land
Management (“BLM”) mining claims, the mill site,
buildings and equipment, (ii) the four (4) Arizona State Land
Department Exploration Permits registered to the Company, (iii) any
permits, financial and reclamation guaranties, bonds and licenses
connected with the foregoing assets. In addition, thirty-three (33)
unpatented BLM mining claims remained the property of UMI, along
with any associated permits, financial and reclamation guaranties,
bonds, licenses, and the rights to the corporation, the
corporation’s name, stock symbol, or any other asset of UMI,
shall remain the property of UMI under the management of Glenn E.
Martin.
On
January 26, 2017, the Company cancelled a total of 1,000,000 shares
of common stock previously granted to two individuals for
non-performance of services.
F-18
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 11 – Common Stock Warrants and Options
Common Stock Warrants Granted (2018)
See
Note 10 for details on warrants issued during the year ended
December 31, 2018.
Common
stock warrants granted consist of the following at December 31,
2018 and 2017, respectively:
|
2018
|
|
2017
|
|||||||
|
Issuance
|
Warrant
|
Name
|
# of Common
|
|
Issuance
|
Warrant
|
Name
|
# of Common
|
|
|
Date
|
#
|
Stock Warrants
|
|
Date
|
#
|
Stock Warrants
|
|||
|
1/5/2018
|
1029
|
Lex Seabre
|
100,000.00
|
|
1/23/2017
|
1010
|
Sandra Hogan
|
2,000.00
|
|
|
1/21/2018
|
1031
|
Roger Forsyth
|
100,000.00
|
|
4/20/2017
|
1015
|
Lex Seabre
|
375,000.00
|
|
|
1/23/2018
|
1032
|
Roger Forsyth
|
100,000.00
|
|
4/20/2017
|
1020
|
Lex Seabre
|
125,000.00
|
|
|
2/9/2018
|
1033
|
Lawrence Wesigal
|
15,000.00
|
|
5/25/2017
|
1016
|
Russ Karlen
|
100,000.00
|
|
|
3/19/2018
|
1034
|
Donald Steinberg
|
150,000.00
|
|
5/25/2017
|
1017
|
Eric Karlen
|
20,000.00
|
|
|
3/15/2018
|
1035
|
Donald Harrington
|
12,500.00
|
|
5/31/2017
|
1018
|
Matt Turner
|
20,000.00
|
|
|
4/26/2018
|
1036
|
Roger Seabre
|
100,000.00
|
|
5/31/2017
|
1022
|
Rodger Seabre
|
300,000.00
|
|
|
4/26/2018
|
1037
|
Michael Kirk Wines
|
100,000.00
|
|
6/16/2017
|
1019
|
Black Mountain Equities
|
70,000.00
|
|
|
5/7/2018
|
1038
|
Donald Steinberg
|
400,000.00
|
|
7/7/2017
|
1021
|
Rodger Seabre
|
200,000.00
|
|
|
5/15/2018
|
1039
|
Roger Seabre
|
200,000.00
|
|
8/2/2017
|
1026
|
Rodger Seabre
|
100,000.00
|
|
|
6/13/2018
|
1040
|
Blue Ridge Enterprises
|
450,000.00
|
|
9/5/2017
|
1023
|
Harry Methewson #1
|
40,000.00
|
|
|
6/26/2018
|
1041
|
Dianna Steinberg
|
200,000.00
|
|
9/24/2017
|
1024
|
Harry Methewson #2
|
133,000.00
|
|
|
Total
|
|
|
1,927,500.00
|
|
9/29/2017
|
1025
|
A2Z Inc.
|
300,000.00
|
|
|
|
|
|
|
|
10/24/2017
|
1027
|
Salvatore Rutigliano
|
13,333.00
|
|
|
|
|
|
|
|
11/10/2017
|
1028
|
Rodger Seabre
|
125,000.00
|
|
|
|
|
|
|
|
Total
|
|
|
1,923,333.00
|
|
F-19
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 11 – Common Stock Warrants and Options
(Continued)
A
summary of the Company’s outstanding common stock warrants is
as follows:
|
Issuance
|
Warrant
|
|
|
# of Common
|
Strike
|
Term
|
|
Date
|
#
|
Name
|
Document
|
Stock Warrants
|
Price
|
In Mos.
