PART II AND III

As filed with the Securities and Exchange Commission on September 30, 2022

SEC File No. 024-11668

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549SEC File No. 024-11668

Post-Effective Amendment No. 5

FORM 1-A

REGULATION A OFFERING CIRCULAR

UNDER THE SECURITIES ACT OF 1933

Marijuana Company of America, Inc.

(Exact name of issuer as specified in its charter)

Utah

(State of other jurisdiction of incorporation or organization)

633 West Fifth Street, Suite 2826

Los Angeles, California 90071

Phone: (888) 777-4362

(Address, including zip code, and telephone number,

including area code of issuer’s principal executive office)

Jesus Quintero

Chief Executive Officer

Marijuana Company of America, Inc.

633 West Fifth Street, Suite 2826

Los Angeles, California 90071

Phone: (888) 777-4362

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies to:

Independent Law PLLC

Alan T. Hawkins, Esq.

2106 NW 4th Place

Gainesville, FL 32603

Telephone: (352) 353-4048

2833	98-1246221
(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

EXPLANATORY NOTE

This Post-Qualification Regulation A Offering Circular Amendment No. 5 amends the offering circular of Marijuana Company of America, Inc., as qualified on October 20, 2021, amended on December 8, 2021, on March 4, 2022, March 21, 2022 and April 19, 2022, to change the per share price and maximum proceeds from the offering, maintaining the same maximum shares offered, and to include current financial information from our audited financial statements for the fiscal quarter ending on June 30, 2022. This Post-Qualification Regulation A Offering Circular Amendment No. 5 seeks to qualify a lowered per-share offering price that correspondingly lowers the aggregate offering price set forth in the earlier offering circular. A revised subscription agreement is included with this Amendment No. 5 reflecting the changes. In all other respects this Regulation A Offering Circular is unchanged from the Regulation A Offering Circular filed by the Company on December 31, 2021, qualified on October 20, 2021 and amended on December 8, 2021, March 4, 2022, March 21, 2022 and April 19, 2022.

An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Securities and Exchange Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Offering Circular was filed may be obtained.

Preliminary Offering Circular

September 30, 2022

Subject to Completion

MARIJUANA COMPANY OF AMERICA, INC.

633 West Fifth Street, Suite 2826

Los Angeles, California 90071

Phone: (888) 777-4362

$1,000,000 (10,000,000,000 Shares of Common Stock)

MARIJUANA COMPANY OF AMERICA, INC., a Utah corporation, is offering 10,000,000,000 shares (the “Shares”) of common stock, no par value , on a “best efforts” basis (the “Offering”). This means that, although we are offering Shares having an aggregate purchase price of up to $1,000,000 (the “Maximum Offering Amount”), we are not required to sell a specified number of Shares in the Offering prior to accepting any subscriptions, and no assurance can be given that all or any of the Shares will be sold. The public offering price per Share is $0.0001. This Offering will terminate on the earlier of (i) the date which is 90 days immediately following the date of qualification by the Securities and Exchange Commission (“SEC” or “Commission”) of the Offering Statement of which this Offering Circular is a part, subject to 90 day extensions at our sole discretion, (ii) the date on which the Maximum Offering Amount is sold and (iii) the date upon which we elect to terminate the Offering (such earliest date, the “Termination Date”). The initial 90-day offering period and any additional 90 day-incremental offering periods will, in the aggregate, not exceed 24 months from the date of this Offering Circular, pursuant to Rule 251(d)(3) of Regulation A of the Securities Act of 1933, as amended (the “Securities Act”).

Our affiliates, including our officers and directors, may invest in the Offering. Upon our acceptance, after the date hereof of subscriptions for the Shares, we shall have the right at any time thereafter, prior to the Termination Date, to effect an initial closing with respect to this Offering (the “Initial Closing”). Thereafter, we shall continue to accept additional subscriptions for the Shares, and continue to have closings (each an “Additional Closing” and together with the Initial Closing, a “Closing”) from time to time until the Termination Date. We will consider various factors in determining the timing of any Additional Closings, including the amount of proceeds received at the Initial Closing, any Additional Closings that have already been held, the level of additional valid subscriptions received after the Initial Closing, and the eligibility of additional investors under applicable laws. We expect to have Additional Closings on a monthly basis and expect that we will accept all funds subscribed for each month subject to our working capital and other needs consistent with the use of proceeds described in this Offering Circular.  Investors should expect to wait approximately 15 days and no longer than one month before we accept their subscriptions and they receive the Shares subscribed for. An investor’s subscription is binding and irrevocable and investors will not have the right to withdraw their subscription or receive a return of funds prior to the next Closing unless we reject the investor’s subscription. An investor will receive a confirmation of the investor’s purchase promptly following the Closing in which the investor participates.

The proceeds of this Offering will be deposited directly into our operating account for immediate use, with no obligation to refund subscriptions; however, if the Offering does not close, the proceeds from the Offering will be promptly returned to investors, without deduction and without interest.

After the qualification by the SEC of the Offering Statement of which this Offering Circular is a part, investors can make payment of the purchase price by wire transfer or check in accordance with the instructions set forth in the Subscription Agreement which is included as an exhibit hereto.

The minimum purchase requirement per investor is $2,000; however, we can waive the minimum purchase requirement on a case-by-case basis in our sole discretion. We expect to commence the sale of the Shares as of the date on which the Offering Statement the of which this Offering Circular is a part, is qualified by the SEC.

Our Common Stock is currently quoted on the OTC Pink tier of the OTC Market Group, Inc. (“OTC Markets”) under the symbol “MCOA.” On September 30, 2022, the last reported sale price of our common stock was $0.0002.

See “Plan of Distribution” and “Securities Being Offered” for a description of our capital stock.

	Number of Shares	Price to Public		Underwriting Discount and Commissions (1)		Proceeds to Company, Before Expenses (2)
Per Share	1	$	0.0001		N/A	$	0.0001
Maximum Offering Amount	10,000,000,000	$	1,000,000		N/A	$	1,000,000

(1) The Shares will be offered on a best efforts basis by the Company’s officers and directors. Accordingly, there are no underwriting fees or commissions currently associated with this Offering; however, the Company may engage sales associates after this Offering commences.

(2) Does not include expenses relating to this Offering, including, without limitation, fees and expenses for administrative, accounting, audit and legal services, printing fees and other miscellaneous expenses, which we estimate will be approximately $52,200.

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

An investment in our common stock is subject to certain risks and should be made only by persons or entities able to bear the risk of and to withstand the total loss of their investment. Prospective investors should carefully consider and review the RISK FACTORS beginning on page 10. 

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SELLING LITERATURE. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

THE SECURITIES OFFERED HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY STATE REGULATORY AUTHORITY NOR HAS ANY STATE REGULATORY AUTHORITY PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

This Offering Circular is following the offering circular format described in Part II of Form 1-A.

The date of this Offering Circular is December 31, 2021.

ITEM 2: TABLE OF CONTENTS

	Page
MARKET AND INDUSTRY DATA AND FORECASTS	1
TRADEMARKS AND COPYRIGHTS	1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS	1
SUMMARY AND RISK FACTORS	2
THE OFFERING	7
RISK FACTORS	10
DETERMINATION OF OFFERING PRICE	24
DIVIDEND POLICY	24
DILUTION	24
PLAN OF DISTRIBUTION	26
USE OF PROCEEDS TO ISSUER	27
DESCRIPTION OF BUSINESS	27
DESCRIPTION OF PROPERTY	40
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	40
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES	56
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS	58
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS	60
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS	61
SECURITIES BEING OFFERED	62
SHARES ELIGIBLE FOR FUTURE SALE	63
LEGAL MATTERS	64
EXPERTS	65
WHERE YOU CAN FIND MORE INFORMATION	66
FINANCIAL STATEMENTS	F-1
EXHIBITS	67

We have not authorized anyone to provide any information other than that contained or incorporated by reference in this Offering Circular prepared by us or to which we have referred you. We do not take responsibility for and can provide no assurance as to the reliability of, any other information that others may give you. This Offering Circular is an offer to sell only the Shares offered hereby but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this Offering Circular is current only as of its date, regardless of the time of delivery of this Offering Circular or any sale of the Shares.

For investors outside the United States: We have not done anything that would permit this Offering or possession or distribution of this Offering Circular in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourselves about and to observe any restrictions relating to this Offering and the distribution of this Offering Circular.

MARKET AND INDUSTRY DATA AND FORECASTS

Certain market and industry data included in this Offering Circular is derived from information provided by third-party market research firms or third-party financial or analytics firms that we believe to be reliable. Market estimates are calculated by using independent industry publications, government publications and third-party forecasts in conjunction with our assumptions about our markets. We have not independently verified such third-party information. The market data used in this Offering Circular involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and are subject to change based on various factors, including those discussed under the headings “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in this Offering Circular. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

Certain data are also based on our good faith estimates, which are derived from management’s knowledge of the industry and independent sources. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of included information. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. Statements as to our market position are based on market data currently available to us. While we are not aware of any misstatements regarding the industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this Offering Circular. Similarly, we believe our internal research is reliable, even though such research has not been verified by any independent sources.

TRADEMARKS AND COPYRIGHTS

We own or have rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names. In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products and the formulations for such products. This Offering Circular may also contain trademarks, service marks and trade names of other companies, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this Offering Circular is not intended to, and should not be read to, imply a relationship with or endorsement or sponsorship of us. Solely for convenience, copyrights, trade names and trademarks in this Offering Circular are referred to without the ® and ^TM symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Offering Circular, including the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Offering Circular include, but are not limited to, statements about:

· our business strategies;

· management’s expectation with respect to future acquisitions;

· risks related to market acceptance of our products and services;

· risks associated with our reliance on third parties;

1 

· our financial performance;

· developments relating to our competitors and our industry, including the impact of government regulations;

· estimates of our expenses, future revenues, capital requirements and our needs for additional financing;

· statements regarding our goals, intentions, plans and expectations, including the introduction of new products, services and markets;  and

· other risks and uncertainties, including those listed under the captions “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In some cases, forward-looking statements can be identified by terminology such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “could,” “project,” “will,” “will be,” “would,” or the negative of these terms or other comparable terminology and expressions. However, this is not an exclusive way of identifying such statements. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section entitled “Risk Factors” and elsewhere in this Offering Circular. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Offering Circular and the documents that we reference in this Offering Circular and have filed with the SEC as exhibits hereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

The forward-looking statements in this Offering Circular represent our views as of the date of this Offering Circular. We anticipate that subsequent events and developments may cause our views to change. Except as expressly required under federal securities laws and the rules and regulations of the SEC, we do not undertake any obligation to update any forward-looking statements to reflect events or circumstances arising after the date of this Offering Circular, whether as a result of new information or future events or otherwise. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Offering Circular. You should not place undue reliance on the forward-looking statements included in this Offering Circular. All forward-looking statements attributable to use are expressly qualified by these cautionary statements.

ITEM 3: SUMMARY AND RISK FACTORS

This summary of the Offering Circular highlights material information concerning our business and this Offering. This summary does not contain all of the information that you should consider before making your investment decision. You should carefully read the entire Offering Circular, including the information presented under the section entitled “Risk Factors” and the financial data and related notes, before making an investment decision. This summary contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from future results contemplated in the forward-looking statements as a result of factors such as those set forth in “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

In this Offering Circular, unless the context indicates otherwise, “Marijuana Company of America,” “MCOA,” the “Company,” “we,” “our,” “ours” or “us” refer to Marijuana Company of America, Inc., a Utah corporation, individually, or as the context requires, collectively with its subsidiaries.

2 

SUMMARY

Overview

We are focused on the research and development of (i) various species of hemp; (ii) beneficial uses of hemp and hemp derivatives; (iii) indoor and outdoor cultivation methods for hemp; (iv) technology used for cultivation and harvesting of different species of hemp, including, but not limited to, lighting, venting, irrigation, hydroponics, nutrients and soil; (v) different industrial hemp derived cannabinoids (“CBD”) and the possible health benefits thereof; and (vi) new and improved methods of hemp cannabinoid extraction omitting or eliminating the delta-9 tetrahydrocannabinol “THC” molecule.

Specifically, we develop and sell consumer products that include industrial hemp derived, non-psychoactive CBD as an ingredient, under the brand name “hempSMART™” through our wholly-owned subsidiary, H Smart, Inc., and we distribute hemp and CBD products through our wholly-owned subsidiary, cDistro, Inc. In addition, we provide consulting services to licensed cannabis and/or hemp operators with respect to financial accounting and bookkeeping and real property management. Our business also includes making selected investments and entering into joint ventures with start-up businesses in the legalized cannabis and hemp industries.

Our Products

 

hempSMART™

Our consumer products containing hemp and CBD are sold through our wholly-owned subsidiary H Smart, Inc. under the brand name hempSMART™. Our current hempSMART™ products offerings include the following:

• hempSMART Brain™ a proprietary patented and formulated personal care consumer product encapsulated with enriched non-psychoactive industrial hemp derived CBD. This encapsulation is combined with other high quality, proprietary natural ingredients to compliment CBD to support the brain.

• hempSMART Pain™ capsules formulated with 10mg of full spectrum, non-psychoactive CBD per serving, derived from industrial hemp, which along with a proprietary blend of other natural ingredients, are intended to deliver an all-natural formulation for the temporary relief of minor discomfort associated with physical activity.

• hempSMART Pain Cream™ each container is formulated with 300mg of full spectrum non-psychoactive CBD derived from industrial hemp. This product contains a synergistic combination of natural botanicals and full spectrum hemp extract featuring CBD, cannabigerol, also known as CBG, and a broad range of terpenes. Our proprietary blend of Ayurvedic herbs along with menthol, cayenne pepper extract, rosemary oil, aloe gel, white willow bark, arnica, wintergreen extract and tea tree oil, is intended to provide an immediate cooling and soothing sensation. This topical product is formulated to help reduce minor discomfort and promote muscle relaxation on the areas to which it is applied.

• hempSMART Drops™ full spectrum hemp CBD oil tincture drops available in 250mg and 500mg bottles, enriched with non-psychoactive industrial hemp derived CBD, and available in four different flavors (lemon, mint, orange and strawberry). These drops are free of the THC isolate.

• hempSMART Pet Drops™ for cats and dogs, formulated with 250mg of full spectrum non-psychoactive CBD derived from industrial hemp. This product contains naturally occurring CBD derived from hemp seed oil, full spectrum hemp extract, fractionated coconut oil, and a rich bacon flavor.

• hempSMART Face™ a nourishing facial moisturizer combines full spectrum CBD from hemp with a unique blend of Ayurvedic herbs and botanicals. This facial moisturizer is designed to refresh, replenish and restore skin, providing long lasting hydration and balance.

• hempSMART Drink Mix, an industrial hemp based powderized premium CBD drink made with organic CBD infused with honey to be mixed with any beverage of preference.

3 

cDistro, Inc. Acquisition

On June 30, 2021, we acquired cDistro, Inc. (“cDistro”) which is engaged in the hemp and CBD product distribution business. Specifically, through its website located at www.cdistro.com, cDistro distributes a select list of quality CBD brands along with smoke and vape shop related products to wholesalers, c-stores, specialty retailers, and dispensaries in North America. cDistro distributes a catalog of eight unique product lines that are currently being sold to over 250 customers. Through our acquisition of cDistro, we believe that we are positioned to take advantage of the developing market opportunity generated by consumers' growing demand for quality hemp products.

Our Consulting Services

In addition to selling our hempSMART™ and cDistro products, we also provide certain services to licensed cannabis and/or hemp operators. Our services include the following:

Financial Accounting and Bookkeeping

We provide financial accounting, bookkeeping and reporting protocols in order to allow licensed cannabis and/or hemp operators in those states where cannabis has been legalized for medicinal and/or recreational use, to report, collect, verify and state effective financial records and disclosure. We provide a comprehensive accounting strategy based on best accounting practices.

Real Property Management Consulting

Our property management consulting services consist of providing planning, budgeting, acquisition, accounting and management services to licensed cannabis and/or hemp operators in those states where cannabis and/or hemp has been legalized for medicinal and/or recreational use and who are searching for real property to conduct operations.

As of the date of this Offering Circular, we have not generated any revenue related to such services.

4 

Current Joint Ventures and Investments

Joint Ventures in Brazil and Uruguay

On September 30, 2020, we entered into two joint venture agreements with Marco Guerrero, our director, to form joint venture operations in Brazil and Uruguay to produce, manufacture, market and sell our hempSMART™ products in Latin America and to develop and sell hempSMART™ products globally.

CannabisGlobal, Inc. 

Joint Venture

On May 12, 2021, we entered into a joint venture agreement with Cannabis Global, Inc. (“Cannabis Global”) pursuant to which we will invest in the joint venture (“MCOA Lynwood”) and Cannabis Global, through Natural Plant Extracts of California, Inc. (“Natural Plant”), will operate a regulated and licensed laboratory to manufacture various cannabis products in the State of California. Cannabis Global owns a controlling interest in Natural Plant which operates a licensed cannabis manufacturing operation. As of the date hereof, we have invested $158,000 in the joint venture.

Share Exchange

On September 30, 2020, we entered into a securities exchange agreement with Cannabis Global pursuant to which we issued 650,000,000 shares of our common stock to Cannabis Global in exchange for 7,222,222 shares of Cannabis Global common stock. In addition, we and Cannabis Global entered into a lock-up leak-out agreement which contains certain restrictions with respect to the sales of such securities.

Joint Venture Subject to Ongoing Dispute

Bougainville Ventures, Inc. 

On March 16, 2017, we entered into a joint venture agreement with Bougainville Ventures, Inc. (“Bougainville”) to, among other things, engage in the development and promotion of products in the legalized cannabis industry in Washington State. We believe that some of the funds we paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds and that Bougainville misrepresented certain material facts in the joint venture agreement. As a result of the foregoing, on September 20, 2018, we filed a lawsuit against Bougainville and certain other defendants in Okanogan County Washington Superior Court. See Business – Legal Proceedings. 

Risk Factors

Our ability to execute on our business strategy is subject to a number of risks, which are discussed more fully in the section titled “Risk Factors.” Investors should carefully consider these risks before making an investment in the Shares. These risks include, among others, the following:

· If we fail to obtain the capital necessary to fund our operations, we may be required to cease or curtail our operations.

· Even if we can raise additional funding, we may be required to do so on terms that are dilutive to you.

· Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

· We are dependent on consumer acceptance of hemp products.

· Due to our involvement in the hemp industry, we may have a difficult time obtaining and/or maintaining insurance that is desired to operate our business, which may expose us to significant risk and financial liability.

· We compete for market share with other companies, which may have longer operating histories, more financial resources and more research and development, manufacturing and marketing experience than we do.

· The hemp industry is subject to the risks inherent in an agricultural business, including the risk of crop failure.

· Our products are not approved by the U.S. Food and Drug Administration or any other federal governmental authority.

· The presence of trace amounts of THC in our hemp products may cause adverse consequences to users of such products that will expose us to the risk of liability and other consequences.

· Litigation, complaints, enforcement actions and governmental inquiries could have a material adverse effect on our business, financial condition and results of operations.

· We may be subject to product liability claims and product recalls.

· Third parties with whom we do business may perceive themselves as being exposed to reputational risk because of their relationship with us due to our hemp-related business activities and may as a result, refuse to do business with us.

· We may become subject to liability arising from fraudulent or illegal activity by our employees, independent contractors and consultants.

· We are dependent on third parties for manufacturing our products. If we are not able to secure favorable arrangements with such third parties, our business and financial condition could be harmed.

5 

· If our joint ventures in Brazil and/or Uruguay are not successful or if we fail to realize the benefits we anticipate from such joint ventures, we may not be able to capitalize on the full market potential of our hempSMART™ products.

· Our current and future joint ventures may be adversely affected by our lack of sole decision-making authority, our reliance on our co-venturers’ financial condition and liquidity and disputes between us and our co-venturers.

· We have invested and may continue to invest in securities of private companies and may hold a minority interest in such companies, which may limit our ability to sell or otherwise transfer those securities and direct management decisions of such companies.

· Our business may be adversely affected by the ongoing Coronavirus pandemic.

· We may be subject to risks related to the protection and enforcement of our intellectual property rights, and third parties may enforce their intellectual property rights against us.

· Legislation or regulations which impose substantial new regulatory requirements on the manufacture, packaging, labeling, advertising and distribution and sale of hemp-derived products could harm our business, results of operations, financial condition and prospects.

· The market price of our common stock may be volatile and may not accurately reflect the long term value of our Company.

· We do not intend to pay cash dividends on our shares of common stock so any returns will be limited to the value of our shares.

· If investors successfully seek rescission, we would face severe financial demands that we may not be able to meet.

· This is a fixed price offering and the fixed offering price may not accurately represent the current value of our business or our assets at any particular time. Therefore, the purchase price you pay for the Shares may not be supported by the value of our business and assets at the time of your purchase.

· We may invest or spend the proceeds of this Offering in ways with which you may not agree or in ways which may not yield a return.

· This Offering is being conducted on a “best efforts” basis and we may not be able to execute our growth strategy if the Maximum Offering Amount is not sold.

Company Information

We were incorporated in the State of Utah on October 4, 1985, under the name of Mormon Mint, Inc. In 1999, Bekam Investments, Ltd. acquired 100% of our common stock and spun us off, changing our name to Converge Global, Inc. On October 31, 2009, we filed Articles of Merger with the State of Utah pursuant to which Sparrowtech Resources, Inc., a Nevada corporation, was merged with and into us. On September 4, 2015, Donald Steinberg and Charles Larsen purchased 400,000,000 shares of common stock and 10,000,000 shares of Class A Preferred Stock from our then President, resulting in a change of control of our Company. In connection with our change of control, we changed our business to focus on cannabis and legalized hemp and changed our name to Marijuana Company of America, Inc. with the State of Utah on November 9, 2015, which name change became effective on the OTC Markets on December 1, 2015.

6 

THE OFFERING

Issuer:	Marijuana Company of America, Inc.
Securities Offered:	A maximum of 10,000,000,000 shares (the “Shares”) of our common stock, no par value (“Offering”).
Offering Price:	$0.0001 per Share.
Number of Shares Outstanding After the Offering:	17,122,806,264 shares common stock if the maximum number of Shares are sold.
Minimum Investment Amount:	The minimum investment amount per investor is $2,000; however, we may waive the minimum purchase requirement on a case-by-case basis in our sole discretion. The subscriptions, once received, are irrevocable.
Investment Amount Restrictions:	Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(c) of Regulation A of the Securities Act of 1933, as amended. For general information on investing, we encourage you to refer to www.investor.gov.

Payment for Offered Shares: After the qualification by the Securities and Exchange Commission (“SEC”) of the Offering Statement of which this Offering Circular is a part, investors can make payment of the purchase price directly into our operating account by wire transfer or check in accordance with the instructions set forth in the Subscription Agreement which is included as an exhibit hereto.   Upon our acceptance, after the date hereof of subscriptions for the Shares, we shall have the right at any time thereafter, prior to the Termination Date (as defined herein), to effect an initial closing with respect to this Offering (the “Initial Closing”). Thereafter, we shall continue to accept additional subscriptions for the Shares and continue to have closings (each an “Additional Closing” and together with the Initial Closing, a “Closing”) from time to time until the Termination Date. We will consider various factors in determining the timing of any Additional Closings, including the amount of proceeds received at the Initial Closing, any Additional Closings that have already been held, the level of additional valid subscriptions received after the Initial Closing, and the eligibility of additional investors under applicable laws. We expect to have Additional Closings on a monthly basis and expect that we will accept all funds subscribed for each month subject to our working capital and other needs consistent with the use of proceeds described in this Offering Circular.  Investors should expect to wait approximately 15 days and no longer than one month before we accept their subscriptions and they receive the Shares subscribed for. An investor’s subscription is binding and irrevocable and investors will not have the right to withdraw their subscription or receive a return of funds prior to the next Closing unless we reject the investor’s subscription. An investor will receive a confirmation of the investor’s purchase promptly following the Closing in which the investor participates.   If the Offering does not close, the proceeds for the Offering will be promptly returned to investors, without deduction and without interest.

7 

Use of Proceeds:

We expect to receive net proceeds from this Offering of approximately $947,800 after deducting our offering expenses, estimated to be $52,200. We intend to use the net proceeds from this Offering for the expansion of hempSMART in South America; hempSMART™ product development and marketing;  repayment of certain notes payable; and working capital and general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, products or other properties; however, we have no current commitments or obligations to do so. See “Use of Proceeds.”

Offering:

We are offering the Shares on a “best efforts” basis. This means that, although we are offering the Shares having an aggregate purchase price of up to $10,000,000 (the “Maximum Offering Amount”), we are not required to sell a specified number of Shares in the Offering prior to accepting any subscriptions, and no assurance can be given that all or any of the Shares will be sold.

Risk Factors:	See “Risk Factors” beginning on page 10 of this Offering Circular for a discussion of some of the factors you should carefully consider before deciding to invest in our common stock.
Trading Symbol:	Our common stock is currently quoted on the OTC Pink tier of the OTC Market Group, Inc. under the symbol “MCOA.”
Termination of Offering:	This offering will terminate on the earlier of (i) the date which is 90 days immediately following the date of qualification by the SEC of the Offering Statement of which this Offering Circular is a part, subject to extension for up to 90 days at our sole discretion, (ii) the date on which the Maximum Offering Amount is sold and (iii) the date upon which we elect to terminate the Offering (such earliest date, the “Termination Date”). The initial 90-day offering period and any additional 90 day-incremental offering periods will, in the aggregate, not exceed 24 months from the date of this Offering Circular, pursuant to Rule 251(d)(3) of Regulation A.
Transfer Agent and Registrar:	Pacific Stock Transfer Company is our transfer agent and registrar in connection with the Offering.

The number of shares of our common stock to be outstanding after this offering is based on 7,122,806,264 shares of our common stock outstanding as of December 31, 2021, and excludes as of that date:

· 145,302,385 shares of common stock issuable upon exercise of warrants at a weighted average exercise price of $0.0033; and

· 1,409,784,121 shares of common stock issuable upon conversion of outstanding convertible notes in the aggregate amount of $3,467,651 which includes principal together with interest accrued thereon;

· 0 shares of common stock reserved for future issuance under our 2016 Equity Incentive Plan.

8 

Summary Financial Data

The following tables set forth our summary financial data as of the dates and for the periods indicated. We have derived the summary statement of operations data for the fiscal quarters ended June 30, 2022 and 2021 from our unaudited financial statements included elsewhere in this Offering Circular. The following summary financial data should be read with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes and other information included elsewhere in this Offering Circular. Our historical results are not necessarily indicative of the results to be expected in the future.

Statement of Operations Data:

	For the Three Months ended June 30,						For the Six Months Ended June 30,
	2020			2021			2020			2021
REVENUES:
Sales	$	258,628		$	16,880		$	819,949		$	51,810
Related party Sales		—			—			—			—
Total Revenues		258,628			16,880			819,949			51,810
Cost of sales		38,599			3,301			548,861			28,481
Gross Profit		220,029			13,579			271,088			23,329
Operating expenses		1,103,188			1,039,701			1,990,041			1,832,368
Net loss from operations		(883,159	)		(1,026,122	)		(1,718,953	)		(1,809,039	)
Interest expense, net		(852,319	)		(2,999,291	)		(2,098,474	)		(1,992,745	)
Income (Loss) on equity investment		—			(394,194	)		—			(394,194	)
Impairment loss on acquisition		(2,020,982	)		—			(2,020,982	)		—
Gain (loss) on change in fair value of derivative liabilities		957,862			696,729			(69,067	)		(1,629,289	)
Realized Gain (loss) on trading securities		—			(115,997	)		6,086			504,137
(Loss) Gain on settlement of debt		—			(96,750	)		(187,500	)		(164,977	)
Total other income (expense)		(1,915,439	)		(801,995	)		(4,369,937	)		(3,677,068	)
NET LOSS	$	(2,798,598	)	$	(1,828,117	)		(6,088,890	)		(5,486,107	)

Balance Sheet Data:

(in thousands)

As of June 30, 2022	Actual		As Adjusted(1)
Cash and cash equivalents	$	43,064	$	990,864
Total assets		5,691,114		6,638,914
Total stockholders’ equity (deficit)	$	(2,136,939)	$	(1,189,139)

(1)    On an as adjusted basis to give further effect to our issuance and sale of 10,000,000,000 Shares in this Offering at an offering price of $0.0001 per Share, after deducting the estimated offering expenses payable by us.

9 

RISK FACTORS

The purchase of the securities offered hereby involves a high degree of risk. Each prospective investor should consult his, her or its own counsel, accountant and other advisors as to legal, tax, business, financial, and related aspects of an investment in the securities offered hereby. Prospective investors should carefully consider the following specific risk factors, in addition to the other information set forth in this Offering Circular, before purchasing the securities offered hereby.

RISKS RELATED TO OUR FINANCIAL POSITION AND NEED FOR CAPITAL

If we fail to obtain the capital necessary to fund our operations, we may be required to cease or curtail our operations.

Although we expect the net proceeds of this offering to be sufficient to satisfy our capital requirements for a period of 12 months from the date of this Offering Circular, we believe that we will need to raise substantial additional capital to fund our continuing operations. Our business or operations may change in a manner that may consume available funds more rapidly than anticipated and substantial additional funding may be required to maintain operations, fund expansion, develop new or enhanced products and services, acquire complementary products or businesses or otherwise respond to competitive pressures and opportunities, such as a change in the regulatory environment. In addition, we may need to accelerate the growth of our sales capabilities and distribution beyond what is currently envisioned, and this would require additional capital. However, we may not be able to secure funding when we need it or on favorable terms. If we cannot raise adequate funds to satisfy our capital requirements, we may have to cease or curtail our operations.

Even if we can raise additional funding, we may be required to do so on terms that are dilutive to you.

The capital markets have been unpredictable in the past. In addition, it is generally difficult for early stage companies to raise capital under current market conditions. The amount of capital that a company such as ours is able to raise often depends on variables that are beyond our control. As a result, we may not be able to secure financing on terms attractive to us, or at all. If adequate funds are not available on acceptable terms, or at all, our business, including our results of operations, financial condition and our continued viability will be materially adversely affected.

We anticipate our operating expenses will increase, and we may never achieve profitability.

We launched our first hempSMART™ product, hempSMART Brain™, in November 2016. Since then, we have introduced a number of other consumer products, including, but not limited to, hempSMART Pain™, hempSMART™ Pet Drops™, and hempSMART™ Drops™. As we continue to produce other hempSMART™ products, we anticipate increases in our operating expenses, without realizing significant revenues from operations. Within the next 12 months, we anticipate that these increases in expenses will be attributed to (i) general and administrative costs; (ii) new research and development costs; (iii) advertising and website development; (iv) legal and accounting fees; (v) joint venture activities; and (vi) creating and maintaining distribution and supply chain channels.

As a result of some or all of these factors in combination, we anticipate that we will incur significant financial losses in the foreseeable future. There is a limited history upon which to base any assumption as to the likelihood that our business will prove successful. We cannot provide investors with any assurance that our business will attract customers or investors. If we are unable to address these risks, there is a high probability that our business will fail.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

Our financial statements as of December 31, 2020 have been prepared under the assumption that we will continue as a going concern for the next 12 months. Our independent registered public accounting firm included in its opinion for the year ended December 31, 2020 an explanatory paragraph referring to our recurring losses from operations and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to develop and maintain profitable operations and to obtain additional funding sources. Our financial statements as of December 31, 2020 did not include any adjustments that might result from the outcome of this uncertainty. The reaction of investors to the inclusion of a going concern statement by our auditors and our potential inability to continue as a going concern in future years could materially adversely affect our share price and our ability to raise new capital or enter into strategic alliances.

10 

RISKS RELATED TO OUR BUSINESS

We are dependent on consumer acceptance of hemp products.

We believe the hemp industry is highly dependent upon consumer perception regarding the safety and quality of hemp products distributed to such consumers. Consumer perception can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of hemp-based products. There has been limited scientific research on hemp and there can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention, or other research findings or publicity will be favorable to the hemp market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention, or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings, or publicity could have a material adverse effect on the demand for our products and services and on our business, financial condition and results of operations. Further, adverse publicity reports or other media attention regarding the safety and quality of hemp and related products in general, or our products specifically, or associating the consumption hemp or related products with illness or other negative effects or events, could also have such a material adverse effect. Such adverse publicity reports or other media attention could have a material adverse effect even if the adverse effects associated with such products resulted from consumers’ failure to consume such products appropriately or as directed. The increased usage of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share opinions and views in regard to our business and activities, whether true or not. Although we take care in protecting our image and reputation, we do not ultimately have direct control over how it is perceived by others. Reputational loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations and an impediment to our overall ability to advance our business, thereby having a material adverse impact on our financial performance, financial condition, cash flows and growth prospects.

Due to our involvement in the hemp industry, we may have a difficult time obtaining and/or maintaining insurance that is desired to operate our business, which may expose us to significant risk and financial liability.

Insurance that is otherwise readily available, such as general liability and officers’ and directors’ insurance, is more difficult for us to find, and more expensive for us to obtain, because we service companies in the hemp and cannabis industry. There are no guarantees that we will be able to obtain or maintain insurance desired to operate our business in the future, or that the cost will be affordable to us. If we are forced to conduct our business without having obtained insurance that we deem is essential to our business, our growth may be inhibited and we may be exposed to significant risk and financial liabilities.

Our products are relatively new and our industry is rapidly evolving.

Consideration must be given to our prospects in light of the risks, uncertainties and difficulties frequently encountered by companies in their early stage of development, particularly companies in the rapidly evolving legal cannabis and hemp industries. To be successful we must, among other things:

● Develop, manufacture and introduce new attractive and successful consumer products;

● Attract and maintain a large customer base and develop and grow that customer base;

● Increase awareness of our products and services and develop effective marketing strategies to insure consumer loyalty;

● Establish and maintain strategic relationships with key sales, marketing, manufacturing and distribution providers;

11 

● Respond to competitive developments; and

● Attract, retain and motivate qualified personnel.

There can be no assurance that our efforts will be successful or that we will ultimately be able to attain or maintain profitability.

We cannot guarantee that we will succeed in achieving our goals, and our failure to do so would have a material adverse effect on our business, prospects, financial condition and operating results.

Some of our hempSMART™ products such as hempSMART Brain and hempSMART Pain are new and are only in the developmental stages of commercialization. We are not certain that these products will generate sales as anticipated or be desirable for their intended uses in their intended markets. Failure of our current or future hempSMART™ products to achieve and sustain market acceptance could have a material adverse effect on our business, financial condition and operating results.

As is typical in a new and rapidly evolving industry, demand and market acceptance for recently introduced products and services are subject to a high level of uncertainty and risk. Because the market for our products and services is evolving, it is difficult to predict with any certainty the ultimate size of the market for our services and products. We cannot guarantee that a market for our products or services will develop or that demand for our products or services will be sustainable. If the market for our products or services fails to develop, develops more slowly than expected or becomes saturated with competitors, our business, financial condition and operating results may be adversely affected.

We compete for market share with other companies, which may have longer operating histories, more financial resources and more research and development, manufacturing and marketing experience than we do.

We face and expect to continue to face competition from other companies some of which may have longer operating histories, more financial resources, more experience and greater brand recognition than us. Increased competition by larger and well-financed competitors and/or competitors that have longer operating histories, greater brand recognition and more research and development, manufacturing and marketing experience than us could have a material adverse effect on our business, financial condition and results of operations. As we operate in an early stage industry, we expect to face additional competition from new entrants which may result in downward price pressure on our products as new entrants increase production, which could have a material adverse effect on our business.

In addition, if the number of users of hemp derived products increases, the demand for products will increase and we expect that competition will become more intense, as current and future competitors begin to offer an increasing number of diversified products. To remain competitive, we will require a continued high level of investment in research and development together with marketing, sales and other support. We may not have sufficient resources to maintain research and development and sales efforts on a competitive basis, which could have a material adverse effect on our business, financial condition and results of operations.

The hemp industry is subject to the risks inherent in an agricultural business, including the risk of crop failure.

The growing of hemp is an agricultural process. As such, a business with operations in the hemp industry is subject to the risks inherent in the agricultural business, including risks of crop failure presented by weather, insects, plant diseases and similar agricultural risks. Accordingly, there can be no assurance that artificial or natural elements, such as insects and plant diseases, will not interrupt production activities or have an adverse effect on the production of hemp which could have a material adverse effect on our products and accordingly our operations. If our suppliers are unable to obtain sufficient hemp from which to process CBD, our ability to meet customer demand, generate sales, and maintain operations may be adversely effected.

Our products are not approved by the U.S. Food and Drug Administration (“FDA”) or any other federal governmental authority.

The FDA has not approved our products for sale. The FDA also has not permitted the marketing of certain CBD-containing products, such as foods, tinctures, gummies, and other ingestible products. Our CBD-containing products are not intended for use in the diagnosis, cure, mitigation, treatment, or prevention of a disease or condition. We can provide no assurance that our products or operations are in compliance with federal regulations, including those enforced by the FDA. Failure to comply with FDA regulations or foreign regulations may result in among other things, warning letters, injunctions, product recalls, product seizures, fines and/or criminal prosecutions.

12 

The presence of trace amounts of THC in our hemp products may cause adverse consequences to users of such products that will expose us to the risk of liability and other consequences.

Some of our products that are intended to primarily contain hemp-derived CBD may contain trace amounts of THC. THC is an illegal or controlled substance in many jurisdictions, including under the federal laws of the U.S. Whether or not ingestion of THC (at low levels or otherwise) is permitted in a particular jurisdiction, there may be adverse consequences to consumers of our hemp products who test positive for any amounts of THC, even trace amounts, because of the presence of unintentional amounts of THC in our hemp products. In addition, certain metabolic processes in the body may negatively affect the results of drug tests. As a result, we may have to recall our products from the market. Positive tests for THC may adversely affect our reputation and our ability to obtain or retain customers. A claim or regulatory action against us based on such positive test results could materially and adversely affect our business, financial condition, operating results, liquidity, cash flow and operational performance.

We depend on key personnel to operate our business, and if we are unable to retain, attract and integrate qualified personnel, our ability to develop and successfully grow our business could be harmed.

We believe our success has depended and will continue to depend on the efforts and talents of our management team and employees. Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees, including employees with sufficient experience in the hemp industry. Qualified individuals, including individuals with sufficient experience in the hemp industry, are in high demand, and we may incur significant costs to attract and retain such individuals. In addition, the loss of any of our key employees or senior management could have a material adverse effect on our ability to execute our business plan and strategy, and we may not be able to find adequate replacements on a timely basis, or at all. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, it could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to constraints on marketing our products.

There may be restrictions on sales and marketing activities imposed by government regulatory bodies that can hinder the development of our business and operating results. Restrictions may include regulations that specify what, where and to whom product information and descriptions may appear and/or be advertised. Marketing, advertising, packaging and labeling regulations also vary from state to state, potentially limiting the consistency and scale of consumer branding communication and product education efforts. The regulatory environment in the U.S. limits our ability to compete for market share in a manner similar to other industries. If we are unable to effectively market our products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for our products, our sales and operating results could be adversely affected.

Litigation, complaints, enforcement actions and governmental inquiries could have a material adverse effect on our business, financial condition and results of operations.

Our participation in the hemp industry may lead to litigation, formal or informal complaints, enforcement actions and governmental inquiries. Such litigation, complaints, enforcement actions and governmental inquiries may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required. The cost to defend such litigation, complaints, actions, or inquiries may be significant and may require a diversion of our resources, including the attention of our management. There also may be adverse publicity associated with such litigation, complaints, actions, or inquiries that could negatively affect customer perception our business, regardless of whether the allegations are valid or whether we are ultimately found liable.

13 

We may be subject to product liability claims and product recalls.

As a distributor of products designed to be ingested by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused significant loss or injury. In addition, the sale of CBD products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination, which may affect consumer confidence in our CBD products. Previously unknown adverse reactions resulting from human consumption of CBD products alone or in combination with other medications or substances could occur. We may be subject to various product liability claims, including inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action against us could result in increased costs, adversely affect our reputation with our clients and consumers generally and have a material adverse effect on our business, financial condition and results of operations.

In addition, distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If one or more of our products are recalled due to an alleged product defect or for any other reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. We may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin, or at all. In addition, a product recall may require significant attention from our management.

