UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

x

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

 

For the quarterly period ended June 30, 2020

 

o

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

 

For the transition period from _______________ to _______________.

 

Commission file number: 333-219922

 

WEED, Inc.

(Exact name of registrant as specified in its charter)

 

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

 

(520) 818-8582

Registrant’s telephone number, including area code

 

(Former address, if changed since last report)

(Former fiscal year, if changed since last report)

 

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

 

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

 

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

 

Common Stock, $0.001 par value

(Title of class)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x     No o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x     No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o		Accelerated filer o
Non-accelerated filer x		Smaller reporting company x
		Emerging growth company o

 

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. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No x

 

Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:

 

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o     No o

 

Applicable only to corporate issuers:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 11, 2020, there were 112,222,685 shares of common stock, $0.00001 par value, issued and outstanding.

WEED, INC.

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION		3
ITEM 1	Condensed Consolidated Financial Statements	4
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	28
ITEM 4	Controls and Procedures	28
PART II – OTHER INFORMATION		29
ITEM 1	Legal Proceedings	29
ITEM 1A	Risk Factors	31
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	31
ITEM 3	Defaults Upon Senior Securities	31
ITEM 4	Mine Safety Disclosures	31
ITEM 5	Other Information	31
ITEM 6	Exhibits	32

PART I – FINANCIAL INFORMATION

 

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider,” or similar expressions are used.

 

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

ITEM 1

Condensed Consolidated Financial Statements

 

The consolidated balance sheets as of June 30, 2020 (unaudited) and December 31, 2019, the consolidated statements of operations for the three and six months ended June 30, 2020 and 2019, the consolidated statement of stockholders equity (deficit) for the three and six months ended June 30, 2020, and the consolidated statements of cash flows for the six months ending June 30, 2020 and 2019, follow. The unaudited interim condensed financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. All such adjustments are of a normal and recurring nature.

WEED, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

TABLE OF CONTENTS

 

	Page No.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets	6
Condensed Consolidated Statements of Operations and Comprehensive Income	7
Condensed Consolidated Statements of Changes in Stockholders’ Equity	8
Condensed Consolidated Statements of Cash Flows	9

WEED, INC.

CONSOLIDATED  BALANCE SHEETS

 

		June 30				December 31,
		2020				2019
		(unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	8,018			$	2,509
Accounts Receivable			822				822
Prepaid expenses			23,316				30,979
Deposits			142,000				92,000
TOTAL CURRENT ASSETS			174,156				126,310
Land			136,400				136,400
Building			1,887,802				1,887,802
Computers &  Equipment			73,681				73,681
Leasehold improvements			5,000				5,000
			2,102,883				2,102,883
Less:  Accumulated depreciation			(397,921	)			(322,498	)
Property and equipment, net			1,704,962				1,780,385
Trademark			50,000				50,000
Less:  Accumulated amortization			(5,383	)			(4,083	)
Trademark, net			44,617				45,917
TOTAL ASSETS		$	1,923,735			$	1,952,612
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	263,286			$	212,181
Accrued expense			12,500				10,000
Accrued officer compensation			201,750				122,250
Accrued interest			22,758				16,453
Notes payable, related parties			283,600				224,100
Notes payable			147,531				167,263
Due to officer			723				723
TOTAL CURRENT LIABILITIES			932,148				752,970
TOTAL LIABILITIES			932,148				752,970
STOCKHOLDERS’  EQUITY
Common stock, $0.001 par value, 200,000,000 authorized, 111,922,685 and 109,262,685 issued and outstanding, respectively			111,923				109,263
Additional paid-in capital			80,088,861				76,660,712
Subscription payable			396,250				356,250
Accumulated deficit			(79,604,822	)			(75,925,974	)
Accumulated other comprehensive loss:
Foreign currency translation			(625	)			(609	)
TOTAL STOCKHOLDERS’ EQUITY			991,587				1,199,642
TOTAL LIABILITIES & STOCKERHOLDERS’ EQUITY		$	1,923,735			$	1,952,612

 

The accompanying notes are an integral part of the condensed consolidated financial statements

WEED, INC.

CONSOLIDATED  STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

 

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2020				2019				2020				2019
REVENUE		$	-				-
OPERATING EXPENSES
General and administrative expenses			73,087				124,928				148,683				310,688
Professional fees			442,163				7,004,377				3,430,812				17,913,703
Depreciation & amortization			41,224				40,756				76,723				81,416
Total operating expenses			556,474				7,170,061				3,656,218				18,305,807
NET OPERATING LOSS			(556,474	)			(7,170,061	)			(3,656,218	)			(18,305,807	)
OTHER INCOME (EXPENSE)
Interest income			-				-				-				-
Interest expense			(18,039	)			(2,140	)			(22,630	)			(2,389	)
Other income			-				17				-				1,017
Loss on deposit			-				-				-				-
Loss on extinguishment of debt			-				-				-				-
Gain on extinguishment of debt			-				-				-				-
Other expense			-				(476	)			-				(1,956	)
TOTAL OTHER EXPENSE, NET			(18,039	)			(2,599	)			(22,630	)			(3,328	)
NET LOSS		$	(574,513	)			(7,172,660	)			(3,678,848	)			(18,309,135	)
OTHER COMPREHENSIVE LOSS			98				(521	)			(625	)			(521	)
COMPREHENSIVE LOSS			(574,415	)			(7,173,181	)			(3,679,473	)			(18,309,656	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
Outstanding - basic and fully diluted			111,171,037				107,274,850				110,663,938				107,667,685
Net loss per share - basic and fully diluted		$	(0.01	)			(0.07	)			(0.03	)			(0.17	)

 

The accompanying notes are an integral part of the condensed consolidated financial statements