|
|
|
|
|
|
|
|
|
|
12/31/16
|
|
|
|
325,000
|
|
|
|
01/07/17
|
1007
|
Partial
Exercise - David Eckert
|
Subscription
Agreement
|
(2,666)
|
$1.50
|
12
|
|
01/09/17
|
1009
|
Edward
Matkoff
|
Subscription
Agreement
|
50,000
|
$3.00
|
12
|
|
01/23/17
|
1010
|
Sandra
Hogan
|
Subscription
Agreement
|
2,000
|
$3.00
|
12
|
|
04/20/17
|
1015
|
Lex
Seabre
|
Subscription
Agreement
|
375,000
|
$3.00
|
12
|
|
04/20/17
|
1020
|
Lex
Seabre
|
Subscription
Agreement
|
125,000
|
$3.00
|
12
|
|
05/25/17
|
1016
|
Russ
Karlen
|
Subscription
Agreement
|
100,000
|
$3.00
|
24
|
|
05/25/17
|
1017
|
Eric
Karlen
|
Subscription
Agreement
|
20,000
|
$3.00
|
24
|
|
05/31/17
|
1018
|
Matt
Turner
|
Subscription
Agreement
|
20,000
|
$3.00
|
24
|
|
05/31/17
|
1022
|
Rodger
Seabre
|
Subscription
Agreement
|
300,000
|
$3.00
|
24
|
|
06/16/17
|
1019
|
Black
Mountain Equities
|
Debt
Exchange Agreement
|
70,000
|
$3.00
|
12
|
|
07/07/17
|
1021
|
Rodger
Seabre
|
Subscription
Agreement
|
200,000
|
$3.00
|
24
|
|
08/02/17
|
1026
|
Rodger
Seabre
|
Subscription
Agreement
|
100,000
|
$3.00
|
24
|
|
09/05/17
|
1023
|
Harry
Methewson #1
|
Subscription
Agreement
|
40,000
|
$3.00
|
24
|
|
09/24/17
|
1024
|
Harry
Methewson #2
|
Subscription
Agreement
|
133,000
|
$3.00
|
24
|
|
09/29/17
|
1025
|
A2Z
Inc.
|
Subscription
Agreement
|
300,000
|
$3.00
|
24
|
|
10/19/17
|
1005
|
Expired
- Salvatore Rutigliano
|
Subscription
Agreement
|
(100,000)
|
$1.50
|
12
|
|
10/19/17
|
1006
|
Expired
- Michael Ryan
|
Subscription
Agreement
|
(25,000)
|
$1.50
|
12
|
|
10/24/17
|
1027
|
Salvatore
Rutigliano
|
Subscription
Agreement
|
13,333
|
$3.00
|
24
|
|
10/25/17
|
1007
|
Expired
- David Eckert
|
Subscription
Agreement
|
(147,334)
|
$1.50
|
12
|
|
10/31/17
|
1008
|
Expired
- Tom Harrington
|
Subscription
Agreement
|
(50,000)
|
$1.50
|
12
|
|
11/10/17
|
1028
|
Rodger
Seabre
|
Subscription
Agreement
|
125,000
|
$3.00
|
24
|
|
12/31/17
|
|
|
|
1,973,333
|
|
|
|
|
|
|
|
|
|
|
|
01/02/18
|
1009
|
Exercise
- Edward Matkoff
|
Subscription
Agreement
|
(50,000)
|
$3.00
|
12
|
|
01/05/18
|
1029
|
Lex
Seabre
|
Subscription
Agreement
|
100,000
|
$5.00
|
12
|
|
01/21/18
|
1031
|
Roger
Forsyth
|
Subscription
Agreement
|
100,000
|
$12.50
|
24
|
|
01/23/18
|
1010
|
Expired
- Sandra Hogan
|
Subscription
Agreement
|
(2,000)
|
$3.00
|
12
|
|
01/23/18
|
1032
|
Roger
Forsyth
|
Subscription
Agreement
|
100,000
|
$12.50
|
24
|
|
02/09/18
|
1033
|
Lawrence
Wesigal
|
Subscription
Agreement
|
15,000
|
$12.50
|
12
|
|
03/19/18
|
1034
|
Donald
Steinberg
|
Subscription
Agreement
|
150,000
|
$5.00
|
12
|
|
03/15/18
|
1035
|
Donald
Harrington
|
Subscription
Agreement
|
12,500
|
$5.00
|
12
|
|
04/20/18
|
1015
|
Expired
- Lex Seabre
|
Subscription
Agreement
|
(375,000)
|
$3.00
|
12
|
|
04/20/18
|
1020
|
Expired
- Lex Seabre
|
Subscription
Agreement
|
(125,000)
|
$3.00
|
12
|
|
04/26/18
|
1036
|
Roger
Seabre
|
Subscription
Agreement
|
100,000
|
$5.00
|
12
|
|
04/26/18
|
1037
|
Michael
Kirk Wines
|
Subscription
Agreement
|
100,000
|
$5.00
|
12
|
|
05/07/18
|
1038
|
Donald
Steinberg
|
Subscription
Agreement
|
400,000
|
$6.00
|
12
|
|
05/15/18
|
1039
|
Roger
Seabre
|
Subscription
Agreement
|
200,000
|
$6.00
|
12
|
|
06/13/18
|
1040
|
Blue
Ridge Enterprises
|
Subscription
Agreement
|
450,000
|
$6.00
|
12
|
|
06/16/18
|
1019
|
Expired
- Black Mountain Equities
|
Debt
Exchange Agreement
|
(70,000)
|
$3.00
|
12
|
|
06/26/18
|
1041
|
Dianna
Steinberg
|
Subscription
Agreement
|
200,000
|
$6.00
|
12
|
|
12/31/18
|
|
|
|
3,278,833
|
|
|
F-20
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 11 – Common Stock Warrants and Options
(Continued)
Common Stock Warrants Expired (2018)
A total
of 572,000 warrants expired during the year ended December 31,
2018.