Additionally, if one or more of our products are subject to recall, the reputation of that product and our reputation could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for our products and could have a material adverse effect on our business, financial condition and results of operations. Additionally, product recalls may lead to increased scrutiny of our operations by regulatory agencies in the jurisdictions in which we operate, requiring further attention from our management and potential legal fees and other expenses. Furthermore, any product recall affecting the CBD industry more broadly could lead consumers to lose confidence in the safety of the products, which could have a material adverse effect on our business, financial condition and results of operations.

Third parties with whom we do business may perceive themselves as being exposed to reputational risk because of their relationship with us due to our hemp-related business activities and may as a result, refuse to do business with us.

The third parties with whom we do business may perceive that they are exposed to reputational risk because of our hemp-related business activities. Any third-party service provider could suspend or withdraw its services if it perceives that the potential risks exceed the potential benefits of providing such services to us. Our failure to establish or maintain business relationships could have a material adverse effect on our business, financial condition and results of operations.

We may become subject to liability arising from fraudulent or illegal activity by our employees, independent contractors and consultants.

We are exposed to the risk that our employees, independent contractors and consultants may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or that violates government regulations and laws. It is not always possible for us to identify and deter misconduct by our employees and other third parties. The precautions we take to detect and prevent such misconduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending such actions, such actions could have a significant impact on our business, including, but not limited to, the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, any of which could have a material adverse effect on our business, financial condition and results of operations.

14 

Conflicts of interest may arise between us and our directors and officers which may have a material adverse effect on our operations.

We may be subject to various potential conflicts of interest because of the fact that some of our directors and officers may be engaged in a range of business activities. In addition, our executive officers and directors may devote time to their outside business interests so long as such activities do not materially or adversely conflict with our business or interfere with their duties to us. In some cases, our directors and executive officers may have fiduciary obligations associated with those business interests that interfere with their ability to devote time to our business and affairs and that could have a material adverse effect on our business, financial condition and results of operations.

Security threats to our information technology infrastructure and/or our physical buildings could expose us to liability and damage our reputation and business.

It is essential to our business strategy that our technology and network infrastructure and our physical buildings remain secure and are perceived by our customers and corporate partners to be secure. Despite security measures, however, any network infrastructure may be vulnerable to cyber-attacks by hackers and other security threats. We may face cyber-attacks that attempt to penetrate our network security, sabotage or otherwise disable our research, products and services, misappropriate our or our customers’ and partners’ proprietary information, which may include personally identifiable information, or cause interruptions of our internal systems and services. Despite security measures, we also cannot guarantee security of our physical buildings. Physical building penetration or any cyber-attacks could negatively affect our reputation, damage our network infrastructure and our ability to deploy our products and services, harm our relationship with customers and partners that are affected, and expose us to financial liability.

Confusion between legal hemp and illegal cannabis.

There is risk that confusion or uncertainty surrounding our products with regulated cannabis could occur on the state or federal level and impact us. We may, among other impacts, have difficulty with establishing banking relationships which may affect our business, prospects, assets or results of operation.

We are dependent on third parties for manufacturing our products. If we are not able to secure favorable arrangements with such third parties, our business and financial condition could be harmed.

We do not manufacture any of our products for commercial sale nor do we have the resources necessary to do so. We have contracted with and intend to continue to contract with third parties to manufacture our products. If we are unable to successfully enter into agreements for the manufacturing of our products or if we are not able to secure favorable commercial terms or arrangements with third parties for the manufacturing of our products, our business and financial condition could be harmed.

15 

RISKS RELATED TO OUR JOINT VENTURES AND INVESTMENTS

If our joint ventures in Brazil and/or Uruguay are not successful or if we fail to realize the benefits we anticipate from such joint ventures, we may not be able to capitalize on the full market potential of our hempSMART™ products.

On September 30, 2020, we entered into two joint venture agreements with Marco Guerrero, our director, to form joint venture operations in Brazil and Uruguay to produce, manufacture, market and sell our hempSMART™ products in Latin America and to develop and sell hempSMART™ products globally.In connection with such joint ventures, we face numerous risks and uncertainties, including, but not limited to, effectively integrating our respective personnel, management controls and business relationships into an effective and cohesive operation. Further, we are subject to additional risks and uncertainties because we may be dependent upon, and subject to, liability, losses or damages relating to system controls and personnel that are not under our control. Moreover, the joint ventures may be subject to negative market conditions, economic downturns, and legal and political considerations in Brazil and Uruguay. While cannabis and hemp are legalized in Uruguay, Brazil is only considering legalization, and legalization there is not guaranteed.

We will be dependent upon our strategic partners with respect to our current and future joint venture operations.

We will be dependent upon our strategic partners with respect to our current and future joint venture operations. Specifically, we will be dependent upon our strategic partners’ personnel, including their experience with respect to, among other things, compliance with applicable laws and regulations. If our strategic partners do not commit sufficient resources to the joint ventures’ operations or if we are unable to integrate such operations successfully and efficiently, our results of operations, financial condition and cash flows may be materially and adversely affected. In addition, conflicts or disagreements between us and our strategic partners may, among other things, delay or prevent the production, manufacturing, marketing and sales of our products, which may have a material adverse effect on our business and results of operations.

Our current and future joint ventures may be adversely affected by our lack of sole decision-making authority, our reliance on our co-venturers’ financial condition and liquidity and disputes between us and our co-venturers.

We have and may in the future form joint ventures with third parties in which we may not exercise sole decision-making authority regarding the operations of the joint venture. In certain cases, we may have little or no decision-making authority. Joint ventures are subject to various risks including, but not limited to, bankruptcy of the joint venture or failure of a third party to fund required capital contributions. In addition, our partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our objectives. Furthermore, disputes between us and our partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our management from focusing their time and effort on our business. The occurrence of any of the foregoing may have a material adverse effect on our business and results of operations.

We have invested and may continue to invest in securities of private companies and may hold a minority interest in such companies, which may limit our ability to sell or otherwise transfer those securities and direct management decisions of such companies.

We have invested and may continue to invest in securities of private companies and may hold a minority interest in such companies. In some cases, we may be restricted for a period by contract or applicable securities laws from selling or otherwise transferring those securities. In addition, any securities of private companies in which we invest may not have a liquid market and the inability to sell those securities on a timely basis or at acceptable prices may impair our ability to exit the investments when we consider appropriate. Further, to the extent we hold a minority interest in certain companies, we may be limited in our ability to direct management decisions of such companies.

Our business may be adversely affected by the Coronavirus (“COVID-19”) pandemic.

The outbreak of COVID-19 evolved into a global pandemic as COVID-19 spread to many regions of the world. In response to COVID-19, governmental authorities around the world implemented measures to reduce the spread of COVID-19. These measures have and may continue to adversely affect workforces, customers, supply chains, consumer sentiment, economies, and financial markets. In addition, decreased consumer spending has and may continue to lead to an economic downturn globally.

Specifically, numerous state and local jurisdictions have and may in the future impose shelter-in-place orders, quarantines, shut-downs of non-essential businesses, and similar government orders and restrictions on their residents to control the spread of COVID-19. Such orders or restrictions have resulted in temporary facility closures, work stoppages, slowdowns and travel restrictions, among other effects, thereby adversely impacting our operations. As a result of COVID-19, we have experienced a reduction in sales of our products and slower lead times with respect to the manufacturing of our products. In addition, a downturn in the United States economy may have an adverse impact on discretionary consumer spending which may have a significant impact on our business operations and/or our ability to generate revenues and profits.

The extent to which COVID-19 impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, including variants such as the delta variant, and the actions to contain COVID-19 or treat its impact, among others. We do not yet know the full extent of the impacts of COVID-19 on our business; however, these effects could have a material impact on our operations and financial condition.

16 

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

We may be subject to risks related to the protection and enforcement of our intellectual property rights, and third parties may enforce their intellectual property rights against us.

The ownership and protection of our intellectual property rights is a significant aspect of our future success. We rely on patents, trade secrets, trademarks, service marks technical know-how and other proprietary information (collectively, “Intellectual Property”) to maintain our competitive position. We try to protect our Intellectual Property by seeking registered protection where possible, developing and implementing standard operating procedures to protect Intellectual Property and entering into agreements with parties that have access to our Intellectual Property, such as our employees and consultants, to protect confidentiality and ownership.

It is possible that we may fail to identify Intellectual Property, fail to protect or enforce our Intellectual Property, inadvertently disclose such Intellectual Property or fail to register rights in relation to such Intellectual Property.

In relation to our agreements with parties that have access to our Intellectual Property, any of these parties may breach those agreements, and we may not have adequate remedies for any specific breach. In relation to our security measures, such security measures may be breached, and we may not have adequate remedies for any such breach. In addition, certain of our Intellectual Property, which has not yet been applied for or registered, may otherwise become known to or be independently developed by competitors or may already be the subject of applications for intellectual property registrations filed by our competitors, which could have a material adverse effect on our business, financial condition and results of operations.

We cannot provide any assurance that our Intellectual Property will not be disclosed in violation of agreements or that competitors will not otherwise gain access to our Intellectual Property or independently develop and file applications for intellectual property rights that adversely affect our Intellectual Property rights. Unauthorized parties may attempt to copy, reverse engineer, or otherwise obtain and use our Intellectual Property. Identifying and policing the unauthorized use of our current or future Intellectual Property rights could be difficult, expensive, time-consuming and unpredictable, as may be enforcing these rights against unauthorized use by others. We may be unable to effectively monitor and evaluate the products being distributed by our competitors and the processes used to produce such products. Additionally, if the steps taken to identify and protect our Intellectual Property rights are deemed inadequate, we may have insufficient recourse against third parties for enforcement of our Intellectual Property rights.

In any infringement proceeding, some or all of our Intellectual Property rights or arrangements or agreements seeking to protect the same for our benefit may be found invalid, unenforceable, or anti-competitive. An adverse result in any litigation or defense proceedings could put one or more of our Intellectual Property rights at risk of being invalidated or interpreted narrowly and could put existing intellectual property applications at risk of not being issued. Any or all of these events could have a material adverse effect on our business, financial condition and results of operations.

Additionally, other parties may claim that our products or services infringe on their proprietary rights or other intellectual property rights. Parties making claims against us may obtain injunctive or other equitable relief, which may have an adverse impact on our business. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, legal fees, result in injunctions, temporary restraining orders and/or require the payment of damages. In addition, we may need to obtain licenses from third parties who allege that we have infringed on their lawful rights. However, such licenses may not be available on terms acceptable to us, if at all. In addition, we may not be able to obtain licenses on terms that are favorable to us, or at all, or other rights with respect to intellectual property that we do not own.

Our trade secrets may be difficult to protect.

Our success depends upon the skills, knowledge and experience of our scientific and technical personnel, our consultants and advisors, as well as our contractors. We rely in part on trade secrets to protect our proprietary products and processes. However, trade secrets are difficult to protect. Although we enter into agreements with our corporate partners, employees, consultants, outside scientific collaborators, developers and other advisors which generally require that information received by such parties during the course of their relationship with us be kept confidential and include provisions with respect to the assignment of inventions to us, such agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case we would not be able to prevent the use of such trade secrets by our competitors. Any enforcement proceedings with respect to our trade secretary may be expensive and time consuming. Any failure to obtain or maintain meaningful trade secret protection could adversely affect our business.

17 

RISKS RELATED TO GOVERNMENT REGULATIONS

There is uncertainty surrounding the regulatory pathway for CBD.

The FDA currently does not permit the marketing of CBD-containing foods or dietary supplements, and we may be subject to enforcement action taken by the FDA concerning products containing derivatives from hemp. On February 4, 2021, Representative Kurt Schrader introduced H.R. 8179, a bill seeking to amend the U.S. Federal Food, Drug, and Cosmetic Act with respect to the regulation of certain hemp-derived CBD and which, if enacted into law, would permit the marketing of hemp-derived CBD and substances containing hemp-derived CBD as dietary supplements under the U.S. Federal Food, Drug, and Cosmetic Act, resolving ambiguity and providing clear guidance to stakeholders about how to comply with applicable FDA law. However, there can be no assurance that such bill will be enacted into law, and our failure to comply with FDA requirements may result in, among other things, warning letters, injunctions, product recalls, product seizures, fines and/or criminal prosecutions.

Legislation or regulations which impose substantial new regulatory requirements on the manufacture, packaging, labeling, advertising and distribution and sale of hemp-derived products could harm our business, results of operations, financial condition and prospects.

We believe that the sale of our hemp-derived products are in compliance with applicable U.S. regulations because our hemp products contain less than 0.3% THC and are sold only in states in the United States that have not prohibited the sale of hemp products. The rapidly changing regulatory landscape regarding hemp-derived products presents a substantial risk to the success and ongoing viability of the hemp industry in general and our ability to offer and market hemp-derived products. New legislation or regulations may be introduced at either the federal or state level which, if passed, could impose substantial new regulatory requirements on the manufacture, packaging, labeling, advertising and distribution and sale of hemp-derived products. New legislation or regulations may also require the reformulation, elimination or relabeling of certain products to meet new standards and revisions to certain sales and marketing materials, and it is possible that the costs of complying with these new regulatory requirements could be material.

“Marijuana” is illegal under the  U.S. Controlled Substances Act  (“CSA”). The 2018 Farm Bill modified the definition of “marijuana” in the CSA so that the definition of “marijuana” no longer includes hemp. The 2018 Farm Bill defines hemp as the “plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3% on a dry weight basis.” All of our hemp-derived products contain less than 0.3% delta-9 tetrahydrocannabinol concentration content. As such, we believe that the manufacture, packaging, labeling, advertising, distribution and sale of our hemp-derived products do not violate the CSA. The FDA, however, does not permit the sale or distribution of certain products, including food and dietary supplements (such as tinctures and gummies). If federal or state regulatory authorities, however, were to determine that industrial hemp and derivatives could be treated by federal and state regulatory authorities as “marijuana,” we could no longer offer our CBD products legally and could potentially be subject to regulatory action. Violations of United States federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by the United States federal government including but not limited to disgorgement of profits, cessation of business activities or divestiture. Any such actions could have a material adverse effect on our business.

The FDA, Federal Trade Commission (“FTC”) and their state-level equivalents, also possess broad authority to enforce the provisions of federal and state law, respectively, applicable to consumer products and safeguards as such relate to foods and dietary supplements, including powers to issue a public warning or notice of violation letter to us, publicizing information about illegal products, detaining products intended for import or export (in conjunction with U.S. Customs and Border Protection) or otherwise deemed illegal, requesting a recall of illegal products from the market, and requesting the Department of Justice, or the state-level equivalent, to initiate a seizure action, an injunction action, or a criminal prosecution in the U.S. or respective state courts. The initiation of any regulatory action towards industrial hemp or hemp derivatives by the FDA, FTC or any other related federal or state agency, would result in greater legal cost to us, may result in substantial financial penalties and enjoinment from certain business-related activities, and if such actions were publicly reported, they may have a material adverse effect on our business and results of operations.

18 

Our hempSMART™ sales in the UK may be subject to unforeseeable events and regulation that may have a material impact on our efforts to sell our hempSMART™ products in the UK.

Currently, the UK regulates wellness products containing CBD through its Medicines and Healthcare products Regulatory Agency (“MHRA”). Pursuant to the MHRA, only wellness products containing less than 0.2% THC may be sold in the UK. While we believe our hempSMART™ products are compliant with regulations in the UK, these regulations may change, and any such change may have a material effect on our ability to market and sell our hempSMART™ products in the UK. Additionally, we rely on affiliates in the UK for the administration of our business there. We do not have an effective warehousing protocol to efficiently store and deliver products there. The failure of our UK affiliates to efficiently handle the storage and distribution of our products may impact our ability to conduct business in the UK.

RISKS RELATED TO OUR COMMON STOCK

The market price of our common stock may be volatile and may not accurately reflect the long term value of our Company.

Securities markets have a high level of price and volume volatility, and the market price of securities of many companies has experienced substantial volatility in the past. This volatility may affect the ability of holders of our common stock to sell their securities at an advantageous price. Market price fluctuations in our common stock may be due to our operating results, failing to meet expectations of securities analysts or investors in any period, downward revision in securities analysts’ estimates, adverse changes in general market conditions or economic trends, acquisitions, dispositions, or other material public announcements by us or our competitors, along with a variety of additional factors. These broad market fluctuations may adversely affect the market price of our common stock. Financial markets have historically, at times, experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance, underlying asset values, or prospects of such companies.

Accordingly, the market price of our common stock may decline even if our operating results, underlying asset values, or prospects have not changed. Additionally, these factors as well as other related factors may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. There can be no assurance that continuing fluctuations in the price and volume of our common stock will not occur. If such increased levels of volatility and market turmoil continue, our operations could be adversely impacted and the trading price of our common stock may be materially adversely affected.

The price of our common stock may fluctuate substantially.

You should consider an investment in our common stock to be risky, and you should invest in our common stock only if you can withstand a significant loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere in this Offering Circular, are:

· sale of our common stock by our stockholders, executives, and directors;

· volatility and limitations in trading volumes of our shares of common stock;

· our ability to obtain financings to conduct and complete research and development activities and other business activities;

· the timing and success of introductions of new products and services by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors;

· our ability to attract new and maintain existing customers;

19 

· unanticipated safety concerns related to the use of our products;

· changes in our capital structure or dividend policy and future issuances of securities;

· our cash position;

· announcements and events surrounding financing efforts, including debt and equity securities;

· reputational issues;

· announcements of acquisitions, partnerships, collaborations, joint ventures, new products and services, capital commitments, or other events by us or our competitors;

· changes in general economic, political and market conditions in or any of the regions in which we conduct our business;

· changes in industry conditions or perceptions;

· analyst research reports, recommendation and changes in recommendations, price targets, and withdrawals of coverage;

· departures and additions of key personnel;

· disputes and litigations related to our Intellectual Property;

· changes in applicable laws, rules or regulations and other dynamics; and

· other events or factors, many of which may be out of our control, including, but not limited to, pandemics such as COVID-19, war, or other acts of God.

In addition, if the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

Market and economic conditions may negatively impact our business, financial condition and share price.

Concerns over inflation, energy costs, geopolitical issues, the U.S. mortgage market and a declining real estate market, unstable global credit markets and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, increased unemployment rates, and increased credit defaults in recent years. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and share price. Additional factors that may affect the demand for products and services include, but are not limited to: changes in laws and regulations effecting the hemp industry; adverse developments with respect to the hemp industry or increased federal or foreign enforcement; the nature and extent of competition from other companies; and changes in general economic, political and market conditions in or any of the regions in which we conduct our business.

20 

We do not intend to pay cash dividends on our shares of common stock so any returns will be limited to the value of our shares.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the increase, if any, of our share price.

There is no assurance that an investment in our common stock will earn any positive return.

There is no assurance that an investment in our common stock will earn any positive return. An investment in our common stock involves a high degree of risk and should be undertaken only by investors whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. An investment in our common stock is appropriate only for investors who have the capacity to absorb a loss of some or all of their investment.

There is a limited market for our common stock.

Our common stock is quoted over-the-counter in the United States on the OTC Pink tier of the OTC Markets. The over-the-counter markets provide less liquidity than U.S. national securities exchanges, such as the New York Stock Exchange or Nasdaq. Accordingly, a market for our common stock may be highly illiquid and holders of our common stock may be unable to sell or otherwise dispose of their common stock at desirable prices or at all.

If we fail to remain current in our reporting requirements, we could be removed from the OTC Pink tier of the OTC Markets which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

As a company listed on the OTC Pink tier of the OTC Markets and subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we must be current with our filings pursuant to Section 13 or 15(d) of the Exchange Act in order to maintain price quotation privileges on the OTC Pink tier of the OTC Markets. If we fail to remain current in our reporting requirements, we could be removed from the OTC Pink tier of the OTC Markets. As a result, the market liquidity of our securities could be severely adversely affected by limiting the ability of broker-dealers to trade our securities and the ability of stockholders to sell their securities in the secondary market.

Our common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

Rule 15g-9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our common stock.

21 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Future sales and issuances of our securities could result in additional dilution of the percentage ownership of our stockholders and could cause our share price to fall.

We expect that significant additional capital will be needed in the future to continue our planned operations, including research and development, increased marketing, hiring new personnel, commercializing our products, and continuing activities as an operating public company. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.

We are an “emerging growth company” and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.”

Financial reporting obligations of being a public company in the United States are expensive and time-consuming, and our management will be required to devote substantial time to compliance matters.

As a publicly traded company we incur significant legal, accounting and other expenses. The obligations of being a public company in the United States require significant expenditures and places significant demands on our management and other personnel, including costs resulting from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules require the establishment and maintenance of effective disclosure and financial controls and procedures and internal control over financial reporting among many other complex rules that are often difficult to implement, monitor and maintain compliance with. Moreover, despite recent reforms made possible by the JOBS Act, the reporting requirements, rules, and regulations will make some activities more time-consuming and costly, particularly after we are no longer an “emerging growth company.” Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted, among other potential problems.

Failure to maintain effective internal control over our financial reporting in accordance with Section 404 of Sarbanes-Oxley Act could cause our financial reports to be inaccurate.

We are required pursuant to Section 404 of the Sarbanes-Oxley Act to maintain internal control over financial reporting and to assess and report on the effectiveness of those controls. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Although we prepare our financial statements in accordance with accounting principles generally accepted in the United States, our internal accounting controls may not meet all standards applicable to companies with publicly traded securities. If we fail to implement any required improvements to our disclosure controls and procedures, we may be obligated to report control deficiencies which may cause us to become subject to regulatory sanction or investigation. Further, these outcomes could damage investor confidence in the accuracy and reliability of our financial statements.

22 

Our management has concluded that our internal controls over financial reporting were, and continue to be, ineffective, and as of the quarter ended June 30, 2021, identified a material weakness with respect to our ability to prepare our financial statements in a timely manner and inadequate segregation of duties consistent with control objectives. While we intend to remediate the material weaknesses, there is no assurance that such changes, when economically feasible and sustainable, will remediate the identified material weaknesses or that the controls will prevent or detect future material weaknesses. If we are not able to maintain effective internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could have a material adverse effect on our business.

If investors successfully seek rescission, we would face severe financial demands that we may not be able to meet.

The Shares have not been registered under the Securities Act and are being offered in reliance upon the exemption provided by Section 3(b) of the Securities Act and Regulation A promulgated thereunder. We represent that this Offering Circular does not contain any untrue statements of material fact or omit to state any material fact necessary to make the statements made, in light of all the circumstances under which they are made, not misleading. However, if this representation is inaccurate with respect to a material fact, if this Offering fails to qualify for exemption from registration under the federal securities laws pursuant to Regulation A, or if we fail to register the Shares or find an exemption under the securities laws of each state in which we offer the Shares, each investor may have the right to rescind his, her or its purchase of the Shares and to receive back his, her or its purchase price with interest. Such investors, however, may be unable to collect on any judgment, and the cost of obtaining such judgment may outweigh the benefits. If investors successfully seek rescission, we would face severe financial demands we may not be able to meet and it may adversely affect any non-rescinding investors.

This is a fixed price offering and the fixed offering price may not accurately represent the current value of our business or our assets at any particular time. Therefore, the purchase price you pay for the Shares may not be supported by the value of our business assets at the time of your purchase.

This is a fixed price offering, which means that the offering price for the Shares is fixed and will not vary based on the underlying value of our business or assets at any time. Our board of directors (“Board of Directors” or “Board”) has determined the offering price in its sole discretion without the input of an investment bank or other third party. The fixed offering price for the Shares has not been based on appraisals of any assets we own or may own, or of our Company as a whole, nor do we intend to obtain such appraisals. Therefore, the fixed offering price established for the Shares may not be supported by the current value of our business or our assets at any particular time.

We may invest or spend the proceeds of this Offering in ways with which you may not agree or in ways which may not yield a return.

The principal purposes of this Offering is to raise additional capital. We currently intend to use the proceeds we receive from this Offering after deducting estimated fees and expenses associated with qualification of offering under Regulation A, including legal, auditing, accounting, transfer agent, and other professional fees, primarily for the expansion of hempSMART™ in South America; hempSMART™ product development and marketing; repayment of certain notes payable; and working capital and general corporate purposes. Our management will have considerable discretion in the application of the net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. Investors in this Offering will need to rely upon the judgment of our management with respect to the use of proceeds. If we do not use the net proceeds that we receive in this Offering effectively, our business, financial condition, results of operations and prospects could be harmed, and the market price of our common stock could decline.

This Offering is being conducted on a “best efforts” basis and we may not be able to execute our growth strategy if the Maximum Offering Amount is not sold.

We are offering our common stock on a “best efforts” basis, and we can give no assurance that all of the Shares will be sold. If less than Maximum Offering Amount is sold, we may be unable to fund all the intended uses described in this Offering Circular from the net proceeds anticipated from this Offering without obtaining funds from alternative sources or using working capital that we may generate. Alternative sources of funding may not be available to us at a reasonable cost, if at all, and the working capital generated by us may not be sufficient to fund any uses not financed by the net proceeds from this Offering. No assurance can be given to you that any funds will be invested in this Offering other than your own.

23 

DETERMINATION OF OFFERING PRICE

The public offering price of the Shares was determined by our Board of Directors. The principal factors considered in determining the public offering price of the hares included:

• the information in this Offering Circular, including our financial information;

• the history and the prospects for the industry in which we compete;

• the ability of our management;

• the prospects for our future earnings;

• the present state of our development and our current financial condition;

• the general condition of the economy and the securities markets in the United States at the time of this Offering;

• the market price of our common stock quoted on the OTC Pink tier of the OTC Markets;

• the recent market prices of, and the demand for, publicly-traded securities of generally comparable companies; and

• other factors as were deemed relevant.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our Board of Directors after considering our financial condition, results of operations, capital requirements, business prospects and other factors our Board of Directors deems relevant.

ITEM 4: DILUTION

If you invest in our common stock, your ownership interest will be diluted to the extent of the difference between the offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock immediately after this Offering.

If you invest in our common stock, your ownership interest will be diluted to the extent of the difference between the offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock immediately after this Offering.  

As of June 30, 2022, our net tangible book value was approximately $(3,770,496), or $(0.00030) per share based on 12,380,532,543 shares of our common stock outstanding at June 30, 2022. Our historical net tangible book value per share is the amount of our total tangible assets less our total liabilities at June 30, 2022, divided by the number of shares of common stock outstanding at June 30, 2022.  

Based on an offering price of $0.0001 per Share, on an as adjusted basis as of June 30, 2022, after giving effect to the offering of the Shares and the application of the related net proceeds, our net tangible book value would be:  

(i) ($2,822,696), or ($0.00013) per share of common stock, assuming the sale of 100% of the Shares (10,000,000,000 Shares) with net proceeds in the amount of $947,800 after deducting estimated Offering expenses of $52,200;  

(ii) ($3,072,696), or ($0.00015) per share of common stock, assuming the sale of 75% of the Shares (7,500,000,000 Shares) with net proceeds in the amount of $697,800 after deducting estimated Offering expenses of $52,200;  

(iii) ($3,322,696), or ($0.00019) per share of common stock, assuming the sale of 50% of the Shares (5,000,000,000 Shares) with net proceeds in the amount of $447,800 after deducting estimated Offering expenses of $52,200; and  

(iv) ($3,722,696), or $(0.00028) per share of common stock, assuming the sale of 10% of the Shares (1,000,000,000 Shares) with net proceeds in the amount of $47,800 after deducting estimated Offering expenses of $52,200.  

24 

Purchasers of Shares in this Offering will experience immediate and substantial dilution in net tangible book value per share of common stock for financial accounting purposes, as illustrated in the following table on an approximate dollar per share basis,

Percentage of Shares sold	100%		75%		50%		10%
Offering price per Share	$	0.0001	$	0.0001	$	0.0001	$	0.0001
Net tangible book value per share of common stock as of June 30, 2022	$	(0.00030)	$	(0.00030)	$	(0.00030)	$	(0.00030)
Increase in net tangible book value per share of common stock attributable to old investors in this Offering	$	0.00018	$	0.00015	$	0.00011	$	0.00003
As adjusted net tangible book value per share of common stock immediately after this Offering	$	(0.00012)	$	(0.00015)	$	(0.00019)	$	(0.000028)
Dilution per share of common stock to new investors in this Offering	$	(0.00023)	$	(0.00025)	$	(0.00029)	$	(0.00038)

The following tables set forth, depending upon whether we sell 100%, 75%, 50%, or 10% of the Shares in this Offering, as of December 31, 2021, the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by existing stockholders and to be paid by new investors purchasing shares of common stock in this Offering at the offering price of $0.0001 per Share, together with the total consideration paid and average price per share paid by each of these groups, before deducting estimated Offering expenses.

	100% of the Shares Sold
	Shares Purchased					Total Consideration					Average
Price
	Number		Percent			Amount		Percent			per Share
Existing stockholders as of June 30, 2022		12,380,532,543		55.3	%	$	100,448,308		99	%	$	0.0081
New investors		10,000,000,000		44.7	%	$	1,000,000		1	%	$	0.0001
Total		22,380,532,543		100	%	$	101,448,308		100	%	$	0.0045

	75% of the Shares Sold
	Shares Purchased					Total Consideration					Average
Price
	Number		Percent			Amount		Percent			per Share
Existing stockholders as of June 30, 2022		12,380,532,543		62.3	%	$	100,448,308		99.3	%	$	0.0081
New investors		7,500,000,000		37.7	%	$	750,000		0.7	%	$	0.0001
Total		19,880,532,543		100	%	$	101,198,308		100	%	$	0.0051

25 

	50% of the Shares Sold
	Shares Purchased					Total Consideration					Average
Price
	Number		Percent			Amount		Percent			per Share
Existing stockholders as of June 30, 2022		12,380,532,543		71.2	%	$	100,448,308		99.5	%	$	0.0081
New investors		5,000,000,000		28.8	%	$	500,000		0.5	%	$	0.0001
Total		17,380,532,543		100	%	$	100,948,308		100	%	$	0.0058

	10% of the Shares Sold
	Shares Purchased					Total Consideration					Average
Price
	Number		Percent			Amount		Percent			per Share
Existing stockholders as of June 30, 2022		12,380,532,543		92.5	%	$	100,448,308		99.9	%	$	0.0081
New investors		1,000,000,000		7.5	%	$	100,000		0.1	%	$	0.0001
Total		13,380,532,543		100	%	$	100,548,308		100	%	$	0.0075

ITEM 5: PLAN OF DISTRIBUTION

We currently plan to have our directors and executive officers sell the shares of our common stock offered pursuant to this Offering Circular. Our executive officers and directors will receive no discounts or commissions. Our executive officers and directors will deliver this Offering Circular to those persons who they believe might have an interest in purchasing all or a part of the shares of our common stock offered pursuant to this Offering Circular. We may generally solicit investors, including, but not limited to, the use of social media, newscasts, advertisements, roadshows and the like.

There is no minimum offering amount and no provision to escrow or return investor funds if any minimum number of shares of our common stock are not sold. The minimum investment amount established for each investor is $2,000; however, we can waive the minimum purchase requirement on a case-by-case basis in our sole discretion. All funds raised by us from this offering will be immediately available for our use.

As of the date of this Offering Circular, we have not entered into any arrangements with any selling agents for the sale of the shares of common stock offered pursuant to this Offering Circular; however, we may engage one or more selling agents to sell our shares of common stock in the future. If we elect to do so, we will file a supplement to this Offering Circular to identify such selling agent(s).

Our directors and officers will not register as broker-dealers under Section 15 of the Exchange Act in reliance upon Rule 3a4-1 which sets forth the conditions pursuant to which a person associated with an issuer may participate in the offering of the issuer’s securities and not be deemed to be a broker-dealer. The conditions are that:

· the person is not statutorily disqualified, as that term is defined in Section 3(a)(39) of the Exchange Act, at the time of his participation;

· the person is not compensated in connection with his participation by the payment of commissions or other renumeration based either directly or indirectly on transactions in securities;

· the person is not at the time of their participation an associated person of a broker-dealer; and

· the person meets the conditions of paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that he (i) primarily performs, or is intended primarily to perform at the end of the offering, substantial duties for or on behalf of the issuer otherwise than in connection with transactions in securities; and (ii) was not a broker or dealer, or an associated person of a broker or dealer, within the preceding 12 months; and (iii) does not participate in selling and offering of securities for any issuer more than once every 12 months other than in reliance on paragraphs (a)(4)(i) or (a)(4)(iii) of Rule 3a4-1 of the Exchange Act.

26 

Our officers and directors are not statutorily disqualified, are not being compensated, and are not associated with a broker-dealer. They are and will continue to hold their positions as officers or directors following the completion of this offering and have not been during the past 12 months and are currently not brokers or dealers or associated with brokers or dealers. Furthermore, our officer and directors have not nor will they participate in the sale of securities of any issuer more than once every 12 months.

Unless sooner withdrawn or canceled by us, the offering will continue until (i) the maximum offering amount has been sold, or (ii) one year from the date this offering circular is qualified with the SEC. Notwithstanding the foregoing, the Company may terminate this offering at any time or extend this offering by ninety (90) days, in its sole discretion.

OTC Markets Considerations

The OTC Markets is separate and distinct from the Nasdaq stock market or other national exchange. Nasdaq has no business relationship with issuers of securities quoted on the OTC Markets. The SEC’s order handling rules, which apply to Nasdaq-listed securities, do not apply to securities quoted on the OTC Markets.

Although the Nasdaq and other national stock markets have rigorous listing standards to ensure the high quality of their issuers, and can delist issuers for not meeting those standards, the OTC Markets has no listing standards. Rather, it is the market maker who chooses to quote a security on the system, files the application, and is obligated to comply with keeping information about the issuer in its files.

Although we believe being listed on the OTC Markets increases liquidity for our stock, investors may have greater difficulty in getting orders filled than if we were listed on Nasdaq or another exchange. Investors’ orders may be filled at a price much different than expected when an order is placed. Trading activity in general is not conducted as efficiently and effectively on OTC Markets as with exchange-listed securities. Also, because OTC Markets stocks are usually not followed by analysts, there may be lower trading volume than for exchange-listed securities.

Investors must contact a broker-dealer to trade OTC Markets securities. Investors do not have direct access to the quotation service.

ITEM 6: USE OF PROCEEDS TO ISSUER

We intend to use the net proceeds for the following purposes: the fees and expenses associated with qualification of this Offering under Regulation A; the expansion of our hempSMART™ products in South America; hempSMART™ product development and marketing; repayment of certain notes payable; and working capital and general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, products or other properties, however, we have no current commitments or obligations to do so. In the event that we sell less than the Maximum Offering Amount, our first priority is to pay fees associated with the qualification of this Offering under Regulation A. No proceeds will be used to compensate or otherwise make payments to officers or directors except for ordinary payments under employment agreements.

On July 10, 2021, we issued a convertible note (the “July Note”) in the aggregate principal amount of $268,750 (including a $26,875 original issuance discount) to an investor. The July Note accrues interest at a rate of 12% per annum, subject to adjustment, and matures on July 10, 2022. The July Note is convertible into shares of our common stock at a conversion price of $0.005 per share, subject to adjustment (the “Conversion Price”); provided, however, we are prohibited from effecting a conversion of the July Note to the extent that, as a result of such conversion, the holder together with the holder’s affiliates, would beneficially own more than 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the July Note. If, at any time while the July Note is outstanding, we, among other things, issue, sell or grant any common stock or common stock equivalents at an effective price per share that is lower than the then Conversion Price, then the Conversion Price shall be reduced to such lower amount. We may prepay the Note at any time prior to the occurrence of an event of default by paying the holder thereof the principal amount of the July Note together with interest accrued thereon plus $750. In addition, at any time prior to the full repayment or full conversion of the July Note, we receive cash proceeds including, but not limited to, pursuant to the issuance of equity or debt securities (which includes this Offering), the holder of the July Note shall have the right to require us to immediately apply 45% of such proceeds to repay the July Note. Furthermore, we are required to pay $59,125 to the holder of the July Note on or before January 10, 2022. In addition, at any time while the July Note is outstanding, if we have a financing offer from a third party, we must offer such financing opportunity to the holder of the July Note on the same terms and conditions as the third party.

27 

On June 23, 2021, we issued a convertible note (the “June Note”) in the aggregate principal amount of $537,500 (including a $53,750 original issuance discount) to an investor. The June Note accrues interest at a rate of 12% per annum, subject to adjustment, and matures on June 23, 2022. The June Note is convertible into shares of our common stock at a conversion price of $0.005 per share, subject to adjustment (the “June Conversion Price”); provided, however, we are prohibited from effecting a conversion of the June Note to the extent that, as a result of such conversion, the holder together with the holder’s affiliates, would beneficially own more than 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the June Note. If, at any time while the June Note is outstanding, we, among other things, issue, sell or grant any common stock or common stock equivalents at an effective price per share that is lower than the then June Conversion Price, then the June Conversion Price shall be reduced to such lower amount. We may prepay the June Note at any time prior to the occurrence of an event of default by paying the holder thereof the principal amount of the June Note together with interest accrued thereon plus $750. In addition, at any time prior to the full repayment or full conversion of the June Note, we receive cash proceeds including, but not limited to, pursuant to the issuance of equity or debt securities (which includes this Offering), the holder of the June Note shall have the right to require us to immediately apply 45% of such proceeds to repay the June Note. Furthermore, we are required to pay $118,250 to the holder of the June Note on or before December 23, 2021. In addition, at any time while the June Note is outstanding, if we have a financing offer from a third party, we must offer such financing opportunity to the holder of the June Note on the same terms and conditions as the third party.

The gross proceeds of this Offering will be $10,000,000 if all of the Shares offered hereunder are purchased. However, we cannot guarantee that we will sell all of the Shares we are offering. The following table summarizes how we anticipate using the gross proceeds of this Offering, depending upon whether we sell 10%, 50%, 75%, or 100% of the Shares in this Offering:

	If 100% of the Shares are Sold		If 75% of the Shares are Sold		If 50% of the Shares are Sold		If 10% of the Shares are Sold
Repayment of notes payable		2,800,000		2,100,000		1,400,000		280,000
Inventory Purchase		450,000		337,500		225,000		45,000
Marketing/Advertising		500,000		375,000		250,000		50,000
Acquisitions		5,000,000		3,750,000		2,500,000		500,000
Working capital and general corporate purposes		1,197,800		898,350		598,900		119,780
Fees for qualification of Offering under Regulation A (includes legal, auditing, accounting, transfer agent, printing and other professional fees)		52,200		52,200		52,200		52,200
Total Use of Proceeds		10,000,000		7,513,050		5,026,100		1,046,980

Pending our use of the net proceeds from this Offering, we may invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and government securities. 

28 

ITEM 7: DESCRIPTION OF BUSINESS

Overview

We are focused on the research and development of (i) various species of hemp; (ii) beneficial uses of hemp and hemp derivatives; (iii) indoor and outdoor cultivation methods for hemp; (iv) technology used for cultivation and harvesting of different species of hemp, including, but not limited to, lighting, venting, irrigation, hydroponics, nutrients and soil; (v) different industrial hemp derived CBD and the possible health benefits thereof; and (vi) new and improved methods of hemp cannabinoid extraction omitting or eliminating the delta-9 tetrahydrocannabinol “THC” molecule.

Specifically, we develop and sell consumer products that include industrial hemp derived, non-psychoactive CBD as an ingredient, under the brand name “hempSMART™” through our wholly-owned subsidiary, H Smart, Inc., and we distribute hemp and CBD products through our wholly-owned subsidiary, cDistro. Our industrial hemp-based products are developed with an enriched CBD molecular composition with a THC concentration of 0.3% or less by dry weight. We market and sell our hempSMART™ products directly through our website, and we market and sell our cDistro hemp-derived cannabinoid products through cDistro’s website.

In addition, we provide financial accounting, bookkeeping services, real property management, and reporting protocols in order to allow licensed cannabis and/or hemp operators in those states where cannabis has been legalized for medicinal and/or recreational use, to report, collect, verify and state effective financial records and disclosure. We provide a comprehensive accounting strategy based on best accounting practices. As of the date of this Offering Circular, we have not generated any revenue related to such services.

Furthermore, our business includes making selected investments and entering into joint ventures with start-up businesses in the legalized cannabis and hemp industries.

Our Products

 

hempSMART™

Our consumer products containing hemp and CBD are sold through our wholly-owned subsidiary H Smart, Inc. under the brand name hempSMART™. We market and sell our hempSMART™ products directly through our website, and through our affiliate marketing program, pursuant to which qualified sales affiliates use a secure multi-level-marketing sales software program that: facilitates order placement over the internet via a website; accounts for affiliate orders and sales; calculates referral benefits apportionable to specific sales associates; and calculates and accounts for loyalty and rewards benefits for returning customers. We plan on focusing our sales and marketing efforts on direct sales on our website and intend to wind down and terminate our affiliate marketing and sales program during fiscal 2021.