WEED, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three Months Ended June 30, 2020

(UNAUDITED)

 

																						Accumulated
		Common Stock																				Other				Total
										Additional				Subscriptions				Accumulated				Comprehensive				Stockholders’
		Shares				Amount				Paid-In Capital				Payable				Deficit				loss				Equity
Balance, December 31, 2019			109,262,685				109,263				76,660,712				356,250				(75,925,974	)			(609.00	)			1,199,642
Common stock sold for cash			150,000				150				39,850				55,000				-				-				95,000
																											-
Common stock issued for services			1,310,000				1,310				906,390				-				-				-				907,700
																											-
Vesting of employee stock options			-				-				2,015,911				-				-				-				2,015,911
																											-
Net loss			-				-				-				-				(3,104,335	)			-				(3,104,335	)
																											-
Other comprehensive income, net			-				-				-				-				-				(114	)			(114	)
Balance, March 31, 2020			110,722,685				110,723				79,622,863				411,250				(79,030,309	)			(723	)			1,113,804
Common stock sold for cash			200,000				200				54,800				(15,000	)			-				-				40,000
Common stock issued for services			1,000,000				1,000				399,000				-				-				-				400,000
Imputed Interest on RP Loans			-				-				12,198				-				-				-				12,198
Net loss			-				-				-				-				(574,513	)			-				(574,513	)
Other comprehensive income, net			-				-				-				-				-				98				98
Balance, June 30, 2020			111,922,685				111,923				80,088,861				396,250				(79,604,822	)			(625	)			991,587

 

The accompanying notes are an integral part of the condensed consolidated financial statements

WEED, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2020 and June 30, 2019

(UNAUDITED)

 

		For the Six
		Months Ended
		2020				2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(3,678,848	)		$	(18,309,135	)
Adjustments to reconcile net loss used in operating activities:
Depreciation and amortization			76,723				81,416
Gain on settlement of debt			-				-
Loss on deposit			-				-
Impairment of CIP			-				-
Imputed Interet on RP Loans			12,198
Estimated fair value of stock based compensation			2,015,911				15,413,319
Estimated fair value of shares issued for services			1,307,700				1,709,530
Loss on debt extinguishment			-				-
Decrease (increase) in assets
Accounts Receivable			-				(801	)
Prepaid expenses and other assets			(42,337	)			225,057
Increase (decrease) in liabilities
Accounts Payable			51,105				78,958
Accrued expenses			88,305				46,612
NET CASH USED IN OPERATING ACTIVITIES			(169,243	)			(755,044	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment			-				(2,979	)
Purchase of intangible assets			-				-
NET CASH USED IN INVESTING ACTIVITIES			-				(2,979	)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock Payable			40,000				107,600
Proceeds from notes payable - related party			59,500				234,000
Proceeds from the sale of common stock			95,000				350,000
Proceeds on notes payable			2,328				-
Repayments on notes payable			(22,060	)			-
NET CASH PROVIDED BY FINANCING ACTIVITIES			174,768				691,600
NET CHANGE IN CASH			5,525				(66,423	)
EFFECT OF EXCHANGE RATE ON CASH			(16	)			(521	)
CASH, BEGINNING OF PERIOD			2,509				70,608
CASH, END OF PERIOD		$	8,018			$	3,664
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year ended December 31:
Income taxes		$	-			$	-
Interest paid		$	-			$	-
Non-cash investing and financing activities:
Shares issued from subscription payable		$	55,000			$	-

 

The accompanying notes are an integral part of the condensed consolidated financial statements

WEED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

 

Note 1 – Nature of Business and Significant Accounting Policies

 

Nature of Business

 

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

 

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

 

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

 

The Company has a calendar year end for reporting purposes.

 

Basis of Presentation:

 

The accompanying condensed consolidated balance sheet at December 31, 2019, has been derived from audited consolidated financial statements and the unaudited condensed consolidated financial statements as of June 30, 2020 and 2019 ( the “financial statements”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and related footnotes included in our Registration Statement on Form S-1 for the year ended December 31, 2019 (the “2019 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”). It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The condensed consolidated financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed consolidated financial statements not misleading as required by Regulation S-X, Rule 10-01.

 

Principles of Consolidation

 

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

 

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

 

(1)

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

 

(2)

Sangre AT, LLC is doing business as Sangre AgroTech.

 

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

 

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

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 requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

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

 

Impairment of Long-Lived Assets

 

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

 

Basic and Diluted Loss Per Share

 

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

 

Stock-Based Compensation

 

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

 

Revenue Recognition

 

On January 1, 2018, the Company adopted the new revenue recognition standard ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, using the cumulative effect (modified retrospective) approach. Modified retrospective adoption requires entities to apply the standard retrospectively to the most current period presented in the financial statements, requiring the cumulative effect of the retrospective application as an adjustment to the opening balance of retained earnings at the date of initial application. No cumulative-effect adjustment in retained earnings was recorded as the Company’s has no historical revenue. The impact of the adoption of the new standard was not material to the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2020. The Company expects the impact to be immaterial on an ongoing basis.

 

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

 

The Company operates as one reportable segment.

 

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

 

Advertising and Promotion

 

All costs associated with advertising and promoting products are expensed as incurred. These expenses were $0 and $3,441 for the six months ended June 30, 2020 and 2019.

Note 1 – Nature of Business and Significant Accounting Policies (continued)

 

Recently Issued Accounting Pronouncements

 

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

 

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

 

The Company adopted the new lease guidance effective January 1, 2019 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. As of June 30, 2020, the adoption of the standard had no impact on the Company, as there were no leases in place longer than 12 months.

 

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

 

Note 2 – Going Concern

 

As shown in the accompanying financial statements, the Company has no revenues, incurred net losses from operations resulting in an accumulated deficit of $79,604,822 and negative working capital of $757,992 at June 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new products and services to begin generating revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful; therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.

