UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: April 8, 2020
PURE HARVEST CANNABIS GROUP, INC.
(Name of registrant as specified in its charter)
| Colorado | 333-212055 | 71-0942431 | ||
| State of | Commission File | IRS Employer | ||
| Incorporation | Number | Identification No. |
2401 E. 2nd Avenue, Suite 600
Denver, CO 80206
Address of principal executive offices
(800) 924-3716
Telephone number, including area code
Former name or former address if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-14(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (240.12b-2 of this chapter).
Emerging Growth Company [X]
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 13a of the Exchange Act. [X]
| Item 4.02(a). | Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review. |
In May 2019, the Company leased a property which the Company intends to use as a marijuana retail dispensary. The initial term of the lease is for a period of three years. The Company has an option to purchase the property at prices ranging between $1,400,000 and $1,600,000 at various dates prior to May 1, 2022. The Company issued the landlord 400,000 shares of its post-split common stock in consideration for the option to purchase the property.
On April 8, 2020 in connection, with the Company’s preparation of its annual report on form 10-K, the Company discovered that at the inception of the lease, the Company should have recorded a “right of use” asset and liability due to the Company adopting Accounting Standards Codification 842- Leases on January 1, 2019. In addition, the 400,000 shares issued for the option to purchase the property should have been recorded as deferred rent and amortized to rent expense using the straight-line method over the term of the lease.
As a result of these errors, investors should no longer rely upon the Company’s financial statements in its previously filed 10-Q reports for the periods ended June 30, 2019 and September 30, 2019.
The Company intends to restate its financial statements for the periods ended June 30, 2019 and September 30, 2019 to reflect the right of use asset and liability and deferred rent.
The Company’s restated June 30, 2019 balance sheet is expected to be as follows:
| June 30, 2019 | June 30, 2019 | Change | ||||||||||
| (as reported) | (as restated) | |||||||||||
| Deferred rent | $ | - | $ | 93,333 | $ | 93,333 | ||||||
| Total Current Assets | 317,391 | 410,724 | 93,333 | |||||||||
| Deferred rent, net of current portion | - | 171,111 | 171,111 | |||||||||
| Right of use asset | - | 215,729 | 215,729 | |||||||||
| Total Assets | $ | 370,217 | $ | 850,390 | $ | 480,173 | ||||||
| Accrued Liabilities | $ | - | $ | 75,131 | $ | 75,131 | ||||||
| Total Current Liabilities | 967,024 | 1,042,155 | 75,131 | |||||||||
| Right of Use Liabilities, net of Current Portion | - | 146,598 | 146,598 | |||||||||
| Total Liabilities | 967,024 | 1,188,753 | 221,729 | |||||||||
| Common Stock | 318,034 | 322,034 | 4,000 | |||||||||
| Additional Paid-in Capital | 118,661 | 394,661 | 276,000 | |||||||||
| Accumulated Deficit | (1,033,502 | ) | (1,055,058 | ) | (21,556 | ) | ||||||
| Total Stockholders’ Deficit | (596,807 | ) | (338,363 | ) | 258,444 | |||||||
| Total Liabilities and Stockholders’ Deficit | $ | 370,217 | $ | 850,390 | $ | 480,173 | ||||||
| 2 |
The Company’s restated September 30, 2019 balance sheet is expected to be as follows:
| September 30, 2019 | September 30, 2019 | Change | ||||||||||
| (as reported) | (as restated) | |||||||||||
| Deferred rent | $ | - | $ | 93,333 | $ | 93,333 | ||||||
| Total Current Assets | - | 244,691 | 93,333 | |||||||||
| Deferred rent, net of current portion | - | 147,778 | 147,778 | |||||||||
| Right of use asset | - | 200,207 | 200,207 | |||||||||
| Total Assets | $ | 468,882 | $ | 910,201 | $ | 441,318 | ||||||
| Accrued Liabilities | $ | - | $ | 75,131 | $ | 75,131 | ||||||
| Total Current Liabilities | - | 1,154,506 | 1,154,506 | |||||||||
| Right of Use Liabilities, net of Current Portion | - | 140,076 | 140,076 | |||||||||
| Total Liabilities | 1,079,375 | 1,294,582 | 215,207 | |||||||||
| Common Stock | 322,034 | 326,034 | 4,000 | |||||||||
| Additional Paid-in Capital | 313,861 | 589,861 | 276,000 | |||||||||
| Accumulated Deficit | (1,246,387 | ) | (1,300,276 | ) | (53,889 | ) | ||||||
| Total Stockholders’ Deficit | (610,492 | ) | (384,381 | ) | 226,111 | |||||||
| Total Liabilities and Stockholders’ Deficit | $ | 468,882 | $ | 10,201 | $ | 441,318 | ||||||
Additionally, the Company’s Statements of Operation for the three and six months ended June 30, 2016 will be restated as follows:
| Three
Months Ended June 30, 2019 | Change | |||||||||||
| (as reported) | (as restated) | |||||||||||
| General and Administrative Expenses | $ | 483,772 | $ | 505,328 | $ | 21,556 | ||||||
| Total Costs and Expenses | 517,886 | 539,442 | 21,556 | |||||||||
| Net Loss | $ | (513,704 | ) | $ | (535,260 | ) | $ | (21,556 | ) | |||
| Basic and Diluted Net Loss per Common Share | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.00 | ) | |||
| 3 |
| Six Months Ended | ||||||||||||
| June 30, 2019 | Change | |||||||||||
| (as reported) | (as restated) | |||||||||||
| General and Administrative Expenses | $ | 724,859 | $ | 746,415 | $ | 21,556 | ||||||
| Total Costs and Expenses | 792,714 | 814,269 | 21,556 | |||||||||
| Net Loss | $ | (782,188 | ) | $ | (803,744 | ) | $ | (21,556 | ) | |||
| Basic and Diluted Net Loss per Common Share | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.01 | ) | |||
Additionally, the Company’s Statements of Operation for the three and nine months ended September 30, 2016 will be restated as follows:
| Three Months Ended | ||||||||||||
| September 30, 2019 | Change | |||||||||||
| (as reported) | (as restated) | |||||||||||
| General and Administrative Expenses | $ | 213,917 | $ | 246,251 | $ | 32,333 | ||||||
| Total Costs and Expenses | 222,401 | 254,734 | 32,333 | |||||||||
| Net Loss | $ | (212,885 | ) | $ | (245,219 | ) | $ | (32,333 | ) | |||
| Basic and Diluted Net Loss per Common Share | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.00 | ) | |||
| Nine Months Ended | ||||||||||||
| September 30, 2019 | Change | |||||||||||
| (as reported) | (as restated) | |||||||||||
| General and Administrative Expenses | $ | 938,777 | $ | 992,666 | $ | 53,889 | ||||||
| Total Costs and Expenses | $ | 1,015,115 | 1,069,003 | 53,889 | ||||||||
| Net Loss | $ | (995,073 | ) | $ | (1,048,962 | ) | $ | (53,889 | ) | |||
| Basic and Diluted Net Loss per Common Share | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.00 | ) | |||
The Company intends to file amended 10-Q reports covering these periods as soon as practicable.
The Company’s Chief Executive Officer has discussed the matters disclosed in this Report with the Company’s independent registered public accounting firm.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: April 23, 2020 | PURE HARVEST CANNABIS GROUP, INC. | |
| By: | /s/ Matthew Gregarek | |
| Matthew Gregarek | ||
| Chief Executive Officer | ||
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