Our current hempSMART™ products offerings include the following:

• hempSMART Brain™ a proprietary patented and formulated personal care consumer product encapsulated with enriched non-psychoactive industrial hemp derived CBD. This encapsulation is combined with other high quality, proprietary natural ingredients to compliment CBD to support the brain.

• hempSMART Pain™ capsules formulated with 10mg of full spectrum, non-psychoactive CBD per serving, derived from industrial hemp, which along with a proprietary blend of other natural ingredients, are intended to deliver an all-natural formulation for the temporary relief of minor discomfort associated with physical activity.

• hempSMART Pain Cream™ each container is formulated with 300mg of full spectrum non-psychoactive CBD derived from industrial hemp. This product contains a synergistic combination of natural botanicals and full spectrum hemp extract featuring CBD, cannabigerol, also known as CBG, and a broad range of terpenes. Our proprietary blend of Ayurvedic herbs along with menthol, cayenne pepper extract, rosemary oil, aloe gel, white willow bark, arnica, wintergreen extract and tea tree oil, is intended to provide an immediate cooling and soothing sensation. This topical product is formulated to help reduce minor discomfort and promote muscle relaxation on the areas to which it is applied.

29 

• hempSMART Drops™ full spectrum hemp CBD oil tincture drops available in 250mg and 500mg bottles, enriched with non-psychoactive industrial hemp derived CBD, and available in four different flavors (lemon, mint, orange and strawberry). These drops are free of the THC isolate.

• hempSMART Pet Drops™ for cats and dogs, formulated with 250mg of full spectrum non-psychoactive CBD derived from industrial hemp. This product contains naturally occurring CBD derived from hemp seed oil, full spectrum hemp extract, fractionated coconut oil, and a rich bacon flavor.

• hempSMART Face™ a nourishing facial moisturizer combines full spectrum CBD from hemp with a unique blend of Ayurvedic herbs and botanicals. This facial moisturizer is designed to refresh, replenish and restore skin, providing long lasting hydration and balance.

• hempSMART Drink Mix, an industrial hemp based powderized premium CBD drink made with organic CBD infused with honey to be mixed with any beverage of preference.

Joint Ventures and Investments

cDistro, Inc. Acquisition

On June 29, 2021 (the “Effective Date”), we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with cDistro Merger Sub, Inc., our wholly-owned subsidiary (“Merger Sub”), and cDistro, a company engaged in the hemp and CBD product distribution business. Pursuant to the terms of the Merger Agreement, on June 30, 2021 (the “Merger Effective Date”), Merger Sub merged with and into cDistro, with cDistro surviving the merger as our wholly-owned subsidiary (the “Merger”).

In connection with the Merger Agreement, on the Effective Date, we entered into an earnout agreement (the “Earnout Agreement”) with the sole securityholder of cDistro (the “cDistro Stockholder”) pursuant to which we agreed to issue additional shares of our common stock to the cDistro Stockholder conditioned upon the achievement of certain revenue milestones. In addition, on the Effective Date, the cDistro Stockholder entered into a Lock-Up and Leak-Out Agreement with us pursuant to which, among other thing, the cDistro Stockholder agreed to certain restrictions regarding the resale of our shares of common stock issued and to be issued pursuant to the Merger Agreement for a period of six months from the Effective Date. In connection with the Merger Agreement, on the Effective Date, we entered into a stock purchase agreement with cDistro pursuant to which we purchased 350,000 shares of cDistro common stock at the price of $1.00 per share.

At the Merger Effective Date, all outstanding shares of common stock of cDistro were exchanged for 265,164,070 shares of our common stock. In addition, we may be required to issue up to an additional 220,970,059 shares of our common stock pursuant to the Earnout Agreement.

cDistro is engaged in the hemp and CBD product distribution business. Specifically, through its website located at www.cdistro.com, cDistro distributes a select list of quality CBD brands along with smoke and vape shop related products to wholesalers, c-stores, specialty retailers, and dispensaries in North America. cDistro distributes a catalog of eight unique product lines that are currently being sold to over 250 customers. Through our acquisition of cDistro, we believe that we are positioned to take advantage of the developing market opportunity generated by consumers' growing demand for quality hemp products.

Bougainville Ventures, Inc. Joint Venture

On March 16, 2017, we entered into a joint venture agreement with Bougainville Ventures, Inc., a Canadian corporation. The purpose of the joint venture was for the Company and Bougainville to (i) jointly engage in the development and promotion of products in the legalized cannabis industry in Washington State; (ii) utilize Bougainville’s high quality cannabis grow operations in the State of Washington, where it claimed to have an ownership interest in real property for use within the legalized cannabis industry; (iii) leverage Bougainville’s agreement with a I502 Tier 3 license holder to grow cannabis on the site; provide technical and management services and resources including, but not limited to: sales and marketing, agricultural procedures, operations, security and monitoring, processing and delivery, branding, capital resources and financial management; and, (iv) optimize collaborative business opportunities. The Company and Bougainville agreed to operate through a Washington State Limited Liability Company, and BV-MCOA Management, LLC was organized in the State of Washington on May 16, 2017.

30 

As our contribution to the joint venture, the Company committed to raise not less than $1,000,000 to fund joint venture operations, based upon a funding schedule. The Company also committed to providing branding and systems for the representation of cannabis related products and derivatives comprised of management, marketing and various proprietary methodologies directly tailored to the cannabis industry.

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

As disclosed on Form 8-K on December 11, 2017, the Company did not comply with the funding schedule for the joint venture. On November 6, 2017, the Company and Bougainville amended the joint venture agreement to reduce the amount of the Company’s commitment from $1,000,000 to $800,000, and also required the Company to issue Bougainville 15 million shares of the Company’s restricted common stock. The Company completed its payments pursuant to the amended agreement on November 7, 2017, and on November 9, 2017, issued to Bougainville 15 million shares of restricted common stock. The amended agreement provided that Bougainville would deed the real property to the joint venture within thirty days of its receipt of payment.

Thereafter, the Company determined that Bougainville had no ownership interest in the property in Washington State, but rather was a party to a purchase agreement for real property that was in breach of contract for non-payment. Bougainville also did not possess an agreement with a Tier 3 I502 license holder to grow Marijuana on the property. Nonetheless, as a result of funding arranged for by the Company, Bougainville and an unrelated third party, Green Ventures Capital Corp., purchased the land, but did not deed the real property to the joint venture. Bougainville failed to pay delinquent property taxes to Okanogan County and to date, the property has not been deeded to the joint venture.

To clarify the respective contributions and roles of the parties, the Company offered to enter into good faith negotiations to revise and restate the joint venture agreement with Bougainville. The Company diligently attempted to communicate with Bougainville to accomplish a revised and restated joint venture agreement, and efforts towards satisfying the conditions to complete the subdivision of the land by the Okanogan County Assessor. However, Bougainville failed to cooperate or communicate with the Company in good faith, and failed to pay the delinquent taxes on the real property that would allow for sub-division and the deeding of the real property to the joint venture.

On August 10, 2018, the Company advised its independent auditor that Bougainville did not cooperate or communicate with the Company regarding its requests for information concerning the audit of Bougainville’s receipt and expenditures of $800,000 contributed by the Company in the joint venture agreement. Bougainville had a material obligation to do so under the joint venture agreement. The Company believes that some of the funds it paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds. Additionally, the Company believes that Bougainville misrepresented material facts in the joint venture agreement, as amended, including, but not limited to, Bougainville’s representations that: (i) it had an ownership interest in real property that was to be deeded to the joint venture; (ii) it had an agreement with a Tier 3 # I502 cannabis license holder to grow cannabis on the real property; and, (iii) that clear title to the real property associated with the Tier 3 # I502 license would be deeded to the joint venture thirty days after the Company made its final funding contribution. As a result, on September 20, 2018, the Company filed suit against Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court, case number 18-2- 0045324. The Company’s complaint seeks legal and equitable relief for breach of contract, fraud, breach of fiduciary duty, conversion, recession of the joint venture agreement, an accounting, quiet title to real property in the name of the Company, for the appointment of a receiver, the return to treasury of 15 million shares issued to Bougainville, and, for treble damages pursuant to the Consumer Protection Act in Washington State. The registrant has filed a lis pendens on the real property. The case is currently in litigation.

31 

In connection with the agreement, the Company recorded a cash investment of $1,188,500 to the Joint Venture during 2017. This was comprised of 49.5% ownership of BV-MCOA Management LLC, and was accounted for using the equity method of accounting. The Company recorded an annual impairment in 2017 of $792,500, reflecting the Company’s percentage of ownership of the net book value of the investment. During 2018, the Company recorded equity losses of $37,673 and $11,043 for the first and second quarters respectively, and recorded an annual impairment of $285,986 for the year ended December 31, 2018, at which time the Company determined the investment to be fully impaired due to Bougainville’s breach of contract and resulting litigation, as discussed above. 

Natural Plant Extract of California

Natural Plant Extract of California & Subsidiaries Joint Venture; On April 15, 2019, the Company entered into a joint venture agreement with Natural Plant Extracts of California, Inc. and subsidiaries. The purpose of the joint venture was to utilize Natural Plant Extracts’ California and City cannabis licenses to jointly operate a business named “Viva Buds” to operate a licensed cannabis distribution service in California. In exchange for acquiring 20% of Natural Plant Extracts’ common stock, the Company agree to pay two million dollars and issue Natural Plant Extract one million dollars’ worth of the Company’s restricted common stock. As of February 3, 2020, the Company was in arrears in its payment obligations under the joint venture agreement, and the parties entered into a settlement and release of all claims terminating the joint venture. The parties agreed to reduce the Company’s equity ownership in Natural Plant Extracts from 20% to 5%. The Company also agreed to pay Natural Plant Extracts $85,000 and the balance of $56,085.15 paid in a convertible promissory note issued with terms allowing Natural Plant Extracts to convert the note into common stock at a 50% discount to the closing price of MCOA’s common stock as of the maturity date. As of the date of this filing, the Company satisfied its payment obligations under the settlement agreement.

Cannabis Global Share Exchange

Share Exchange with Cannabis Global, Inc. On September 30, 2020, the Company entered into a securities exchange agreement with Cannabis Global, Inc., a Nevada corporation. By virtue of the agreement, the Company issued 650,000,000 shares of its unregistered common stock to Cannabis Global in exchange for 7,222,222 shares of Cannabis Global unregistered common stock. The Company and Cannabis Global also entered into a lock up leak out agreement which prevents either party from sales of the exchanged shares for a period of 12 months. Thereafter the parties may sell not more than the quantity of shares equaling an aggregate maximum sale value of $20,000 per week, or $80,000 per month until all Shares and Exchange Shares are sold.

Eco Innovation Group Share Exchange

On February 26, 2021, we entered into a Share Exchange Agreement with Eco Innovation Group, Inc., a Nevada corporation quoted on OTC Markets Pink (“ECOX”) to acquire the number of shares of ECOX’s common stock, equal in value to $650,000 based on the per-share price of $0.06, in exchange for the number of shares of MCOA common stock equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date (the “Share Exchange Agreement”).  For both parties, the Share Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event that a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant to the Share Exchange Agreement to fall below $650,000.

Complementary to the Share Exchange Agreement, the Company and ECOX entered into a Lock-Up Agreement dated February 26, 2021 (the “Lock-Up Agreement”), providing that the shares of common stock acquired pursuant to the Share Exchange Agreement shall be subject to a lock-up period preventing its sale for a period of 12 months following issuance and limiting the subsequent sale to aggregate maximum sale value of $20,000 per week, or $80,000 per month. On October 1, 2021, we entered into a First Amendment to Lock-Up Agreement between the Company and Eco Innovation Group, Inc., dated and effective October 1, 2021 (the “Amended Lock-Up Agreement”), which amends that certain Lock-Up Agreement entered into between the Company and Eco Innovation Group, Inc. on February 26, 2021 (the “Original Lock-Up Agreement”). The Amended Lock-Up Agreement amends the Original Lock-Up Agreement in one respect, by amending the initial lock-up period from 12 months following its effective date to 6 months following its effective date. All other terms and conditions of the Original Lock-Up Agreement remain unaffected. 

32 

Joint Ventures in Brazil and Uruguay – Development Stage

On October 1, 2020, we entered into two Joint Venture Agreements with Marco Guerrero, a director of the Company, dated September 30, 2020, to form joint venture operations in Brazil and in Uruguay to produce, manufacture, market and sell the Company’s hempSMART™ products in Latin America, and will also work to develop and sell hempSMART™ products globally. The Joint Venture Agreements contain equal terms for the formation of joint venture entities in Uruguay and Brazil. The Brazilian joint venture will be headquartered in São Paulo, Brazil, and will be named HempSmart Produtos Naturais Ltda. (“HempSmart Brazil”). The Uruguayan joint venture will be headquartered in Montevideo, Uruguay and will be named Hempsmart Uruguay S.A.S. (“HempSmart Uruguay”). Both are in the development stage. Under the Joint Venture Agreements, the Company will acquire a 70% equity interest in both HempSmart Brazil and HempSmart Uruguay. A minority 30% equity interest in both HempSmart Brazil and HempSmart Uruguay will be held by newly formed entities controlled by Mr. Guerrero, our director and a successful Brazilian entrepreneur. The Company will provide capital in the amount of $50,000 to both HempSmart Brazil and HempSmart Uruguay under the Joint Venture Agreements, for a total capital obligation of $100,000. As of December 31, 2020, this amount has not been disbursed. It is expected that the proceeds of the initial capital contribution will be used for contracting with third-party manufacturing facilities in Brazil and Uruguay, and related infrastructure and employment of key personnel. The boards of directors of HempSmart Brazil and HempSmart Uruguay will consist of three directors, elected by the joint venture partners. As part of the Joint Venture Agreements, the Company will license, on a royalty-free basis, certain of its intellectual property regarding the Company’s existing products to HempSmart Brazil and HempSmart Uruguay to enable the joint ventures to manufacture and sell the Company’s products in Brazil, Uruguay, and for export to other Latin American countries, the United States, and globally in accordance with the terms of the Joint Venture Agreements. The Joint Venture Agreements provide the partners with a right of first offer. Under this right, each partner may trigger an “interest sale” right of first offer process at any time pursuant to which the other partners may either acquire the triggering partner’s interest in the joint ventures, or permit the triggering partner to sell its interest to a third party. In addition, the Company, as majority partner, may trigger a compulsory buy-sell procedure in the event a joint venture is frustrated in its intent or purpose, pursuant to which the Company could pursue a sale of all or substantially all of the joint venture. Subject to certain exceptions, the joint venture partners may not transfer their interests in HempSmart Brazil and HempSmart Uruguay. The Joint Venture Agreements contain customary terms, conditions, representations, warranties and covenants of the parties for like transactions.

Asset Purchase Agreement with VBF Brands, Inc.

On October 6, 2021, the Company, through its wholly owned subsidiary Salinas Diversified Ventures, Inc., a California corporation, entered into an Asset Purchase Agreement, Management Services Agreement, Cooperation Agreement and Employment Agreement with VBF Brands, Inc., a California corporation (“VBF”), a wholly owned subsidiary of Sunset Island Group, Inc., a Colorado corporation (“SIGO”). VBF and SIGO agreed to transfer to the Company all of VBF’s outstanding stock to the Company, and appointed our CEO and CFO Jesus Quintero as President of VBF.

VBF owns various fixed assets including machinery and equipment, a lease for a 10,000 square foot facility located at 20420 Spence Road, Salinas, California, 93908, leasehold improvements, good-will, inventory, tradenames including “VBF Brands,” trade secrets, intellectual property, and other tangible and intangible properties, including licenses issued by the City of Salinas, County of Monterey, and the State of California to operate a licensed cannabis nursery, cultivation facility, and operations for the manufacturing and distribution of cannabis and cannabis products.

33 

VBF and SIGO agreed to sell and transfer to the Company all of VBF’s outstanding stock, and, by virtue of the Management Services Agreement, appoint Mr. Jesus Quintero as President of VBF, vesting management and control of VBF’s licensed cannabis operations in the Company. Concurrently, VBF and Livacich entered into a Cooperation Agreement, whereby VBF and Livacich agreed to cooperate to facilitate the transfer of ownership of VBF, which includes licenses issued by the City of Salinas, County of Monterey, and the State of California, to operate a cannabis nursery, cultivation facility and manufacturing and distribution operations to the Company. The Company also agreed to retain Livacich as Chief Executive Officer for a term of two years and agreed to compensate her with a salary including a signing cash bonus of $250,000, and a $250,000 performance cash bonus payable after six months after the Effective Date. The bonus is conditioned upon Livacich meeting an agreed to “Net Revenue” target of one million dollars ($1,000,000) from VBF’s operations during the six-month period after closing of the Asset Purchase Agreement, and her compliance with the terms and conditions of this Asset Purchase Agreement, the Management Services Agreement and the Cooperation Agreement.

As consideration for the transaction, the Company agreed to assume two secured convertible promissory notes issued by SIGO to St. George Investments, LLC, a Utah limited liability company (“St. George”) (the “SIGO Notes”). The first note was issued December 8, 2017, in the original face amount of $170,000.00, and the second was issued February 13, 2018, in the original face amount of $4,245,000.00. SIGO also issued warrants to St. George to purchase common shares in SIGO, and fifty (50) shares of SIGO’s preferred stock. St. George agreed to cancel the warrants and preferred shares upon the Company’s assumption of the SIGO Notes.

Under the Asset Purchase Agreement, the closing is conditioned upon certain conditions precedent, specifically (i) VBF and SIGO’s full corporate authorization, consent and execution of this Agreement; (ii) VBF’s sale to MCOA of 100% of the issued and outstanding shares of VBF; (iii) full corporate authorization, consent compliance with and execution of the Management Services Agreement and Cooperation Agreement; (iv) SIGO’s disclosure of the Agreement on Form 8-K with the Securities and Exchange Commission; (v) full cooperation in MCOA’s financial auditing of VBF in accordance with ASC 805, including providing unrestricted access to all VBF corporate and financial records and providing all necessary cooperation with VBF financial personnel; (vi) full cooperation in aiding and assisting Buyer with its change of ownership applications with the relevant licensing authorities; (vii) the warranty of truthful representations and execution of and compliance with the terms and conditions of the Executive Employment Agreement, Management Services Agreement and the Cooperation Agreement.

As of the date of this filing, the conditions precedent to the closing of the Asset Purchase Agreement remain in the process of implementation, so that the Asset Purchase Agreement closing has not yet occurred pursuant to its terms. Legal counsel for MCOA is currently in the process of working with VBF, Salinas Diversified Ventures, and the relevant state and local governments to effect the change of control and license transfers necessary to close the Asset Purchase Agreement.

34 

The following table indicates the amount of impairments recorded by us quarter to quarter for investment activity quarter to quarter related to our joint venture investments:

MARIJUANA COMPANY OF AMERICA, INC.

INVESTMENT ROLL-FORWARD

AS OF JUNE 30, 2022

INVESTMENTS
	TOTAL			Consolidated			Cannabis Global						Hempsmart		Lynwood		Natural Plant			Salinas Ventures		VBF
	INVESTMENTS			Eliminations			Inc.		ECOX		C'Distro		Brazil		JV		Extract			Holding		BRANDS		Vivabuds
Investments made during quarter ended 03-31-19		0
Quarter 03-31-19 equity method Loss		0
Unrealized gains on trading securities - quarter ended 03-31-19		-			-			-		-		-		-		-		-			-		-		-
Balance @03-31-19	$	0		$	0		$	0	$	0	$	0	$	0	$	0	$	0		$	0	$	0	$	0
Investments made during quarter ended 06-30-19	$	3,073,588															$	3,000,000						$	73,588
Quarter 06-30-19 equity method Income (Loss)	($	29,414	)														($	6,291	)					($	23,123	)
Unrealized gains on trading securities - quarter ended 06-30-19	$	0			-			-		-		-		-		-		-			-		-		-
Balance @06-30-19	$	3,044,174		$	0		$	0	$	0	$	0	$	0	$	0	$	2,993,709		$	0	$	0	$	50,465
Investments made during quarter ended 09-30-19	$	186,263																						$	186,263
Quarter 09-30-19 equity method Income (Loss)	($	139,926	)														($	94,987	)					($	44,939	)
Sale of trading securities during quarter ended 09-30-19		-			-			-		-		-		-		-		-			-		-		-
Unrealized gains on trading securities - quarter ended 09-30-19	$	0
Balance @09-30-19	$	3,090,511		$	0		$	0	$	0	$	0	$	0	$	0	$	2,898,722		$	0	$	0	$	191,789
Investments made during quarter ended 12-31-19	$	129,812																						$	129,812
Quarter 12-31-19 equity method Income (Loss)	$	(102,944	)														$	(23,865	)					$	(79,079	)
Reversal of Equity method Loss for 2019	$	272,285															$	125,143						$	147,142
Impairment of investment in 2019	$	(2,306,085	)														$	(2,306,085	)					$	0
Loss on disposition of investment	$	(389,664	)																					$	(389,664	)
Sale of trading securities during quarter ended 12-31-19	$	0
Unrealized gains on trading securities - quarter ended 12-31-19	$	0			-			-		-		-		-		-		-			-		-		-
Balance @12-31-19	$	693,915		$	0		$	0	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Equity Loss for Quarter ended 03-31-20		0
Recognize Joint venture liabilities per JV agreement @03-31-20		0
Impairment of Equity Loss for Quarter ended 03-31-20		0
Unrealized gains on trading securities - quarter ended 03-31-19		-			-			-		-		-		-		-		-			-		-		-
Balance @03-31-20	$	693,915		$	0		$	0	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Equity Loss for Quarter ended 06-30-20		0
Impairment of Equity Loss for Quarter ended 06-30-20		0
Sales of of trading securities - quarter ended 06-30-20		-			-			-		-		-		-		-		-			-		-		-
Balance @06-30-20	$	693,915		$	0		$	0	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Global Hemp Group trading securities issued		650,000					$	650,000
Investment in Cannabis Global		0			-			-		-		-		-		-		-			-		-		-
Balance @09-30-20	$	1,343,915		$	0		$	650,000	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Unrealized gain on Global Hemp Group securities - 4th Quarter 2020		-			-			-		-		-		-		-		-			-		-		-
Unrealized gains on Cannabis Global Inc securities - 4th Quarter 2020		208,086					$	208,086
Balance @12-31-20	$	1,552,001		$	0		$	858,086	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Investment in ECOX		650,000			-			-	$	650,000		-		-		-		-			-		-		-
Balance @03-31-21	$	2,202,001		$	0		$	858,086	$	650,000	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Investments made during quarter ended 06-30-21		30,898													$	30,898
Unrealized gain on Global Hemp Group securities - 2nd quarter 2021		-			-			-		-		-		-		-		-			-		-		-
Balance @06-30-21	$	2,232,899		$	0		$	858,086	$	650,000	$	0	$	0	$	30,898	$	693,915		$	0	$	0	$	0
Investments made during quarter ended 09-30-21		68,200					$	68,000												$	200
Sale of short-term investments in quarter ended 09-30-21		0			-			-		-		-		-		-		-			-		-		-
Balance @09-30-21	$	2,301,099		$	0		$	926,086	$	650,000	$	0	$	0	$	30,898	$	693,915		$	200	$	0	$	0
Investments made during quarter ended 12-31-21		5,087,079									$	2,975,174	$	90,923								$	2,020,982
Consolidated Eliminations @12/31/21		(5,060,821	)		(5,060,821	)		-		-		-		-		-		-			-		-		-
Balance @12-31-21	$	2,327,357		($	5,060,821	)	$	926,086	$	650,000	$	2,975,174	$	90,923	$	30,898	$	693,915		$	200	$	2,020,982	$	0
Investments made during quarter ended 03-31-22		(26,458	)		(26,458	)		-		-		-		-		-		-			-		-		-
Balance @03-31-22	$	2,300,899		($	5,087,279	)	$	926,086	$	650,000	$	2,975,174	$	90,923	$	30,898	$	693,915		$	200	$	2,020,982	$	0
Investments made during quarter ended 06-30-22		20,976			-			-		-		-	$	20,976		-		-			-		-		-
Balance @06-30-22	$	2,321,875		($	5,087,279	)	$	926,086	$	650,000	$	2,975,174	$	111,899	$	30,898	$	693,915		$	200	$	2,020,982	$	0

35 

Government Regulations

We are subject to local, federal and foreign laws and regulations pertaining to the sale of hemp derived CBD products in our operating jurisdictions, and we continuously monitor changes in laws, regulations and treaties.

The Agriculture Improvement Act of 2018, known as the "2018 Farm Bill", is United States federal legislation signed into law on December 20, 2018, that provides the legal framework for hemp-based products. The 2018 Farm Bill permanently removed “hemp” from the purview of the CSA, and accordingly, the U.S. Drug Enforcement Administration (“DEA”) no longer has any claim to interfere with the interstate commerce of hemp products. Some of the immediate impact from this legislation includes the ability for hemp farmers to access crop insurance and U.S. Department of Agriculture (“USDA”) programs for competitive grants.

The 2018 Farm Bill officially removes the DEA from enforcement of hemp regulations; however, the FDA retains its authority to regulate ingestible and topical hemp products, including hemp extracts that contain CBD. Although no longer a controlled substance under federal law, cannabinoids derived from industrial hemp are still subject to a patchwork of state regulations.

A range of federal laws and regulations govern sourcing, manufacturing, distribution, sales, and marketing of hemp derived CBD products in the U.S. Products sold for oral consumption as liquids, tablets, capsules, softgels, or gummies are under the purview of The Dietary Supplement Health and Education Act of 1994 (“DSHEA”). Under DSHEA, supplement manufacturing is regulated by the FDA for current Good Manufacturing Practices (“cGMP”) under 21 CFR Part 111.

In conjunction with the enactment of the 2018 Farm Bill, the FDA released a statement about the regulatory status of CBD. The statement noted that the 2018 Farm Bill explicitly preserved the FDA’s authority to regulate products containing cannabis or cannabis-derived compounds under the U.S. Federal Food, Drug, and Cosmetic Act (“FDCA”) and Section 351 of the Public Health Service Act. This authority allows the FDA to continue enforcing the law to protect the public while also providing potential regulatory pathways for products containing cannabis and cannabis-derived compounds. The statement also noted the growing public interest in cannabis and cannabis-derived products, including CBD, and informed the public that the FDA will treat products containing cannabis or cannabis-derived compounds as it does any other FDA-regulated products — meaning the products will be subject to the same authorities and requirements as FDA-regulated products containing any other substance, regardless of the source of the substance, including whether the substance is derived from a plant that is classified as hemp under the 2018 Farm Bill. The FDA’s CBD enforcement discretion and regulatory actions with regards to CBD provide regulatory guidance to the CBD industry.

36 

Based upon publicly available information, to our knowledge, the FDA has not taken any enforcement actions against CBD companies that are compliant with the FDCA. The FDA, however, has sent warning letters to companies demanding they cease and desist from the production, distribution, or advertising of CBD products when these companies have made prohibited, misleading, and unapproved drug claims. We continue to monitor the FDA’s position on CBD.

We are subject to federal and state consumer protection laws, including laws protecting the privacy of customer non-public information; the handling of customer complaints; the requirement to provide warnings about exposures to chemicals with adverse health effects; and regulations prohibiting unfair and deceptive trade practices.

The growth and demand for online commerce has resulted in more stringent consumer protection laws that impose additional compliance burdens on online companies. These laws cover issues such as user privacy, spyware and the tracking of consumer activities, marketing e-mails and communications, other advertising and promotional practices, money transfers, pricing, product safety, content and quality of products and services, taxation, electronic contracts and other communications and information security.

There is uncertainty over whether or how existing laws governing issues such as sales and other taxes, auctions, libel, and personal privacy apply to the internet and commercial online services. These issues are predicted to take years to resolve. For example, tax authorities in some states, as well as a Congressional advisory commission, are currently reviewing the appropriate tax treatment of companies engaged in online commerce. Furthermore, new state tax regulations may subject us to additional state sales and income taxes. Other areas that may result in significant additional taxes or regulatory restrictions include, without limitation, new legislation or regulation; the application of laws and regulations from jurisdictions whose laws do not currently apply; or the application of existing laws and regulations to the internet and commercial online services. These taxes or restrictions could have an adverse effect on our cash flow, output, and overall financial condition. Furthermore, there is a possibility that we may be financially responsible for past failures to comply with requirements.

Brazilian Law Regarding Cannabis and Hemp

Brazilian law currently prohibits cannabis cultivation, processing, and sales. This restriction applies to both marijuana and industrial hemp. There is no distinction between hemp and marijuana. As a result, there is no specific legislation on industrial hemp. However, on August 18, 2020, draft legislation was introduced that would allow Brazilian farmers to grow cannabis for medical and industrial purposes on domestic soil for the first time has been submitted to the country’s lower house of Congress. The bill was delivered to the House of Deputies speaker by lawmakers Paulo Teixeira and Luciano Ducci, co-sponsors of the bill who sit on the chamber’s special commission for the regulation of medicinal cannabis. On June 8, 2021, the bill was approved by the Brazilian Chamber of Deputies’ Special Commission and will now be submitted to the Federal Senate, Brazil's upper house of Congress.

Uruguayan Law on Cannabis

Cannabis is legal in Uruguay, and is one of the most widely used drugs in the nation. President Jose Mujica signed legislation to legalize recreational cannabis in December 2013, making Uruguay the first country in the modern era to legalize cannabis.

37 

Sales and Marketing

We market and sell our services and products throughout the United States consistent with the Farm Bill, as well as in Canada and in the United Kingdom. We intend to expand our offerings to additional countries and jurisdictions that adopt state-regulated or government programs similar to the Farm Bill. Currently, we market and sell our hempSMART™products directly through our website, and through our affiliate marketing program pursuant to which qualified sales affiliates use a secure multi-level-marketing sales software program that: facilitates order placement over the internet via a website; accounts for affiliate orders and sales; calculates referral benefits apportionable to specific sales associates; and calculates and accounts for loyalty and rewards benefits for returning customers. We plan to focus sales and marketing efforts with respect to our hempSMART™products on direct sales on our website and intend to wind down and terminate our affiliate marketing and sales program during fiscal 2021. Currently, we market and sell our cDistro hemp-derived cannabinoid products through cDistro’s website, www.cdistro.com.

Research and Development

Our research and development activity to date has been primarily focused on formulations of our various hempSMART™ products.

Intellectual Property

In February 2019, the U.S. Patent and Trademark Office (“USPTO”) issued patent number 10,201,553 for our hempSMART™ Brain product. In addition, in June 2021, H Smart, Inc. was issued a trademark by the USPTO for the tradename hempSMART™.

Competition

The CBD industry is highly competitive and fragmented with numerous companies, consisting of publicly- and privately-owned companies Our competitors include sellers of hemp-based CBD products and professional services firms dedicated to the regulated hemp industry. We compete in markets where hemp has been legalized and regulated, which includes the United States, Canada and the United Kingdom. Our marketing efforts in Brazil and Uruguay are in the development stages. We expect that the quantity and composition of our competitive environment will continue to evolve as the global hemp industry develops. Additionally, increased competition worldwide is possible to the extent that new states, jurisdictions and countries enter the marketplace as a result of continued enactment of regulatory and legislative changes that de-criminalize and regulate hemp products.

Legal Proceedings

Bougainville Ventures, Inc.  On March 16, 2017, we entered into a joint venture agreement with Bougainville to (i) jointly engage in the development and promotion of products in the legalized cannabis industry in Washington State; (ii) utilize Bougainville's high quality cannabis grow operations in the State of Washington, where it claimed to have an ownership interest in real property for use within the legalized cannabis industry; (iii) leverage Bougainville’s agreement with a Tier 3 I502 cannabis license holder to grow cannabis on the site; (iv) provide technical and management services and resources including, but not limited to: sales and marketing, agricultural procedures, operations, security and monitoring, processing and delivery, branding, capital resources and financial management; and (v) optimize collaborative business opportunities. We believe that some of the funds we paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds. Additionally, we believe that Bougainville misrepresented material facts in the joint venture agreement including, but not limited to, Bougainville’s representations that: (i) it had an ownership interest in real property that was to be deeded to the joint venture; (ii) it had an agreement with a Tier 3 I502 cannabis license holder to grow cannabis on the real property; and (iii) that clear title to the real property associated with the Tier 3 I502 license would be deeded to the joint venture 30 days after we made our final funding contribution. As a result of the foregoing, on September 20, 2018, we filed a lawsuit against Bougainville, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court seeking legal and equitable relief for breach of contract, fraud, breach of fiduciary duty, conversion, recession of the joint venture agreement, an accounting, quiet title to real property in our name, for the appointment of a receiver, the return to treasury of 15 million shares of common stock issued by us to Bougainville, and, for treble damages pursuant to the Consumer Protection Act in Washington State. We filed a lis pendens on the real property. The case is currently in litigation.

38 

Employees

As of December 31, 2021, we had 4 full-time employees and no part-time employees.

Company Information

We were incorporated in the State of Utah on October 4, 1985, under the name of Mormon Mint, Inc. In January 1999, Bekam Investments, Ltd. acquired 100% of our common stock and spun us off, changing our name to Converge Global, Inc. On October 31, 2009, we filed Articles of Merger with the State of Utah pursuant to which Sparrowtech Resources, Inc., a Nevada corporation, was merged with and into us. On September 4, 2015, Donald Steinberg and Charles Larsen purchased 400,000,000 shares of common stock and 10,000,000 shares of Class A Preferred Stock from our then President, resulting in a change of control of our Company. In connection with our change of control, we changed our business to focus on cannabis and legalized hemp and changed our name to Marijuana Company of America, Inc. with the State of Utah on November 9, 2015, which name change became effective on the OTC Markets on December 1, 2015.

ITEM 8: DESCRIPTION OF PROPERTY

Our executive office is located at 633 West Fifth Street, Suite 2826, Los Angeles, CA 90071. We lease our office for $2,349 per month pursuant to a lease which terminates on May 31, 2022. We believe that our existing facilities are suitable and adequate to meet our current needs. We intend to add new facilities or expand existing facilities as we add employees, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.

ITEM 9: MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and plan of operations together with “Summary Financial Data” and our financial statements and the related notes appearing elsewhere in this Offering Circular. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this Offering Circular. All amounts in this Offering Circular are in U.S. dollars, unless otherwise noted.

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluate these estimates, including those related to useful lives of real estate assets, cost reimbursement income, bad debts, impairment, net lease intangibles, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurance that actual results will not differ from those estimates.

Background

History and Development of the Company

We were incorporated in the State of Utah on October 4, 1985, under the name of Mormon Mint, Inc., and our business focused on the manufacture and marketing of commemorative medallions related to the Church of Jesus Christ of Latter-Day Saints. On January 5, 1999, the Company changed its name to Converge Global, Inc., and subsequently focused on the development and implementation of Internet web content and e-commerce applications. In the period from 2009 to 2014, we operated primarily in the mining exploration business, and in 2015, we left the mining business and began an internet-based marketing business focused on online marketing of service items to the hospitality and food service industry, selling retail product directly to consumers from food distributors via credit card and commercial accounts.

On September 4, 2015, Donald Steinberg and Charles Larsen acquired control of the Company through the purchase of 400,000,000 shares of restricted common stock and 10,000,000 shares of Preferred Class A stock for $105,000.00, in equal amounts. On September 9, 2015, Donald Steinberg was appointed Chairman of the Board, Chief Executive Officer and Secretary of the Company. Mr. Larsen was appointed to the Board of Directors. The new management changed the Company’s business plans and operations to focus on emerging opportunities in the cannabis and hemp industries. On December 1, 2015, the Company changed its name to Marijuana Company of America, Inc. and its stock trading symbol to MCOA. On December 6, 2019, a change of control occurred, where Donald Steinberg and Charles Larsen transferred their control shares to directors Robert Coale, Edward Manolos and Jesus Quintero. Also on December 6, 2019, Jesus Quintero, who was appointed as Chief Financial Officer in 2018, was appointed as our Chief Executive Officer. Mr. Quintero is currently our Chief Executive Officer and Chief Financial Officer, and a member of the Board of Directors.

We are a publicly listed company quoted on OTC Markets OTC Pink Market Tier under the symbol “MCOA”. We are a Smaller Reporting Company based in Los Angeles, California. Our business includes the research and development of (1) varieties of various species of hemp; (2) beneficial uses of hemp and hemp derivatives; (3) indoor and outdoor cultivation methods for hemp; (4) technology used for cultivation and harvesting of different species of hemp, including but not limited to lighting, venting, irrigation, hydroponics, nutrients and soil; (5) different industrial hemp derived cannabinoids (“CBD”) and the possible health benefits thereof; and, (6) new and improved methods of hemp cannabinoid extraction omitting or eliminating the delta-9 tetrahydrocannabinol “THC” molecule.

Marijuana Company of America is a Utah corporation quoted on OTC Markets Pink Tier under the symbol “MCOA”. We are based in Los Angeles, California.

39 

We are an owner and operator of licensed cannabis cultivation, processing and dispensary facilities and a developer, producer and distributor of innovative branded cannabis and cannabidiol (“CBD”) products in the United States. We are committed to creating a national distributorship and retail brand portfolio of branded cannabis and CBD products, although as of the date of this filing, marijuana (defined as cannabis containing delta-9 tetrahydrocannabinol concentration of more than 0.3 percent on a dry weight basis) currently remains illegal under U.S. federal law.

Through our wholly-owned subsidiary cDistro, Inc., a Nevada corporation, our wholly-owned CBD product distribution business, we distribute hemp and CBD products throughout the United States. Through cDistro, we distribute high quality hemp-derived cannabinoid products, as detailed on our cDistro website, www.cdistro.com. cDistro offers CBD brands along with smoke and vape shop related products to wholesalers, c-stores, specialty retailers, and consumers in North America. Through cDistro, we work exclusively with select manufacturers to deliver retail service and products at wholesale prices

Through our wholly owned subsidiary HSmart, Inc., a California corporation, we develop and sell CBD products under the brand name hempSMART™. Our business also includes making selected investments and entering into joint ventures with start-up businesses in the legalized cannabis and hemp industries.

Readers are directed to review our detailed disclosures in Item 1, Business; Principal Products and their Markets; Joint Ventures and Investments above. A summary of our investment and joint venture activity follows:

Joint Ventures

Bougainville Ventures, Inc.

Our joint venture with Bougainville Ventures, Inc. is currently in litigation (See Legal Proceedings, Item 3). We recorded an annual impairment in 2017 of $792,500, reflecting the Company’s percentage of ownership of the net book value of the investment. During 2018, the Company recorded equity losses of $37,673 and $11,043 for the first and second quarters respectively, and recorded an annual impairment of $285,986 for the year ended December 31, 2018, at which time we determined the investment to be fully impaired due to Bougainville’s breach of contract and resulting litigation.

Global Hemp Group Scio Oregon Joint Venture. On May 8, 2018, we entered into a joint venture with Global Hemp Group, Inc., develop a project to commercialize the cultivation of industrial hemp on a 109 acre parcel of real property owned by the Company and Global Hemp Group in Scio, Oregon, and operating under the Oregon corporation Covered Bridges, Ltd. The joint venture agreement commits the Company to a cash contribution of $600,000 payable on the following funding schedule: $200,000 upon execution of the joint venture agreement; $238,780 by July 31, 2018; $126,445 by October 31, 2018; and, $34,775 by January 31, 2019. The Company has complied with its payments. The 2018 crop of hemp grown on the joint venture’s real property consisted of 33 acres of high yielding CBD hemp grown in an orchard style cultivation on the property. The 2018 harvest consisted of approximately 37,000 high yielding CBD hemp plants producing 24 tons of biomass that produced 48,000 pounds of dried biomass. However, there were delays with Global Hemp Group’s management and maintenance of the business and the biomass that caused degradation to the harvested crop affecting marketability. Additional issues and disputes arose between the Company and Global Hemp Group. These disputes led to the parties entering into a settlement agreement on September 28, 2020, whereby Global Hemp Group agreed to pay the Company $200,000 and issue common stock to the Company equal in value to $185,000 as of September 28, 2020, subject to a non-dilutive protection provision. Additionally, Global Hemp Group agreed to pay the Company $10,000 to cover the Company’s legal fees relating to the Agreement. In exchange for the settlement consideration, the Company agreed to relinquish its ownership interest in the joint venture.