Common Stock Warrants Granted (2017)
On
September 29, 2017, the Company sold warrants to purchase 300,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$150,000 in conjunction with the sale of 300,000 shares of common
stock. The relative fair value of the 300,000 common stock warrants
using the Black-Scholes option-pricing model was $303,242, or
$1.01081 per share, based on a volatility rate of 206%, a risk-free
interest rate of 1.47% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
September 24, 2017, the Company sold warrants to purchase 133,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$100,000 in conjunction with the sale of 133,000 shares of common
stock. The relative fair value of the 133,000 common stock warrants
using the Black-Scholes option-pricing model was $152,795, or
$1.14884 per share, based on a volatility rate of 206%, a risk-free
interest rate of 1.46% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
September 5, 2017, the Company sold warrants to purchase 40,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$20,000 in conjunction with the sale of 40,000 shares of common
stock. The relative fair value of the 40,000 common stock warrants
using the Black-Scholes option-pricing model was $27,215, or
$0.68039 per share, based on a volatility rate of 207%, a risk-free
interest rate of 1.30% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
August 2, 2017, the Company sold warrants to purchase 100,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$50,000 in conjunction with the sale of 100,000 shares of common
stock. The relative fair value of the 100,000 common stock warrants
using the Black-Scholes option-pricing model was $80,872, or
$0.80872 per share, based on a volatility rate of 210%, a risk-free
interest rate of 1.36% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On July
7, 2017, the Company sold warrants to purchase 200,000 shares of
common stock at $3.00 per share over a two (2) year period from the
date of sale, in exchange for total proceeds of $100,000 in
conjunction with the sale of 200,000 shares of common stock. The
relative fair value of the 200,000 common stock warrants using the
Black-Scholes option-pricing model was $156,339, or $0.78169 per
share, based on a volatility rate of 209%, a risk-free interest
rate of 1.40% and an expected term of 2.0 years. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
On June 16, 2017, the Company issued warrants to purchase 70,000
shares of common stock at $3.00 per share over a one (1) year
period from the date of exchange in conjunction with the issuance
of 70,000 shares of common stock in exchange for the settlement of
a convertible note, consisting of $35,000 of principal and $33,250
of interest. The relative fair value of the 70,000 common stock
warrants using the Black-Scholes option-pricing model was $49,433,
or $0.70618 per share, based on a volatility rate of 211%, a
risk-free interest rate of 1.21% and an expected term of 1.0 year.