 

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

 

Note 3 – Related Party

 

Notes Payable

 

From time to time, the Company has received short term loans from officers and directors as disclosed in Note 7 below. The Company has a total of $283,600 and $224,100 of note payable on the consolidated balance sheet as of June 30, 2020 and December 31, 2019, respectively. On October 28, 2019, the Company transferred the ownership of the 2017 Audi Q7 and Audi A4, valued at $46,609, to Nicole Breen as a repayment for her loans. $93,000 was recorded as a forgiveness on notes payable, and $46,391 recorded to additional paid-in capital. In March 2020, the Company received $22,000 loan from Nicole Breen, and from April 1, 2020 to June 30, 2020, the Company received an additional $37,500 loan from Nicole Breen.

Note 3 – Related Party (continued)

 

Services

 

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

 

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

 

Capital Contributions

 

The Company imputed interest on non-interest bearing, related party loans, resulting in a total of $0 and $0 of contributed capital during the six months ended June 30, 2020 and 2019, respectively.

 

Common Stock Issued for Bartered Assets

 

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

 

Common Stock

 

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

 

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

 

A total of $201,750 and $39,500 of officer compensation was unpaid and outstanding at June 30, 2020 and 2019, respectively.

 

Stock Options Issued for Services – related party

 

On February 1, 2018, in connection with executive employment agreements, the Company granted non-qualified options to purchase an aggregate of 6,000,000 shares of the Company’s common stock at the exercise price of $10.55 per share. The options shall become exercisable at the rate of 1/3 upon the six-month anniversary, 1/3 upon the one-year anniversary and 1/3 upon the second anniversary of the grant. The options were valued at $45,987,970 using the Black-Scholes option pricing model. The Company recognized expense of approximately, $2,015,911 relating to these options during the six months ended June 30, 2020.

 

Note 4 – Fair Value of Financial Instruments

 

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

 

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

 

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

 

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

 

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

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 June 30, 2020 and 2019, respectively:

 

Fair Value Measurements at December 31, 2019

 

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

 

Fair Value Measurements at June 30, 2020

 

		Level 1				Level 2				Level 3
Assets
Cash		$	8,018			$	-			$	-
Total assets			8,018			$	-			$	-
Liabilities
Notes payable, related parties						$	283,600
Notes payable		$	-			$	147,531			$	-
Total liabilities		$	-			$	431,131			$	-
		$	8,018			$	431,131			$	-

 

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 six months ended June 30, 2020 and the year ended December 31, 2019.

 

Note 5 – Investment in Land and Property

 

On July 26, 2017, the Company closed on the purchase of property, consisting of a home, recreational facility and RV park located at 5535 State Highway 12 in La Veta, Colorado to be developed into a bioscience center. The home has 4 Bedrooms and 2 Baths, and the recreational facility has showers, laundry, and reception area with an additional equipment barn attached, in addition to another facility with 9,500 square feet. The RV Park has 24 sites with full hook-ups including water, sewer, and electric, which the Company plans to convert into a series of small research pods. Under the terms of the purchase agreement, the Company paid $525,000 down, including 25,000 shares of our common stock, and Sangre took immediate possession of the property. Under the terms of the original purchase agreement, the Company was obligated to pay an additional $400,000 in cash and issue an additional 75,000 shares of our common stock over the next two years in order to pay the entire purchase price. On January 12, 2018, the Company entered into an Amendment No. 1 to the $475,000 principal amount promissory note issued by the Company to the seller of the property, under which both parties agreed to amend the purchase and the promissory note to allow the Company to pay off the note in full if it paid $100,000 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			44,640
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.

 

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

 

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

 

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

 

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

Note 6 – Property and Equipment

 

Property and equipment consist of the following at June 30, 2020 and December 31, 2019, respectively:

 

		June 30,				December 31,
		2020				2019
Property improvements		$	5,000			$	5,000
Automobiles			0				0
Office equipment			4,933				4,933
Furniture & Fixtures			2,979				2,979
Lab equipment			65,769				65,769
Construction in progress			0				0
Property (1)			1,887,802				1,887,802
Property and equipment, gross			1,966,483				1,966,483
Less accumulated depreciation			(397,921	)			(322,498	)
Property and equipment, net		$	1,568,562			$	1,643,985

 

(1)

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

 

Depreciation and amortization expense totaled $76,723 and $81,416 for the years ended June 30, 2020 and 2019, respectively.

 

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

 

Construction in progress in the amount of $499,695 was fully impaired due to the Company may not receive funds to complete the research facility center project. There was no work performed in 2019 and 2020.

 

Note 7 – Intangible Assets

 

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

 

Amortization expense totaled $1,300 and $1,300 for the three months ended June 30, 2020 and 2019, respectively.

 

Note 8 – Notes Payable, Related Parties

 

Notes payable, related parties consist of the following at June 30, 2020 and December 31, 2019, respectively:

 

		June 30, 2020				December 31, 2019
On April 12, 2010, the Company received an unsecured, non-interest-bearing loan in the amount of $2,000, due on demand from Robert Leitzman. Interest is being imputed at the Company’s estimated borrowing rate, or 10% per annum. The largest aggregate amount outstanding was $2,000 during the periods ended December 31, 2019 and December 31, 2018. Mr. Leitzman owns less than 1% of the Company’s common stock, however, the Mr. Leitzman is deemed to be a related party given the non-interest-bearing nature of the loan and the materiality of the debt at the time of origination.			2,000				2,000
Over various dates in 2011 and 2012, the Company received unsecured loans in the aggregate amount of $10,000, due on demand, bearing interest at 10%, from Sandra Orman. The largest aggregate amount outstanding was $10,000 during the periods ended December 31, 2019 and December 31, 2018. Mrs. Orman owns less than 1% of the Company’s common stock, however, Mrs. Orman is deemed to be a related party given the nature of the loan and the materiality of the debt at the time of origination.			10,000				10,000
Over various dates from April 2019 to June 2020, the company received a total of $364,600 of advances, bearing interest at 5%, from Nicole Breen. A detailed list of advances and repayments follows. On October 28, 2019, the company’s vehicles valued at $93,000 were used as a repayment.			271,600				212,100
Notes payable, related parties		$	283,600			$	224,100