40 

Natural Plant Extract of California & Subsidiaries Joint Venture; On April 15, 2019, the Company entered into a joint venture agreement with Natural Plant Extracts of California, Inc. and subsidiaries (“NPE”). The purpose of the joint venture was to utilize NPE’s California and City cannabis licenses to jointly operate a business named “Viva Buds” to operate a licensed cannabis distribution service in California. In exchange for acquiring 20% of NPE’s common stock, the Company agree to pay two million dollars and issue NPE one million dollars’ worth of the Company’s restricted common stock. As of February 3, 2020, the Company was in arrears in its payment obligations under the joint venture agreement, and the parties entered into a settlement and release of all claims terminating the joint venture. The parties agreed to reduce the Company’s equity ownership in NPE from 20% to 5%. The Company also agreed to pay NPE $85,000 and the balance of $56,085.15 paid in a convertible promissory note issued with terms allowing NPE to convert the note into common stock at a 50% discount to the closing price of MCOA’s common stock as of the maturity date. As of the date of this filing, the Company satisfied its payment obligations under the settlement agreement. Our continuing 5% equity ownership in NPE involves related parties, since Edward Manolos, our director, is also a director and beneficial owner of 18.8% of the common stock in NPE.

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

Investments

Share Exchange with CannabisGlobal, Inc. On September 30, 2020, the Company entered into a securities exchange agreement with Cannabis Global, Inc. (OTC: CBGL), a Nevada corporation. By virtue of the agreement, the Company issued 650,000,000 shares of its unregistered common stock to Cannabis Global in exchange for 7,222,222 shares of Cannabis Global unregistered common stock. The Company and Cannabis Global also entered into a lock up leak out agreement, which prevents either party from sales of the exchanged shares for a period of 12 months. Thereafter the parties may sell not more than the quantity of shares equaling an aggregate maximum sale value of $20,000 per week, or $80,000 per month until all Shares and Exchange Shares are sold.Our transaction with Cannabis Global, Inc. is material and involves related parties, since Edward Manolos, our director and holder of Preferred Class A stock, is also a director of Cannabis Global, Inc.

Share Exchange with Eco Innovation Group, Inc. On February 26, 2021, we entered into a Share Exchange Agreement with Eco Innovation Group, Inc., a Nevada corporation quoted on OTC Markets Pink (“ECOX”) to acquire the number of shares of ECOX’s common stock, equal in value to $650,000 based on the per-share price of $0.06, in exchange for the number of shares of MCOA common stock equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date (the “Share Exchange Agreement”).  For both parties, the Share Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event that a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant to the Share Exchange Agreement to fall below $650,000. Complementary to the Share Exchange Agreement, the Company and ECOX entered into a Lock-Up Agreement dated February 26, 2021 (the “Lock-Up Agreement”), providing that the shares of common stock acquired pursuant to the Share Exchange Agreement shall be subject to a lock-up period preventing its sale for a period of 12 months following issuance and limiting the subsequent sale to aggregate maximum sale value of $20,000 per week, or $80,000 per month. On October 1, 2021, we entered into a First Amendment to Lock-Up Agreement between the Company and Eco Innovation Group, Inc., dated and effective October 1, 2021 (the “Amended Lock-Up Agreement”), which amends that certain Lock-Up Agreement entered into between the Company and Eco Innovation Group, Inc. on February 26, 2021 (the “Original Lock-Up Agreement”). The Amended Lock-Up Agreement amends the Original Lock-Up Agreement in one respect, by amending the initial lock-up period from 12 months following its effective date to 6 months following its effective date. All other terms and conditions of the Original Lock-Up Agreement remain unaffected.

41 

Asset Purchase Agreement with VBF Brands, Inc. On October 6, 2021, the Company, through its wholly owned subsidiary Salinas Diversified Ventures, Inc., a California corporation, entered into an Asset Purchase Agreement, Management Services Agreement, Cooperation Agreement and Employment Agreement with VBF Brands, Inc., a California corporation (“VBF”), a wholly owned subsidiary of Sunset Island Group, Inc., a Colorado corporation (“SIGO”). VBF and SIGO agreed to transfer to the Company all of VBF’s outstanding stock to the Company, and appointed our CEO and CFO Jesus Quintero as President of VBF.

VBF owns various fixed assets including machinery and equipment, a lease for a 10,000 square foot facility located at 20420 Spence Road, Salinas, California, 93908, leasehold improvements, good-will, inventory, tradenames including “VBF Brands,” trade secrets, intellectual property, and other tangible and intangible properties, including licenses issued by the City of Salinas, County of Monterey, and the State of California to operate a licensed cannabis nursery, cultivation facility, and operations for the manufacturing and distribution of cannabis and cannabis products.

VBF and SIGO agreed to sell and transfer to the Company all of VBF’s outstanding stock, and, by virtue of the Management Services Agreement, appoint Mr. Jesus Quintero as President of VBF, vesting management and control of VBF’s licensed cannabis operations in the Company. Concurrently, VBF and Livacich entered into a Cooperation Agreement, whereby VBF and Livacich agreed to cooperate to facilitate the transfer of ownership of VBF, which includes licenses issued by the City of Salinas, County of Monterey, and the State of California, to operate a cannabis nursery, cultivation facility and manufacturing and distribution operations to the Company. The Company also agreed to retain Livacich as Chief Executive Officer for a term of two years and agreed to compensate her with a salary including a signing cash bonus of $250,000, and a $250,000 performance cash bonus payable after six months after the Effective Date. The bonus is conditioned upon Livacich meeting an agreed to “Net Revenue” target of one million dollars ($1,000,000) from VBF’s operations during the six-month period after closing of the Asset Purchase Agreement, and her compliance with the terms and conditions of this Asset Purchase Agreement, the Management Services Agreement and the Cooperation Agreement.

As consideration for the transaction, the Company agreed to assume two secured convertible promissory notes issued by SIGO to St. George Investments, LLC, a Utah limited liability company (“St. George”) (the “SIGO Notes”). The first note was issued December 8, 2017, in the original face amount of $170,000.00, and the second was issued February 13, 2018, in the original face amount of $4,245,000.00. SIGO also issued warrants to St. George to purchase common shares in SIGO, and fifty (50) shares of SIGO’s preferred stock. St. George agreed to cancel the warrants and preferred shares upon the Company’s assumption of the SIGO Notes.

Under the Asset Purchase Agreement, the closing is conditioned upon certain conditions precedent, specifically (i) VBF and SIGO’s full corporate authorization, consent and execution of this Agreement; (ii) VBF’s sale to MCOA of 100% of the issued and outstanding shares of VBF; (iii) full corporate authorization, consent compliance with and execution of the Management Services Agreement and Cooperation Agreement; (iv) SIGO’s disclosure of the Agreement on Form 8-K with the Securities and Exchange Commission; (v) full cooperation in MCOA’s financial auditing of VBF in accordance with ASC 805, including providing unrestricted access to all VBF corporate and financial records and providing all necessary cooperation with VBF financial personnel; (vi) full cooperation in aiding and assisting Buyer with its change of ownership applications with the relevant licensing authorities; (vii) the warranty of truthful representations and execution of and compliance with the terms and conditions of the Executive Employment Agreement, Management Services Agreement and the Cooperation Agreement.

As of the date of this filing, the conditions precedent to the closing of the Asset Purchase Agreement remain in the process of implementation, so that the Asset Purchase Agreement closing has not yet occurred pursuant to its terms. Legal counsel for MCOA is currently in the process of working with VBF, Salinas Diversified Ventures, and the relevant state and local governments to effect the change of control and license transfers necessary to close the Asset Purchase Agreement.

42 

Results of Operations

Year ended December 31, 2021 compared to year ended December 31, 2020

The following table presents our operating results for the year ended December 31, 2021 compared to December 31, 2020:

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
AUDITED
	For the Year ended Dec 31,
	2021			2020
REVENUES:
Sales	$	1,030,249		$	267,584
Related party Sales		—			13,069
Total Revenues		1,030,249			280,653
Cost of sales		873,371			159,304
Gross Profit		156,878			121,349
Operating expenses		4,868,011			4,976,240
Net loss from operations		(4,711,133	)		(4,854,891	)
Interest expense, net		(4,302,293	)		(2,999,291	)
Impairment gain (Loss) on Joint Ventures		0			(22,658	)
Income (Loss) on equity investment		(735,178	)		106,305
Gain (loss) on change in fair value of derivative liabilities		3,852			(4,698,072	)
Unrealized Gain (loss) on trading securities		504,137			248,204
Realized Gain (loss) on trading securities		(543,200	)		(2,603	)
(Loss) Gain on settlement of debt		(407,635	)		77,624
Total other income (expense)		(5,480,317	)		(7,290,491	)
NET INCOME (LOSS)	$	(10,191,450	)	$	(12,145,382	)
Foreign currency Translation Adjustment		(11,725	)
Comprehensive Income	$	(10,198,883	)	$	(12,145,382	)
Loss per common share, basic and diluted	$	(0.00	)	$	(0.01	)
Weighted average number of common shares outstanding, basic and diluted (after stock-split)		5,248,075,532			962,029,388

43 

Revenues

Total revenues for the year end December 31, 2021 and December 31, 2020, were $1,030,249 and $280,653, respectively, an increase of $749,596. This increase is attributed to $93,633 of our hempSMART product lines and our new line of businesses which were $901,535 for cDistro, a distributor of hemp and CBD products, and equipment lease rental from our new joint venture of $35,081.

The following table identifies our new product offerings in 2021, and the revenues produces from sales of our products in 2021 and 2020 respectively:

	2021		2020
Body	$	1,400	$	3,901
Brain Capsules		3,635		29,135
Drink Mix		167		2,966
Drops		42,734		152,121
Face Moisturizers		2,648		13,951
Pain Capsules		—		8,308
Pain Cream		37,753		55,938
Pet Drops		5,296		14,332
Bottles - Nic		41,470		—
Bottles - Salt Nic		20,804		—
CBD Hempettes		3,913		—
Disposables - Tobacco Free Nicotine (TFN)		261,719		—
Kratom		338,735		—
Other C-Distro Products		148,805		—
Vape		86,089		—
MCOA Equipment Lease		35,081		—
TOTAL	$	1,030,249	$	280,653

Related Party Sales

Related party sales contributed $0 and $13,069 to our revenue for 2021 and 2020, respectively. Related party sales are comprised of sales of our hempSMART products to our directors, officers, and sales team members. No related party sales were for services. All sales were made at listed retail prices and were for cash consideration.

Costs of Sales

Costs of sales primarily consist of inventory cost and overhead, manufacturing, packaging, warehousing, shipping and direct labor costs directly attributable to our hempSMART products. For the year ended December 31, 2021 and December 31, 2020, our total costs of sales were $873,371 and $159,304, respectively. The increase is attributed to $62,434 for our hempSMART business and our new business line that we acquired during 2021, which were $810,937 for cDistro, a distributor of hemp and CBD products.

Gross Profit

For the year ended December 31, 2021 and December 31, 2020, gross profit was $156,878 and $121,349, respectively. This increase was attributed to $66,280 from our hempSMART products and the new business that we acquired during 2021, which was $90,598 for cDistro, a distributor of hemp and CBD products. Gross margins were 15.2% and 43.2% for the years ended December 31, 2021 and December 31, 2020, respectively. The Company has incurred net losses from operations of $4,711,133 and $4,854,891 for the years ended December 31, 2021 and 2020, respectively.

44 

The following is a tabular breakdown of expenses related to Selling and Marketing, Payroll and Related expenses, Stock-based Compensation and General and Administrative Expenses:

Expense	2021		2020
Stock Based Compensation	$	1,207,945	$	3,014,888
Legal Expense		495,117		171,680
Admin Compensation		424,537		163,091
Consulting Fees		408,047		236,343
Investor Relation		366,590		123,399
Travel and Related		299,014		74,244
Marketing / Media		280,749		136,703
Officer’s Compensation		269,350		223,356
Marketing Compensation		157,050		154,430
Independent Contractor		137,885		47,800
Insurance Expense		111,327		56,762
Board of Director Fees		95,000		91,010
Accounting		92,743		111,810
Rent Expense		66,582		51,526
Advertising Promotion		60,296		4,012
Audit Fee		59,500		74,475
Office Supplies		26,308		6,741
Intangible amortization		40,000		—
Bad Debt Expense		34,359		—
Website Development Cost		32,320		56,260
SEC Filing Fees		28,057		16,668
Security		12,560		—
Bank Service Charges		10,928		2,120
Web Sales Commission		6,765		30,632
UK Contract Compensation		4,274		26,704
Fees / Licensing		3,617		1,252
All other expenses, net*		137,091		100,334
Total Payroll & G&A Expenses	$	4,868,011	$	4,976,240

*This represents other individually immaterial General and Administrative expenses in the ordinary course of business that were not compensation to any third-party vendors.

Stock-based Compensation decreased by $1,806,943 primarily due to less stock-based compensation issued to officers and employees during the year ended December 31, 2021. Stock compensation was $1,207,945 for the year ended December 31, 2021 as compared to $3,014,888 for the year ended December 31, 2020. Stock based compensation during the year ended December 31, 2021 included $251,008 related to additional shares issued to the former owners of cDistro as part of the merger and share exchange agreement amendment entered into on November 24, 2021, and an additional $234,633 related to additional shares owed under that agreement as of December 31, 2021. Administrative compensation increased to $424,537 in 2021 from $163,091 in 2020, the $261,446 increase was due to new hires during 2021 resulting from the expansion of our business. Overall, selling and marketing increased by $36,472, attributed mainly to marketing and media costs that increased by the amount of $36,472 in 2021, from $420,511 in 2020 to a total of $456,983 in 2021, due to an increase in social media advertising costs that resulted in an increase in sales for the year ended December 31, 2021. Legal expenses increased to $495,117 for the year ended December 31, 2021, from $171,680 in 2020, due primarily to increased compliance and regulatory filing activity associated with our public offerings and corporate governance. Investor relation costs increased by $243,191 during 2021 due to increase in investor and shareholder outreach events and hiring of additional investment firms to increase interactions with the investment community. This also resulted in an increase in travel and related expenses by $144,046 for 2021 over 2020. Director and officer insurance increased to $111,327 during the year ended December 31, 2021 from $56,762 for the year ended December 31, 2020 due to an increase in rates from insurance carriers affiliated with the cannabis industry.  

Overall, our total operating expenses in 2021 decreased by 2.2% from 2020, from $4,976,240 to $4,868,011, for the year ended 2021, respectively.

45 

Stock Compensation for Officers and Directors, 2021 and 2020.

Officer and Director	2021		2020
Edward Manolos	$	20,526	$	15,600
Marco Guerrero	$	25,526	$	—
Themistocles Psomiadis	$	—	$	19,010
Jesus Quintero	$	501,264	$	2,502,140
Tad Milander	$	—	$	49,350

The 2021 stock compensation bonuses were issued by the Board of Directors pursuant to our Equity Incentive Plan and executive contracts with our directors and officers. Pursuant to our Equity Incentive Plan, the Company has discretion to make stock awards to its affiliates for past services, in lieu of bonuses or other cash compensation, for directors’ compensation or for any other valid purpose. At December 31, 2021, we reviewed the performance of our staff and affiliates, and in making the 2021 awards, determined the awards justified because our staff and affiliates accomplished the following:

Our Equity Plan issuances to affiliates as of December 31, 2021 increased by $508,644. This was due to the Company’s performance during 2021 and additional shares issued as there were issues with liquidity to pay cash compensation at times. The balance was in stock-based compensation in 2021 as it was for 2020. This was primarily for shares issued for consulting services as follows:

The balance of our stock-based compensation in 2021, as compared to 2020 was for consulting services as follows:

	2021 Stock-Based		2020 Stock-Based
Consultant	Compensation		Compensation		Variance			Nature of Consultant Services Provided
Paula Vetter		10,900		19,065		16,467		Consulting Services - Medical Advisory Specialist for hempSMART during 2021 and 2020
Gloria Lynch		—		70,350		(70,350	)	Bonus as part of Equity Incentive Plan during 2020
Lauren Regier		37,766		41,975		(4,209	)	Consulting Services - Web and graphic design during 2021 and 2020
Danny Rodriguez		15,395		—		15,395		Accounting Services 2021
Eddie Bonet		18,474		—		18,474		Accounting Services 2021
Mario Greco MD		25,011		—		25,011		Medical Advisory 2021
Herlin Soto		18,474		—		18,474		Marketing Research 2021
Alan T. Hawkins		100,000		—		100,000		Legal Advisory services 2021
John Grosso		34,800		—		34,800		Investor Relation services 2021
Cory Battan		34,800		—		34,800		Investor Relation services 2021
Ian Harvey		8,726		—		8,726		Consulting and Marketing Services 2021
Tad Mailander		—		43,950		(43,950	)	Consulting Services - Legal services during 2020
Otto Creative Studio		31,140		31,140		—		Consulting Services - IT services during 2021 and 2020

46 

The objective outcomes resulting from the consulting services are summarized as follows:

• The Company lowered its expense rate by becoming more efficient, reducing head count, and making efficient and effective cashflow decisions.

• The Company paid off most variable priced convertible notes prior to conversion over the last quarter with funds raised from its Form S-1 registration statement.

• The Company successfully negotiated a full settlement of its largest senior convertible note holder at a fixed price, preserving shareholder value and minimizing the impact of the dilutive nature of the notes.

• The management team has helped pivot from the legacy affiliate marketing (MLM) model for hempSMART to the new direct to consumer e-commerce marketing model. This required significant changes to the culture, business plan and branding of the products.

• The Company successfully drew down on its Form S-1 registration equity line with White Lion and was able to get a second Form S-1 primary offering registration statement effective to obtain funds for operations and expansion.

• The Company managed to not only survive during the COVID pandemic, but actually grew and thrived due to key management decisions along the way and the personal sacrifice of our CEO Jesus Quintero, who paid for business expenses for several months on his personal business card to help float the Company during periods where funds were depleted.

• The executive management team has overseen significant efforts to expand into South America and move key parts of its supply chain to Uruguay to reduce the cost of goods sold and increase gross margins and overall profitability.

• The Company has successfully negotiated acquisitions and deals that resulted in the Company’s market capitalization increasing substantially during the year to enhance shareholder value.

• The Company successfully removed over three billion shares that were on reservation with the Transfer Agent during 2021 due to successful settlement of convertible debt, resulting in less dilution and more shares available for financing and acquisitions. 

We anticipate continuing to reduce our dependence on stock-based compensation in the future. However, given our present cash position, and because of possible increased operational costs including overhead, product manufacturing and development, and related costs, we may, to the extent necessary, utilize stock-based compensation in the future to compensate key product development, operations and sales and marketing personnel. 

Operating Losses

For the year ended December 31, 2021, operating losses were $4,711,133 or 457% of total revenues, as compared to $4,854,891 or 1,730% of total revenues for the year ended December 31, 2020. This increase of $143,758 was due to continued restructuring and expansion of the Company’s operations. We believe the reduced operating losses incurred in 2021, as compared to 2020, reflect the effectiveness of the Company’s management team in 2021. We expect to continue to reduce our losses as we continue to implement our plan for new sales strategies and cost-cutting measures in the near future until profitability is achieved, which is not certain. Our operations are subject to numerous risks associated with establishing any new business, including unforeseen expenses, delays and complications. There can be no assurance that we will achieve or sustain profitable operations. This increase is attributed to the company's expansion into Latin America and operations attributed to our acquisitions in 2021, one of which is not yet integrated financially.

47 

Other Income (Expense)

Other income (expense) for the years ended December 31, 2021 and December 31, 2020 included other expenses of $5,480,317 and $7,290,491, respectively. The decrease of $1,810,174 was primarily due to an increase of $1,303,002 in interest expense. This was offset by an increase of $4,701,924 in gain on changes in fair value of derivative liabilities from a loss of $4,698,072 for the year ended December 31, 2020 to a gain of $3,852 for year ended December 31, 2021 and a decrease of $841,484 in losses on equity investment from a gain of $106,305 for the year ended December 31, 2020 as compared to a loss of $735,178 for the year ended December 31, 2021. Also, we reflect a decrease in realized loss on trading securities of $540,597 from a loss of $2,603 for the period ended December 31, 2020 compared to a loss of $543,200 for the year ended December 31, 2021.

Income Tax Expense (Benefit)

We did not have any income tax expense or benefit for the years ended December 31, 2021 and December 31, 2020, respectively.

Net Income (Loss)

As a result of the factors discussed above, net losses for the year ended December 31, 2021 and December 31, 2020 were $10,191,450 and $12,145,382, respectively. For December 31, 2021 and December 31, 2020, these net losses represented 989.2% and 4,328% of total revenues for the respective periods.

Segment Information

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

hempSMART
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
	For the Years ended
	Dec 31, 2021			Dec 31, 2020
Revenues	$	93,575		$	280,653
Cost of Goods Sold		61,267			159,304
Gross Profit		32,308			121,349
Expense
Depreciation Expense		10,103			5,933
Stock-based Compensation		104,685			207,955
Selling and Marketing		443,569			393,799
Payroll and Related expenses		252,123			165,491
General and Admin Expenses		456,322			217,288
Total Expense		1,266,802			990,466
Net Loss from Operations	$	(1,234,494	)	$	(869,117	)

The following table represents the Company's cDistro business segment for the years ended December 31, 2021 and 2020 since it was acquired:

	For the Years ended
	Dec 31, 2021			Dec 31, 2020
Revenues	$	901,535		$	—
Cost of Goods Sold		810,937			—
Gross Profit		90,598			—
Expense
Depreciation and amortization expense		91,358			—
Stock-based Compensation		—			—
Selling and Marketing		4,549			—
Payroll and Related expenses		110,000			—
General and Admin Expenses		163,355			—
Total Expense		369,262			—
Net Loss from Operations	$	(278,664	)	$	—

48 

Liquidity and Capital Resources

As of December 31, 2021, and December 31, 2020, our operating activities produced cash used in operations of $3,984,108 and $1,723,950, respectively. Our primary internal sources of liquidity were provided by an increase in proceeds from the issuance of note payables of $3,295,863 for the year ended December 31, 2021 as compared to $1,017,664 for the year ended December 31, 2020, and a decrease in proceeds from the sale of note payables to a related party of $20,000 in 2021 as compared to $75,000 in repayments to a related party for the year ended December 31, 2020. We saw an increase in proceeds from sales of our common stock to $2,201,601 at December 31, 2021, as compared to $478,685 at December 31, 2020. During the period ended December 31, 2021, we relied upon external financing arrangements to fund our operations. During the year ended December 31, 2020, we entered into several separate financing arrangements with St. George Investments, LLC, a Utah limited liability company, in which we borrowed an aggregate of $2,541,470, the principal of which is convertible into shares of our common stock (see Note 4, Convertible Notes Payable). Our ability to rely upon external financing arrangements to fund operations is not certain, and this may limit our ability to secure future funding from external sources without changes in terms requested by counterparties, changes in the valuation of collateral, and associated risk, each of which is reasonably likely to result in our liquidity decreasing in a material way. We intend to utilize cash on hand, loans and other forms of financing such as the sale of additional equity and debt securities and other credit facilities to conduct our ongoing business, and to also conduct strategic business development and implementation of our business plans generally.

Operating Activities

For the year ended December 31, 2021 and 2020, the Company used cash for operating activities of $3,984,108 and $1,723,950, respectively. Operating activities consist of corporate overhead, product development of our hempSMART™ products, and development of our distribution business. Increases are due primarily to increases in executive compensation, professional fees, and product development costs.

Investing Activities

For the years ended December 31, 2021 and December 31, 2020, net cash used in and provided by investing activities was $216,810 and $118,984, respectively. For the year ended December 31, 2021, the Company used $126,305 and $6,016 for the purchase of equipment, while receiving $125,000 in proceeds from the disposition of an investment during the year ended December 31, 2020, compared to the receipt of $190,401 for the sales of investments during the year ended December 31, 2021.

Financing Activities

For the years ended December 31, 2021 and 2020, financing activities were a source of cash of $4,242,164 and $1,467,704, respectively. For the years ended December 31, 2021 and 2020, this was primarily from proceeds of $3,295,863 and $1,017,664 derived from the issuance of notes payable, and repayment to related parties of $20,000 and $75,000 for the year ended December 31, 2021 and 2020, respectively. The Company received income from the sale of common stock of $2,201,601 and $478,685 for the years ended December 31, 2021 and 2020, respectively. For the year ended December 31, 2020, the Company received proceeds of $35,500 from a Payroll Payment Protection loan from the Small Business Administration and also received proceeds of $10,855 from the sale of trading securities.

We currently do not have sufficient cash and liquidity to meet our anticipated working capital for the next twelve months. Historically, we have financed our operations primarily through private sales of our common stock. If our sales goals for our hempSMART™ products and our distribution business, cDistro, do not materialize as planned, and we are not able to achieve profitable operations at some point in the future, we may have insufficient working capital to maintain our operations as we presently intend to conduct them or to fund our expansion, marketing, and product development plans. There can be no assurance that we will be able to obtain such financing on acceptable terms, or at all.

Off Balance Sheet Arrangements

As of December 31, 2021 and December 31, 2020, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

49 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect amounts reported in those statements. We have made our best estimates of certain amounts contained in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities. However, application of our accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties, and, as a result, actual results could differ materially from these estimates. Management believes that the estimates, assumptions, and judgments involved in the accounting policies described below have the most significant impact on our consolidated financial statements.

We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.

Cash and Cash Equivalents

We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution.

Inventory

Inventory is primarily comprised of products and equipment to be sold to end-customers. Inventory is valued at cost, based on the specific identification method, unless and until the market value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to market value. As of December 31, 2021, and December 31, 2020, market values of all of our inventory were greater than cost, and accordingly, no such valuation allowance was recognized. The value of inventory on December 31, 2021 and December 31, 2020 was $252,199 and $103,483, respectively.

Deposits

Deposits is comprised of advance payments made to third parties, primarily for inventory for which we have not yet taken title. When we take title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon sale (see “Costs of Revenues” below).

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets is primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. The balance of prepaid insurance at December 31, 2021 and December 31, 2020 was $61,705 and $55,783. The balance of prepaid insurance at December 31, 2021 and December 31, 2020 was $61,705 and $55,783.

Accounts Receivable

Accounts receivable are recorded at the net value of face amount less any allowance for doubtful accounts. On a periodic basis, we evaluate our accounts receivable and, based on a method of specific identification of any accounts receivable for which we deem the net realizable value to be less than the gross amounts of accounts receivable recorded, we establish an allowance for doubtful accounts for those balances. In determining our need for an allowance for doubtful accounts, we consider historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, our actual experience may vary from our estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay our fees, we may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent that we collect retainers from our clients prior to performing significant services.

The allowance for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client's inability to make required payments on accounts receivables, the provision is recorded in operating expenses. As of December 31, 2021, and 2020, allowance for doubtful accounts was $3,267 and $0, respectively. For December 31, 2021 and December 31, 2020, we recorded bad debt expense of $34,359 and $9,249, respectively. Net accounts receivable for year end December 31, 2021 and December 31, 2020 were $121,588 and $6,542, respectively. Net accounts receivable for year end December 31, 2021 and December 31, 2020 were $121,588 and $6,542, respectively.

50 

Property and Equipment, net

Property and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Depreciation of capitalized construction in progress costs, a component of property and equipment, net, begins once the underlying asset is placed into service and is recognized over the estimated useful life. Property and equipment is reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” We did not capitalize any interest as of December 31, 2021 and as of December 31, 2020.

Accounting for the Impairment of Long-Lived Assets

We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. We have recorded $0 and $22,658 in impairment charges related to our JV investments during the years ended December 31, 2021 and 2020, respectively.

Beneficial Conversion Feature

If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”).  We record a BCF as a debt discount pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ACF”) Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and we amortize the discount to interest expense over the life of the debt using the effective interest method. 

Revenue Recognition

For annual reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from Contracts with Customers,” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The objective of the guidance is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. The core principle is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Two options were made available for implementation of the standard: the full retrospective approach or modified retrospective approach. The guidance became effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. We adopted FASB ASC Topic 606 for our reporting period as of the year ended December 31, 2017, which made our implementation of FASB ASC Topic 606 effective in the first quarter of 2018. We decided to implement the modified retrospective transition method to implement FASB ASC Topic 606, with no restatement of the comparative periods presented. Using this transition method, we applied the new standards to all new contracts initiated on/after the effective date. We also decided to apply this method to any incomplete contracts we determine are subject to FASB ASC Topic 606 prospectively. For the years ended December 31, 2021 and 2020, there were no incomplete contracts. As is more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant financing components that require revenue adjustment under FASB ASC Topic 606.

51 

Identification of Our Contracts with Our Customers.

Contracts included in our application of FASB ASC Topic 606, consist completely of sales contracts between us and our customers that create enforceable rights and obligations. For the years ended December 31, 2020, and 2019, our sales contracts included the following parties: us, our sales associates and our customers. Our sales contracts were offered by us and our sales associates to our customers directly through our web site. Our sales contracts, and those formalized by our sales associates, are represented by an electronic order form, which contains the contractual elements of offer for sale, acceptance and the provision of consideration consisting of the buyer’s payment, which is concurrent with our delivery of hempSMART™ product. Since our hempSMART™ product sales contracts are consummated upon receipt of the customer’s acceptance of our offer; our concurrent receipt of our customers payment; and, our delivery of the agreed to hempSMART™ product, all parties are equally committed to fulfilling their respective obligations under the sales contracts. Further, the sales contracts specifically identify (1) parties; (2) quantity of hempSMART™ product ordered; (3) price; and, (4) subject, and so each respective party’s rights are identifiable and the payment terms are defined. Since the sales contracts are consummated concurrent with offer, acceptance, payment and delivery of the hempSMART™ product ordered, we recognize revenue and cash flows as the principal from the respective sales contract transactions as they complete. Further, because our sales contracts are offered, accepted and consummated concurrently, our ability to collect revenue is immediate. We receive no payments for agreements that do not qualify as a contract. If customers agree to multiple sales contracts when they are entered into at or near the same time, our policy is to combine those contracts if: (1) the sales contracts are negotiated as a single package; (2) the payment amount of one sales contract is dependent upon another sales contract; (3) our performance obligations of delivering multiple hempSMART™ products can be determined to be part of a single transaction. Since the nature of the entry into and consummation of our sales contracts occur concurrently, there are no changes or modifications to the terms of the sales contracts that would modify the enforceable rights and performance obligations of the parties and that would materially alter the timing of our receipt of revenue from our sales contracts.

Identifying the Performance Obligations in Our Sales Contracts.

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

Determination of the Price in Our Sales Contracts.

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

52 

Allocation of the Transaction Price of Our Sales Contracts.

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

Recognition of Revenue when the Performance Obligation is Satisfied.

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

Regarding our offered financial accounting, bookkeeping and/or real property management consulting services, to date no contracts have been entered into, and thus no reportable revenues have resulted for the fiscal years ended 2021 and 2020.

Product Sales

Revenue from product sales, including delivery fees, FOB shipping point, is recognized when (1) an order is placed by the customer; (2) the price is fixed and determinable when the order is placed; (3) the customer is required to and concurrently pays for the product upon order; and, (4) the product is shipped. The evaluation of our recognition of revenue after the adoption of FASB ASC 606 did not include any judgments or changes to judgments that affected our reporting of revenues, since our product sales, both pre and post adoption of FASB ASC 606, were evaluated using the same standards as noted above, reflecting revenue recognition upon order, payment and shipment, which all occurs concurrently when the order is placed and paid for by the customer, and the product is shipped. Further, given the facts that (1) our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in our product sales is fixed and determinable at the time the customer places the order, and there is no delay in shipment, we are of the opinion that our product sales do not indicate or involve any significant customer financing that would materially change the amount of revenue recognized under the sales transaction, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606.

Costs of Revenues

Our policy is to recognize costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenues include the costs directly attributable to revenue recognition and includes compensation and fees for services, travel and other expenses for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred.

Advertising and Promotion Costs

Advertising and promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the years ended December 31, 2021 and December 31, 2020, these costs were $236,563 and $129,504, respectively.

Shipping and Handling Costs

For product and equipment sales, shipping and handling costs are included as a component of cost of revenues.

Stock-Based Compensation

Restricted shares are awarded to employees and entitle the grantee to receive shares of restricted common stock at the end of the established vesting period. The fair value of the grant is based on the stock price on the date of grant. We recognize related compensation costs on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant date. During the years ended December 31, 2021 and December 31, 2020, stock-based compensation expense for restricted shares was $1,207,945 and $3,014,888, respectively. Compensation expense for warrants and options is based on the fair value of the instruments on the grant date, which is determined using the Black-Scholes valuation model and are expensed over the expected term of the awards.

Income Taxes

We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized.  For the year ended December 31, 2021 and December 31, 2020, due to cumulative losses, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero. As of December 31, 2021, and December 31, 2020, we had no liabilities related to federal or state income taxes and the carrying value of our deferred tax asset was zero.

53 

Loss Contingencies

From time to time the Company is subject to various legal proceedings and claims that arise in the ordinary course of business. On at least a quarterly basis, consistent with ASC 450-20-50-1C, if the Company determines that there is a reasonable possibility that a material loss may have been incurred, or is reasonably estimable, regardless of whether the Company accrued for such a loss (or any portion of that loss), the Company will confer with its legal counsel, consistent with ASC 450. If the material loss is determinable or reasonably estimable, the Company will record it in its accounts and as a liability on the balance sheet. If the Company determines that such an estimate cannot be made, the Company's policy is to disclose a demonstration of its attempt to estimate the loss or range of losses before concluding that an estimate cannot be made, and to disclose it in the notes to the financial statements under Contingent Liabilities.

Net Income (Loss) Per Common Share

We report net income (loss) per common share in accordance with FASB ASC 260, “Earnings per Share.” This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net income (loss) per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted net income (loss) per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings.

Related Party Transactions

We follow FASB ASC subtopic 850-10, “Related Party Transactions”, for the identification of related parties and disclosure of related party transactions.

Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

Material related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

54 

ITEM 10: DIRECTORS, EXECUTIVE OFFICERS

AND SIGNIFICANT EMPLOYEES

BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

Each director shall serve for a term ending on the date of the annual meeting of stockholders following the annual meeting of the stockholders at which such director was elected. Notwithstanding the foregoing, each director shall serve until his successor is elected and qualified or until his death, resignation, retirement, removal or disqualification. Our officers are appointed by our Board of Directors and serve until their successors are duly elected and qualified, or until the officer’s death, resignation, retirement, removal or disqualification.

Set forth below is certain information concerning the directors and executive officers of the Company as of December 31, 2021.

Name	Principal Occupation	Age
Jesus Quintero	Chief Executive Officer, Chief Financial Officer and Chairman of the Board		60
Edward Manolos	Director		47
Tad Mailander	Director		65

Jesus Quintero, Chief Executive Officer, Chief Financial Officer and Chairman of the Board. Since August 2018, Jesus Quintero has served as our Chief Financial Officer, since December 2019, he has served as our Chief Executive Officer and Chairman of our Board of Directors. From 2011 to 2020, Mr. Quintero served as a financial consultant to several multi-million dollar businesses in South Florida. From January 2017 through December 2017, Mr. Quintero served as a financial consultant to several domestic and international companies including, but not limited to, Premier Radiology Services LLC, ATR Wireless Inc. and GAM Distribution Corporation. From January 2018 to March 2021 and from May 2014 until December 2016, Mr. Quintero served as Chief Financial Officer of MassRoots, Inc. (OTC Pink: MSRT) and from January 2013 until October 2014, he served as Chief Financial Officer of Brazil Interactive Media. Mr. Quintero has held senior finance positions with Avnet Inc. (Nasdaq: AVT), Latin Node, Inc., World Surveillance Group Inc. (formerly known as Globetel Communications Corp) and Telefonica of Spain and has extensive experience in public company reporting and SEC compliance matters. His prior experience also includes tenure with PricewaterhouseCoopers and Deloitte & Touch. Mr. Quintero received a B.S. in Accounting from St. John’s University and is a Certified Public Accountant in the State of New York. We believe Mr. Quintero is qualified to serve as a member of our Board of Directors because of his extensive accounting background and tenure as an officer of several other public companies.

55 

Edward Manolos, Director. Edward Manolos has served as our director since April 2019. Since May 2018, he has served as the Co-Founder of CarBoard, a system of mobilized outdoor advertising, and since August 2015, he has served as Managing Partner of Chase Business Consulting Inc., a marijuana consulting firm. In addition, since April 2015, Mr. Manolos has served as the Co-Founder of Natural Plant Extracts, an entity which operates a licensed cannabis manufacturing and distribution business in California. Mr. Manolos also previously served as Founder of the KIWIBERRI frozen yogurt franchise; Founder of California Medical Caregivers Association; and Co-Founder of oCen Communications Inc., an Asia-focused internet communications service provider. Since June 2019, Mr. Manolos has served as a director of Cannabis Global Inc. (OTC: CBGL), a company which operates multiple cannabis businesses in California and hemp-related business in the United States. Mr. Manolos is credited with opening CMCA in 2004, the first medical marijuana dispensary in Los Angeles County. He is also credited with starting The California Heritage Farmer's Market, Los Angeles' first medical marijuana farmer's market. Mr. Manolos received his bachelor of applied science in business administration, management and operations from the University of California Riverside. We believe Mr. Manolos is qualified to serve as a member of our Board of Directors because of his experience in the cannabis industry and experience on the board of directors of other public companies.

Marco Guerrero, Director. Marco Guerrero has served as our director since June 2020. He is a professional executive with more than 20 years of experience in insurance and reinsurance. Since 2015 he has served as the co-founder and Chief Executive Officer of Truster Brasil Corretagem de Resseguroso Ltda., an independent reinsurance intermediary headquartered in Brazil. Mr. Guerrero holds a bachelor’s degree in business administration and a post graduate degree in Controllership from Instituto Presbiteriano Mackenzie in Brazil. We believe Mr. Guerrero is qualified to serve as a member of our Board of Directors because of his extensive experience with business operations in South America through his reinsurance practice and his experience with the Brazilian Health Surveillance Agency.

Tad Mailander, Director. Tad Mailander has served as our director since January 2021. In 1991, Mr. Mailander founded Mailander Law Office, Inc. Since December 2020, Mr. Mailander has served as a director of SPYR, Inc. (OTCQB: SPYR) and since March 2018, Mr. Mailander has served as a director of American Cannabis Company, Inc. (OTCQB: AMMJ). Since November 2020, Mr. Mailander has served as a director of Plandai Biotechnology, Inc., and from December 2018 to June 2020, Mr. Mailander served as a director of Cannabis Strategic Ventures Inc. (OTC: NUGS). Mr. Mailander is admitted to the State Bar of California. He received his juris doctorate from Western State College of Law and his bachelor of arts in philosophy from Loras College. We believe Mr. Mailander is qualified to serve as a member of our Board of Directors because of his prior experience serving on the board of directors of public companies.

Family Relationships

There are no family relationships among our executive officers and directors.

Arrangements between Officers and Directors

Except as set forth herein, to our knowledge, there is no arrangement or understanding between any of our officers or directors and any other person pursuant to which the officer or director was selected to serve as an officer or director.

Involvement in Certain Legal Proceedings

We are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy, insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation S-K.

Committees

We presently do not have an audit committee, compensation committee or nominating and corporate governance committee or committee performing similar functions, as management believes that we are in an early stage of development to form such committees. Our Board of Directors acts in place of such committees. We currently do not have an audit committee financial expert for the same reason that we do not have board committees.

56 

Director Independence

Our Board of Directors has determined that a majority of the Board consists of members who are currently “independent” as that term is defined under the listing standards of The Nasdaq Stock Market. The Board considers

 Edward Manolos, Marco Guerrero and Tad Mailander to be “independent.” 

Code of Business Code and Ethical Conduct

We adopted a written code of business and ethical conduct and ethics (“Code”) that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the Code is filed as an exhibit to this Offering Circular. Disclosure regarding any amendments to, or waivers from, provisions of the Code will be included in a Current Report on Form 8-K, which we will file within four business days following the date of the amendment or waiver.

ITEM 11: COMPENSATION OF

DIRECTORS AND EXECUTIVE OFFICERS

Summary Compensation Table

The following table sets forth information concerning the compensation of our principal executive officer, our principal financial officer and each of our other executive officers during 2021.