The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On May 31, 2017, the Company sold warrants to purchase 20,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$10,000 in conjunction with the sale of 20,000 shares of common
stock. The relative fair value of the 20,000 common stock warrants
using the Black-Scholes option-pricing model was $8,946, or
$0.44730 per share, based on a volatility rate of 209%, a risk-free
interest rate of 1.28% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On May 31, 2017, the Company sold warrants to purchase 300,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$150,000 in conjunction with the sale of 300,000 shares of common
stock. The relative fair value of the 300,000 common stock warrants
using the Black-Scholes option-pricing model was $134,190, or
$0.44730 per share, based on a volatility rate of 209%, a risk-free
interest rate of 1.28% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
F-21
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 11 – Common Stock Warrants and Options
(Continued)
On May 25, 2017, the Company sold warrants to purchase 20,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$10,000 in conjunction with the sale of 20,000 shares of common
stock. The relative fair value of the 20,000 common stock warrants
using the Black-Scholes option-pricing model was $5,887, or
$0.29434 per share, based on a volatility rate of 205%, a risk-free
interest rate of 1.30% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On May 25, 2017, the Company sold warrants to purchase 100,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$50,000 in conjunction with the sale of 100,000 shares of common
stock. The relative fair value of the 100,000 common stock warrants
using the Black-Scholes option-pricing model was $29,434, or
$0.29434 per share, based on a volatility rate of 205%, a risk-free
interest rate of 1.30% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On April 20, 2017, the Company sold warrants to purchase 500,000
shares of common stock at $3.00 per share over a one (1) year
period from the date of sale, in exchange for total proceeds of
$500,000 in conjunction with the sale of 500,000 shares of common
stock. The relative fair value of the 500,000 common stock warrants
using the Black-Scholes option-pricing model was $626,641, or
$1.25328 per share, based on a volatility rate of 202%, a risk-free
interest rate of 1.01% and an expected term of 1.0 year. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On January 23, 2017, the Company sold warrants to purchase 2,000
shares of common stock at $3.00 per share over a one (1) year
period from the date of sale, in exchange for total proceeds of
$4,000 in conjunction with the sale of 2,000 shares of common
stock. The relative fair value of the 2,000 common stock warrants
using the Black-Scholes option-pricing model was $5,106, or
$2.55281 per share, based on a volatility rate of 211%, a risk-free
interest rate of 0.79% and an expected term of 1.0 year. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On January 9, 2017, the Company sold warrants to purchase 50,000
shares of common stock at $3.00 per share over a one (1) year
period from the date of sale, in exchange for total proceeds of
$50,000 in conjunction with the sale of 50,000 shares of common
stock. The relative fair value of the 50,000 common stock warrants
using the Black-Scholes option-pricing model was $108,228, or
$2.16456 per share, based on a volatility rate of 210%, a risk-free
interest rate of 0.82% and an expected term of 1.0 year. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
Warrants Exercised
On January 7, 2017, a warrant holder exercised warrants to purchase
2,666 shares of common stock at a strike price of $1.50 in exchange
for proceeds of $3,999.
Common Stock Warrants Expired or Cancelled
On May 31, 2017, the Company sold 20,000 units at $0.50 per unit,
consisting of 20,000 shares of common stock and warrants to
purchase 20,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 31, 2019, in exchange for
total proceeds of $10,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May 31, 2017, the Company sold 300,000 units at $0.50 per unit,
consisting of 300,000 shares of common stock and warrants to
purchase 150,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 31, 2019, in exchange for
total proceeds of $150,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May 25, 2017, the Company sold 20,000 units at $0.50 per unit,
consisting of 20,000 shares of common stock and warrants to
purchase 20,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 25, 2019, in exchange for
total proceeds of $10,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May 25, 2017, the Company sold 20,000 units at $0.50 per unit,
consisting of 100,000 shares of common stock and warrants to
purchase 100,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 25, 2019, in exchange for
total proceeds of $50,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
F-22
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 11 – Common Stock Warrants and Options
(Continued)
On April 20, 2017, the Company sold 500,000 units at $1.00 per
unit, consisting of 500,000 shares of common stock and warrants to
purchase 500,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until April 20, 2018, in exchange for
total proceeds of $500,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On
January 23, 2017, the Company sold warrants to purchase 2,000
shares of common stock at $3.00 per share over a one (1) year
period from the date of sale, in exchange for total proceeds of
$4,000 in conjunction with the sale of 2,000 shares of common
stock. The relative fair value of the 2,000 common stock warrants
using the Black-Scholes option-pricing model was $5,106, or
$2.55281 per share, based on a volatility rate of 211%, a risk-free
interest rate of 0.79% and an expected term of 1.0 year. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
January 9, 2017, the Company sold warrants to purchase 50,000
shares of common stock at $3.00 per share over a one (1) year
period from the date of sale, in exchange for total proceeds of
$50,000 in conjunction with the sale of 50,000 shares of common
stock. The relative fair value of the 50,000 common stock warrants
using the Black-Scholes option-pricing model was $108,228, or
$2.16456 per share, based on a volatility rate of 210%, a risk-free
interest rate of 0.82% and an expected term of 1.0 year. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
Common Stock Warrants Expired (2017)
No
warrants were expired or cancelled during the year ended December
31, 2017.
Common Stock Warrants Exercised (2017)
On
January 7, 2017, a warrant holder exercised warrants to purchase
2,666 shares of common stock at a strike price of $1.50 in exchange
for proceeds of $3,999.