Note 8 – Notes Payable, Related Parties (continued)

 

The Company recorded interest expense in the amount of $22,630 and $2,389 for the six months ended June 30, 2020 and 2019, respectively, including imputed interest expense in the amount of $0 and $0 during such periods related to notes payable, related parties.

 

Note 9 – Notes Payable

 

Note payable consist of the following at June 30, 2020 and December 31, 2019, respectively:

 

		June 30, 2020				December 31, 2019
On July 26, 2017, the Company issued a $475,000 note payable, bearing interest at 5% per annum, to A.R. Miller (“Miller Note”) pursuant to the purchase of land and property in La Veta, Colorado. The note is to be paid in four consecutive semi-annual installments in the amount of $118,750 plus accrued interest commencing on January 26, 2018 and continuing on the 26th day of July and the 26th day of January each year until the debt is repaid on July 26, 2019. The note carries a late fee of $5,937.50 in the event any installment payment is more than 30 days late, and upon default the interest rate shall increase to 12% per annum. During the three months ended March 31, 2018, the Company issued 125,000 shares of common stock, valued at $1,450,000 based on the closing price on the measurement date. Accordingly, the Company recorded a loss on extinguishment of $1,064,719.		$	-			$	-
On February 16, 2018, the Company issued a $1,040,662 note payable, bearing interest at 1.81% per annum (the low interest rate was due to the short-term nature of the note – six months. See Note 6), to Craig and Carol Clark (“Clark Note”) pursuant to the purchase of land and property in La Veta, Colorado. The note is to be paid in consecutive monthly installments in the amount of $5,000, including accrued interest commencing on March 15, 2018 and continuing through August 15, 2018. The note carries a late fee of 3% in the event any installment payment is more than 10 days late, and upon default the interest rate shall increase to 10% 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.   On August 5, 2019, the Company entered into a promissory note, whereby the Company promises to pay Snell & Wilmer L.L.P the principal amount of $250,000, bearing interest at 2.5% per annum. The note is to be paid in consecutive monthly installments in the amount of $25,000, including accrued interest commencing on August 30, 2019, until the final balloon payment is paid on January 30, 2020. The promissory note is secured by the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing with respect to the real property owned by Sangre located on 1390 Mountain Valley Road, La Veta, Colorado 81055. As of June 30, 2020, $105,648 has been paid to Snell & Wilmer.		$	144,352				166,412
On various dates, the Company received advances from consultant, Patrick Brodnik, bearing 0% interest.		$	3,178				850
		$	147,530			$	167,262

 

The Company recognized interest expense of $10,237 and $7,807 related to the note payables for the six months ended June 30, 2020 and 2019, respectively.

Note 10 – Commitments and Contingencies

 

On November 8, 2016, the Company entered into an agreement with Gregory DiPaolo’s Pro Am Golf, LLC to acquire improved property located in Westfield, New York. The total purchase price of $1,600,000 is to be paid with a deposit of 50,000 shares of common stock, followed by cash of $1,250,000 and 300,000 shares of the Company’s common stock to be delivered at closing. The deposit of 50,000 shares issued as a deposit was $42,500 based on the closing price of the Company’s common stock on the date of grant. Subsequently, we entered into an amended Purchase and Sale Agreement on October 24, 2017, under which we amended the total purchase price to Eight Hundred Thousand Dollars ($800,000) and forfeited our previous deposit of stock. Under the terms of the amended agreement, we paid an additional Ten Thousand Dollar ($10,000) deposit on October 26, 2017, with the remaining purchase price to be paid on or before the date closing date, which was scheduled on May 1, 2018. The property is approximately 43 acres and has unlimited water extraction rights from the State of New York. We had planned to use this property as our inroads to the New York hemp and infused beverage markets in the future. Since the property was in foreclosure it was put up for auction, which occurred on July 1, 2019. At the auction, we were the winning bidder with a bid of $597,000. Our prior deposit payment of $120,000 was credited towards the purchase price, and the remaining $477,000, was finally due on November 30, 2019, after several extensions (which cost us total of $40,000 to obtain). At the end of June 30, 2020, a total of $142,000 was issued as a deposit for the property. We were not able to meet that deadline, but in January 2020 we worked out an additional extension with the bank. Under the terms of the new agreement, we still owe approximately $392,000 to acquire the property. We have agreed to pay that amount in installment payments of $10,000 per month for six months beginning February 2020, with a balloon payment of approximately $332,000 due on or before August 3, 2020. The Company was not able to pay the balloon payment by the August 3, 2020 deadline, but on July 31, 2020 the Company worked out an additional extension with the bank. Under the terms of that agreement, the Company paid $10,000 in exchange for an additional extension and the Company then owed approximately $332,000 to acquire the property. The Company agreed to pay that amount in installment payments of $10,000 per month for six months beginning September 2020, with a balloon payment of approximately $272,000 due on or before February 1, 2021. These payments are in addition to the approximately $480,000 in payments the Company has already made.