Name and Principal Position	Year		Salary ($)		Bonus ($)		Stock Awards ($)		Non-Equity Incentive Plan Compensation ($)		All Other Compensation ($)		Total ($)
Jesus Quintero		2021		301,150		—		232,632		—		—		533,782
Principal Financial Officer, Principal Executive Officer(1)		2020		119,658		—		273,113		—		—		311,333

⁽¹⁾ The Company appointed Jesus Quintero CFO on August 31, 2018 and CEO on December 6, 2019.

Retirement Benefits

We do not currently provide our named executive officers with supplemental or other retirement benefits.

Outstanding Equity Awards at December 31, 2021

As of December 31, 2021, no stock-based compensation awards to any of our named executive officers were outstanding.

Compensation of Directors

The following table sets forth information concerning the compensation earned during 2021 by each individual who served as a non-employee director at any time during the fiscal year:

2021 DIRECTOR COMPENSATION

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Total ($)
Edward Manolos		30,000		20,526		50,526
Jesus Quintero		0		501,264		501,264
Tad Mailander		20,000		—		20,000
Marco Guerrero		20,000		—		20,000

Employment Agreements

Jesus Quintero Employment Agreement

On February 3, 2020, the Company entered into an employment agreement with Jesus Quintero, as amended on April 27, 2021 (as amended, the “Employment Agreement”) pursuant to which Mr. Quintero serves as Principal Executive Officer and Principal Accounting Officer of the Company. The term of the Employment Agreement was initially for a period of 12 months and is renewable at the option of the Company and Mr. Quintero. Pursuant to the terms of the Employment Agreement, Mr. Quintero shall receive a monthly salary of $23,000 paid as follows: $20,000 shall be paid in cash and $3,000 shall be paid in shares of the Company’s common stock based upon the closing price of the Company’s common stock on the final trading day of each month as reported on the OTC Markets. In addition, pursuant to the Employment Agreement, Mr. Quintero received a one-time bonus of 20,000,000 shares of the Company’s common stock. Pursuant to the terms of the Employment Agreement, Mr. Quintero shall also be entitled to receive reimbursement of reasonable expenses as well as such other benefits as other executive employees of the Company shall be entitled to including, but not limited to, being eligible to participate in the Company’s employee incentive plan.

57 

Mr. Quintero’s employment shall terminate (i) upon his death, (ii) upon his Disability (as defined in the Employment Agreement”), (iii) by the Company with or without case, (iv) by Mr. Quintero (A) upon 30 days prior written notice or (B) for Good Reason (as defined in the Employment Agreement) and (v) upon a change in management or ownership of the Company. In the event Mr. Quintero’s employment is terminated due to his death or Disability, Mr. Quintero shall receive any unpaid earned salary, including shares of common stock issuable as part of Mr. Quintero’s salary. In the event Mr. Quintero’s employment is terminated by the Company for cause, all compensation and other benefits due pursuant to the Employment Agreement shall cease upon the date of termination. In the event Mr. Quintero voluntarily terminates his employment, Mr. Quintero shall be entitled to receive his pro rata salary earned as of the date of termination together with any other pro rata compensation or benefits due to him pursuant to the terms of the Employment Agreement, also paid pro rata to the date of termination. In the event Mr. Quintero terminates his employment for Good Reason, Mr. Quintero shall be entitled to receive his pro rata salary earned as of the date of termination together with any other pro rata compensation or benefits due to him pursuant to the terms of the Employment Agreement, also paid pro rata to the date of termination. In the event Mr. Quintero’s employment is terminated by the Company without cause, Mr. Quintero shall be entitled to receive his pro rata salary earned as of the date of termination together with any other pro rata compensation or benefits due to him pursuant to the terms of the Employment Agreement, also paid pro rata to the date of termination.

Equity Incentive Plan

Our Equity Incentive Plan (the “Plan”) was adopted by our Board of Directors and our stockholders on January 1, 2016.

Share Reserve

The maximum number of shares of common stock that can be issued under the Plan is 8,333,333shares. 

Administration

The Plan shall be administered by a committee comprised of one or more members of the Board of Directors, or if no such committee exists, the Board of Directors (the “Committee”). The Committee shall have authority in its discretion to, among other things:

· determine the participants eligible to receive awards pursuant to the Plan;

· the terms of each award including, but not limited to, the exercise price, the vesting schedule and the performance goals and other conditions with respect to such awards;

· amend the terms of an award in any manner that is not inconsistent with the Plan;

· interpret the provisions of the Plan; and

· correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any award agreement.

Eligibility

Employees, consultants, advisors and non-employee directors are eligible to receive awards, provided that the Committee has the discretion to determine (i) who shall receive any awards, and (ii) the terms and conditions of such awards.

58 

Types of Awards

Stock Options. A stock option is the right to acquire shares at a fixed exercise price over a fixed period of time. The Committee will determine, among other terms and conditions, the number of shares covered by each stock option and the exercise price of the shares subject to each stock option, but such per share exercise price cannot be less than the fair market value of a share of our common stock on the date of grant of the stock option. The exercise price of each stock option granted under the Plan must be paid in full at the time of exercise, either with cash, or through a broker-assisted “cashless” exercise and sale program, or net exercise, or through another method approved by the Committee. Stock options granted under the Plan may be either incentive stock options or nonqualified stock options.

Restricted Stock. A restricted stock award is the grant of shares of our common stock to a selected participant and such shares may be subject to a substantial risk of forfeiture until specific conditions or goals are met. The restricted shares may be issued with or without cash consideration being paid by the selected participant as determined by the Committee. The Committee also will determine any other terms and conditions of an award of restricted stock.

Other Awards. The Plan also provides that other equity awards, which derive their value from the value of our shares or from increases in the value of our shares, may be granted. In addition, cash awards may also be issued.

Term, Termination and Amendment to Plan

The Plan shall terminate on January 1, 2026. The Board of Directors may, at any time, amend, modify or terminate the Plan. 

ITEM 12: SECURITY OWNERSHIP OF

MANAGEMENT AND CERTAIN SECURITYHOLDERS

The following table sets forth information known to us regarding the beneficial ownership of our common stock as of December 31, 2021 by (1) each stockholder who is known by us to beneficially own more than 5% of our common stock, (2) each of our directors, (3) each of our executive officers named in the Summary Compensation Table above, and (4) all of our directors and executive officers as a group.

Beneficial Owner(1)	Number of  Shares Beneficially Owned(2)		Percent(3)
Named Executive Officers and Directors:
Jesus Quintero		12,670,853		*
Edward Manolos		6,100,000		*
Marco Guerrero(4)		107,507		*
Tad Mailander		183,333		*
All executive officers and directors as a group (4 persons)		19,061,693

 *Denotes less than 1%

(1)	Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table. Readers should refer to the table below for disclosures of the ownership of Preferred Class “A” shares which carry separate voting rights and preferences.
(2)	Under SEC rules, a person is deemed to be the beneficial owner of shares that can be acquired by such person within 60 days upon the exercise of options or the settlement of other equity awards.
(3)	Calculated on the basis of 7,122,806,264 shares of common stock outstanding as of December 31, 2021, plus any additional shares of common stock that a stockholder has the right to acquire within 60 days after December 31, 2021.
(4)	Mr. Guerrero was appointed director on June 12, 2020.

59 

The following table sets forth information known to us regarding the beneficial ownership of our Class A and Class B preferred common stock as of December 31, 2021.

Title of Class	Name and address of beneficial owner	Amount and nature of beneficial ownership		Percent of Class
Class “A” Preferred Stock	Jesus Quintero 16860 Southwest 1st Street Pembroke Pines, FL 33027		8,666,666		72.22	%
Class “B” Preferred Stock	Jesus Quintero 16860 Southwest 1st Street Pembroke Pines, FL 33027		2,000,000		100	%
Class “A” Preferred Stock	Edward Manolos 1100 Wilshire Boulevard #2808 Los Angeles CA 90017		3,333,333		27.78	%

(1)

Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of Class “A” preferred common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table. The holders of the Class “A” Preferred Stock shall vote for the election of directors, and shall have full voting rights, except that each Class “A” Preferred share shall entitle the holder to exercise one hundred (100) votes for each one (1) Class A Preferred Share held. By virtue of his ownership of 8,666,666 shares of Class “A” Preferred Common Stock, Mr. Jesus Quintero beneficially owns in excess of 50% of the votes eligible to be cast on any decision regarding corporate actions under Utah law that are assigned to a vote of the stockholders, including but not limited to: (i) the sale of all or substantially all of its property; (ii) the election of directors; (iii) dissolving the corporation; (iv) amending the articles of incorporation; and, (v) approving a merger or consolidation. The beneficial owners of the Class “A” Preferred Stock vote with the common stockholders and the designated preferences cannot be modified but for a majority vote of the common shares eligible to vote as a class.

(2)

Under SEC rules, a person is deemed to be the beneficial owner of shares that can be acquired by such person within 60 days upon the exercise of options or the settlement of other equity awards.

ITEM 13: INTEREST OF MANAGEMENT AND 

OTHERS IN CERTAIN TRANSACTIONS

The following includes a summary of transactions during our fiscal years ended December 31, 2020 and December 31, 2019 to which we have been a party, including transactions in which the amount involved in the transaction exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described elsewhere in this Offering Circular. We are not otherwise a party to a current related party transaction, and no transaction is currently proposed, in which the amount of the transaction exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years and in which a related person had or will have a direct or indirect material interest.

None to report.

60 

ITEM 14: SECURITIES BEING OFFERED

General

As of December 31, 2021, our authorized capital stock consists of 22,000,000,000 shares of common stock, par value $0.001 per share, 50,000,000 shares of preferred stock, par value $0.001 per share, referred to as Class A Preferred Stock, and 5,000,000 shares of Class B Preferred Stock, par value $0.001 per share. On October 21, 2021, the Company increased its authorized common shares from 15,000,000,000 to 22,000,000,000. As of December 31, 2021, and December 31, 2020, the Company had 7,122,806,264 and 6,373,157,821 shares of common stock issued and outstanding, respectively.

As of December 31, 2021, 7,122,806,264 shares of our common stock were outstanding and held by 431 stockholders of record. The actual number of holders of our common stock is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. As of December 31, 2021, 10,000,000 shares of our Class A Preferred Stock were issued and outstanding and 2,000,000 shares of our Class B Preferred Stock were issued and outstanding held by 2 and 1 stockholders of record, respectively.

The following description of our capital stock and provisions of our Articles of Incorporation and Bylaws is only a summary. You should also refer to our Articles of Incorporation and Bylaws, copies of which are filed as an exhibit to this Offering Circular.

Common Stock

Each share of our common stock entitles the holder to receive notice of and to attend all meetings of our stockholders with the entitlement to one vote. Holders of common stock are entitled, subject to the rights, privileges, restrictions and conditions attaching to any other class of shares ranking in priority to the common stock, to receive any dividend declared by the board of directors. If the Company is voluntarily or involuntarily liquidated, dissolved or wound-up, the holders of common stock will be entitled to receive, after distribution in full of the preferential amounts, if any, all of the remaining assets available for distribution ratably in proportion to the number of shares of common stock held by them. Holders of common stock have no redemption or conversion rights. The rights, preferences and privileges of holders of shares of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

Preferred Stock

Class A Preferred Stock

Each share of Class A Preferred Stock is entitled to 100 votes on all matters submitted to a vote to the stockholders of the Company and does not have conversion, dividend or distribution upon liquidation rights.

Class B Preferred Stock

Each share of Class B Preferred Stock is entitled to 1,000 votes on all matters submitted to a vote to the stockholders of the Company and does not have conversion, dividend or distribution upon liquidation rights.

Warrants

As of December 31, 2021, warrants to purchase up to an aggregate of 145,302,385 shares of the Company’s common stock are outstanding, and the weighted average exercise price of such warrants is $0.0033 per share.

61 

Equity Awards

Pursuant to the Plan, 8,333,333 shares of our common stock are reserved for issuance of equity awards under the Plan. As of December 31, 2021, we issued zero shares of common stock pursuant to the Plan and had no outstanding options to purchase shares of our common stock or other equity awards.

Registration Rights

On July 2, 2021, we entered into a consulting agreement with Dutchess Strategic Advisors LLC (“Dutchess”) pursuant to which we issued Dutchess 20,000,000 shares of our common stock. Pursuant to the consulting agreement, we are required to file a registration statement that covers the resale of the 20,000,000 shares of common stock issued to Dutchess.

Anti-Takeover Provisions our Bylaws

Board of Directors Vacancies

Our Bylaws authorize our board of directors to fill vacant directorships. In addition, the number of directors constituting our board of directors may be set only by resolution of our directors.

Special Meeting of Stockholders

Our Bylaws provide that special meetings of our stockholders may be called by the President of the Company and by either the President or Secretary of the Company at the request, in writing, of a majority of the Company’s Board of Directors or at the written request for the holders owning a majority of all shares entitled to vote at the meeting.

Authorized but Unissued Shares

Our authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval and may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Transfer Agent and Registrar

Our transfer agent and registrar is Pacific Stock Transfer Company whose address is 6725 Via Austi Pkwy, Suite 300 Las Vegas, Nevada 89119.

SHARES ELIGIBLE FOR FUTURE SALE

Immediately prior to this Offering, there was little trading activity in our common stock. Future sales of substantial amounts of our common stock in the public market, or the anticipation of these sales, could materially and adversely affect market prices prevailing from time to time, and could impair our ability to raise capital through sales of equity or equity-related securities.

All shares sold in this Offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, whose sales would be subject to the Rule 144 resale restrictions described below, other than the holding period requirement.

Rule 144

Affiliate Resales of Restricted Securities

Affiliates of ours must generally comply with Rule 144 if they wish to sell any shares of our common stock in the public market, whether or not those shares are “restricted securities.” “Restricted securities” are any securities acquired from us or one of our affiliates in a transaction not involving a public offering. The shares of our common stock sold in this Offering are not considered to be restricted securities.

62 

Non-Affiliate Resales of Restricted Securities

Any person or entity who is not an affiliate of ours and who has not been an affiliate of ours at any time during the three months preceding a sale is only required to comply with Rule 144 in connection with sales of restricted shares of our common stock. Subject to the lock-up agreements described below, these persons may sell shares of our common stock that they have beneficially owned for at least six months without any restrictions under Rule 144.

Resales of restricted shares of our common stock by non-affiliates are not subject to the manner of sale, volume limitation or notice filing provisions of Rule 144 that are applicable to our affiliates.

Lock-Up and Leak-Out Agreements

On February 25, 2021, we entered into a warrant settlement agreement pursuant to which an investor has agreed that in any given week its Net Sales of shares of our common stock shall not exceed the greater of (i) 7.5% of our weekly dollar trading volume in such week (which means the number of shares of our common stock traded during such calendar week multiplied by the volume weighted average price per share for such week) and (ii) $100,000. “Net Sales ” means the gross proceeds from sales of the shares sold in a calendar week minus (i) any trading commissions or costs associated with clearing and selling such shares, (ii) legal fees the investor incurs to obtain any legal opinions required to sell such shares and (iii) the purchase price paid for any shares of our common stock purchased on the open market during such week.

On February 26, 2021, we entered into a lock-up/leak-out agreement with Eco Innovation Group, Inc. (“Eco”) pursuant to which Eco may not sell certain shares of our common stock held by Eco until February 26, 2022 and thereafter sales shall be limited such that Eco may not sell more than the quantity of shares of our common stock equaling an aggregate maximum sale value of $20,000 per week, or $80,000 per month until all such shares are sold.

On June 29, 2021, in connection with the Merger of Merger Sub merged with and into cDistro, with cDistro surviving the merger as our wholly-owned subsidiary, the cDistro Stockholder entered into a Lock-Up and Leak-Out Agreement with us pursuant to which, among other thing, the cDistro Stockholder agreed to certain restrictions regarding the resale of our shares of common stock issued and to be issued pursuant to the Merger Agreement for a period of six months from the Effective Date.

LEGAL MATTERS

The validity of the securities offered by this Offering Circular will be passed upon for us by Independent Law, PLLC of Gainesville, Florida.

EXPERTS

The financial statements of Marijuana Company, Inc. as of December 31, 2021 and 2020 and for each of the years then ended included in this Offering Circular have been so included in reliance on the report of L&L CPAs, PA, an independent registered public accounting firm, appearing elsewhere herein, given on the authority of said firm as experts in auditing and accounting.

63 

WHERE YOU CAN FIND MORE INFORMATION

We have filed an Offering Statement on Form 1-A with the Commission under Regulation A of the Securities Act with respect to the common stock offered by this Offering Circular. This Offering Circular, which constitutes a part of the Offering Statement, does not contain all of the information set forth in the Offering Statement or the exhibits and schedules filed therewith. For further information with respect to us and our common stock, please see the Offering Statement and the exhibits and schedules filed with the Offering Statement. Statements contained in this Offering Circular regarding the contents of any contract or any other document that is filed as an exhibit to the Offering Statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the Offering Statement. The Offering Statement, including its exhibits and schedules, may be inspected without charge at the public reference room maintained by the Commission, located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, and copies of all or any part of the Offering Statement may be obtained from such offices upon the payment of the fees prescribed by the Commission. Please call the Commission at 1-800-SEC-0330 for further information about the public reference room. The Commission also maintains an Internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of the site is www.sec.gov.

We also maintain a website at www.marijuanacompanyofamerica.com where you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the Commission. Information contained on our website is not a part of this Offering Circular and the inclusion of our website address in this Offering Circular is an inactive textual reference only.

64 

MARIJUANA COMPANY OF AMERICA, INC.

Index to Financial Statements

Report of Independent Registered Public Accounting Firm	F-1
Condensed Consolidated Balance Sheets as of December 31, 2021 and 2020	F-5
Condensed Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020	F-6
Condensed Consolidated Statement of Stockholder’s Deficit for the Years Ended December 31, 2021 and 2020	F-7
Condensed Consolidated Statement of Cash Flows for the 12 Months Ended December 31, 2021 and 2020	F-8
Notes to Consolidated Financial Statements	F-9
Condensed Consolidated Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021 (Audited)	F-43
Condensed Consolidated Statements of Operations and Other Comprehensive Income for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)	F-44
Condensed Consolidated Statements of Stockholders’ Deficit for the Six Months Ended June 30, 2022 and 2021 (Unaudited)	F-45
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (Unaudited)	F-47
Notes to the Condensed Consolidated Financial Statements (Unaudited)	F-48

 F-1

FL Office 7951 SW 6^th Street, Suite 216 Plantation, FL 33324 Tel: 954-424-2345 Fax: 954-424-2230

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB # 454)

To the Board of Directors and Stockholders of

Marijuana Company of America, Inc. (Converge Global, Inc.)

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Marijuana Company of America, Inc. and its subsidiaries (“the Company”) as of December 31, 2021 and December 31, 2020 and the related statements of operations, stockholders’ deficit, cash flow and the related notes to consolidated financial statements (collectively referred to as the consolidated financial statements) for the year ended December 31, 2021 and December 31, 2020. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and December 31, 2020 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-2 

FL Office 7951 SW 6^th Street, Suite 216 Plantation, FL 33324 Tel: 954-424-2345 Fax: 954-424-2230

Joint Ventures and Investments

As discussed in Note 4 to the consolidated financial statements, the Company accounted for certain joint ventures under the equity method of accounting. In addition, the Company had investments in publicly traded equity securities and entered share exchange agreements with other publicly traded companies. Some of these investments are Level 2 investments and can be hard to value. In addition, as the securities held at fair value, management must assess securities that are in a significant unrealized loss position for other than temporary impairment. For these securities, management must make difficult and subjective judgments about the ability of the issuer to be able to meet its obligations under terms of the security. These judgments can have a significant impact on the Company’s reported earnings if they should prove to be significantly inaccurate.

Our principal audit procedures performed to address the joint ventures included the following:

· We reviewed joint venture agreements and discussing with management the nature of the rights conveyed to the Company through the joint venture agreements.

· We reviewed management’s assessment of the activities that would most significantly impact the joint venture’s economic performance and evaluated whether the joint venture agreements provided participating or protective rights to the Company.

· We evaluated transactions with the joint ventures for events which would require reconsideration of previous consolidation conclusions.

Our principal audit procedures performed to address the investments included the following:

· We evaluated management’s significant accounting policies related to the identification of other than temporary impairment.

· Valuation specialists, with specialized skills and knowledge, were involved in the assessment of the fair values for a sample of Level 2 investments.

· We performed testing over a sample of securities to determine if conclusions reached by management regarding other than temporary impairment were appropriate.

Convertible Notes

As discussed in Notes 5 and 6 to the consolidated financial statements, the Company had various debt instruments which included conversion features requiring bifurcation and separate accounting. Management evaluated the required accounting, significant estimates, and judgments around the valuation for these embedded derivatives. These embedded derivatives were initially measured at fair value and have subsequently been remeasured to fair value at each reporting period and at settlement.

There is no current observable market for these types of features and, as such, the Company determined the fair value of the embedded derivatives using a binomial option pricing model to measure the fair value of the bifurcated derivative. As a result, a high degree of auditor judgment and effort was required in performing audit procedures to evaluate the conclusions reached by management as well as the inputs to the Company’s binomial option pricing model.

Our principal audit procedures performed to address this critical audit matter included the following:

· We obtained an understanding of the controls and processes surrounding the evaluation, initial measurement and revaluation of the bifurcated derivatives.

· We evaluated management’s assessment and the conclusions reached to ensure these instruments were recorded in accordance with the relevant accounting guidance.

· We evaluated the fair value of the bifurcated derivatives that included testing the valuation models and assumptions utilized by management. We reviewed and tested the fair value model used, significant assumptions, and underlying data used in the model.

F-3 

FL Office 7951 SW 6^th Street, Suite 216 Plantation, FL 33324 Tel: 954-424-2345 Fax: 954-424-2230

Goodwill Impairment

As discussed in Note 13 to the consolidated financial statements, the Company’s goodwill was $1,633,557 as of December 31, 2021. The Company’s goodwill was recognized in connection with business acquisitions. In accordance with ASC 350, goodwill is reviewed for impairment at least once a year. As of December 31, 2021, the Company concluded there was no impairment for intangible assets as of such date.

We identified the evaluation of the impairment analysis for goodwill as a critical audit matter because of the significant estimates and assumptions management used in the analysis. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Our principal audit procedures performed to address the goodwill impairment included the following:

  ● Performed a sensitivity analysis of significant assumptions, particularly as it relates to revenue growth rates and operating margins and evaluating the impact on the fair values that would result from changes in the assumptions.

  ● Utilizing personnel with specialized knowledge and skill in analysis to assist in assessing the appropriateness of the methodology applied in estimating the fair values of the Company’s goodwill and evaluating the reasonableness of certain assumptions used in analysis.

/s/ L&L CPAS, PA

L&L CPAS, PA

Certified Public Accountants

Plantation, FL

The United States of America

April 15, 2022

F-4 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AUDITED
	Dec 31, 2021			Dec 31, 2020
ASSETS
Current assets:
Cash	104,024		$	74,503
Short-term Investments	—			239,063
Accounts receivable, net	211,288			8,640
Inventory	252,199			103,483
Prepaid Insurance	61,705			55,783
Other current assets	2,133,640			56,121
Total current assets	2,762,856			537,593
Property and equipment, net	121,588			6,542
Other assets:
Long-term Investments	2,327,357			1,552,001
Right-of-use-assets	—			7,858
Intangible assets, net	1,110,000
Goodwill	1,633,557			—
Security deposit	4,541			2,500
Total assets	7,959,899			2,106,494
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	932,760			480,877
Accrued compensation - related party	42,925			79,214
Accrued liabilities	270,689			401,461
Notes payable, related parties	20,000			40,000
Loans payable PPP Stimulus	—			35,500
Convertible notes payable, net of debt discount of $1,659,622 and $808,980, respectively	3,769,449			1,426,894
Contingent Liability - Acquisition	953,837			—
Right-of-use liabilities - current portion	—			7,858
Subscriptions payable	989,594			670,000
Derivative liability	749,756			4,426,057
Total current liabilities	7,729,010			7,567,861
Total liabilities	7,729,010			7,567,861
Stockholders' deficit:
Preferred stock, $0.001 par value, 50,000,000 shares authorized
Class A preferred stock, $0.001 par value, 10,000,000 shares designated, 10,000,000 shares issued and outstanding as of December 31, 2021 and December 31, 2020	10,000			10,000
Class B preferred stock, $0.001 par value, 5,000,000 shares designated, 2,000,000 shares issued and outstanding as of December 30, 2021 and December 31, 2020	2,000			2,000
Common stock, $0.001 par value; 15,000,000,000 shares authorized; 7,122,806,264 and 3,136,774,861 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively	7,122,806			3,136,775
Common stock to be issued, 1,000,000 and 11,892,411 shares, respectively	1,000			11,892
Additional paid in capital	89,607,853			77,687,561
Accumulated other Comprehensive Income (loss)	(11,725	)		—
Accumulated deficit	(96,501,045	)		(86,309,595	)
Total stockholders' deficit	230,889			(5,461,367	)
Total liabilities and stockholders' deficit	7,959,899		$	2,106,494

See the accompanying notes to these audited condensed consolidated financial statements

F-5 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
AUDITED
	For the Year ended Dec 31,
	2021			2020
REVENUES:
Sales	$	1,030,249		$	267,584
Related party Sales		—			13,069
Total Revenues		1,030,249			280,653
Cost of sales		873,371			159,304
Gross Profit		156,878			121,349
OPERATING EXPENSES:
Depreciation and amortization		101,334			5,933
Selling and marketing		456,983			420,511
Payroll and related		681,786			411,954
Stock-based compensation		1,207,945			3,014,888
General and administrative		2,419,963			1,122,954
Total operating expenses		4,868,011			4,976,240
Net loss from operations		(4,711,133	)		(4,854,891	)
OTHER INCOME (EXPENSES):
Interest expense, net		(4,302,293	)		(2,999,291	)
Impairment gain (Loss) on Joint Ventures		0			(22,658	)
Income (Loss) on equity investment		(735,178	)		106,305
Gain (loss) on change in fair value of derivative liabilities		3,852			(4,698,072	)
Unrealized Gain (loss) on trading securities		504,137			248,204
Realized Gain (loss) on trading securities		(543,200	)		(2,603	)
(Loss) Gain on settlement of debt		(407,635	)		77,624
Total other income (expense)		(5,480,317	)		(7,290,491	)
Net loss before income taxes		(10,191,450	)		(12,145,382	)
Income taxes (benefit)		—			—
NET INCOME (LOSS)	$	(10,191,450	)	$	(12,145,382	)
Foreign currency Translation Adjustment		(11,725	)
Comprehensive Income	$	(10,198,883	)	$	(12,145,382	)
Loss per common share, basic and diluted	$	(0.00	)	$	(0.01	)
Weighted average number of common shares outstanding, basic and diluted (after stock-split)		5,248,075,532			962,029,388

See the accompanying notes to these audited condensed consolidated financial statements

F-6 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 2021 AND 2020
AUDITED
	Class A Preferred Stock				Class B Preferred Stock				Common Stock				Common Stock to be issued						Stock		Paid In			Accumulated			Accumulated Other Comprehensive
	Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount			Subscriptions		Capital			Deficit			Loss			Total
Balance, December 31, 2019		10,000,000	$	10,000		—	$	—		77,958,081	$	77,958		—		$	—		$	—	$	63,467,054		$	(74,164,213	)	$	—		$	(10,609,201	)
Common stock issued to settle amounts previously accrued		—								8,333		8		—			—			—	$	6,692			—			—			6,700
Issuance of Preferred stock to officer		—				2,000,000	$	2,000		—		—		—			—			—	$	2,227,027			—			—			2,227,027
Common stock issued for services rendered		—		—		—		—		217,396,427	$	217,396		—			—			—	$	568,465			—			—			785,861
Common stock issued in settlement of convertible notes payable and accrued interest		—		—		—		—		2,291,141,317	$	2,291,141		—			—			—	$	1,625,799			—			—			3,916,940
Issuance of common stock for settlement of liabilities								—		205,582,481	$	205,582		10,892,411		$	10,892			—	$	546,248			—			—			762,723
Conversion of related party notes payable		—		—		—		—		21,276,596	$	21,277		—			—			—	$	28,723			—			—			50,000
Common stock issued in exchange for exercise of warrants on a cashless basis		—		—		—		—		51,054,214	$	51,054		1,000,000		$	1,000			—	$	375,446			—			—			427,500
Sale of common stock						—				268,679,513	$	268,680		—			—			—	$	210,006			—			—			478,686
Common shares issued in settlement of legal case		—		—		—		—		677,889	$	3,678		—			—			—	$	952,573			—			—			956,251
Reclassification of derivative liabilities to additional paid in capital		—		—		—		—		—		—		—			—				$	7,679,528			—			—			7,679,528
Net Loss		—		—		—		—		—		—		—		$	0			—		—			(12,145,382	)		—		($	12,145,382	)
Balance, December 31, 2020		10,000,000	$	10,000		2,000,000	$	2,000		3,136,774,851	$	3,136,774		11,892,411		$	11,892		$	—	$	77,687,561		$	(86,309,595	)	$	—		$	(5,461,367	)
		Class A Preferred Stock				Class B Preferred Stock				Common Stock				Common Stock to be issued						Stock		Paid In			Accumulated			Accumulated Other Comprehensive
		Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount			Subscriptions		Capital			Deficit			Loss			Total
Balance, December 31, 2020		10,000,000	$	10,000		2,000,000	$	2,000		3,136,774,851	$	3,136,774		11,892,411		$	11,892		$	—	$	77,687,561		$	(86,309,595	)	$	—		$	(5,461,367	)
Common stock issued to settle amounts previously accrued		—		—		—		—		—		—		—			—			—		0			—			—			—
Issuance of Preferred stock to officer		—		—		—	$	—		—		—		—			—			—		0		$	—			—			—
Common stock issued for services rendered		—		—						142,946,860		142,947		—			—					518,345						—			661,292
Common stock issued in settlement of convertible notes payable and accrued interest		—		—		—		—		1,236,181,851		1,236,181		—			—			—		1,073,693			—			—			2,309,874
Issuance of common stock for settlement of liabilities		—		—		—		—		3,027,031		3,027		(10,892,411	)		(10,892	)		—		16,488						—			8,623
Conversion of related party notes payable and accounts payable		—		—		—		—		22,500,000		22,500		—			—			—		119,250			—			—			141,750
Common stock issued in exchange for exercise of warrants on a cashless basis		—		—		—		—		462,844,406		462,844		—			—			—		(462,844	)		—			—			—
Sale of common stock		—		—		—		—		1,052,297,599		1,052,298		—			—					1,149,303			—			—			2,201,601
Issuance of common stock for investments		—		—		—		—		691,935,484		691,935		691,935			—			—		608,065						—			1,300,000
Reclassification of derivative liabilities to additional paid in capital		—		—		—		—		—		—		—			—			—		6,483,762			—			—			6,483,762
Debt discount from warrants issued with convertible notes payable		—		—		—		—		—		—		—			—			—		716,953			—			—			716,953
Common stock issued for acquisition of business		—		—		—		—		265,164,070		265,164		—			—			—		1,352,337			—			—			1,617,501
Common stock issued for amendment to acquisition consideration		—		—		—		—		109,134,122		109,134		—			—			—		141,874			—			—			251,008
Modification of Notes Payable		—		—		—		—		—		—		—			—			—		203,066			—			—			203,066
Net Loss		—		—		—		—		—		—		—			—			—		—			(10,191,450	)		(11,725	)		(10,203,174	)
Balance, December 31, 2021		10,000,000	$	10,000		2,000,000	$	2,000		7,122,806,264	$	7,122,805		1,691,935		$	1,000		$	—	$	89,607,853		$	(96,501,045	)	$	(11,725	)	$	230,889

See the accompanying notes to these audited condensed consolidated financial statements

F-7 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2021 AND 2020

AUDITED

		2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)	$	(10,191,450	)	$	(12,145,382	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		1,993,373			1,658,395
Depreciation and amortization		101,334			5,933
Bad debt expense		34,359			—
Impairment loss on equity investment					—
Loss on equity investment		735,178			—
Loss (Gain) on change in fair value of derivative liability		(3,852	)		4,698,072
Interest expense recognized for the excess of fair value of derivative liability over net book value of notes payable at issuance		1,900,836			792,321
Loss on share inducement and settlement of warrant liability		—			163,885
Stock-based compensation		1,146,933			3,014,888
Unrealized (Gain) Loss on trading securities		39,063			(248,204	)
Realized Loss on trading securities					2,603
Gain on Settlement of joint venture		—			(77,624	)
Loss on settlement of liabilities		407,635			—
Changes in operating assets and liabilities:
Accounts receivable		(210,132	)		9,677
Inventories		(140,900	)		45,692
Prepaid expenses and other current assets		(314,056	)		(100,870	)
Notes receivable					75,000
Accounts payable		382,355			(45,706	)
Accrued expenses and other current liabilities		135,216			427,488
Right-of-use assets		7,858			14,243
Right-of-use liabilities		(7,858	)		(14,361	)
Net cash provided by (used in) operating activities		(3,984,108	)		(1,723,950	)
Cash flows from investing activities:
Purchases of property and equipment		(126,305	)		(6,016	)
Payment to establish joint venture		(125,356	)		—
Proceeds from sale of investments		190,401			125,000
Investment in joint venture		—
Acquisition of business		(155,550	)		—
Net cash provided by (used in) investing activities		(216,810	)		118,984
Cash flows from financing activities:
Proceeds from issuance of notes payable		3,295,863			1,017,664
Proceeds from PPP loan payable		—			35,500
Proceeds from sales of trading securities		—			10,855
Repayments of notes payable		(1,235,300	)		—
Repayments to related parties		(20,000	)		(75,000	)
Proceeds from sale of common stock		2,201,601			478,685
Net cash provided by (used in) financing activities		4,242,164			1,467,704
Foreign exchange impact on cash		(11,725	)		—
Net increase (decrease) in cash		29,521			(137,262	)
Cash at beginning of period		74,503			211,765
Cash at end of period	$	104,024		$	74,503
		—
Supplemental disclosure of cash flow information:
Cash paid for interest		—			—
Cash paid for taxes		—			—
Non cash financing activities:
Common stock issued in settlement of convertible notes payable	$	2,309,874		$	2,635,647
Common stock issued in settlement of related party notes payable and accrued compensation				$	50,613
Reclassification of derivative liabilities to additional paid-in capital	$	6,483,762		$	3,886,971
Gains on settlement of JV investment	$	—		$	386,930
Common stock issued for investment	$	1,300,000		$	—
Common stock issued to settle liabilities	$	8,623		$	—
Common stock issued for acquisition of business	$	1,617,501		$	—
Common shares issued in settlement of legal case	$	—		$	1,283,632

See the accompanying notes to these audited condensed consolidated financial statements

F-8 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the presentation of the accompanying financial statements follows:

Basis and business presentation

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

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

On September 21, 2015, the Company formed H Smart, Inc, a Delaware corporation as a wholly owned subsidiary for the purpose of operating the hempSMART brand. H Smart, Inc. is also registered with the California Secretary of State as a foreign corporation.

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

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

On May 23, 2018, the Company formed H Smart, LLC in Washington State. On January 21, 2019, the Company converted this entity into a Washington State corporation named H Smart, Inc.

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

Revenue Recognition

For annual reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from Contracts with Customers,” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The objective of the guidance is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. The core principal is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Two options were made available for implementation of the standard: the full retrospective approach or modified retrospective approach. The guidance became effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. We adopted FASB ASC Topic 606 for our reporting period as of the year ended December 31, 2017, which made our implementation of FASB ASC Topic 606 effective in the first quarter of 2018. We decided to implement the modified retrospective transition method to implement FASB ASC Topic 606, with no restatement of the comparative periods presented. Using this transition method, we applied the new standards to all new contracts initiated on/after the effective date. We also decided to apply this method to any incomplete contracts we determine are subject to FASB ASC Topic 606 prospectively. For the year ended December 31, 2021, there were no incomplete contracts. As is more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant financing components that require revenue adjustment under FASB ASC Topic 606.

F-9 

Identification of Our Contracts with Our Customers.

Contracts included in our application of FASB ASC Topic 606, consist completely of sales contracts between us and our customers that create enforceable rights and obligations. For the year ended December 31, 2021, our sales contracts included the following parties: us, our sales associates and our customers. Our sales contracts were offered by us and our sales associates to our customers directly through our web site. Our sales contracts, and those formalized by our sales associates, are represented by an electronic order form, which contains the contractual elements of offer for sale, acceptance and the provision of consideration consisting of the buyer’s payment, which is concurrent with our delivery of hempSMART™ product. Since our hempSMART™ product sales contracts are consummated upon receipt of the customer’s acceptance of our offer; our concurrent receipt of our customers payment; and, our delivery of the agreed to hempSMART™ product, all parties are equally committed to fulfilling their respective obligations under the sales contracts. Further, the sales contracts specifically identify (1) parties; (2) quantity of hempSMART™ product ordered; (3) price; and, (4) subject, and so each respective party’s rights are identifiable and the payment terms are defined. Since the sales contracts are consummated concurrent with offer, acceptance, payment and delivery of the hempSMART™ product ordered, we recognize revenue and cash flows as the principal from the respective sales contract transactions as they complete. Further, because our sales contracts are offered, accepted and consummated concurrently, our ability to collect revenue is immediate. We receive no payments for agreements that do not qualify as a contract. If customers agree to multiple sales contracts when they are entered into at or near the same time, our policy is to combine those contracts if: (1) the sales contracts are negotiated as a single package; (2) the payment amount of one sales contract is dependent upon another sales contract; (3) our performance obligations of delivering multiple hempSMART™ products can be determined to be part of a single transaction. Since the nature of the entry into and consummation of our sales contracts occur concurrently, there are no changes or modifications to the terms of the sales contracts that would modify the enforceable rights and performance obligations of the parties and that would materially alter the timing of our receipt of revenue from our sales contracts.

Identifying the Performance Obligations in Our Sales Contracts.

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

Determination of the Price in Our Sales Contracts.

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

F-10 

Allocation of the Transaction Price of Our Sales Contracts.

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

Recognition of Revenue when the Performance Obligation is Satisfied.

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

Product Sales

Revenue from product sales, including delivery fees, FOB shipping point, is recognized when (1) an order is placed by the customer; (2) the price is fixed and determinable when the order is placed; (3) the customer is required to and concurrently pays for the product upon order; and, (4) the product is shipped. The evaluation of our recognition of revenue after the adoption of FASB ASC 606 did not include any judgments or changes to judgments that affected our reporting of revenues, since our product sales, both pre and post adoption of FASB ASC 606, were evaluated using the same standards as noted above, reflecting revenue recognition upon order, payment and shipment, which all occurs concurrently when the order is placed and paid for by the customer, and the product is shipped. Further, given the facts that (1) our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in our product sales is fixed and determinable at the time the customer places the order, and there is no delay in shipment, we are of the opinion that our product sales do not indicate or involve any significant customer financing that would materially change the amount of revenue recognized under the sales transaction, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606.

The Company determined that upon adoption of ASC 606 there were no quantitative adjustments converting from ASC 605 to ASC 606 respecting the timing of our revenue recognition because product sales revenue is recognized upon customer order, payment and shipment, which occurs concurrently.

Use of Estimates

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

Cash

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

Concentrations of credit risk

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

Accounts Receivable

Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus, trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition. Net accounts receivable for year end December 31, 2021 and December 31, 2020 were $121,588 and $6,542, respectively.

Allowance for Doubtful Accounts

Any charges to the allowance for doubtful accounts on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired. As of December 31, 2021, and 2020, allowance for doubtful accounts was $3,267 and $0, respectively.

F-11 

Inventories

Inventories are stated at the lower of cost or market with cost being determined on a first-in, first-out (FIFO) basis. The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. During the periods presented, there were no inventory write-downs. The value of inventory on December 31, 2021 and December 31, 2020 was $252,199 and $103,483, respectively.

Cost of sales

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

Stock-Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments including stock, stock options and restricted stock awards based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. For non-employees, share-based compensation awards are recorded at either the fair value of the services rendered or the fair value of the share-based payments, whichever is more readily determinable. Stock and restricted stock and option awards are based on the closing price of the stock underlying the awards on the grant date. Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements of operations, as if such amounts were paid in cash. As of December 31, 2021, and 2020, the number of outstanding stock options to purchase shares of common stock was 0 and 0 shares, respectively. 0 and 0 shares were vested as of December 31, 2021 and 2020, respectively.