Common Stock Options (2018)
On
February 1, 2018, in connection with executive employment
agreements, the Company granted non-qualified options to purchase
an aggregate of 6,000,000 shares of the Company’s common
stock at the exercise price of $10.55 per share. The options shall
become exercisable at the rate of 1/3 upon the six-month
anniversary, 1/3 upon the one-year anniversary and 1/3 upon the
second anniversary of the grant. The options were valued at
$45,753,000 using the Black-Scholes option pricing model. The
Company recognized expense of approximately $21,201,397 relating to
these options during the year ended December 31, 2018.
The
assumptions used in the Black-Scholes model are as
follows:
|
|
For the year ended December 31, 2018
|
|
Risk-free
interest rate
|
1.75%
|
|
Expected
dividend yield
|
0%
|
|
Expected
lives
|
6.0
years
|
|
Expected
volatility
|
200%
|
F-23
WEED, INC. AND SUBSIDIARY
Notes
to Consolidated Financial Statements
December
31, 2018
Note 11 – Common Stock Warrants and Options
(Continued)
A
summary of the Company’s stock option activity and related
information is as follows:
|
|
For the years ended
December 31,
2018
and 2017
|
|
|
|
|
|
|
|
Number of Shares
|
Average
Price
|
|
Outstanding at the
beginning of period
|
-
|
$
-
|
|
Granted
|
6,000,000
|
10.55
|
|
Exercised/Expired/Cancelled
|
-
|
-
|
|
Outstanding at the
end of period
|
6,000,000
|
$
10.55
|
|
Exercisable at the
end of period
|
1,250,000
|
$
10.55
|
Note 12 – Subsequent Events
Common Stock Sales
On
March 21, 2019, the Company sold 50,000 shares of common stock in
exchange for total proceeds of $50,000.
On
March 11, 2019, the Company sold 100,000 shares of common stock in
exchange for total proceeds of $100,000.
On
February 12, 2019, the Company sold 100,000 shares of common stock
in exchange for total proceeds of $100,000.
Common Stock Issued for Services
On
March 11, 2019, the Company issued 10,000 shares to the Andrew
Defries in exchange for services rendered to the
Company.
Pursuant
to a Retainer Agreement dated January 31, 2019, we agreed to issue
the Law Offices of Craig V. Butler 400,000 shares of our common
stock in exchange for services rendered to the Company. These
shares were issued on February 12, 2019.
F-24
TABLE OF CONTENTS
Part IItem 1 BusinessItem 1 Business (continued)Item 1A. Risk FactorsItem 1A. Risk Factors (continued)Item 1B Unresolved Staff CommentsItem 2 PropertiesItem 2 Properties (continued)Item 3 - Legal ProceedingsItem 3 - Legal Proceedings (continued)Item 4 Mine Safety DisclosuresPart IIItem 5 - Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 5 - Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities (continued)Item 6 Selected Financial DataItem 7 - Management S Discussion and Analysis Of Financial Condition and Results Of OperationItem 7 - Management S Discussion and Analysis Of Financial Condition and Results Of Operation (continued)Item 7A Quantitative and Qualitative Disclosures About Market RiskItem 8 - Financial Statements and Supplementary DataItem 9 - Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A - Controls and ProceduresItem 9A - Controls and Procedures (continued)Item 9B Other InformationPart IIIItem 10 Directors, Executive Officers and Corporate GovernanceItem 10 Directors, Executive Officers and Corporate Governance (continued)Item 11 - Executive CompensationItem 11 - Executive Compensation (continued)Item 12 - Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 12 - Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder Matters (continued)Item 13 - Certain Relationships and Related Transactions, and Director IndependenceItem 13 - Certain Relationships and Related Transactions, and Director Independence (continued)Item 14 Principal Accounting Fees and ServicesPart IVItem 15 - Exhibits, Financial Statement SchedulesItem No. DescriptionItem 15 - Exhibits, Financial Statement Schedules (continued)Item 1 Consolidated Financial StatementsNote 1 Nature Of Business and Significant Accounting PoliciesNote 1 Nature Of Business and Significant Accounting Policies (continued)Note 2 Going ConcernNote 3 Related PartyNote 4 Fair Value Of Financial InstrumentsNote 4 Fair Value Of Financial Instruments (continued)Note 5 Investment in Land and PropertyNote 6 Property and EquipmentNote 7 Intangible AssetsNote 8 Notes Payable, Related PartiesNote 8 Notes PayableNote 9 Commitments and ContingenciesNote 10 Stockholders EquityNote 10 Stockholders Equity (continued)Note 11 Common Stock Warrants and OptionsNote 11 Common Stock Warrants and Options (continued)Note 12 Subsequent Events