 

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

 

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

Note 10 – Commitments and Contingencies (continued)

 

Material Definitive Agreements

 

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 had planned to use this property as our inroads to the New York hemp and infused beverage markets in the future. Since the property was in foreclosure it was put up for auction, which occurred on July 1, 2019. At the auction, we were the winning bidder with a bid of $597,000. Our prior deposit payment of $120,000 was credited towards the purchase price, and the remaining $477,000, was finally due on November 30, 2019, after several extensions (which cost us total of $40,000 to obtain). We were not able to meet that deadline, but in January 2020 we worked out an additional extension with the bank. Under the terms of that agreement, we owed approximately $392,000 to acquire the property. We agreed to pay that amount in installment payments of $10,000 per month for six months beginning February 2020, with a balloon payment of approximately $332,000 due on or before August 3, 2020. We were not able to pay the balloon payment by the August 3, 2020 deadline, but on July 31, 2020 we worked out an additional extension with the bank. Under the terms of that agreement, we paid $10,000 in exchange for an additional extension and we owed approximately $332,000 to acquire the property. We agreed to pay that amount in installment payments of $10,000 per month for six months beginning September 2020, with a balloon payment of approximately $272,000 due on or before February 1, 2021. These payments are in addition to the approximately $480,000 in payments we have already made.

 

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

 

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

 

Note 11 – Stockholders’ Equity

 

Preferred Stock

 

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

 

Common Stock

 

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

 

2020 Common Stock Activity

 

Common Stock Sales (2020)

 

During the quarter ended June 30, 2020, the Company issued 350,000 shares of common stock for proceeds of $95,000. 200,000 shares valued at $40,000 were not issued at June 30, 2020, and such amount has been included in subscriptions payable.

 

Common Stock Issued for Services (2020)

 

During the three months ended June 30, 2020, the Company agreed to issue an aggregate of 1,000,000 shares of common stock to consultants for services performed. The total fair value of common stock was $400,000 based on the closing price of the Company’s common stock earned on the measurement date.

 

Common Stock Cancellations

 

No common stocks were cancelled during the quarter ended June 30, 2020.

 

2019 Common Stock Activity

 

Common Stock Sales (2019)

 

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

 

Common Stock Issued for Services (2019)

Note 11 – Stockholders’ Equity (continued)

 

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

 

Common Stock Cancellations (2019

 

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

 

Note 12 – Common Stock Warrants and Options

 

Common Stock Warrants Granted (2020)

 

No common stock warrants were granted during the six months ended June 30, 2020 and December 31, 2019.

 

Common Stock Warrants Expired (2020)

 

A total of 200,000 warrants expired during the six months ended June 30, 2020.

 

Warrants Exercised (2020)

 

No warrants were exercised during the six months ended June 30, 2020.

 

2019 Common Stock Warrant Activity

 

Common Stock Warrants Granted (2019)

 

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

 

Common Stock Warrants Exercised (2019)

 

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

 

Common Stock Warrants Expired (2019)

 

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

 

Common Stock Options (2019)

 

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

 

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

 

		For the period ended June 30, 2020
Risk-free interest rate		1.75%
Expected dividend yield		0%
Expected lives		10.0 years
Expected volatility		200%

Note 12 – Common Stock Warrants and Options (continued)

 

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

 

		For the Six Months Ended June 30, 2020
		Number of				Average
		Shares				Price
Outstanding at the beginning of period		$	-			$	-
Granted			6,000,000				10.55
Exercised/Expired/Cancelled			-				-
Outstanding at the end of period			6,000,000			$	10.55
Exercisable at the end of period			1,250,000			$	10.55

 

Note 13 – Subsequent Events

 

On July 21, 2020, the Company sold 100,000 shares of common stock to Lex Seabre in exchange for total proceeds of $20,000.

 

On July 21, 2020, the Company sold 100,000 shares of common stock to Wendy Seabre in exchange for total proceeds of $20,000.

 

On July 27, 2020, the Company sold 100,000 shares of common stock to Lex Seabre in exchange for total proceeds of $20,000.

 

On July 21, 2020, the parties to the Company’s lawsuit with Travis Nelson filed a Joint Stipulation for Dismissal of all claims with Prejudice.

 

On July 27, 2020, the Court issued its Order granting the Stipulation for Dismissal with Prejudice. The lawsuit is now terminated and all claims against the Company have been dismissed with prejudice.

 

On July 31, 2020, the Company worked out an additional extension with M&T Bank to purchase the property located on 7060 East Lake Road. Under the terms of that agreement, the Company agreed to pay that amount in installment payments of $10,000 per month for six months beginning September 2020, with a balloon payment of approximately $272,000 due on or before February 1, 2021.

ITEM 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 Quarterly Report 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.

 

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 will be sequenced by the Sangre team using a binary sequencing approach based on the use of two distinct sequencing technologies and a proprietary bioinformatics database, as funds allow. 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 at an estimated cost of $300,000, if we raise sufficient funding. We will need additional extraction equipment and analytical lab equipment, totaling approximately $700,000. During the year ended December 31, 2019, construction in progress in the amount of $499,695 was fully impaired due to the Company may not receive funds to complete the research facility center project. There was no work performed in 2019. We will need to raise additional funds in order to complete the planned renovations and pay the purchase price for the equipment.

 

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 will undergo a re-design and renovation to convert the existing structures into a world-class genetics research center, once we have sufficient funds to proceed with the work.

 

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.

 

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. 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 Quarterly Report.