Net Loss per Common Share, basic and diluted

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

The computation of basic and diluted income (loss) per share as of December 31, 2021 and 2020 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

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

	2021		2020
Convertible notes payable		1,282,203,301		137,219,847
Options to purchase common stock(1)		0		0
Warrants to purchase common stock		293,054,702		110,846,817
Total		1,575,258,003		248,066,664

F-12 

Property and Equipment

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

Goodwill and Intangible Assets

Goodwill is carried at cost and is not amortized. The Company tests goodwill for impairment on an annual basis at the end of each fiscal year, relying on a number of factors including operating results, business plans, economic projections, anticipated future cash flows and marketplace data. Company management uses its judgment in assessing whether goodwill has become impaired between annual impairment tests according to specifications set forth in ASC 350. The Company completed an evaluation of goodwill at December 31, 2021 and determined that the goodwill was not impaired.

The Company recognizes an acquired intangible asset apart from goodwill whenever the intangible asset arises from contractual or other legal rights, or when it can be separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged, either individually or in combination with a related contract, asset or liability. Such intangibles are amortized over their useful lives. Impairment losses are recognized if the carrying amount of an intangible asset subject to amortization is not recoverable from expected future cash flows and its carrying amount exceeds its fair value.

We evaluate long-lived assets, including intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. We have recorded $0 and $22,658 in impairment charges related to our JV investments during the years ended December 31, 2021 and 2020, respectively. 

Investments

The Company follows Accounting Standards Codification subtopic 321-10, Investments-Equity Securities (“ASC 321-10) which requires the accounting for equity security to be measured at fair value with changes in unrealized gains and losses are included in current period operations. Where an equity security is without a readily determinable fair value, the Company may elect to estimate its fair value at cost minus impairment plus or minus changes resulting from observable price changes (See Note 4).

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets is primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. The balance of prepaid insurance at December 31, 2021 and December 31, 2020 was $61,705 and $55,783.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets is primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. The balance of prepaid insurance at December 31, 2021 and December 31, 2020 was $61,705 and $55,783.

Derivative Financial Instruments

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

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

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

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

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2021 and 2020. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash, accounts payables and short-term notes because they are short term in nature.

Accrued liabilities

As of December 31, 2021 and 2020, the balance of accrued liabilities on the Company’s consolidated balance sheets consisted of the following:

	Dec 31, 2021		Dec 31, 2020
Accrued interest	$	197,407	$	365,279
Accrued insurance payable		41,115		29,192
Accrued vacation liability		25,417		6,990
Accrued other expenses		6,750		—
Net Loss from Operations	$	270,689	$	401,461

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred. The Company charged to operations $236,563 and $129,504 for the years ended December 31, 2021 and 2020, respectively, as advertising costs.

F-13 

Income Taxes

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

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2021, and 2020, the Company has not recorded any unrecognized tax benefits.

Segment Information

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

The following table represents the Company’s hempSMART business.

	For the Years ended
	Dec 31, 2021			Dec 31, 2020
Revenues	$	93,575		$	280,653
Cost of Goods Sold		61,267			159,304
Gross Profit		32,308			121,349
Expense
Depreciation Expense		10,103			5,933
Stock-based Compensation		104,685			207,955
Selling and Marketing		443,569			393,799
Payroll and Related expenses		252,123			165,491
General and Admin Expenses		456,322			217,288
Total Expense		1,266,802			990,466
Net Loss from Operations	$	(1,234,494	)	$	(869,117	)

The following table represents the Company's cDistro business segment for the years ended December 31, 2021 and 2020 since it was acquired:

	For the Years ended
	Dec 31, 2021			Dec 31, 2020
Revenues	$	901,535		$	—
Cost of Goods Sold		810,937			—
Gross Profit		90,598			—
Expense
Depreciation and amortization expense		91,358			—
Stock-based Compensation		—			—
Selling and Marketing		4,549			—
Payroll and Related expenses		110,000			—
General and Admin Expenses		163,355			—
Total Expense		369,262			—
Net Loss from Operations	$	(278,664	)	$	—

Recent Accounting Pronouncements

There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

Adoption of Accounting Standards

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-09 “Revenue from Contracts with Customers” to supersede previous revenue recognition guidance under current U.S. GAAP. The guidance presents a single five-step model for comprehensive revenue recognition that requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Two options are available for implementation of the standard which is either the retrospective approach or cumulative effect adjustment approach. The guidance becomes effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted.

The Company has determined that the adoption of ASU-2014-09 will not have a material impact on its financial statements.

COVID-19 Impacts on Accounting Policies and Estimates

COVID-19 Impacts on Accounting Policies and Estimates In light of the currently unknown ultimate duration and severity of COVID-19, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply our significant accounting policies. As COVID-19 continues to develop, we may make changes to these estimates and judgments over time, which could result in meaningful impacts to our financial statements in future periods. 

F-14 

Subsequent Events

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

Subsequent to December 31, 2021, the Company has sold a total of 90,000,000 shares of common stock at a fixed price of $0.001 per share for a total of $90,000 in cash to accredited investors under the Company’s active Regulation A offering, qualified by the SEC on October 20, 2021. There is no assurance that the Company will raise any further funds under the Regulation A offering.

Subsequent to December 31, 2021, the Company has sold a total of 706,250,000 shares of common stock at a fixed price of $0.0008 per share for a total of $565,000 in cash to accredited investors under the Company’s active Regulation A offering, qualified by the SEC on October 20, 2021 and amended on December 15, 2021. There is no assurance that the Company will raise any further funds under the Regulation A offering.

On February 17, 2022, the Company issued 12,500,000 shares of common stock to SRAX, Inc. in full conversion of a promissory note dated August 7, 2020, at a per-share conversion price of $0.0016.

On April 1, 2022, the Company issued 76,923,077 shares of restricted common stock to North Equities USA Ltd., valued at $100,000, or $0.0013 per share, in compensation pursuant to a consulting agreement dated December 24, 2021.

On April 5, 2022, the Company issued 38,762,344 shares of common stock to an accredited investor in partial conversion of a promissory note dated May 25, 2021, at a per-share conversion price of $0.00039.

On April 6, 2022, the Company issued 435,540,070 shares of restricted common stock to Beach Labs, Inc., pursuant to the earnout agreement between the Company and Beach Labs executed in relation to the acquisition of cDistro, Inc.

On April 7, 2022, the Company made a promissory note in the principal amount of $59,743.96 to a related party.

NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements during year ended December 31, 2021, the Company incurred net losses of $10,191,450 and used cash in operations of $3,984,108. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.

The Company’s primary source of operating funds in 2021 and 2020 has been from funds generated from proceeds from the sale of common stock and the issuance of convertible and other debt. The Company has experienced net losses from operations since its inception but expects these conditions to improve in 2022 and beyond as it develops its business model. The Company has stockholders’ deficiencies at December 31, 2021 and requires additional financing to fund future operations.

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

NOTE 3 – PROPERTY AND EQUIPMENT

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

	2021			2020
Computer equipment	$	30,155		$	20,143
Machinery		104,102			—
Furniture and fixtures		13,278			5,140
Subtotal		147,535			25,283
Less accumulated depreciation		(25,947	)		(18,741	)
Property and equipment, net	$	121,588		$	6,542

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

Depreciation expense was $101,334 and $5,933 for the year ended December 31, 2021 and 2020.

F-15 

NOTE 4 – INVESTMENTS

Bougainville Ventures, Inc. Joint Venture

On March 16, 2017, we entered into a joint venture agreement with Bougainville Ventures, Inc., a Canadian corporation. The purpose of the joint venture was for the Company and Bougainville to (i) jointly engage in the development and promotion of products in the legalized cannabis industry in Washington State; (ii) utilize Bougainville’s high quality cannabis grow operations in the State of Washington, where it claimed to have an ownership interest in real property for use within the legalized cannabis industry; (iii) leverage Bougainville’s agreement with a I502 Tier 3 license holder to grow cannabis on the site; provide technical and management services and resources including, but not limited to: sales and marketing, agricultural procedures, operations, security and monitoring, processing and delivery, branding, capital resources and financial management; and, (iv) optimize collaborative business opportunities. The Company and Bougainville agreed to operate through a Washington State Limited Liability Company, and BV-MCOA Management, LLC was organized in the State of Washington on May 16, 2017. 

As our contribution to the joint venture, the Company committed to raise not less than $1,000,000 to fund joint venture operations, based upon a funding schedule. The Company also committed to providing branding and systems for the representation of cannabis related products and derivatives comprised of management, marketing and various proprietary methodologies directly tailored to the cannabis industry.

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

As disclosed on Form 8-K on December 11, 2017, the Company did not comply with the funding schedule for the joint venture. On November 6, 2017, the Company and Bougainville amended the joint venture agreement to reduce the amount of the Company’s commitment from $1,000,000 to $800,000, and also required the Company to issue Bougainville 15 million shares of the Company’s restricted common stock. The Company completed its payments pursuant to the amended agreement on November 7, 2017, and on November 9, 2017, issued to Bougainville 15 million shares of restricted common stock. The amended agreement provided that Bougainville would deed the real property to the joint venture within thirty days of its receipt of payment.

Thereafter, the Company determined that Bougainville had no ownership interest in the property in Washington State, but rather was a party to a purchase agreement for real property that was in breach of contract for non-payment. Bougainville also did not possess an agreement with a Tier 3 I502 license holder to grow Marijuana on the property. Nonetheless, as a result of funding arranged for by the Company, Bougainville and an unrelated third party, Green Ventures Capital Corp., purchased the land, but did not deed the real property to the joint venture. Bougainville failed to pay delinquent property taxes to Okanogan County and to date, the property has not been deeded to the joint venture.

To clarify the respective contributions and roles of the parties, the Company offered to enter into good faith negotiations to revise and restate the joint venture agreement with Bougainville. The Company diligently attempted to communicate with Bougainville to accomplish a revised and restated joint venture agreement, and efforts towards satisfying the conditions to complete the subdivision of the land by the Okanogan County Assessor. However, Bougainville failed to cooperate or communicate with the Company in good faith, and failed to pay the delinquent taxes on the real property that would allow for sub-division and the deeding of the real property to the joint venture.

On August 10, 2018, the Company advised its independent auditor that Bougainville did not cooperate or communicate with the Company regarding its requests for information concerning the audit of Bougainville’s receipt and expenditures of $800,000 contributed by the Company in the joint venture agreement. Bougainville had a material obligation to do so under the joint venture agreement. The Company believes that some of the funds it paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds. Additionally, the Company believes that Bougainville misrepresented material facts in the joint venture agreement, as amended, including, but not limited to, Bougainville’s representations that: (i) it had an ownership interest in real property that was to be deeded to the joint venture; (ii) it had an agreement with a Tier 3 # I502 cannabis license holder to grow cannabis on the real property; and, (iii) that clear title to the real property associated with the Tier 3 # I502 license would be deeded to the joint venture thirty days after the Company made its final funding contribution. As a result, on September 20, 2018, the Company filed suit against Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court, case number 18-2- 0045324. The Company’s complaint seeks legal and equitable relief for breach of contract, fraud, breach of fiduciary duty, conversion, recession of the joint venture agreement, an accounting, quiet title to real property in the name of the Company, for the appointment of a receiver, the return to treasury of 15 million shares issued to Bougainville, and, for treble damages pursuant to the Consumer Protection Act in Washington State. The registrant has filed a lis pendens on the real property. The case is currently in litigation.

F-16 

In connection with the agreement, the Company recorded a cash investment of $1,188,500 to the Joint Venture during 2017. This was comprised of 49.5% ownership of BV-MCOA Management LLC, and was accounted for using the equity method of accounting. The Company recorded an annual impairment in 2017 of $792,500, reflecting the Company’s percentage of ownership of the net book value of the investment. During 2018, the Company recorded equity losses of $37,673 and $11,043 for the first and second quarters respectively, and recorded an annual impairment of $285,986 for the year ended December 31, 2018, at which time the Company determined the investment to be fully impaired due to Bougainville’s breach of contract and resulting litigation, as discussed above. 

Natural Plant Extract of California

Natural Plant Extract of California & Subsidiaries Joint Venture; On April 15, 2019, the Company entered into a joint venture agreement with Natural Plant Extracts of California, Inc. and subsidiaries. The purpose of the joint venture was to utilize Natural Plant Extracts’ California and City cannabis licenses to jointly operate a business named “Viva Buds” to operate a licensed cannabis distribution service in California. In exchange for acquiring 20% of Natural Plant Extracts’ common stock, the Company agree to pay two million dollars and issue Natural Plant Extract one million dollars’ worth of the Company’s restricted common stock. As of February 3, 2020, the Company was in arrears in its payment obligations under the joint venture agreement, and the parties entered into a settlement and release of all claims terminating the joint venture. The parties agreed to reduce the Company’s equity ownership in Natural Plant Extracts from 20% to 5%. The Company also agreed to pay Natural Plant Extracts $85,000 and the balance of $56,085.15 paid in a convertible promissory note issued with terms allowing Natural Plant Extracts to convert the note into common stock at a 50% discount to the closing price of MCOA’s common stock as of the maturity date. As of the date of this filing, the Company satisfied its payment obligations under the settlement agreement.

Cannabis Global Share Exchange

Share Exchange with Cannabis Global, Inc. On September 30, 2020, the Company entered into a securities exchange agreement with Cannabis Global, Inc., a Nevada corporation. By virtue of the agreement, the Company issued 650,000,000 shares of its unregistered common stock to Cannabis Global in exchange for 7,222,222 shares of Cannabis Global unregistered common stock. The Company and Cannabis Global also entered into a lock up leak out agreement which prevents either party from sales of the exchanged shares for a period of 12 months. Thereafter the parties may sell not more than the quantity of shares equaling an aggregate maximum sale value of $20,000 per week, or $80,000 per month until all Shares and Exchange Shares are sold.

Eco Innovation Group Share Exchange

On February 26, 2021, we entered into a Share Exchange Agreement with Eco Innovation Group, Inc., a Nevada corporation quoted on OTC Markets Pink (“ECOX”) to acquire the number of shares of ECOX’s common stock, equal in value to $650,000 based on the per-share price of $0.06, in exchange for the number of shares of MCOA common stock equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date (the “Share Exchange Agreement”).  For both parties, the Share Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event that a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant to the Share Exchange Agreement to fall below $650,000.

Complementary to the Share Exchange Agreement, the Company and ECOX entered into a Lock-Up Agreement dated February 26, 2021 (the “Lock-Up Agreement”), providing that the shares of common stock acquired pursuant to the Share Exchange Agreement shall be subject to a lock-up period preventing its sale for a period of 12 months following issuance and limiting the subsequent sale to aggregate maximum sale value of $20,000 per week, or $80,000 per month. On October 1, 2021, we entered into a First Amendment to Lock-Up Agreement between the Company and Eco Innovation Group, Inc., dated and effective October 1, 2021 (the “Amended Lock-Up Agreement”), which amends that certain Lock-Up Agreement entered into between the Company and Eco Innovation Group, Inc. on February 26, 2021 (the “Original Lock-Up Agreement”). The Amended Lock-Up Agreement amends the Original Lock-Up Agreement in one respect, by amending the initial lock-up period from 12 months following its effective date to 6 months following its effective date. All other terms and conditions of the Original Lock-Up Agreement remain unaffected.

F-17 

Joint Ventures in Brazil and Uruguay – Development Stage

On October 1, 2020, we entered into two Joint Venture Agreements with Marco Guerrero, a director of the Company, dated September 30, 2020, to form joint venture operations in Brazil and in Uruguay to produce, manufacture, market and sell the Company’s hempSMART™ products in Latin America, and will also work to develop and sell hempSMART™ products globally. The Joint Venture Agreements contain equal terms for the formation of joint venture entities in Uruguay and Brazil. The Brazilian joint venture will be headquartered in São Paulo, Brazil, and will be named HempSmart Produtos Naturais Ltda. (“HempSmart Brazil”). The Uruguayan joint venture will be headquartered in Montevideo, Uruguay and will be named Hempsmart Uruguay S.A.S. (“HempSmart Uruguay”). Both are in the development stage. Under the Joint Venture Agreements, the Company will acquire a 70% equity interest in both HempSmart Brazil and HempSmart Uruguay. A minority 30% equity interest in both HempSmart Brazil and HempSmart Uruguay will be held by newly formed entities controlled by Mr. Guerrero, our director and a successful Brazilian entrepreneur. The Company will provide capital in the amount of $50,000 to both HempSmart Brazil and HempSmart Uruguay under the Joint Venture Agreements, for a total capital obligation of $100,000. As of December 31, 2020, this amount has not been disbursed. It is expected that the proceeds of the initial capital contribution will be used for contracting with third-party manufacturing facilities in Brazil and Uruguay, and related infrastructure and employment of key personnel. The boards of directors of HempSmart Brazil and HempSmart Uruguay will consist of three directors, elected by the joint venture partners. As part of the Joint Venture Agreements, the Company will license, on a royalty-free basis, certain of its intellectual property regarding the Company’s existing products to HempSmart Brazil and HempSmart Uruguay to enable the joint ventures to manufacture and sell the Company’s products in Brazil, Uruguay, and for export to other Latin American countries, the United States, and globally in accordance with the terms of the Joint Venture Agreements. The Joint Venture Agreements provide the partners with a right of first offer. Under this right, each partner may trigger an “interest sale” right of first offer process at any time pursuant to which the other partners may either acquire the triggering partner’s interest in the joint ventures, or permit the triggering partner to sell its interest to a third party. In addition, the Company, as majority partner, may trigger a compulsory buy-sell procedure in the event a joint venture is frustrated in its intent or purpose, pursuant to which the Company could pursue a sale of all or substantially all of the joint venture. Subject to certain exceptions, the joint venture partners may not transfer their interests in HempSmart Brazil and HempSmart Uruguay. The Joint Venture Agreements contain customary terms, conditions, representations, warranties and covenants of the parties for like transactions.

Acquisition of cDistro, Inc.

On June 29, 2021, we acquired 100% of the capital stock of cDistro, Inc., a Florida-based hemp and CBD product distribution business incorporated in the State of Nevada (“cDistro”) by a statutory merger and share exchange. After the acquisition, cDistro’s founding partner and Chief Executive Officer, Ronald Russo, remains its Chief Executive Officer, and our Chief Financial Officer Jesus Quintero serves as cDistro’s Chief Financial Officer.

Asset Purchase Agreement with VBF Brands, Inc.

On October 6, 2021, the Company, through its wholly owned subsidiary Salinas Diversified Ventures, Inc., a California corporation, entered into an Asset Purchase Agreement, Management Services Agreement, Cooperation Agreement and Employment Agreement with VBF Brands, Inc., a California corporation (“VBF”), a wholly owned subsidiary of Sunset Island Group, Inc., a Colorado corporation (“SIGO”). VBF and SIGO agreed to transfer to the Company all of VBF’s outstanding stock to the Company, and appointed our CEO and CFO Jesus Quintero as President of VBF.

VBF owns various fixed assets including machinery and equipment, a lease for a 10,000 square foot facility located at 20420 Spence Road, Salinas, California, 93908, leasehold improvements, good-will, inventory, tradenames including “VBF Brands,” trade secrets, intellectual property, and other tangible and intangible properties, including licenses issued by the City of Salinas, County of Monterey, and the State of California to operate a licensed cannabis nursery, cultivation facility, and operations for the manufacturing and distribution of cannabis and cannabis products.

F-18 

VBF and SIGO agreed to sell and transfer to the Company all of VBF’s outstanding stock, and, by virtue of the Management Services Agreement, appoint Mr. Jesus Quintero as President of VBF, vesting management and control of VBF’s licensed cannabis operations in the Company. Concurrently, VBF and Livacich entered into a Cooperation Agreement, whereby VBF and Livacich agreed to cooperate to facilitate the transfer of ownership of VBF, which includes licenses issued by the City of Salinas, County of Monterey, and the State of California, to operate a cannabis nursery, cultivation facility and manufacturing and distribution operations to the Company. The Company also agreed to retain Livacich as Chief Executive Officer for a term of two years and agreed to compensate her with a salary including a signing cash bonus of $250,000, and a $250,000 performance cash bonus payable after six months after the Effective Date. The bonus is conditioned upon Livacich meeting an agreed to “Net Revenue” target of one million dollars ($1,000,000) from VBF’s operations during the six-month period after closing of the Asset Purchase Agreement, and her compliance with the terms and conditions of this Asset Purchase Agreement, the Management Services Agreement and the Cooperation Agreement.

As consideration for the transaction, the Company agreed to assume two secured convertible promissory notes issued by SIGO to St. George Investments, LLC, a Utah limited liability company (“St. George”) (the “SIGO Notes”). The first note was issued December 8, 2017, in the original face amount of $170,000.00, and the second was issued February 13, 2018, in the original face amount of $4,245,000.00. SIGO also issued warrants to St. George to purchase common shares in SIGO, and fifty (50) shares of SIGO’s preferred stock. St. George agreed to cancel the warrants and preferred shares upon the Company’s assumption of the SIGO Notes.

Under the Asset Purchase Agreement, the closing is conditioned upon certain conditions precedent, specifically (i) VBF and SIGO’s full corporate authorization, consent and execution of this Agreement; (ii) VBF’s sale to MCOA of 100% of the issued and outstanding shares of VBF; (iii) full corporate authorization, consent compliance with and execution of the Management Services Agreement and Cooperation Agreement; (iv) SIGO’s disclosure of the Agreement on Form 8-K with the Securities and Exchange Commission; (v) full cooperation in MCOA’s financial auditing of VBF in accordance with ASC 805, including providing unrestricted access to all VBF corporate and financial records and providing all necessary cooperation with VBF financial personnel; (vi) full cooperation in aiding and assisting Buyer with its change of ownership applications with the relevant licensing authorities; (vii) the warranty of truthful representations and execution of and compliance with the terms and conditions of the Executive Employment Agreement, Management Services Agreement and the Cooperation Agreement.

As of the date of this filing, the conditions precedent to the closing of the Asset Purchase Agreement remain in the process of implementation, so that the Asset Purchase Agreement closing has not yet occurred pursuant to its terms. Legal counsel for MCOA is currently in the process of working with VBF, Salinas Diversified Ventures, and the relevant state and local governments to effect the change of control and license transfers necessary to close the Asset Purchase Agreement.

F-19 

MARIJUANA COMPANY OF AMERICA, INC.

INVESTMENT ROLL-FORWARD

AS OF DECEMBER 31, 2021

	INVESTMENTS
	TOTAL			Consolidated			Cannabis Global						Hempsmart		Lynwood		Natural Plant			Salinas Ventures		VBF
	INVESTMENTS			Eliminations			Inc.		ECOX		cDistro		Brazil		JV		Extract			Holding		BRANDS		Vivabuds
Investments made during quarter ended 03-31-19		0
Quarter 03-31-19 equity method Loss		0			-			-		-		-		-		-		-			-		-		-
Unrealized gains on trading securities - quarter ended 03-31-19
Balance @03-31-19	$	0		$	0		$	0	$	0	$	0	$	0	$	0	$	0		$	0	$	0	$	0
Investments made during quarter ended 06-30-19	$	3,073,588			-			-		-		-		-		-	$	3,000,000			-		-	$	73,588
Quarter 06-30-19 equity method Income (Loss)	$	(29,414	)														$	(6,291	)					$	(23,123	)
Unrealized gains on trading securities - quarter ended 06-30-19	$	0
Balance @06-30-19	$	3,044,174		$	0		$	0	$	0	$	0	$	0	$	0	$	2,993,709		$	0	$	0	$	50,465
Investments made during quarter ended 09-30-19	$	186,263			-			-		-		-		-		-		-			-		-	$	186,263
Quarter 09-30-19 equity method Income (Loss)	$	(139,926	)														$	(94,987	)					$	(44,939	)
Sale of trading securities during quarter ended 09-30-19
Unrealized gains on trading securities - quarter ended 09-30-19	$	0
Balance @09-30-19	$	3,090,511		$	0		$	0	$	0	$	0	$	0	$	0	$	2,898,722		$	0	$	0	$	191,789
Investments made during quarter ended 12-31-19	$	129,812			-			-		-		-		-		-		-			-		-	$	129,812
Quarter 12-31-19 equity method Income (Loss)	$	(102,944	)														$	(23,865	)					$	(79,079	)
Reversal of Equity method Loss for 2019	$	272,285															$	125,143						$	147,142
Impairment of investment in 2019	$	(2,306,085	)														$	(2,306,085	)					$	0
Loss on disposition of investment	$	(389,664	)																					$	(389,664	)
Sale of trading securities during quarter ended 12-31-19	$	0
Unrealized gains on trading securities - quarter ended 12-31-19	$	0
Balance @12-31-19	$	693,915		$	0		$	0	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Equity Loss for Quarter ended 03-31-20		0			-			-		-		-		-		-		-			-		-		-
Recognize Joint venture liabilities per JV agreement @03-31-20		0
Impairment of Equity Loss for Quarter ended 03-31-20		0
Unrealized gains on trading securities - quarter ended 03-31-19
Balance @03-31-20	$	693,915		$	0		$	0	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Equity Loss for Quarter ended 06-30-20		0			-			-		-		-		-		-		-			-		-		-
Impairment of Equity Loss for Quarter ended 06-30-20		0
Sales of of trading securities - quarter ended 06-30-20
Balance @06-30-20	$	693,915		$	0		$	0	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Global Hemp Group trading securities issued		650,000					$	650,000
Investment in Cannabis Global		0			-			-		-		-		-		-		-			-		-		-
Balance @09-30-20	$	1,343,915		$	0		$	650,000	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Unrealized gain on Global Hemp Group securities - 4th Quarter 2020		-			-			-		-		-		-		-		-			-		-		-
Unrealized gains on Cannabis Global Inc securities - 4th Quarter 2020		208,086					$	208,086
Balance @12-31-20	$	1,552,001		$	0		$	858,086	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Investment in ECOX		650,000			-			-	$	650,000		-		-		-		-			-		-		-
Balance @03-31-21	$	2,202,001		$	0		$	858,086	$	650,000	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Investments made during quarter ended 06-30-21		30,898													$	30,898
Unrealized gain on Global Hemp Group securities - 2nd quarter 2021		-			-			-		-		-		-		-		-			-		-		-
Balance @06-30-21	$	2,232,899		$	0		$	858,086	$	650,000	$	0	$	0	$	30,898	$	693,915		$	0	$	0	$	0
Investments made during quarter ended 09-30-21		68,200					$	68,000												$	200
Sale of short-term investments in quarter ended- 09-30-21		0			-			-		-		-		-		-		-			-		-		-
Balance @09-30-21	$	2,301,099		$	0		$	926,086	$	650,000	$	0	$	0	$	30,898	$	693,915		$	200	$	0	$	0
Investments made during quarter ended 12-31-21		5,087,079									$	2,975,174	$	90,923								$	2,020,982
Consolidated Eliminations @12/31/21		(5,060,821	)		(5,060,821	)		-		-		-		-		-		-			-		-		-
Balance @12-31-21	$	2,327,357		$	(5,060,821	)	$	926,086	$	650,000	$	2,975,174	$	90,923	$	30,898	$	693,915		$	200	$	2,020,982	$	0

F-20 

Loan Payable
				Natural										General
	TOTAL			Plant			Robert L			VBF				Operating
	Debt			Extract			Hymers III			BRANDS		Vivabuds		Expense
Quarter 03-31-19 loan borrowings
Quarter 03-31-19 debt conversion to equity		-			-			-			-		-		-
Balance @03-31-19  ©		0			0			0			0		0		0
Quarter 03-31-19 loan borrowings		3,675,000		$	2,000,000			-			-	$	0	$	1,675,000
Quarter 03-31-19 debt conversion to equity		(1,411,751	)	$	(349,650	)								$	(1,062,101	)
Balance @06-30-19   (d)		2,263,249			1,650,350			0			0		0		612,899
Quarter 09-30-19 loan borrowings		582,000												$	582,000
Quarter 09-30-19 debt conversion to equity		(187,615	)		-			-			-		-	$	(187,615	)
Balance @09-30-19   (e)		2,657,634			1,650,350			0			0		0		1,007,284
Quarter 12-31-19 loan borrowings		2,726,964		$	596,784		$	4,221						$	2,125,959
Impairment of investment in 2019		(2,156,142	)	$	(2,156,142	)
Loss on settlement of debt in 2019		50,093		$	50,093						-		-
Adjustment to reclassify amount to accrued liabilities		(85,000	)	$	(85,000	)
Balance @12-31-19   (f)	$	3,193,549		$	56,085		$	4,221		$	0	$	0	$	3,133,243
Quarter 03-31-20 loan borrowings	$	441,638												$	441,638
Quarter 03-31-20 debt conversion to equity	$	(619,000	)		-			-			-		-	$	(619,000	)
Recognize Joint venture liabilities per JV agreement @03-31-20	$	0
Quarter 03-31-20 Debt Discount adjustments	$	24,138					$	24,138
Balance @03-31-20  (g)	$	3,040,325		$	56,085		$	28,359		$	0	$	0	$	2,955,881
Quarter 06-30-20 loan borrowings, net	$	65,091					$	65,091
Quarter 06-30-20 debt conversion to equity	$	(727,118	)		-			-			-		-	$	(727,118	)
Quarter 06-30-20 reclass of liability	$	0
Quarter 06-30-20 Debt Discount adjustments	$	405,746					($	27,715	)					$	433,461
Balance @06-30-20  (h)	$	2,784,044		$	56,085		$	65,735		$	0	$	0	$	2,662,224
Quarter 09-30-20 debt conversion to equity	$	(606,472	)	$	(56,085	)	($	65,735	)		-		-	$	(484,652	)
Debt Settlement during Q3 2020	$	0
Balance @09-30-20  (i)	$	2,177,572		($	0	)	$	0		$	0	$	0	$	2,177,572
Quarter 12-31-20 loan borrowings, net	$	309,675												$	309,675
Quarter 12-31-20 Debt Discount adjustments	$	(71,271	)		-			-			-		-	$	(71,271	)
Quarter 12-31-20 debt conversion to equity	$	(993,081	)											$	(993,081	)
Balance @12-31-20  (j)	$	1,422,895		$	0		$	0		$	0	$	0	$	1,422,895
Quarter 03-31-21 debt conversion to equity	$	(1,309,016	)		-			-			-		-	$	(1,309,016	)
Quarter 03-31-21 loan borrowings, net	$	145,000												$	145,000
Balance @03-31-21  (k)	$	258,879		$	0		$	0		$	0	$	0	$	258,879
Quarter 06-30-21 loan borrowings, net	$	1,251,779			-		$	185,000			-		-	$	1,066,779
Balance @06-30-21  (l)	$	1,510,658		$	0		$	185,000		$	0	$	0	$	1,325,658
Quarter 09-30-21 loan borrowings, net	$	626,250												$	626,250
Quarter 09-30-21 loan repayments, net	$	(1,077,464	)		-		$	(75,000	)		-		-	$	(1,002,464	)
Balance @09-30-21  (m)	$	1,059,444		($	0	)	$	110,000		$	0	$	0	$	949,444
Quarter 12-31-21 loan borrowings, net	$	2,710,006			-			-		$	1,643,387		-	$	1,066,619
Balance @12-31-21  (n)	$	3,769,449		($	0	)	$	110,000		$	1,643,387	$	0	$	2,016,063

	12-31-21		06-30-20		03-31-20		12-31-19		09-30-19		06-30-19		03-31-19		12-31-18		12-31-17
This includes balances for:		Note (n)		Note (h)		Note (g)		Note (f)		Note (e)		Note (d)		Note (c)		Note (b)		Note (a)
- Debt obligation of JV		0		478,494		394,848		0		1,633,872		1,778,872		128,522		289,742		1,500,000
- Convertible NP, net of discount		3,769,449		2,784,044		3,040,324		3,193,548		2,688,555		2,149,170		1,536,271		1,132,668		394,555
- Longterm debt		0		0		0		0		0		0		0		0		172,856
Total Debt balance	$	3,769,449	$	3,262,538	$	3,435,172	$	3,193,548	$	4,322,427	$	3,928,042	$	1,664,793	$	1,422,410	$	2,067,411

F-21 

NOTE 5 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

During the years ended December 31, 2021 and 2020, the Company issued an aggregate of 1,236,181,851 and 2,291,141,317 shares of its common stock in settlement of the issued convertible notes payable and accrued interest.

For the years ended December 31, 2021 and 2020, the Company recorded amortization of debt discounts of $1,993,373 and $1,658,395, respectively, as a charge to interest expense.

Convertible notes payable are comprised of the following:

	2021			2020
Convertible note payable – Power Up Lending Group	$	—		$	35,000
Convertible note payable – Crown Bridge Partners	$	35,000		$	172,500
Convertible note payable – Labrys	$	99,975		$	—
Convertible note payable – FF Global Opportunities Fund	$	243,750		$	—
Convertible note payable – GS Capital Partners LLC	$	82,000		$	143,500
Convertible note payable – Beach Labs	$	583,333		$	—
Convertible note payable – Pinnacle Consulting Services Inc.	$	30,000		$	70,000
Convertible note payable – Geneva Roth	$	97,939		$	33,500
Convertible note payable – Dutchess Capital Partners	$	60,709		$	10,000
Convertible note payable – Redstart HLDGS	$	—		$	109,000
Convertible note payable – GW Holdings	$	120,750		$	98,175
Convertible note payable - Coventry	$	100,000		$	—
Convertible note payable - Sixth Street Lending	$	60,738		$	—
Convertible notes payable -St George	$	3,914,878		$	1,160,726
Total	$	5,429,072		$	1,832,401
Less debt discounts	$	(1,659,622	)	$	(405,507	)
Net	$	3,769,450		$	1,426,894
Less current portion	$	(3,769,450	)	$	(1,426,894	)
Long term portion	$	—		$	—

Convertible notes payable-Power Up Lending

From July 1 through September 12, 2019, the Company issued four convertible promissory notes in the aggregate principal amount of $294,000 to Power Up Lending (“Power Up”). The promissory notes bear interest at 10% per annum, are due one year from the respective issuance date and include an original issuance discount (“OID”) in aggregate of $12,000. Interest shall accrue from the issuance date, but interest shall not become payable until the notes becomes payable. The notes are convertible at any time at a conversion rate equal to 61% of the Market Price (defined as the lowest trading price during the 15-trading-day period prior to the conversion date). Upon the issuance of these convertible notes, the Company determined that the features associated with the embedded conversion option embedded in the debentures, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $9,395 is being amortized to interest expense over the respective terms of the notes. 

The Company shall have the right to prepay the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance (all principal and accrued interest) depending on the Prepayment Period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note.

As of December 31, 2021, the Company owed an aggregate of $0 of principal and $0 of accrued interest on these convertible promissory notes.

F-22 

Convertible notes payable-Crown Bridge Partners

From October 1 through December 31, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $225,000 to Crown Bridge Partners LLC (“Crown Bridge”). The promissory notes bear interest at 10% per annum, are due one year from the respective issuance date and include an original issuance discount (“OID”) in aggregate of $22,500. Interest shall accrue from the issuance date, but interest shall not become payable until the notes becomes payable. The notes are convertible at any time at a conversion rate equal to 60% of the Market Price (defined as the lowest trading price during the 15-trading-day period prior to the conversion date). Upon the issuance of these convertible notes, the Company determined that the features associated with the embedded conversion option embedded in the debentures, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $78,056 is being amortized to interest expense over the respective terms of the notes.

The Company shall have the right to prepay the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance (all principal and accrued interest) depending on the Prepayment Period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note.

As of December 31, 2021, the Company owed an aggregate of $35,000 of principal and $0 of accrued interest on these convertible promissory notes.

Convertible notes payable-GS Capital Partners LLC

On December 19, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $173,000 to GS Capital Partners LLC (“GS Capital”). The promissory notes bear interest at 10% per annum and is due one year from the respective issuance date and include an original issuance discount (“OID”) in aggregate of $15,000.

The Holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 62% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 52% instead of 62% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor). As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $92,396 is being amortized to interest expense over the respective terms of the notes. As of December 31, 2021, the Company owed an aggregate of $82,000 of principal and $2,561 of accrued interest on these convertible promissory notes.

F-23 

In August and September of 2020, the Company issued convertible promissory notes in the aggregate principal amount of $143,500 to GS Capital. The promissory notes bear interest at 10% per annum and is due one year from the respective issuance date and include an original issuance discount in aggregate of $5,500.

The Holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 62% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 52% instead of 62% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor).

As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $143,500 is being amortized to interest expense over the respective terms of the notes.

In August 2021, the Company issued convertible promissory notes in the aggregate principal amount of $82,000 to GS Capital. The promissory notes bear interest at 10% per annum and is due one year from the respective issuance date and include an original issuance discount in aggregate of $7,000. In connection with the Note, the Company issued 5,000,000 warrants to purchase common stock with a fair value of $18,086, which was recorded as a debt discount.

The Holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 62% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 52% instead of 62% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor).

As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $25,086 is being amortized to interest expense over the respective terms of the notes.

As of December 31, 2021, the Company owed an aggregate of $82,000 of principal and $2,561 of accrued interest on these convertible promissory notes.

F-24 

Convertible notes payable-St George Investments

In December 2020, the Company entered into two convertible promissory notes in the aggregate amount of $160,000 of principal with Bucktown Capital LLC, an entity controlled by the owners of St. George. The Company received net proceeds of $150,000. The notes mature in December 2020 and bear interest at 8% or 22% in the event of default. The notes are convertible at the lender’s option at any time at a fixed price of $0.002 per common share, subject to normal adjustment for common stock splits.

In January and March 2021, the Company entered into three convertible promissory notes in the aggregate amount of $567,500 of principal with Bucktown Capital LLC, entity controlled by the owners of St. George. The Company received net proceeds of $535,000. The notes mature in January and March 2022 and bear interest at 8% or 22% in the event of default. The notes are convertible at the lender’s option at any time at a fixed price of $0.002 per common share, subject to normal adjustment for common stock splits.

Effective October 6, 2021, the Company issued a secured convertible promissory note in the amount of $3,492,378 with Chicago Ventures. The Company received cash proceeds of $1,100,000 and included an original issue discount of $574,916 and paid legal fees of $10,000. This note agreement was assumed by the Company as part of the VBF Acquisition discussed in Note 13 and includes $1,770,982 which reflects the initial consideration towards the future closing of the VBF Acquisition. The note bears interest at 8% and is due upon maturity on October 6, 2023. The note is convertible at a fixed price of $0.002 per share. In the event of default as defined in the agreement, the lender has the right to convertible principal and accrued interest at 70% of the lowest closing trading price over the 10 days preceding the conversion notice.

As of December 31, 2021, the Company owed $3,914,878 of principal and $89,410 of accrued interest on the above convertible promissory notes.

Convertible notes payable - Robert L. Hymers III

On June 17, 2020, the Company issued convertible promissory notes in the aggregate principal amount of $115,091 to Robert L. Hymers III (“Hymers”) in satisfaction of funds owed to Mr. Hymers from his consulting contract with the Company for past services rendered and completed. The promissory notes bear interest at 10% per anum, and is due six months from the respective issuance date of the note along with accrued and unpaid interest. Principal and interest to be payable as provided below on that date which is six months from the date of issuance (the “Maturity Date”).

For so long as there remains any amount due hereunder, the Holder shall have the option to convert all or any portion of the unpaid principal amount of this Note, plus accrued interest (together with the unpaid principal amount, the “Converted Amount”), into shares of the Company’s common stock. The conversion price (the “Conversion Price”) shall be equal to a fifty percent (50%) discount to the lowest closing bid of the previous fifteen (15) day trading period, ending on the business day before a Notice of Conversion is delivered to the Company. The number of shares of Common Stock into which the Converted Amount shall be convertible (the “Conversion Shares”) shall be determined by dividing (i) the Converted Amount by (ii) the Conversion Price. A conversion shall be deemed to occur on the date that the Company receives an executed copy of the Conversion Notice. 

F-25 

The aggregate debt discount of $115,091 is being amortized to interest expense over the respective terms of the notes.

On September 8, 2020, the Company issued convertible promissory notes in the aggregate principal amount of $70,000 to Robert L. Hymers III (“Hymers”). The promissory note bears interest at 10% per anum, and is due six months from the respective issuance date of the note along with accrued and unpaid interest. Principal and interest to be payable as provided below on that date which is six months from the date of issuance (the “Maturity Date”).

For so long as there remains any amount due hereunder, the Holder shall have the option to convert all or any portion of the unpaid principal amount of this Note, plus accrued interest (together with the unpaid principal amount, the “Converted Amount”), into shares of the Company’s common stock. The conversion price (the “Conversion Price”) shall be equal to a fifty percent (50%) discount to the lowest closing bid of the previous fifteen (15) day trading period, ending on the business day before a Notice of Conversion is delivered to the Company. The number of shares of Common Stock into which the Converted Amount shall be convertible (the “Conversion Shares”) shall be determined by dividing (i) the Converted Amount by (ii) the Conversion Price. A conversion shall be deemed to occur on the date that the Company receives an executed copy of the Conversion Notice. 

The aggregate debt discount of $70,000 is being amortized to interest expense over the respective terms of the notes.

On February 4, 2021, the Company issued convertible promissory notes in the aggregate principal amount of $75,000 to Robert L. Hymers III (“Hymers”). The promissory note bears interest at 10% per anum, and is due one year from the respective issuance date of the note along with accrued and unpaid interest. Principal and interest to be payable as provided below on that date which is one year from the date of issuance (the “Maturity Date”).

For so long as there remains any amount due hereunder, the Holder shall have the option to convert all or any portion of the unpaid principal amount of this Note, plus accrued interest (together with the unpaid principal amount, the “Converted Amount”), into shares of the Company’s common stock. The conversion price (the “Conversion Price”) shall be equal to a $0.007.

The aggregate debt discount of $75,000 is being amortized to interest expense over the respective terms of the notes.

Convertible notes payable – Pinnacle Consulting Services Inc.

On April 30, 2021, the Company issued convertible promissory notes in the aggregate principal amount of $110,000 to Pinnacle Consulting Services, Inc. (“Pinnacle”). The promissory note bears interest at 10% per anum, and is due one year from the respective issuance date of the note along with accrued and unpaid interest. Principal and interest to be payable as provided below on that date which is one year from the date of issuance (the “Maturity Date”).

For so long as there remains any amount due hereunder, the Holder shall have the option to convert all or any portion of the unpaid principal amount of this Note, plus accrued interest (together with the unpaid principal amount, the “Converted Amount”), into shares of the Company’s common stock. The conversion price (the “Conversion Price”) shall be equal to a $0.002.

The aggregate debt discount of $110,000 is being amortized to interest expense over the respective terms of the notes.

On December 27, 2021, the Company and Pinnacle entered into an exchange agreement to replace the existing $110,000 of principal and accrued interest of $8,036 to a new note with principal of $118,036. The new convertible note payable has an exercise price of $0.00065.

On December 27, 2021, the Company issued convertible promissory notes in the aggregate principal amount of $30,000 to Pinnacle. The promissory note bears interest at 12.5% per anum, and is due one year from the respective issuance date of the note along with accrued and unpaid interest and includes an original issue discount (“OID”) of $5,000. Principal and interest to be payable as provided below on that date which is one year from the date of issuance (the “Maturity Date”).

For so long as there remains any amount due hereunder, the Holder shall have the option to convert all or any portion of the unpaid principal amount of this Note, plus accrued interest (together with the unpaid principal amount, the “Converted Amount”), into shares of the Company’s common stock. The conversion price (the “Conversion Price”) shall be equal to a $0.006. The Conversion price, and any other economic terms will be adjusted on a ratchet basis if the Company offers a more favorable conversion or stock issuance price, prepayment rate, interest rate, additional securities, look back period or more favorable terms to another party for any financings while this note is in effect.

The aggregate debt discount of $5,000 is being amortized to interest expense over the respective terms of the notes.

As of December 31, 2021, the Company owed an aggregate of $30,000 of principal and $0 of accrued interest on these convertible promissory notes.

Convertible notes payable – Natural Plant Extract

On April 15, 2019, we entered into a joint venture with Natural Plant Extract of California, Inc., and subsidiaries, to operate a licensed psychoactive cannabis distribution service in California. California legalized THC psychoactive cannabis for medicinal and recreational use on January 1, 2018. On February 3, 2020, we terminated the joint venture.

The Original Material Definitive Agreement

Pursuant to the original material definitive agreement, we agreed to acquire twenty percent (equal to 200,000) of NPE’s authorized shares in exchange for our payment of $2,000,000 and $1,000,000 worth of our restricted common stock. We agreed to form a joint venture with NPE incorporated in California under the name “Viva Buds, Inc.” (“Viva Buds”) for the purpose of operating a California licensed cannabis distribution business pursuant to California law legalizing THC psychoactive cannabis for recreational and medicinal use.

Our payment obligations were governed by a stock purchase agreement which required us to make the following payments:

a. Deposit of $350,000 within 5 days of the execution of the material definitive agreement;

b. Deposit of $250,000 payable within 30 days;

F-26 

c. Deposit of $400,000 within 60 days;

d. Deposit of $500,000 within 75 days;

e. Deposit of $500,000 within 90 days

We made our initial payment pursuant to this schedule, but otherwise failed to comply with the payment schedule and we were in breach of contract.

Settlement and Release of All Claims Agreement

On February 3, 2020, the Company and NPE entered into a settlement and release of all claims agreement. In exchange for a complete release of all claims, the Company and NPE (1) agreed to reduce our interest in NPE from 20% to 5%; (2) we agreed to pay NPE a total of $85,000 as follows: $35,000 concurrent with the execution of the Settlement and Release of All Claims Agreement, and $25,000 no later than the 5th calendar day for each of the two months following execution of Settlement and Release of All Claims Agreement; and, (3) to retire the balance of our original valuation obligation from the material definitive agreement, representing a shortfall of $56,085, in a convertible promissory note, with terms allowing NPE to convert the note into common stock of MCOA at a 50% discount to the closing price of MCOA’s common stock as of the maturity date.

As of the date of this filing, the Company satisfied its payment obligations under the settlement agreement. 

Convertible Note Payable – GW Holdings Group

On December 9, 2020, the Company issued convertible promissory notes in the aggregate principal amount of $98,175 to GW Holdings Group, LLC (“GW”). GW has the option, beginning on the six month anniversary of the date of issuance, to convert all or any amount of the principal face amount of the notes then outstanding into shares of the Company's common stock at a conversion price equal to 40% discount of the lowest trading price for the 15 trading days prior to the date of the conversion. The note accrues interest at a rate of 10% per annum.

On June 3, 2021, the Company entered issued a convertible promissory note in the amount of $120,750 to. The holder has the option to convert all or any amount of the principal face amount of the note then outstanding into shares of the Company's common stock at a conversion price equal to $0.005 for the first 90 days and $0.002 thereafter. The note accrues interest at a rate of 10% per annum and included $15,750 of deferred financing fees and original issue discount which is being amortized to interest expense over the term of the note.

On August 24, 2021, the Company entered issued a convertible promissory note in the amount of $120,750 to GW. GW has the option to convert all or any amount of the principal face amount of the note then outstanding into shares of the Company's common stock at a conversion price equal to $0.0025 for the first 90 days and $0.001 thereafter. The note accrues interest at a rate of 10% per annum and includes a $15,750 original issue discount which is being amortized to interest expense over the term of the note

As of December 31, 2021, the Company owed an aggregate of $120,750 of principal and $4,003 of accrued interest on these convertible promissory notes.

Convertible Notes Payable-Redstart Holdings

During the year ended December 31, 2020, the Company entered into various convertible promissory notes with Redstart Holdings (“Redstart Holdings”) totaling a principal amount of $109,000. The promissory notes accrue interest at a rate of 10% per annum, were due one year from the respective issuance date. The notes were convertible at a conversion price equal to 61% of the market price of the Company’s common stock, defined as the lowest trading price during the 15-trading-day period prior to the date of conversion. Upon the issuance of these convertible notes, the Company determined that the features associated with the embedded conversion option embedded in the notes should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares of common stock would be available to settle all potential future conversion transactions. As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense.

F-27 

The Company has the right to prepay the notes for an amount ranging from 125% to 140% multiplied by the outstanding balance (all principal and accrued interest) depending on the prepayment period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note. During the three months ended March 31, 2021, the Company repaid $109,000 of principal and $43,204 of total interest and penalties.

During May 2021, the Company entered into an additional three convertible promissory notes with principal value of $226,250, which accrued interest at 8% per annum and were convertible at 65% of the average of the two lowest trading prices during the previous 15 day trading period.

As of December 31, 2021, the Company owed an aggregate of $0 of principal and $0 of accrued interest on these convertible promissory notes, as the notes were paid in full along with early repayment penalties of $40,857.

Convertible Note Payable-Firstfire

In July 2021, the Company issued a convertible promissory note in the aggregate principal amount of $268,750 to Firstfire Global Opportunities Fund LLC (“Firstfire”). The promissory note accrues interest at 12% per annum, is due one year from the issuance date and includes an original issuance discount and financing fees in the aggregate amount of $44,888 and received $200,963 of net proceeds. The note is convertible at any time at a conversion price of $0.005 per share. The Company also issued a five-year warrants to purchase up to 38,174,715 shares of its common stock to Firstfire, at an exercise price of $0.00704 per share. The aggregate debt discount of $245,851 is being amortized to interest expense over the respective terms of the note.

The Company is prohibited from effecting a conversion of the note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note. The Company is prohibited from effecting an exercise of the warrant to the extent that, as a result of such exercise, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon exercise of the note.

As of December 31, 2021, the Company owed an aggregate of $243,750 of principal and $14,667 of accrued interest on these convertible promissory notes.

Convertible Note Payable-Labrys

In June 2021, the Company issued a convertible promissory note in the aggregate principal amount of $537,500 to Labrys Funds, LP (“Labrys”). The promissory note accrues interest at 12% per annum, is due one year from the issuance date and includes an original issuance discount in the aggregate amount of $53,750. The Company also paid $33,750 in deferred financing fees and received $450,000 of net proceeds. The note is convertible at any time at a conversion price of $0.005 per share. The Company also issued a five-year warrants to purchase up to 76,349,431 shares of its common stock to Labrys, at an exercise price of $0.00704 per share. In addition, the Company issued five-year warrants to purchase up to 76,349,431 shares of its common stock to an investment banker for services, which warrants have an exercise price of $0.008448 per share. The aggregate debt discount of $533,526 is being amortized to interest expense over the respective terms of the note.

The Company is prohibited from effecting a conversion of the note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note. The Company is prohibited from effecting an exercise of the warrant to the extent that, as a result of such exercise, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon exercise of the note.

As of December 31, 2021, the Company owed an aggregate of $99,975 of principal and $36,476 of accrued interest on these convertible promissory notes.

F-28 

Convertible Note Payable- Dutchess Capital Growth Fund LP

On May 25, 2021, the Company issued a convertible promissory note in the aggregate principal amount of $135,000 to Dutchess Capital Growth Fund LP (“Dutchess”). The promissory note accrues interest at 8% per annum, is due one year from the issuance date. The Company paid $13,750 in deferred financing fees and received $121,250 of net proceeds.

Beginning six months after date of issue, the holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 55% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer.

The Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $135,000 is being amortized to interest expense over the respective terms of the notes.

As of December 31, 2021, the Company owed an aggregate of $60,709 of principal and $6,108 of accrued interest on these convertible promissory notes.

Convertible Note Payable- Geneva Roth Holdings

On December 4, 2020, the Company issued a convertible promissory note in the aggregate principal amount of $33,500 to Geneva Roth Holdings (“Geneva”). The promissory note accrues interest at 10% per annum, is due one year from the issuance date.

Beginning six months after date of issue, the holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 55% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer. The company repaid the note before it became convertible and therefore, no derivative liability or debt discount was recorded.

On July 28, 2021, the Company issued a promissory note in the aggregate principal amount of $169,125 to Geneva Roth Holdings (“Geneva”). The promissory note accrues interest at 10% per annum, is due one year from the issuance date. The Company paid $13,750 in deferred financing fees and received $153,750 of net proceeds. The Company also issued five-year warrants to purchase up to 10,147,500 shares of its common stock to Geneva, at an exercise price of $0.001 per share. The aggregate debt discount of $67,253 is being amortized to interest expense over the respective terms of the note.

As of December 31, 2021, the Company owed an aggregate of $97,939 of principal and $13,684 of accrued interest on these promissory notes.

F-29 

Convertible Note Payable- Beach Labs

On November 24, 2021, the Company issued a convertible promissory note in the aggregate principal amount of $625,000 to Beach Labs in connection with the modification of the cDistro acquisition agreement discussion in Note 13. The promissory note accrues interest at 10% per annum and is due four years from the issuance date.

The holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 70% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer.

The Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $625,000 is being amortized to interest expense over the respective terms of the notes.

As of December 31, 2021, the Company owed an aggregate of $583,333 of principal and $15,753 of accrued interest on these promissory notes.

Convertible Note Payable- Sixth Street Lending

On November 16, 2021, the Company issued a promissory note in the aggregate principal amount of $60,738 to Sixth Street Lending (“SSL”). The promissory note has a one-time interest charge of 7,896 and is due one year from the issuance date. The Company paid $10,738 in deferred financing fees and received $50,000 of net proceeds. The note is convertible at a price ("Conversion Price") for each share of Common Stock equal to 73% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the five prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer.

As of December 31, 2021, the Company owed an aggregate of $60,738 of principal and $7,896 of accrued interest on these promissory notes.

Convertible Note Payable- Coventry

On December 29, 2021, the Company issued a promissory note in the aggregate principal amount of $100,000 to Coventry (“Coventry”). The promissory note has a one-time interest charge of 10,000 and is due one year from the issuance date. The Company paid $20,000 in deferred financing fees and received $80,000 of net proceeds. The note is convertible at a price ("Conversion Price") for each share of Common Stock equal to 90% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the five prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer.

As of December 31, 2021, the Company owed an aggregate of $100,000 of principal and $10,000 of accrued interest on these promissory notes.

Summary:

The Company has identified the embedded derivatives related to the above-described notes and warrants. These embedded derivatives included certain conversion and reset features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the note and to fair value as of each subsequent reporting date. 

F-30 

For the year ended December 31, 2021 and 2020, the Company recorded a gain on the change in fair value of derivative liabilities of $3,852 and a loss of $48,204, respectively. For the years ended December 31, 2021 and 2020, the Company recorded amortization of debt discounts of $1,993,373 and $1,658,395, respectively, as a charge to interest expense.

At December 31, 2021, the Company determined the aggregate fair values of $749,756 of embedded derivatives. The fair values were determined using a binomial model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 95.81% to 192.69%, (3) weighted average risk-free interest rate of 0.06% to 0.26%, (4) expected life of 0.5 years to 4.5 years, and (5) estimated fair value of the Company's common stock from $0.0012 per share.

On May 4, 2020, we entered into a loan to borrow $35,500 from Pacific Mercantile Bank (“Lender”), pursuant to a Promissory Note issued by Company to Lender (the “PPP Note”). The loan was made pursuant to the Payroll Protection Program established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and supported by the Small Business Administration (SBA). The PPP Note bears interest at 1.00% per annum, and may be repaid at any time without penalty. The PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the PPP Note. On March 30, 2021, the loan was fully forgiven by the government and the remaining balance was zero as of December 31, 2021.

NOTE 6 – DERIVATIVE LIABILITIES

As described in Notes 4 and 6, the Company issued convertible notes and warrants that contained conversion features and a reset provisions. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date and to fair value as of each subsequent reporting date.

If an embedded conversion option in a convertible debt instrument no longer meets the bifurcation criteria in this Subtopic, an issuer shall account for the previously bifurcated conversion option by reclassifying the carrying amount of the liability for the conversion option (that is, its fair value on the date of reclassification) to shareholders' equity. Any debt discount recognized when the conversion option was bifurcated from the convertible debt instrument shall continue to be amortized.

NOTE 7 – STOCKHOLDERS’ DEFICIT

Preferred stock

The Company is authorized to issue 10,000,000 shares of $0.001 par value preferred stock as of December 31, 2021 and December 31, 2020. As of December 31, 2021, and 2020, the Company has designated and issued 10,000,000 shares of Class A Preferred Stock.

Each share of Class A Preferred Stock is entitled to 100 votes on all matters submitted to a vote to the stockholders of the Company, does not have conversion, dividend or distribution upon liquidation rights. On November 9, 2020, the Company issued 2,000,000 shares of its Class B Preferred Common Stock to Jesus Quintero. The Class B Preferred Stock carries a voting preference of One Thousand (1,000) times that number of votes on all matters submitted to the shareholders that is equal to the number of shares of Common Stock (rounded to the nearest whole number), at the record date for the determination of the shareholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of such shareholders is affected. The issuance constitutes a change of control of the Company, as the voting preference of the issued Class B Preferred Stock provides Mr. Quintero with the right to control a majority of the votes of shareholders eligible to cast votes on any matter brought before the stockholders. The Class B shares were valued at $2,229,027 and recognized as stock-based compensation expense during the year ended December 31, 2020. As of December 31, 2021 and 2020, there were 2,000,000 shares of Class B Preferred Stock outstanding. The Class B Preferred Stock is not convertible into common shares.

F-31 

Common stock

The Company was authorized to issue 22,000,000,000 shares of $0.001 par value per share common stock as of December 31, 2021. As of December 31, 2021, and 2020, the Company had 7,122,806,264 and 3,136,774,861, respectively, common shares issued and outstanding. As of February 4, 2022, we reduced the par value of our common stock from $0.001 per share to zero par value ($0.00) per share.

In 2021, the Company issued an aggregate of 142,946,860 shares of its common stock for services rendered with an estimated fair value of $661,292.

In 2021, the Company issued an aggregate of 1,236,181,851 shares of its common stock in settlement of convertible notes payable and accrued interest with an estimated fair value of $2,309,874.

In 2021, the Company issued an aggregate of 22,500,000 shares of its common stock in conversion of related party notes payable with an estimated fair value of $141,750.

In 2021, the Company issued an aggregate of 462,844,406 common shares of its common stock in exchange for exercise of warrants on a cashless basis.

In 2021, the Company sold 1,052,297,599 shares of its common stock with a value of $2,201,601.

In 2021, the Company issued 3,027,031 shares of its common stock with an estimated value of $8,623 to settle liabilities.

In 2021, the Company issued 691,935,484 shares of common stock for investments with an estimated value of $1,300,000.

In 2021, the Company issued 265,164,070 shares of common stock issued for acquisition of business with an estimated value of $1,617,501.

In 2021, the Company issued 109,134,122 shares for amendment to an acquisition consideration with an estimated value of $251,008.

In 2020, the Company issued an aggregate of 217,396,427 shares of its common stock for services rendered with an estimated fair value of $785,861.

In 2020, the Company issued an aggregate of 2,291,141,317 shares of its common stock in settlement of convertible notes payable and accrued interest with an estimated fair value of $3,916,940.

In 2020, the Company issued an aggregate of 21,276,596 shares of its common stock in conversion of related party notes payable with an estimated fair value of $50,000.

In 2020, the Company issued an aggregate of 51,054,214 common shares of its common stock in exchange for exercise of warrants on a cashless basis.

In 2020, the Company issued 205,582,481 shares of its common stock with an estimated value of $762,723 to settle liabilities.

In 2020, the Company sold shares 268,679,513 shares of its common stock for proceeds of $478,686.

F-32 

Options

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Binomial Option Pricing Model with a volatility figure derived from using the Company’s historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla" options, as defined in the accounting standards codification.

The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. 

In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.

The following table summarizes the stock option activity for the years ended December 31, 2021 and 2020:

	Shares			Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2020		16,666,667		$	0.30		7.76	$	15,400,000
Granted		—
Forfeitures or expirations		—
Outstanding at December 31, 2021		16,666,667		$	0.30		6.76	$	15,296,667
Granted		—
Forfeitures or expirations		(16,666,667	)		0.30
Outstanding at December 31, 2021		0		$	—		—		—
Exercisable at December 31, 2021		0		$	—		—	$	—

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $0 and $0 as of December 31, 2021 and 2020, respectively, which would have been received by the option holders had those option holders exercised their options as of that date.

F-33 

Warrants

The following table summarizes the stock warrant activity for the two years ended December 31, 2021:

	Shares			Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2019		4,011,111			2.15
Granted		6,980,769			0.01
Exercised		(192,521	)		1.78
Increase due to reset provision		322,906,286			0.0004
Exercised		(40,843,463	)		0.0027
Forfeitures or expirations		—
Outstanding at December 31, 2020		293,054,702		$	0.0011		2.2	$	1,023,306
Granted		133,107,371			0.0084
Exercised		(271,137,466	)		0.01
Adjustment due to price reset provision		(9,722,222	)		0.0004
Forfeitures or expirations		—
Outstanding at December 31, 2021		145,302,385		$	0.0033		2.8	$	70,200
Exercisable at December 31, 2021		145,302,385		$	0.0033		2.8	$	70,200

Certain warrants issued to debt holders have reset provisions whereby upon subsequent issuances of common stock at a price below the current exercise price, the number of warrants increase and the exercise price is reduced to the new price. The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on warrants with an exercise price less than the Company’s stock price of $0.0012 and $0.004 as of December 31, 2021 and 2020, respectively, which would have been received by the warrant holders had those option holders exercised their warrants as of that date.

NOTE 8 — FAIR VALUE MEASUREMENT

The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

All items required to be recorded or measured on a recurring basis are based upon level 3 inputs.

F-34 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the financial statements.

The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

As of December 31, 2021, and 2020, the Company did not have any items that would be classified as level 1 or 2 disclosures.

The Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed in note 6. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Notes 4 and 5 are that of volatility and market price of the underlying common stock of the Company.

As of December 31, 2021, and 2020, the Company did not have any derivative instruments that were designated as hedges.

The combined derivative and warrant liability as of December 31, 2021 and 2020, in the amounts of $749,756 and $4,426,057 respectively, have a level 3 classification.

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the year ended December 31, 2021:

	Debt Derivative
Balance, December 31, 2019	$	5,693,071
Increase resulting from initial issuances of additional convertible notes payable		1,714,442
Decreases resulting from conversion or payoff of convertible notes payable		(7,679,528	)
Loss due to change in fair value included in earnings		4,698,072
Balance, December 31, 2020	$	4,426,057
Increase resulting from initial issuances of additional convertible notes payable		2,811,313
Decreases resulting from conversion		(6,483,762
Gain due to change in fair value included in earnings		(3,852
Balance, December 31, 2021	$	749,756

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. During the year ended December 31, 2021, the Company’s stock price decreased significantly from initial valuations. As the stock price decreases for each of the related derivative instruments, the value to the holder of the instrument generally decreases. Stock price is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.

F-35 

NOTE 9 — RELATED PARTY TRANSACTIONS

The Company’s current officers and stockholders advanced funds to the Company for travel related and working capital purposes. As of December 31, 2021, and 2020, there were no related party advances outstanding.

As of December 31, 2021 and 2020, accrued compensation due officers and executives included as accrued compensation was $42,925 and $79,214, respectively.

For the years ended December 31, 2021 and 2020, the Company had sales to related parties of $0 and $13,069, respectively.

During the year ended December 31, 2020, the Company issued 2,000,000 shares of Class B Preferred Stock to the Company’s CEO that were valued at $2,229,027. See Note 7.

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Liabilities and Accruals	12/31/21		12/31/20
Accounts payable		932,760		480,877
Accrued compensation		42,925		79,214
Accrued liabilities		270,689		401,461
Notes payable, related parties		20,000		40,000
Loans payable PPP Stimulus		—		35,500
Right-of-use liabilities - current portion		—		7,858
Liabilities and Accruals	$	1,266,374	$	1,044,910

Liabilities and Accruals

For the year ended December 31, 2021 the Company has accounts payable of $932,760 as compared to $480,877 for the year ended December 31, 2020, which is attributed to $372,428 related to our new acquisition C-Distro and an increase in MCOA accounts payable of $144,734 due to expansion of our business; as of December 31, 2021 and 2020, accrued compensation due officers and executives included as accrued compensation was $42,925 and $79,214, respectively. As of December 31, 2021 our accrued liabilities decreased by $130,772 which is attributed to less accruals for settlement agreements at December 31, 2021 as compared to accruals at December 31, 2020.

On May 4, 2020, we entered into a loan to borrow $35,500 from Pacific Mercantile Bank (“Lender”), pursuant to a Promissory Note issued by Company to Lender (the “PPP Note”). The loan was made pursuant to the Payroll Protection Program established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and supported by the Small Business Administration (SBA). The PPP Note bears interest at 1.00% per annum, and may be repaid at any time without penalty. The PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the PPP Note. On March 30, 2021, the loan was fully forgiven by the government and the remaining balance was zero as of December 31, 2021.

As of December 31, 2021 and December 31, 2020, the Company’s officers and directors have provided advances and incurred expenses on behalf of the Company as such have been evidenced by the issuance of notes to such officers and directors. The notes are unsecured, due on demand and accrue interest at a rate of 5% per annum. The balance due to notes payable related party as of December 31, 2021 and December 31, 2020 was $20,000 and $40,000, respectively. These notes are payable to the estate of Charles Larsen.

To evaluate the impact on adoption of ASC842 – Leases, on the accounting treatment for leasing of real office property referred to as the “Premises”. The premises is located in Los Angeles, CA.

The Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable. The Company used an estimated incremental borrowing rate of 10% to estimate the present value of the right of use liability; however the company entered into a lease agreement for a virtual office service, therefore ASC842 is not applicable.

Based on the above, the Company has right-of-use assets of $0 and $7,858 of operating lease liabilities as of December 31, 2021 and 2020, respectively. Operating lease expense for the year ended December 31, 2021 was $66,582.  

Employment contracts

On February 3, 2020, we entered into an executive employment agreement with Jesus Quintero, our CEO and CFO providing for gross salary of $15,000 monthly, consisting of $12,000 in cash and $3,000 worth of our common stock valued on the closing price of our common stock on the last trading day of each month. Effective as of April 22, 2021, we approved an increase in the cash portion of the compensation payable to Jesus Quintero effective as of May 1, 2021, to $20,000 per month, as well as the immediate issuance to Mr. Quintero of 20,000,000 fully paid and non-assessable shares of the Company’s common stock, par value $0.001 per share, as a one-time bonus, and on April 27, 2021, we entered into a written amendment memorializing the compensation changes to the February 3, 2020 executive employment agreement with Mr. Quintero.

On February 28, 2020, the Company entered into executive contracts with its directors Edward Manolos and Themistocles Psomiadis. The agreements are for a term lasting from the effective date until the earlier of the date of the next annual or special stockholders meeting called for the purposes of electing directors, and the earliest of the following to occur: (a) the death of the Director; (b) the termination of the Director from his membership on the Board by the mutual agreement of the Company and the Director; (c) the removal of the Director from the Board by the majority stockholders of the Company; and (d) the resignation by the Director from the Board. Mr. Psomiadis resigned from the Board of Directors and his contract was mutually terminated on December 4, 2020. Mr. Manolos’ 2020 contracts provide for payments of $5,000 quarterly.

Litigation

The Company is subject at times to other legal proceedings and claims, which arise in the ordinary course of its business.  Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. 

F-36 

Bougainville Ventures

On September 20, 2018, the Company filed suit against Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court, case number 18-2- 0045324.

Background

On March 16, 2017, we entered into a joint venture agreement with Bougainville Ventures, Inc., a Canadian corporation. The purpose of the joint venture was for the Company and Bougainville to jointly engage in the development and promotion of products in the legalized cannabis industry in Washington State; (ii) utilize Bougainville’s high quality cannabis grow operations in the State of Washington, where it claimed to have an ownership interest in real property for use within the legalized cannabis industry; (iii) leverage Bougainville’s agreement with a I502 Tier 3 license holder to grow cannabis on the site; provide technical and management services and resources including, but not limited to: sales and marketing, agricultural procedures, operations security and monitoring, processing and delivery, branding, capital resources and financial management; and, (iv) optimize collaborative business opportunities. The Company and Bougainville agreed to operate through a Washington State Limited Liability Company, and BV-MCOA Management, LLC was organized in the State of Washington on May 16, 2017.

As our contribution to the joint venture, the Company committed to raise not less than $1 million dollars to fund joint venture operations based upon a funding schedule. The Company also committed to providing branding and systems for the representation of cannabis related products and derivatives comprised of management, marketing and various proprietary methodologies directly tailored to the cannabis industry. The Company and Bougainville's agreement provided that funding provided by the Company would go, in part, towards the joint venture’s ultimate purchase of the land consisting of a one-acre parcel located in Okanogan County, Washington, for joint venture operations.

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

Thereafter, the Company determined that Bougainville had no ownership interest in the property in Washington State, but rather was a party to a purchase agreement for real property that was in breach for non-payment. Bougainville also did not possess an agreement with a Tier 3 I502 license holder to grow Marijuana on the property. Nonetheless, as a result of funding arranged for by the Company, Bougainville and an unrelated third party, Green Ventures Capital Corp., purchased the land. The land is currently pending the payment of delinquent property taxes that would allow for the Okanogan County Assessor to sub-divide the property, so that the appropriate portion could be deeded to the joint venture. Although Bougainville represented it would pay the delinquent taxes, it has not. To date, the property has not been deeded to the joint venture.

To clarify the respective contributions and roles of the parties, the Company also offered to enter into good faith negotiations to revise and restate the joint venture agreement with Bougainville. The Company diligently attempted to communicate with Bougainville in good faith to accomplish a revised and restated joint venture agreement, and efforts towards satisfying the conditions to complete the subdivision of the land by the Okanogan County Assessor. However, Bougainville failed to cooperate or communicate with the Company in good faith, and failed to pay the delinquent taxes on the real property that would allow for sub-division and the deeding of the real property to the joint venture.

Company Determines to File Suit.

On August 10, 2018, the Company advised its independent auditor that Bougainville did not cooperate or communicate with the Company regarding its requests for information concerning the audit of Bougainville’s receipt and expenditures of funds contributed by the Company in the joint venture agreement. Bougainville had a material obligation to do so under the joint venture agreement. The Company believes that some of the funds it paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds. Additionally, the Company believes that Bougainville misrepresented material facts in the joint venture agreement, as amended, including, but not limited to, Bougainville’s representations that: (i) it had an ownership interest in real property that was to be deeded to the joint venture; (ii) it had an agreement with a Tier 3 # I502 cannabis license holder to grow cannabis on the real property; and, (iii) that clear title to the real property associated with the Tier 3 # I502 license would be deeded to the joint venture thirty days after the Company made its final funding contribution. As a result, on September 20, 2018, the Company filed suit against Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court, case number 18-2- 0045324. The Company’s complaint seeks legal and equitable relief for breach of contract, fraud, breach of fiduciary duty, conversion, recession of the joint venture agreement, an accounting, quiet title to real property in the name of the Company, for the appointment of a receiver, the return to treasury of 15 million shares issued to Bougainville, and, for treble damages pursuant to the Consumer Protection Act in Washington State. The registrant has filed a lis pendens on the real property. The case is currently in litigation. 

F-37 

NOTE 11 – INCOME TAXES

As of December 31, 2021, the Company has available for federal income tax purposes a net operating loss carry forward of approximately $96,565,499, expiring in the year 2038, that may be used to offset future taxable income, but could be limited under Section 382. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized. Due to possible significant changes in the Company's ownership, the future use of its existing net operating losses may be limited. All or portion of the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits.  

We have adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns.  ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities.  

Tax position that meet the more likely than not threshold is then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement.  The Company had no tax positions relating to open income tax returns that were considered to be uncertain. We file income tax returns in the U.S. and in the state of California and Utah with varying statutes of limitations.

The Company is required to file income tax returns in the U.S. Federal jurisdiction and in California. The Company is no longer subject to income tax examinations by tax authorities for tax years ending before December 31, 2017.

The Company’s deferred taxes as of December 31, 2021 and 2020 consist of the following:

	2021			2020
Non-Current deferred tax asset:
Net operating loss carry-forwards	$	96,501,045		$	86,309,595
Valuation allowance		(96,565,499	)		(86,309,595	)
Net non-current deferred tax asset	$	—		$	—

NOTE 12 – SUBSCRIPTIONS PAYABLE

Share Exchange with Cannabis Global, Inc. On September 30, 2020, the Company entered into a securities exchange agreement with CannabisGlobal, Inc., a Nevada corporation. By virtue of the agreement, the Company issued 650,000,000 shares of its unregistered common stock to Cannabis Global in exchange for 7,222,222 shares of Cannabis Global unregistered common stock. The Company and Cannabis Global also entered into a lock up leak out agreement which prevents either party from sales of the exchanged shares for a period of 12 months. Thereafter the parties may sell not more than the quantity of shares equaling an aggregate maximum sale value of $20,000 per week, or $80,000 per month until all Shares and Exchange Shares are sold. This material transaction involves related parties, insofar as Edward Manolos, our director, is also a director of Cannabis Global, Inc.

Share Exchange with Eco Innovation Group, Inc. On March 1, 2021, the Company entered into a securities exchange agreement with Eco Innovation Group, Inc., a Nevada corporation, to acquire Eco Innovation Group, Inc. common stock, par value $0.001, equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date, in exchange for the number of shares of Company common stock, par value $0.001, equal in value to $650,000 based on the per-share price of $0.06 (the “Share Exchange Agreement”). For both parties, the Share Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event that a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant to the Share Exchange Agreement to fall below $650,000. Complementary to the Share Exchange Agreement, the Company and Eco Innovation Group entered into a Lock-Up Agreement dated February 26, 2021, providing that the shares of common stock acquired pursuant to the Share Exchange Agreement shall be subject to a lock-up period preventing its sale for a period of 12 months following issuance, and limiting the subsequent sale to an aggregate maximum. The Company recorded a value for additional shares owed to Eco Innovation Group pursuant to the Share Exchange Agreement of $754,961 as a subscription agreement along with a loss from equity investment of $735,178. As of December 31, 2021, 41,935,484 shares of the Company’s common stock have been issued for the original agreement.

F-38 

Additionally, as discussed in note 13, the Company entered into an agreement with the former owners of cDistro, whereby the Company will issue additional shares related to the original purchase consideration of that acquisition. During the year ended December 31, 2021, the Company issued an additional 109,134,122 shares with a fair value of $251,008. The Company owes an additional 180,486,830 shares with a fair value of $234,633, which was recorded as stock-based compensation.

As a result, the balance of subscriptions payable as of December 31, 2021 and December 31, 2020 was $989,594 and $670,000, respectively.

NOTE 13 – ACQUISITION 

cDistro

On June 29, 2021, the Company, cDistro Merger Sub, Inc., a Nevada corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), and cDistro, Inc., a privately-held Nevada corporation engaged in the hemp and CBD product distribution business (“cDistro”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which, among other things, Merger Sub merged with and into cDistro on September 30, 2021, with cDistro becoming a wholly-owned subsidiary of the Company and the surviving corporation in the merger (the “Merger”). The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended.

Contingent Consideration - Earnout Agreement

In connection to the Merger, the Company and the securityholder of cDistro (the “cDistro Stockholder”) entered into an earnout agreement dated June 29, 2021 (the “Earnout Agreement”), whereby the Company agreed to issue additional shares of its common stock to the cDistro Stockholder as compensation for the Merger conditioned upon the achievement of certain gross revenue milestones. If cDistro meets revenue targets of $600,000 per quarter, up to a total of $2,400,000 of revenue, the Company will issue shares worth $250,000 upon the achievement each quarterly revenue target, with the number of shares to be issued at each payout date calculated based on the lessor of 220,970,059 shares of common stock or a 30% discount to the average close price of the Company’s common stock for the 20-day period immediately preceding the payout date of the earnout. In accordance with ASC 805, the Company accounts for this earnout agreement as contingent consideration based on the number of shares calculated as owed as of each quarter end, with changes in value to be recorded in earnings each reporting period.

Leak-Out Agreement

On June 29, 2021, in connection with the Merger and the Earnout Agreement, the cDistro Stockholder entered into a Lock-Up and Leak-Out Agreement with the Company pursuant to which, among other thing, such stockholder agreed to certain restrictions regarding the resale of the common stock issued pursuant to the Merger for a period of six months from the date of the Merger.

Employment Agreement

On June 29, 2021, in connection with the Merger, the Company and the Chief Executive Officer of cDistro entered into an employment agreement, pursuant to which that employee will serve as cDistro’s Chief Executive Officer for a three-year term.

The acquisition of cDistro is being accounted for as a business combination under ASC 805. The Company is continuing to gather evidence to evaluate what identifiable intangible assets were acquired, such as a customer list, and the fair value of each, and expects to finalize the fair value of the acquired assets within one year of the acquisition date. 

F-39 

The aggregate preliminary fair value of consideration for the cDistro acquisition was as follows:

	Amount
Cash, net of cash acquired of $94,450	$	155,550
Contingent Consideration - Earnout Agreement		907,407
265,164,070 shares of common stock		1,617,501
Total preliminary consideration transferred	$	2,680,458

A discount of $92,593 on the contingent consideration was recognized at the acquisition date, and is being amortized through the end of the earnout period. Through December 31, 2021, the Company has amortized $X to interest expense.

The following information summarizes the preliminary allocation of the fair values assigned to the assets acquired and liabilities assumed at the acquisition date:

Accounts Receivable	$	27,000
Inventory		3,000
Other Assets		4,943
Trademarks		500,000
Licenses		600,000
Customer Relationships		100,000
Goodwill		1,633,557
Accounts payable		(181,042	)
Other accrued liabilities		(7,000	)
Net assets acquired	$	2,680,458

On November 24, 2021, the Company entered into a letter agreement (“Letter Agreement”) with an attached amendment to the Merger Agreement (“Amendment No. 1 to the Merger Agreement”) with cDistro and Beach Labs, Inc., a Florida corporation and the former stockholder of cDistro prior to the effective date of the Merger Agreement (“Beach Labs”). Capitalized terms used and not defined herein have the respective meanings assigned to them in the Merger Agreement, as amended by Amendment No. 1 thereto.

Pursuant to the Letter Agreement, the Company and cDistro agreed to adjust the compensation paid to Beach Labs under the Merger Agreement to maintain the stipulated value of the compensation paid under the Merger Agreement by issuing part of the stipulated value of that compensation as a promissory note and performing a true-up on the remaining stipulated value held as stock, and by amending the Merger Agreement to accommodate another true-up to the stock in the event the market value of the compensation is lower than the stipulated value at the date of Rule 144 availability to Beach Labs, December 29, 2021. The Letter Agreement also terminates the board observation rights letter with Beach Labs executed in connection with the Merger Agreement.

Pursuant to the Letter Agreement and Amendment No. 1 to the Merger Agreement, the Company made a promissory note to Beach Labs in the amount of $625,000, agreed to satisfy half of the stated Merger Agreement compensation value of $1,200,000 (the “Note”), and performed a true-up of the Merger Agreement stock compensation to reach the value of $600,000, equaling half of the stated Merger Agreement compensation value of $1,200,000 (the “True-Up”), and amended the Merger Agreement to add a true-up provision that will maintain that $600,000 of stock compensation value at the date of Beach Lab’s Rule 144 eligibility. The Note is payable in declining monthly installments over a 4-year period, carries 10% interest, and is convertible at the holder’s option to the Company’s common stock at a conversion per share price of a 30% discount on the 20-day preceding average closing price of our common stock. In performing the True-Up, the Company issued 109,134,121 shares of restricted common stock to Beach Labs which had a fair value of $251,008, which was included in stock-based compensation expense. Additionally, as of December 31, 2021, the Company owed Beach Labs an additional 180,486,830 shares of stock, which had a fair value of $234,633 which was recorded as stock-based compensation expense and included in Subscriptions Payable on the Company’s consolidated balance sheet.

Unaudited Pro Forma Financial Information

The following table sets forth the pro-forma consolidated results of operations for the year ended December 31, 2021 and 2020 as if the cDistro acquisition occurred on January 1, 2020. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisitions had taken place on the dates noted above, or of results that may occur in the future.

F-40 

	Year ended December 31,
	2021			2020
Revenue	$	1,422,678		$	364,811
Operating loss		(4,847,954	)		(5,234,942	)
Net loss		(10,328,270	)		(12,525,433	)
Net loss per common share	$	(0.00	)	$	(0.01	)
Weighted Average common shares outstanding		5,390,127,712			1,227,193,458

VBF Brands, Inc.

On October 6, 2021, the Company, through its wholly owned subsidiary Salinas Diversified Ventures, Inc., a California corporation, entered into an Asset Purchase Agreement, Management Services Agreement, Cooperation Agreement and Employment Agreement with VBF Brands, Inc., a California corporation (“VBF”), a wholly owned subsidiary of Sunset Island Group, Inc., a Colorado corporation (“SIGO”). VBF and SIGO agreed to transfer to the Company all of VBF’s outstanding stock to the Company, and appointed our CEO and CFO Jesus Quintero as President of VBF.