 

Three Months Ended June 30, 2020 compared to Three Months Ended June 30, 2019

 

Results of Operations

 

		Three Months Ended June 30,
		2020				2019
Revenue		$	-			$	-
Operating expenses:
General and administrative			73,087				124,928
Professional fees			442,163				7,004,377
Depreciation and amortization			41,224				40,756
Total operating expenses			556,474				7,170,061
Net operating loss			(556,474	)			(7,170,061	)
Other Expense
Interest expense			(18,039	)			(2,140	)
Other income			-				17
Other expense			-				(476	)
Net loss		$	(574,513	)		$	(7,172,660	)
Other Comprehensive Loss			98				(521	)
Comprehensive Loss			(574,415	)			(7,173,181	)

Operating Loss; Net Loss

 

Our comprehensive loss decreased by $6,598,766, from ($7,173,181) to ($574,415), from the three months ended June 30, 2019 compared to the three months ended June 30, 2020. Our operating loss decreased by $6,613,587, from ($7,170,061) to ($556,474) for the same period. The decrease in operating loss and net loss compared to the same period of the prior year is primarily a result of decreases in professional fees and general and administrative expenses, offset slightly by an increase in our interest expense. These changes are detailed below.

 

Revenue

 

We have not had any revenues since our inception. We are a company focused on 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 decreased by $51,841, from $124,928 for the three months ended June 30, 2019 to $73,087 for the three months ended June 30, 2020, primarily due to decreases in travel, facilities maintenance, and charitable contribution expenses.

 

Professional Fees

 

Our professional fees decreased by $6,562,214 during the three months ended June 30, 2020 compared to the three months ended June 30, 2019. Our professional fees were $442,163 for the three months ended June 30, 2020 and $7,004,377 for the three months ended June 30, 2019. These fees are largely related to fees paid for legal and accounting services, along with compensation to independent contractors, and decreased significantly primarily as a result of a decrease in the value of stock-based compensation awards due to our lower stock price. We expect these fees to vary quarter-to-quarter as our business and stock price fluctuate 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 three months ended June 30, 2020 we had depreciation and amortization expense of $41,224, compared to $40,756 in the three months ended June 30, 2019. Our depreciation and amortization expense primarily relates to our property and trademark acquisitions.

 

Interest Expense

 

Interest expense increased from $2,140 to $18,039 for the three months ended June 30, 2019 compared to the same period in 2020. Our interest expense primarily relates to notes payable from attorney and related parties.

 

Other Income

 

Other income during the three months ended June 30, 2020 was $0, compared to $17 for the three months ended June 30, 2019. Our other income for the three months ended June 30, 2019, related to a refund from a merchant.

 

Other Expense

 

Other expense decreased from $476 to $0 for the three months ended June 30, 2019 compared to the same period in 2020. Our other expense for the three months ended June 30, 2019, relates to bank service charges.

Six Months Ended June 30, 2020 compared to Six Months Ended June 30, 2019

 

Results of Operations

 

		Six Months Ended June 30,
		2020				2019
Revenue		$	-			$	-
Operating expenses:
General and administrative			148,683				310,688
Professional fees			3,420,812				17,913,703
Depreciation and amortization			76,723				81,416
Total operating expenses			3,656,218				18,305,807
Net operating loss			(3,656,218	)			(18,305,807	)
Other Expense
Interest expense			(22,630	)			(2,389	)
Other income			-				1,017
Other expense			-				(1,956	)
Net loss		$	(3,678,848	)		$	(18,309,135	)
Other Comprehensive Loss			(625	)			(521	)
Comprehensive Loss			(3,679,473	)			(18,309,656	)

 

Operating Loss; Net Loss

 

Our comprehensive loss decreased by $14,630,183, from ($18,309,656) to ($3,679,473), from the six months ended June 30, 2019 compared to the six months ended June 30, 2020. Our operating loss decreased by $14,649,589, from ($18,305,807) to ($3,656,218) for the same period. The decrease in operating loss and net loss compared to the same period of the prior year is primarily a result of decreases in professional fees and general and administrative expenses, offset slightly by an increase in our interest expense. These changes are detailed below.

 

Revenue

 

We have not had any revenues since our inception. We are company focused on 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 decreased by $162,005, from $310,688 for the six months ended June 30, 2019 to $148,683 for the six months ended June 30, 2020, primarily due to decreases in travel, facilities maintenance, and charitable contribution expenses.

Professional Fees

 

Our professional fees decreased by $14,482,891 during the six months ended June 30, 2020 compared to the six months ended June 30, 2019. Our professional fees were $3,430,812 for the six months ended June 30, 2020 and $17,913,703 for the six months ended June 30, 2019. These fees are largely related to fees paid for legal and accounting services, along with compensation to independent contractors, and decreased significantly primarily as a result of a decrease in the value of stock-based compensation awards due to our lower stock price. We expect these fees to vary quarter-to-quarter as our business and stock price fluctuate 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 six months ended June 30, 2020 we had depreciation and amortization expense of $76,723, compared to $81,416 in the six months ended June 30, 2019. Our depreciation and amortization expense primarily relates to our property and trademark acquisitions.

 

Interest Expense

 

Interest expense increased from $2,389 to $22,630 for the six months ended June 30, 2019 compared to the same period in 2020. Our interest expense primarily relates to notes payable from attorney and related parties.

 

Other Income

 

Other income during the six months ended June 30, 2020 was $0, compared to $1,017 for the six months ended June 30, 2019. Our other income for the six months ended June 30, 2019, related to a refund from a merchant.

 

Other Expense

 

Other expense decreased from $1,956 to $0 for the six months ended June 30, 2019 compared to the same period in 2020. Our other expense for the six months ended June 30, 2019, relates to bank service charges.

 

Liquidity and Capital Resources

 

Introduction

 

During the six months ended June 30, 2020, because of our operating losses, we did not generate positive operating cash flows. Our cash on hand as of June 30, 2020 was $8,018 and our monthly cash flow burn rate was approximately $45,000. 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.

 

Our cash, current assets, total assets, current liabilities, and total liabilities as of June 30, 2020 and December 31, 2019, respectively, are as follows:

 

		June 30, 2020				December 31, 2019				Change
Cash		$	8,018			$	2,509			$	(5,509	)
Total Current Assets			174,156				126,310				47,846
Total Assets			1,923,735				1,952,612				(28,877	)
Total Current Liabilities			932,148				752,970				179,178
Total Liabilities		$	932,148			$	752,970			$	179,178

 

Our total assets decreased by $28,877 as of June 30, 2020 as compared to December 31, 2019. The slight decrease in our total assets between the two periods was primarily attributed to decreases in our property and equipment, net (due to depreciation) and our prepaid expenses, partially offset by increases in our cash and deposits at June 30, 2020 compared to December 31, 2019.

 

Our current liabilities and total liabilities increased by $179,178, as of June 30, 2020 as compared to December 31, 2019. This increase was due to increases in accounts payable, accrued officer compensation, notes payable, related party, accrued expenses, and accrued interest, partially offset by a decrease in notes payable.

 

In order to pay our obligations in full or in part when due, we will be required to raise capital from other sources. There is no assurance, however, that we will be successful in these efforts.

Cash Requirements

 

We had cash available of $8,018 and $2,509 as of June 30, 2020 and December 31, 2019, respectively. Based on our revenues, cash on hand and current monthly burn rate of approximately $45,000, 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 $169,243 for the six months ended June 30, 2020, as compared to $755,044 for the six months ended June 30, 2019. For the period in 2020, the net cash used in operating activities consisted primarily of our net loss of ($3,678,848), adjusted by estimated fair value of stock-based compensation of $2,015,911, estimated value of shares issued for services of $1,307,700, depreciation and amortization of $76,723, and imputed interest on RP loans of $12,198, and adjusted by an increase in assets of prepaid expenses and other assets of $42,337, and increases in liabilities of accounts payable of $51,105 and accrued expenses of $88,305. For the period in 2019, the net cash used in operating activities consisted primarily of our net loss of ($18,309,135), offset by estimated fair value of stock-based compensation of $15,413,319, estimated value of shares issued for services of $1,709,530, and depreciation and amortization of $81,416, and adjusted by an increase in prepaid expenses and other assets of $225,057, an increase in accrued expenses of $46,612, and an increase in accounts payable of $78,958.

 

Investments

 

For the six months ended June 30, 2020, we did not have any cash flows in investing activities. For the period in 2019, the net cash used in investing activities of $2,979, with the entire amount related to purchases of property and equipment.

 

Financing

 

Our net cash provided by financing activities for the six months ended June 30, 2020 was $174,768, compared to $691,600 for the six months ended June 30, 2019. For the period in 2020, our financing activities related to proceeds from the sale of common stock of $95,000, proceeds from notes payable of $2,328, proceeds from notes payable-related party of $59,500, and stock payable of $40,000, partially offset by repayments on notes payable of $22,060. For the period in 2019, our financing activities related to proceeds from the sale of common stock of $350,000, proceeds from notes payable of $234,000, and stock payable of $107,600.

 

Off Balance Sheet Arrangements

 

We have no off balance sheet arrangements.

 

ITEM 3

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 4

Controls and Procedures

 

(a)

Evaluation of Disclosure Controls Procedures

 

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.

 

As of June 30, 2020, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer (our Principal Executive Officer) and chief financial officer (our Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. We also do not have an audit committee. Based on the evaluation described above, and as a result, in part, of not having an audit committee and having one individual serve as our chief executive officer and chief financial officer has concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective as of June 30, 2020 to the same extent they were not effective as of December 31, 2019.

In addition to the deficiencies previously reported, we do not have formal processes related to the identification and approval of related party transactions.

 

As funds become available to us, we expect to implement additional measures to improve disclosure controls and procedures.

 

(b)

Changes in Internal Controls over Financial Reporting

 

There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

(c)

Officer’s Certifications

 

Appearing as an exhibit to this quarterly report on Form 10-Q are “Certifications” of our Chief Executive and Financial Officer. The Certifications are required pursuant to Sections 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This section of the quarterly report on Form 10-Q contains information concerning the Controls Evaluation referred to in the Section 302 Certifications. This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

 

PART II – OTHER INFORMATION

 

ITEM 1

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.

 

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 were seeking compensatory damages caused by William Martin’s misrepresentation, failure to disclose, and concealment.

 

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, WEED, Inc. filed a Motion for Partial Summary Judgment (MPSJ) seeking the dismissal of all remaining claims in the 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. Originally, the Court set oral argument on the motions for May 16, 2019, but that hearing has been postponed by the Court due to health issues with Plaintiff’s counsel. Subsequently, Plaintiff’s counsel withdrew and consequently, William Martin and his wife are unrepresented. By order of the Court, the Parties participated in a judicial settlement conference August 21, 2019 with Magistrate Judge Thomas Ferraro, but the case did not settle. On October 15, 2019, Judge Marquez heard oral argument on the cross-motions for partial summary judgment. The judge took the motions under considerations. On November 21, 2019, the Judge issued a ruling, which (i) granted our motion for summary judgment as to the Plaintiff’s claim for fraudulent transfer, and as a result Glenn Martin, Nicole Breen, Ryan Breen and GEM Management Group, LLC were dismissed from the lawsuit, (ii) denied our motion to dismiss Plaintiff’s claims for breach of contract, and (iii) granted Plaintiff’s motion to dismiss our claims for fraudulent misrepresentation/concealment, which acted to dismiss our claims against the Plaintiffs. As a result of this ruling, the remaining claim in the lawsuit was one for breach of contract against WEED, Inc.

 

On March 5, 2020, the Plaintiffs filed a Motion to Dismiss the remaining counts in the lawsuit, without prejudice. On March 5, 2020, we filed a Response to the Motion to Dismiss stating that we did not object to the Plaintiff’s motion. As a result, on March 10, 2020, the Court entered an Order dismissing Plaintiff’s remaining counts in the Complaint without prejudice. The only remaining claims relate to awards for attorneys’ fees, with the Parties motions due on June 30, 2020, if they elect to file one.

 

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 parties attended mediation in April 2019, but the case did not settle. Due to concerns related to the COVID-19 pandemic the case had mainly remained static during 2020 until mid-summer. On July 3, 2020, Plaintiff offered to dismiss the case in exchange for payment of $10,000. We rejected the offer. On July 21, 2020, the Parties filed a Joint Stipulation for Dismissal of all claims with Prejudice. On July 27, 2020, the Court issued its Order granting the Stipulation for Dismissal with Prejudice. The lawsuit is now terminated and all claims against us have been dismissed with prejudice.

 

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 1A

Risk Factors

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 2

Unregistered Sales of Equity Securities and Use of Proceeds

 

During the three months ended June 30, 2020, we issued the following unregistered securities:

 

Common Stock Sales

 

During the three months ended June 30, 2020, we sold an aggregate of 200,000 shares of common stock for proceeds of $55,000. The offering and sales were made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make this determination we relied on the representations of the purchaser contained in the securities purchase agreements signed by the purchaser, which indicated the purchaser were knowledgeable about our management and our operations, were sophisticated investors, and understood the purchase was part of a private placement.

 

Common Stock Issued to Consultants

 

During the three months ended June 30, 2020, we issued an aggregate of 1,000,000 shares of our common stock to several unrelated consultants for services rendered. The shares were valued at an average of $0.40 per share for a total value of $400,000. The issuances were made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the purchasers contained in the agreements signed by the purchasers and the fact the consultants did work for the company and was familiar with the company, its operations and its management.

 

ITEM 3

Defaults Upon Senior Securities

 

There have been no events which are required to be reported under this Item.

 

ITEM 4

Mine Safety Disclosures

 

There have been no events which are required to be reported under this Item.

 

ITEM 5

Other Information

 

Status of 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 had planned to use this property as our inroads to the New York hemp and infused beverage markets in the future. Since the property was in foreclosure it was put up for auction, which occurred on July 1, 2019. At the auction, we were the winning bidder with a bid of $597,000. Our prior deposit payment of $120,000 was credited towards the purchase price, and the remaining $477,000, was finally due on November 30, 2019, after several extensions (which cost us total of $40,000 to obtain). We were not able to meet that deadline, but in January 2020 we worked out an additional extension with the bank. Under the terms of that agreement, we owed approximately $392,000 to acquire the property. We agreed to pay that amount in installment payments of $10,000 per month for six months beginning February 2020, with a balloon payment of approximately $332,000 due on or before August 3, 2020. We were not able to pay the balloon payment by the August 3, 2020 deadline, but on July 31, 2020 we worked out an additional extension with the bank. Under the terms of that agreement, we paid $10,000 in exchange for an additional extension and we owed approximately $332,000 to acquire the property. We agreed to pay that amount in installment payments of $10,000 per month for six months beginning September 2020, with a balloon payment of approximately $272,000 due on or before February 1, 2021. These payments are in addition to the approximately $480,000 in payments we have already made.

ITEM 6

Exhibits

 

Item No.		Description
3.1 (1)		Articles of Incorporation of WEED, Inc.
3.2 (1)		Bylaws of WEED, Inc.
10.1 (1)		Share Exchange Agreement by and between WEED, Inc. and Sangre AT, LLC dated April 20, 2017
10.2 (1)		Promissory Note dated July 26, 2017 issued to A.R. Miller for acquisition of La Veta, CO Property
10.3 (1)		Deed of Trust dated July 26, 2017 related to acquisition of La Veta, CO Property
10.4 (2)		Form of Securities Purchase Agreement
10.5 (2)		Form of Warrant Agreement
10.6 (2)		Purchase and Sale Agreement by and between WEED, Inc. and Greg DiPaolo’s Pro Am Golf, LLC dated October 24, 2017
10.7 (3)		Amendment No. 1 to Promissory Note by and between WEED, Inc. and A.R. Miller dated January 12, 2018
10.8 (3)		Amended & Restated Employment Agreement with Glenn E. Martin dated February 1, 2018
10.9 (3)		Amended & Restated Employment Agreement with Nicole M. Breen dated February 1, 2018
10.10 (3)		Form of WEED, Inc. Restricted Stock Agreement
10.11 (3)		Form of WEED, Inc. Notice of Grant of Non-Qualified Stock Options
10.12 (3)		Wage Settlement and Release Agreement with Ryan Breen dated February 1, 2018
10.13 (4)		Second Addendum to Purchase and Sale Agreement Greg DiPaolo’s Pro Am Gold, LLC dated February 19, 2018
10.14 (5)		Exclusive License and Assignment Agreement with Yissum Research Development Company of the Hebrew University of Jerusalem, Ltd. dated March 1, 2019
10.15 (5)		Consulting Agreement with Yissum Research Development Company of the Hebrew University of Jerusalem, Ltd. and Prof. Elka Touitou dated March 1, 2019
21.1 (6)		Subsidiaries of WEED, Inc.
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Accounting Officer (filed herewith).
32.1		Section 1350 Certification of Chief Executive Officer (filed herewith).
32.2		Section 1350 Certification of Chief Accounting Officer (filed herewith).

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.

 

(6)

Incorporated by reference from the Annual Report on Form 10-K filed with the Commission on April 16, 2019.

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 thereunto duly authorized.

 

	WEED, Inc.
Dated:  August 14, 2020		/s/ Glenn E. Martin
	By:	Glenn E. Martin
	Its:	President, Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Accounting Officer) (Principal Financial Officer)