VBF owns various fixed assets including machinery and equipment, a lease for a 10,000 square foot facility located at 20420 Spence Road, Salinas, California, 93908, leasehold improvements, good-will, inventory, tradenames including “VBF Brands,” trade secrets, intellectual property, and other tangible and intangible properties, including licenses issued by the City of Salinas, County of Monterey, and the State of California to operate a licensed cannabis nursery, cultivation facility, and operations for the manufacturing and distribution of cannabis and cannabis products.

VBF and SIGO agreed to sell and transfer to the Company all of VBF’s outstanding stock, and, by virtue of the Management Services Agreement, appoint Mr. Jesus Quintero as President of VBF, vesting management and control of VBF’s licensed cannabis operations in the Company. Concurrently, VBF and Livacich entered into a Cooperation Agreement, whereby VBF and Livacich agreed to cooperate to facilitate the transfer of ownership of VBF, which includes licenses issued by the City of Salinas, County of Monterey, and the State of California, to operate a cannabis nursery, cultivation facility and manufacturing and distribution operations to the Company. The Company also agreed to retain Livacich as Chief Executive Officer for a term of two years and agreed to compensate her with a salary including a signing cash bonus of $250,000, and a $250,000 performance cash bonus payable after six months after the Effective Date. The bonus is conditioned upon Livacich meeting an agreed to “Net Revenue” target of one million dollars ($1,000,000) from VBF’s operations during the six-month period after closing of the Asset Purchase Agreement, and her compliance with the terms and conditions of this Asset Purchase Agreement, the Management Services Agreement and the Cooperation Agreement.

As consideration for the transaction, the Company agreed to assume two secured convertible promissory notes issued by SIGO to St. George Investments, LLC, a Utah limited liability company (“St. George”) (the “SIGO Notes”). The first note was issued December 8, 2017, in the original face amount of $170,000.00, and the second was issued February 13, 2018, in the original face amount of $4,245,000.00. SIGO also issued warrants to St. George to purchase shares in SIGO, and fifty (50) shares of Series A Preferred Stock in SIGO. St. George agreed to cancel the warrants and preferred shares upon the Company’s assumption of the SIGO Notes.

F-41 

Under the Asset Purchase Agreement, the closing is conditioned upon certain conditions precedent, specifically (i) VBF and SIGO’s full corporate authorization, consent and execution of this Agreement; (ii) VBF’s sale to MCOA of 100% of the issued and outstanding shares of VBF; (iii) full corporate authorization, consent compliance with and execution of the Management Services Agreement and Cooperation Agreement; (iv) SIGO’s disclosure of the Agreement on Form 8-K with the Securities and Exchange Commission; (v) full cooperation in MCOA’s financial auditing of VBF in accordance with ASC 805, including providing unrestricted access to all VBF corporate and financial records and providing all necessary cooperation with VBF financial personnel; (vi) full cooperation in aiding and assisting Buyer with its change of ownership applications with the relevant licensing authorities; (vii) the warranty of truthful representations and execution of and compliance with the terms and conditions of the Executive Employment Agreement, Management Services Agreement and the Cooperation Agreement.

As of the date of this filing, the conditions precedent to the closing of the Asset Purchase Agreement remain in the process of implementation, so that the Asset Purchase Agreement closing has not yet occurred pursuant to its terms. Legal counsel for MCOA is currently in the process of working with VBF, Salinas Diversified Ventures, and the relevant state and local governments to effect the change of control and license transfers necessary to close the Asset Purchase Agreement.

NOTE 14 – SUBSEQUENT EVENTS

Subsequent to December 31, 2021, the Company has sold a total of 90,000,000 shares of common stock at a fixed price of $0.001 per share for a total of $90,000 in cash to accredited investors under the Company’s active Regulation A offering, qualified by the SEC on October 20, 2021. There is no assurance that the Company will raise any further funds under the Regulation A offering.

Subsequent to December 31, 2021, the Company has sold a total of 706,250,000 shares of common stock at a fixed price of $0.0008 per share for a total of $565,000 in cash to accredited investors under the Company’s active Regulation A offering, qualified by the SEC on October 20, 2021 and amended on December 15, 2021. There is no assurance that the Company will raise any further funds under the Regulation A offering.

On February 17, 2022, the Company issued 12,500,000 shares of common stock to SRAX, Inc. in full conversion of a promissory note dated August 7, 2020, at a per-share conversion price of $0.0016.

On April 1, 2022, the Company issued 76,923,077 shares of restricted common stock to North Equities USA Ltd., valued at $100,000, or $0.0013 per share, in compensation pursuant to a consulting agreement dated December 24, 2021.

On April 5, 2022, the Company issued 38,762,344 shares of common stock to an accredited investor in partial conversion of a promissory note dated May 25, 2021, at a per-share conversion price of $0.00039.

On April 6, 2022, the Company issued 435,540,070 shares of restricted common stock to Beach Labs, Inc., pursuant to the earnout agreement between the Company and Beach Labs executed in relation to the acquisition of cDistro, Inc.

On April 7, 2022, the Company made a promissory note in the principal amount of $59,743.96 to a related party.

F-42 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
		Unaudited			Audited
		June 30, 2022			Dec 31, 2021
ASSETS
Current assets:
Cash	$	43,064		$	104,024
Accounts receivable, net		287,373			211,288
Inventory		144,954			252,199
Prepaid Insurance		—			61,705
Other current assets		123,572			2,133,640
Total current assets		598,963			2,762,856
Property and equipment, net		112,178			121,588
Other assets:
Long-term Investments		2,321,875			2,327,357
Goodwill		1,633,557			1,633,557
Intangible assets, net		1,020,000			1,110,000
Security deposit		4,541			4,541
Total assets		5,691,114			7,959,899
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable		805,091			932,760
Accrued compensation		122,111			42,925
Accrued liabilities		406,180			270,689
Notes payable, related parties		20,000			20,000
Convertible notes payable, net of debt discount of $1,055,819 and $1,659,622, respectively		4,533,446			3,769,449
Contingent Liability - Acquisition		500,000			953,837
Subscriptions payable		752,961			989,594
Derivative liability		688,264			749,756
Total current liabilities		7,828,053			7,729,010
Total liabilities		7,828,053			7,729,010
Stockholders' (deficit:) equity:
Preferred stock, $0.001 par value, 50,000,000 shares authorized
Class A preferred stock, $0.001 par value, 10,000,000 shares designated, 10,000,000 shares issued and outstanding as of June 30, 2022 and December 31, 2021		10,000			10,000
Class B preferred stock, $0.001 par value, 5,000,000 shares designated, 2,000,000 shares issued and outstanding as of June 30, 2022 and December 31, 2021		2,000			2,000
Common stock, no par value; 32,000,000,000 shares authorized; 12,380,532,543 and 7,122,806,264 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		100,489,308			96,730,659
Common stock to be issued, 1,000,000 and 1,000,000 shares, respectively		19,000			1,000
Treasury Stock		(60,000	)		—
Accumulated other Comprehensive Income (loss)		(7,312	)		(11,725	)
Accumulated deficit		(102,589,935	)		(96,501,045	)
Total stockholders' (deficit) equity		(2,154,939	)		230,889
Total liabilities and stockholders' (deficit) equity	$	5,691,114		$	7,959,899

See the accompanying notes to these unaudited condensed consolidated financial statements

F-43 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
UNAUDITED
	For the three months ended June 30,						For the six months ended June 30,
	2022			2021			2022			2021
REVENUES:
Sales	$	258,628		$	16,880		$	819,949		$	51,810
Total Revenues		258,628			16,880			819,949			51,810
Cost of sales		38,599			3,301			548,861			28,481
Gross Profit		220,029			13,579			271,088			23,329
OPERATING EXPENSES:
Depreciation and amortization		51,109			1,262			102,159			2,653
Selling and marketing		96,094			155,212			177,467			262,761
Payroll and related		260,211			132,257			537,124			270,402
Stock-based compensation		161,000			139,000			170,000			158,900
General and administrative		574,774			611,970			1,043,291			1,137,652
Total operating expenses		1,103,188			1,039,701			1,990,041			1,832,368
Net loss from operations		(883,159	)		(1,026,122	)		(1,718,953	)		(1,809,039	)
OTHER INCOME (EXPENSES):
Interest expense, net		(852,319	)		(891,783	)		(2,098,474	)		(1,992,745	)
Loss on equity investment		—			(394,194	)		—			(394,194	)
Impairment loss on Acquisition		(2,020,982	)		—			(2,020,982	)		—
Gain (loss) on change in fair value of derivative liabilities		957,862			696,729			(69,067	)		(1,629,289	)
Gain (loss) on trading securities		—			(115,997	)		6,086			504,137
(Loss) gain on settlement of debt		—			(96,750	)		(187,500	)		(164,977	)
Total other income (expense)		(1,915,439	)		(801,995	)		(4,369,937	)		(3,677,068	)
Net loss before income taxes		(2,798,598	)		(1,828,117	)		(6,088,890	)		(5,486,107	)
Income taxes (benefit)		—			—			—			—
NET LOSS	$	(2,798,598	)	$	(1,828,117	)	$	(6,088,890	)	$	(5,486,107	)
Foreign currency Translation Adjustment		6,961			0			4,413			0
Comprehensive Income	$	(2,791,637	)	$	(1,828,117	)	$	(6,084,477	)	$	(5,486,107	)
Loss per common share, basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Weighted average number of common shares outstanding, basic and diluted		10,157,215,172			4,837,346,227			9,525,611,678			4,465,632,479

See the accompanying notes to these unaudited condensed consolidated financial statements

F-44 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
UNAUDITED
	Class A Preferred Stock				Class B Preferred Stock				Common Stock				Treasury Stock		Common Stock to be issued						Accumulated			Other Comprehensive
	Shares		Amount		Shares		Amount		Shares		Amount		Amount		Shares			Amount			Deficit			Loss		Total
Balance, December 31, 2020		10,000,000	$	10,000		2,000,000	$	2,000		3,136,774,841	$	80,824,336	$	—		11,892,411		$	11,892		$	(86,309,595	)	$	—	$	(5,461,367	)
Common stock issued for services rendered		—		—						21,000,020		140,900				—			—								140,900
Common stock issued in settlement of convertible notes payable and accrued interest		—		—						810,689,880		1,740,874				—			—			—					1,740,874
Issuance of common stock for settlement of liabilities		—		—						3,027,031		19,515				(10,892,411	)		(10,892	)							8,623
Issuance of common stock for settlement of liabilities - related parties		—		—						22,500,000		141,750							—								141,750
Common stock issued in exchange for exercise of warrants on a cashless basis		—		—						400,000,000		—				—			—			—					—
Issuance of common shares										—		—				—			—								—
Sale of common stock		—		—						632,597,599		1,358,767				—			—			—					1,358,767
Common shares issued in settlement of legal case										—		—															—
Common shares cancelled by officer										—		—															—
Issuance of common stock for investments										41,935,484		650,000															650,000
Reclassification of derivative liabilities to common stock												5,975,670															5,975,670
Debt discount from warrants issued with convertible notes payable												446,026															446,026
Common stock issued for acquisition of business												1,352,337				265,164,070			265,164								1,617,501
Net Loss								—						—								(5,486,107)			—		(5,486,107)
Balance, June 30, 2021		10,000,000	$	10,000		2,000,000	$	2,000		5,068,524,855	$	92,650,175	$	—		266,164,070		$	266,164		$	(91,795,702	)	$	—	$	1,132,637

See the accompanying notes to these unaudited condensed consolidated financial statements

F-45 

	Class A Preferred Stock			Class B Preferred Stock			Common Stock					Treasury Stock		Common Stock to be issued				Accumulated			Other Comprehensive
	Shares		Amount	Shares		Amount	Shares			Amount		Amount		Shares		Amount		Deficit			Loss			Total
Balance, December 31, 2021	10,000,000	$	10,000	2,000,000	$	2,000	7,122,806,264		$	96,730,659	$	—		1,000,000	$	1,000	$	(96,501,045	)	$	(11,725	)	$	230,889
Common stock issued for services rendered	—		—				122,256,410			152,000				—		18,000								170,000
Common stock issued in settlement of convertible notes payable and accrued interest	—		—				1,303,931,600			1,171,554				—		—		—						1,171,554
Issuance of common stock for deferred finance costs	—		—				303,185,000			248,796				—		—								248,796
Sale of common stock	—		—				2,660,000,000			1,066,010				—		—		—						1,066,010
Treasury stock purchase												(60,000	)											(60,000	)
Common shares cancelled by officer							(30,000,000	)		—														—
Reclassification of derivative liabilities to common stock										233,069														233,069
Debt discount from warrants issued with convertible notes payable										152,587														152,580
Common stock issued for contingent consideration							717,866,439			500,000														500,000
Common stock issued for subscriptions payable							180,486,830			234,633														234,633
Net Loss	—		—	—		—	—			—		—		—		—		(6,088,890	)		4,413			(6,084,477	)
Balance, June 30, 2022	10,000,000	$	10,000	2,000,000	$	2,000	12,380,532,543		$	100,476,816	$	(60,000	)	1,000,000	$	18,000	$	(102,589,935	)	$	(7,312	)	$	(2,154,939	)

See the accompanying notes to these unaudited condensed consolidated financial statements

F-46 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021

UNAUDITED

		2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)	$	(6,088,890	)	$	(5,486,107	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		1,370,366			744,783
Depreciation and amortization		102,159			2,653
Bad debt expense		—			—
Loss on equity investment		—			394,194
Loss on VBF acquisition		2,020,982
Loss (Gain) on change in fair value of derivative liability		69,067			1,629,289
Interest expense recognized for the excess of fair value of derivative liability over net book value of notes payable at issuance		157,558			1,035,115
Stock-based compensation		170,000			140,900
Unrealized (Gain) Loss on trading securities		—			(504,137	)
Loss on settlement of liabilities		187,500			168,272
Changes in operating assets and liabilities:
Accounts receivable		(76,085	)		1,361
Inventories		107,245			(93,669	)
Prepaid expenses and other current assets		50,791			37,309
Accounts payable		(124,185	)		155,661
Accrued expenses and other current liabilities		417,951			(67,264	)
Right-of-use assets		—			7,858
Right-of-use liabilities		—			(7,858	)
Net cash (used in) operating activities		(1,635,541	)		(1,841,640	)
Cash flows from investing activities:
Purchases of property and equipment		(2,749	)		(107,934	)
Payment to establish joint venture		—			(30,898	)
Acquisition of business		—			(150,607	)
Net cash (used in) investing activities		(2,749	)		(289,439	)
Cash flows from financing activities:
Proceeds from issuance of notes payable		1,250,664			1,508,250
Repayments of notes payable		(683,757	)		(610,630	)
Repayments to related parties		—			(20,000	)
Repurchase of common stock		(60,000	)		—
Proceeds from sale of common stock		1,066,010			1,358,767
Net cash provided by financing activities		1,572,917			2,236,387
Foreign exchange impact on cash		4,413			—
Net (decrease) increase in cash		(60,960	)		105,308
Cash at beginning of period		104,024			74,503
Cash at end of period	$	43,064		$	179,811
		—
Supplemental disclosure of cash flow information:
Cash paid for interest	$	164,400		$	—
Cash paid for taxes	$	—		$	—
Non cash financing activities:
Common stock issued in settlement of convertible notes payable	$	759,054		$	1,740,874
Reclassification of derivative liabilities to additional paid-in capital	$	—		$	5,975,670
Common stock issued for subscriptions payables	$	234,633		$	650,000
Common stock issued to settle liabilities	$	—		$	8,623
Common stock issued for acquisition of business	$	500,000		$	1,617,501
Debt discount from issuance of warrants	$	152,587		$	—
Common stock issued for deferred finance costs	$	248,796		$	—

See the accompanying notes to these unaudited condensed consolidated financial statements

F-47 

MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

(unaudited)

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

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

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

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

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

On August 8, 2017, the Company formed H Smart, Inc., a Delaware corporation as a wholly owned subsidiary for the purpose of operating the hempSMART™ brand.

On January 11, 2021, the Company formed Hempsmart Global, Inc., a Nevada corporation, as a wholly owned subsidiary for the purpose of facilitating the Company’s Latin American joint ventures in Uruguay and Brazil.

On June 29, 2021, the Company acquired 100% of the capital stock of cDistro, Inc., a Nevada corporation, which is now a wholly owned subsidiary of the Company for the purpose of engaging in the distribution of hemp and CBD products to retail outlets in the North American market.

On July 20, 2021, the Company formed Salinas Diversified Ventures, Inc., a California corporation, as a wholly owned subsidiary for the purpose of consummating the asset purchase agreement with VBF Brands, Inc., see Note 6 for additional information.

On July 19, 2022, the Company formed H Smart, Inc., a California corporation, as a wholly owned subsidiary for the purpose of facilitating the sale and distribution of products in California.

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

The condensed consolidated balance sheet as of December 31, 2021 has been derived from audited financial statements set forth in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 16, 2022 (the “Annual Report”). Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of results that may be expected for the year ending December 31, 2022. These condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2021. 

NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, during the six months ended June 30, 2022, the Company incurred net losses from operations of $1,718,953 and used cash in operations of $1,635,541. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.

The Company's primary source of operating funds for the six months ended June 30, 2022 was from funds generated from the issuance of convertible and non-convertible debt, and sale of common stock. The Company has experienced net losses from operations since inception, but expects these conditions to improve in 2022 and beyond as it continues to develop its business; however, no assurance can be provided that the Company will not continue to experience losses in the future. The Company has stockholders' deficiencies as of June 30, 2022 and requires additional financing to fund future operations.

F-48 

The Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding; however, there can be no assurance that the Company will be successful in developing profitable operations or that it will be able to obtain financing on favorable terms, if at all. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern. 

NOTE 3 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements

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

Revenue Recognition

For annual reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers,” to supersede previous revenue recognition guidance under current GAAP. Revenue is now recognized in accordance with FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue Recognition (“ASC Topic 606”). The objective of the guidance is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. The core principle is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Two options were made available for implementation of the standard: the full retrospective approach or modified retrospective approach. The guidance became effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. The Company adopted ASC Topic 606 for its reporting period as of the year ended December 31, 2017, which made its implementation of ASC Topic 606 effective in the first quarter of 2018. The Company decided to implement the modified retrospective transition method to implement ASC Topic 606, with no restatement of the comparative periods presented. Using this transition method, the Company applied the new standards to all new contracts initiated on or after the effective date. The Company also decided to apply this method to any incomplete contracts it determined are subject to ASC Topic 606 prospectively. For the quarter ended June 30, 2022, there were no incomplete contracts. As is more fully discussed below, the Company is of the opinion that none of its contracts for services or products contain significant financing components that require revenue adjustment under ASC Topic 606.

Identification of Our Contracts with Customers 

Contracts included in the Company’s application of ASC Topic 606 for the six months ended June 30, 2022 consisted solely of sales of the Company’s hempSMART™ and cDistro products. With respect to the Company’s financial accounting, bookkeeping and/or real property management consulting services, to date no contracts have been entered into, and thus no reportable revenues have resulted for the fiscal years ended December 31, 2021 or 2020, or for the six months ended June 30, 2022.

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

F-49 

Determination of the Price in Our Sales Contracts

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

Allocation of the Transaction Price of Our Sales Contracts

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

Recognition of Revenue when the Performance Obligation is Satisfied

A performance obligation is satisfied when or as control of the good or service is transferred to the customer. ASC 606-10-20 defines control as “the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.” For performance obligations that are fulfilled at a point in time, revenue is recognized at the fulfillment of the performance obligation. As noted above, the Company’s single performance obligation sales contracts are singularly related to its promise to provide the hempSMART™ and cDistro products to the customer upon receipt of payment, and upon completion, allows the Company to realize revenue under its revenue recognition policy.

With respect to the Company’s offered financial accounting, bookkeeping and/or real property management consulting services, to date no contracts have been entered into, and thus no reportable revenues have resulted for the fiscal years ended December 31, 2021 and 2020 or for the six months ended June 30, 2022. 

Identifying the Performance Obligations in Our Sales Contracts

In analyzing the Company’s sales contracts, the Company’s policy is to identify the distinct performance obligations in a sales contract arrangement. In determining the Company’s performance obligations under its sales contracts, the Company considers that the terms and conditions of sales are explicitly outlined in its sales contracts and are so distinct and identifiable within the context of each sales contract, and so are not integrated with other goods, or constitute a modification or customization of other goods in the Company’s contracts, or are highly dependent or highly integrated with other goods in the Company’s sales contracts. Thus, the Company’s performance obligations are singularly related to its promise to provide the hempSMART™ and cDistro products upon receipt of payment. The Company offers an assurance warranty on its hempSMART™ and cDistro products that allows a customer to return any hempSMART™ and cDistro products within 30 days if not satisfied for any reason. Assurance warranties are not identifiable performance obligations since they may be elected at the whim of the customer for any reason. However, the Company does account for returns of purchase prices, if made.

Product Sales

Revenue from product sales, including delivery fees, is recognized when (1) an order is placed by the customer; (2) the price is fixed and determinable when the order is placed; (3) the customer is required to and concurrently pays for the product upon order; and (4) the product is shipped. The evaluation of the Company’s recognition of revenue after the adoption of ASC Topic 606 did not include any judgments or changes to judgments that affected the Company’s reporting of revenues since the Company’s product sales, both pre and post adoption of ASC Topic 606 were evaluated using the same standards as noted above, reflecting revenue recognition upon order, payment and shipment, which all occurs concurrently when the order is placed and paid for by the customer, and the product is shipped. Further, given the facts that (1) the Company’s customers exercise discretion in determining the timing of when they place their product order and (2) the price negotiated in the Company’s product sales is fixed and determinable at the time the customer places the order, and there is no delay in shipment, the Company is of the opinion that its product sales do not indicate or involve any significant customer financing that would materially change the amount of revenue recognized under the sales transaction, or would otherwise contain a significant financing component for the Company or the customer under ASC Topic 606.

F-50 

Consulting Services

The Company also offers professional services for financial accounting, bookkeeping and/or real property management consulting services based on consulting agreements. As of the date of this filing, the Company has not entered into any contracts for any financial accounting, bookkeeping and/or real property management consulting services that have generated reportable revenues as of the years ended December 31, 2021 or 2020 or the six months ended June 30, 2022. If and when the Company provides these professional services, it would intend and expect the arrangements to be entered into on an hourly fixed fee basis.

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

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

Use of Estimates

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

Cash

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

Concentrations of Credit Risk

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

 Accounts Receivable 

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

Allowance for Doubtful Accounts

Any charges to the allowance for doubtful accounts on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired. As of June 30, 2022 and December 31, 2021, allowance for doubtful accounts was $3,267 and $3,267, respectively.

Inventories

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

Cost of Sales 

Cost of sales is comprised of cost of product sold, packaging, and shipping costs. We experience substantial variations in our gross margins since our primary operating subsidiary, cDistro, obtains significant discounts from vendors for paying invoices early.

F-51 

Stock-Based Compensation - Employees

The Company accounts for the stock-based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of ASC 718-10-30. Pursuant to ASC 718-10-30-6, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  

The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.  

If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement based on sales to third parties or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of share options and similar instruments is estimated on the date of grant using a Binomial Option Model option-pricing valuation model.  The ranges of assumptions for inputs are as follows:

• Expected term of share options and similar instruments. The expected life of options and similar instruments represents the period of time the options and/or similar instruments are expected to be outstanding. Pursuant to ASC 718-10-50-2(f)(2)(i). the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments.  Pursuant to ASC 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term equal the quotient of the vesting term plus the original contractual term divided by two if (i) a company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) a company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) a company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. 

• Expected volatility of the entity’s shares and the method used to estimate it.  Pursuant to ASC 718-10-50-2(f)(2)(ii), a thinly-traded or non-public entity that uses the calculated value method shall disclose the reasons why it is not practicable for it to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. 

• Expected annual rate of quarterly dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.

• Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. 

F-52 

Generally, all forms of share-based payments, including stock options, warrants, restricted stock and stock appreciation rights are measured at their fair value on the grant date of the award based on the estimated number of awards that are ultimately expected to vest.

The expense resulting from share-based payments is recorded in general and administrative expense in the statements of operations.

Stock-Based Compensation – Non Employees

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation: Improvement to Nonemployee Share-Based Payment Accounting (“Topic 718”s). The ASU supersedes ASC 505-50, Equity-Based Payment to Non-Employment, and expands the scope of the Topic 718 to include stock-based payments granted to non-employees. Under the new guidance, the measurement date and performance and vesting conditions for stock-based payments to non-employees are aligned with those of employees, most notably aligning the award measurement date with the grant date of an award. The new guidance is required to be adopted using the modified retrospective transition approach. The Company adopted the new guidance effective January 1, 2019, and the adoption did not have a material impact on its financial statements and related disclosures.

The fair value of share options and similar instruments is estimated on the date of grant using a Binomial option-pricing valuation model.  The ranges of assumptions for inputs are as follows:

• Expected term of share options and similar instruments: Pursuant to ASC 718-10-50-2(f)(2)(i), the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and the holder’s expected exercise behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate the holder’s expected exercise behavior.  If a company is a newly formed corporation or shares of such company are thinly traded, the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as such company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.   

• Expected volatility of the entity’s shares and the method used to estimate it.  Pursuant to ASC 718-10-50-2(f)(2)(ii), a thinly-traded or non-public entity that uses the calculated value method shall disclose the reasons why it is not practicable for the company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. 

• Expected annual rate of quarterly dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. 

• Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.

Earnings per Share

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

Property and Equipment

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

F-53 

Goodwill and Intangible Assets

Goodwill is carried at cost and is not amortized. The Company tests goodwill for impairment on an annual basis at the end of each fiscal year, relying on a number of factors including operating results, business plans, economic projections, anticipated future cash flows and marketplace data. Company management uses its judgment in assessing whether goodwill has become impaired between annual impairment tests according to specifications set forth in ASC 350.

The Company recognizes an acquired intangible asset apart from goodwill whenever the intangible asset arises from contractual or other legal rights, or when it can be separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged, either individually or in combination with a related contract, asset or liability. Such intangibles are amortized over their useful lives. Impairment losses are recognized if the carrying amount of an intangible asset subject to amortization is not recoverable from expected future cash flows and its carrying amount exceeds its fair value. The following table summarizes the Company’s intangible assets:

	June 30, 2022			December 31, 2021
Trademarks (estimated 5-year life)	$	500,000		$	500,000
Licenses (estimated 10-year life)		600,000			600,000
Customer Relationships (estimated 5-year life)		100,000			100,000
Intangible assets, gross		1,200,000			1,200,000
Accumulated amortization		(180,000	)		(90,000	)
Intangible assets, net	$	1,020,000		$	1,110,000

We evaluate long-lived assets, including intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. The Company completed an evaluation of goodwill and intangible assets at June 30, 2022 and determined that no impairment was necessary.

Investments 

The Company follows ASC subtopic 321-10, Investments-Equity Securities (“ASC 321-10”) which requires the accounting for an equity security to be measured at fair value with changes in unrealized gains and losses are included in current period operations. Where an equity security is without a readily determinable fair value, the Company may elect to estimate its fair value at cost minus impairment plus or minus changes resulting from observable price changes (See Note 6).

Derivative Financial Instruments

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

The Company’s free-standing derivatives consisted of conversion options embedded within its issued convertible debt and warrants with anti-dilutive (reset) provisions. The Company evaluated these derivatives to assess their proper classification in the balance sheet using the applicable classification criteria enumerated under GAAP.  The Company determined that certain conversion and exercise options do not contain fixed settlement provisions.  The convertible notes contain a conversion feature and warrants have a reset provision such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands. As such, the Company was required to record the conversion feature and the reset provision which does not have fixed settlement provisions as liabilities and mark to market all such derivatives to fair value at the end of each reporting period.   

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

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2022 and December 31, 2021. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash, accounts payables and short-term notes because they are short term in nature.

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred. The Company charged to operations $96,938 and $168,780 for the six months ended June 30, 2022 and 2021, respectively, as advertising costs.

Segment Information

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

F-54 

The following table represents the Company’s hempSMART business for the six months ended June 30, 2022 and 2021:

hempSMART

STATEMENT OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

	For the Three Months Ended						6 Months Ended			For the Three Months Ended						6 Months Ended
	March 31, 2022			June 30, 2022			June 30, 2022			March 31, 2021			June 30, 2021			June 30, 2021
Revenues	$	11,914		$	10,119		$	22,033		$	34,872		$	16,537		$	51,409
Cost of Goods Sold		6,097			5,642			11,739			25,032			3,301			28,333
Gross Profit		5,817			4,476			10,293			9,840			13,326			23,076
Expense
Stock Based Compensation		—			—			—			—			-			-
Selling and Marketing		77,905			22,460			100,365			97,812			150,881			248,693
Payroll and Related expenses		60,274			28,531			88,805			53,947			54,864			108,811
Depreciation Expense		5,289			5,259			10,548			1,391			1,391			2,782
General and Admin Expenses		114,072			96,731			210,803			55,801			95,864			151,665
Total Expense		257,540			152,981			410,521			208,951			303,000			511,951
Net Loss from Operations	$	(251,723	)	$	(148,505	)	$	(400,228	)	$	(199,111	)	$	(289,764	)	$	(488,875	)

cDistro Inc.

STATEMENT OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

	For the Three Months Ended					6 Months Ended			For the Three Months Ended				6 Months Ended
	March 31, 2022			June 30, 2022		June 30, 2022			March 31, 2021		June 30, 2021		June 30, 2021
Revenues	$	526,908		$	226,009	$	752,917		$	-	$	343	$	343
Cost of Goods Sold		503,860			32,650		536,510			-		-		-
Gross Profit		23,048			193,359		216,407					343		343
Expense
Stock Based Compensation		—			—		—			—		-		-
Selling and Marketing		35			2,800		2,835			-		-		-
Payroll and Related expenses		54,000			70,000		124,000			-		-		-
Depreciation and amortization Expense		45,762			45,848		91,610			-		-		-
General and Admin Expenses		50,824			36,308		87,132			-		288		288
Total Expense		150,621			154,956		305,577			-		288		288
Net Income (Loss) from Operations	$	(127,573	)	$	38,403	$	(89,170	)	$	-	$	55	$	55

F-55 

Income Taxes

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

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of June 30, 2022 and 2021, the Company has not recorded any unrecognized tax benefits.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

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

Recently Issued Accounting Pronouncements Adopted 

Accounting for Income Taxes In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. ASU 2019-12 became effective for the Company in the first quarter of fiscal year 2021. The adoption of this standard did not have any impact on the Company’s condensed consolidated financial statements.

Equity Securities, Equity-method Investments and Certain Derivatives In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The guidance provides clarification of the interaction of rules for equity securities, the equity method of accounting and forward contracts and purchase options on certain types of securities. ASU 2020-01 became effective for the Company in the first quarter of 2021. The adoption of this standard did not have any impact on the Company’s condensed consolidated financial statements.

NOTE 4 – OPERATING LEASE

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

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

F-56 

The Company elected the package of practical expedients permitted under ASU 2018-11, Leases, allowing it to account for its existing operating lease that commenced before the adoption date as an operating lease under the new guidance without reassessing (i) whether the contract contains a lease; (ii) the classification of the lease; or, (iii) the accounting for indirect costs as defined in ASC 842.  

On May 31, 2021, the Company’s operating lease for its office space located at 1340 West Valley Parkway, Suite 205, Escondido, CA 92029 expired and, at that time, the Company fully amortized its right-of-use asset for such lease. On June 1, 2021, the Company entered into an office accommodation agreement whereby it may access a shared office space located at 633 West Fifth Street, Suite 2826, Los Angeles, CA 90071 on a month-to-month basis over a one-year term for a fee of $2,349 per month. In considering its qualitative disclosure obligations under ASC 842-20-50-3, the Company examined its office accommodation agreement for office space that has a fixed monthly fee with no variable payments and no options to extend. The office accommodation agreement creates no tenancy, leasehold, or other real property interest, other than a shared right-of-use. The office accommodation agreement does not provide for terms and conditions granting residual value guarantees by the Company, or any restrictions or covenants imposed for dividends or incurring additional financial obligations by the Company.

The Company determined under ASC 2018-11, Leases (Topic 842), due to the short-term nature of the office accommodation agreement, that such agreement met the criteria of ASC 842-20-25-2 and as such it is not necessary to capitalize the office accommodation agreement and fees will be recognized on a monthly straight-line basis. The adoption of this guidance resulted in no significant impact to the Company’s results of operations or cash flows.

NOTE 5 – PROPERTY, MACHINERY AND EQUIPMENT

Property and equipment as of June 30, 2022 and December 31, 2021 is summarized as follows:

	June 30, 2022			December 31, 2021
Computer equipment	$	31,855		$	30,155
Furniture and fixtures		14,327			13,278
Machinery		104,102			104,102
Subtotal		150,284			147,535
Less: accumulated depreciation		(38,106	)		(25,947	)
Property, machinery and equipment, net	$	112,178		$	121,588

Property, machinery and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. On May 20, 2021, the Company purchased a new cannabis extraction machine which is to be leased to a cannabis distributor and manufacturer called Lynwood-MCOA joint venture. This joint venture is between Cannabis Global Inc. and the Company and pertains to the licensed cannabis operations of Natural Plant Extract of California Inc. in the city of Lynwood, CA. The lease payments are scheduled to commence during the third quarter of 2021.

Depreciation expense was $12,158 and $2,653 for the six months ended June 30, 2022 and 2021, respectively. 

NOTE 6 – INVESTMENTS 

Bougainville Ventures, Inc. Joint Venture

On March 16, 2017, the Company entered into a joint venture agreement with Bougainville Ventures, Inc. (“Bougainville”), a Canadian corporation, to (i) jointly engage in the development and promotion of products in the legalized cannabis industry in Washington State; (ii) utilize Bougainville's high quality cannabis grow operations in the State of Washington, where it claimed to have an ownership interest in real property for use within the legalized cannabis industry; (iii) leverage Bougainville’s agreement with a I-502 Tier 3 license holder to grow cannabis on the site; provide technical and management services and resources including, but not limited to, sales and marketing, agricultural procedures, operations, security and monitoring, processing and delivery, branding, capital resources and financial management; and (iv) optimize collaborative business opportunities. The Company and Bougainville agreed to operate through BV-MCOA Management, LLC, a limited liability company organized in the State of Washington on May 17, 2017.

Pursuant to the joint venture agreement, the Company committed to raise not less than $1,000,000 to fund joint venture operations, based upon a funding schedule. The Company also committed to providing branding and systems for the representation of cannabis related products and derivatives comprised of management, marketing and various proprietary methodologies directly tailored to the cannabis industry.

The joint venture agreement provided that funding provided by the Company would contribute towards the joint venture’s ultimate purchase of the land consisting of a one-acre parcel located in Okanogan County, Washington, for joint venture operations.

F-57 

As disclosed in the Company’s Current Report on Form 8-K filed with the SEC on December 11, 2017, the Company did not comply with the funding schedule for the joint venture. On November 6, 2017, the Company and Bougainville amended the joint venture agreement to reduce the amount of the Company's commitment from $1,000,000 to $800,000, and also required the Company to issue Bougainville 15 million shares of the Company's restricted common stock. The Company completed its payments pursuant to the amended agreement on November 7, 2017, and on November 9, 2017, issued to Bougainville 15 million shares of restricted common stock. The amended agreement provided that Bougainville would deed the real property to the joint venture within thirty days of its receipt of payment.

Thereafter, the Company determined that Bougainville had no ownership interest in the property in Washington State, but rather was a party to a purchase agreement for real property that was in breach of contract for non-payment. Bougainville also did not possess an agreement with a Tier 3 I-502 license holder to grow marijuana on the property. Nonetheless, as a result of funding arranged for by the Company, Bougainville and an unrelated third party, Green Ventures Capital Corp., purchased the land, but did not deed the real property to the joint venture. Bougainville failed to pay delinquent property taxes to Okanogan County, and as a result, as further discussed below, to date, the property has not been deeded to the joint venture.

To clarify the respective contributions and roles of the parties, the Company offered to enter into good faith negotiations to revise and restate the joint venture agreement with Bougainville. The Company diligently attempted to communicate with Bougainville to enter into an amended and restated joint venture agreement, and efforts towards satisfying the conditions to complete the subdivision of the land by the Okanogan County Assessor. However, Bougainville failed to cooperate or communicate with the Company in good faith, and failed to pay the delinquent taxes on the real property that would allow for sub-division and the deeding of the real property to the joint venture.

On August 10, 2018, the Company advised its independent auditor that Bougainville did not cooperate or communicate with the Company regarding its requests for information concerning the audit of Bougainville’s receipt and expenditures of $800,000 contributed by the Company to the joint venture. Bougainville had a material obligation to do so under the joint venture agreement. The Company believes that some of the funds it paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds. Additionally, the Company believes that Bougainville misrepresented material facts in the joint venture agreement, as amended, including, but not limited to, Bougainville’s representations that: (i) it had an ownership interest in real property that was to be deeded to the joint venture; (ii) it had an agreement with a Tier 3 I-502 cannabis license holder to grow cannabis on the real property; and (iii) that clear title to the real property associated with the Tier 3 I-502 license would be deeded to the joint venture thirty days after the Company made its final funding contribution. As a result, on September 20, 2018, the Company filed a lawsuit against Bougainville, BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court, case number 18-2-0045324. The Company seeks legal and equitable relief for breach of contract, fraud, breach of fiduciary duty, conversion, recession of the joint venture agreement, an accounting, quiet title to real property in the name of the Company, the appointment of a receiver, the return to treasury of 15 million shares of restricted common stock issued by the Company to Bougainville and treble damages pursuant to the Consumer Protection Act. The Company has filed a lis pendens on the real property. The case is currently in litigation.

In connection with the joint venture agreement, the Company recorded a cash investment of $1,188,500 to the joint venture during 2017. This was comprised of a 49.5% ownership of BV-MCOA Management, LLC, and was accounted for using the equity method of accounting. The Company recorded an annual impairment in 2017 of $792,500, reflecting the Company’s percentage of ownership of the net book value of the investment. During 2018, the Company recorded equity losses of $37,673 and $11,043 for the quarters ended March 31, 2018 and June 30, 2018, respectively, and recorded an annual impairment of $285,986 for the year ended December 31, 2018, at which time the Company determined the investment to be fully impaired due to Bougainville’s breach of contract and resulting litigation, as discussed above.

F-58 

Natural Plant Extract

Natural Plant Extract of California & Subsidiaries Joint Venture; On April 15, 2019, the Company entered into a joint venture agreement with Natural Plant Extracts of California, Inc. and subsidiaries. The purpose of the joint venture was to utilize Natural Plant Extracts’ California and City cannabis licenses to jointly operate a business named “Viva Buds” to operate a licensed cannabis distribution service in California. In exchange for acquiring 20% of Natural Plant Extracts’ common stock, the Company agree to pay two million dollars and issue Natural Plant Extract one million dollars’ worth of the Company’s restricted common stock. As of February 3, 2020, the Company was in arrears in its payment obligations under the joint venture agreement, and the parties entered into a settlement and release of all claims terminating the joint venture. The parties agreed to reduce the Company’s equity ownership in Natural Plant Extracts from 20% to 5%. The Company also agreed to pay Natural Plant Extracts $85,000 and the balance of $56,085.15 paid in a convertible promissory note issued with terms allowing Natural Plant Extracts to convert the note into common stock at a 50% discount to the closing price of MCOA’s common stock as of the maturity date. As of the date of this filing, the Company satisfied its payment obligations under the settlement agreement.

Brazilian Joint Ventures

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

Pursuant to the Joint Venture Agreements, the Company acquired a 70% equity interest in both HempSmart Brazil and HempSmart Uruguay, with a minority 30% equity interest in both HempSmart Brazil and HempSmart Uruguay being held by newly formed entities controlled by Guerrero. Pursuant to the Joint Venture Agreements, the Company agreed to provide capital in the amount of $50,000 to both HempSmart Brazil and HempSmart Uruguay, for a total capital outlay obligation of $100,000. It is expected that the proceeds of the initial capital contribution will be used for contracting with third-party manufacturing facilities in Brazil and Uruguay and related infrastructure and employment of key personnel. As of June 30, 2022, the Company has not initiated the capital contribution but is pending to be done in the third quarter.

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

In addition, as majority partner, in the event a joint venture is frustrated in its intent or purpose, the Company may trigger a compulsory buy-sell procedure pursuant to which the Company could pursue a sale of all or substantially all of the joint venture. Subject to certain exceptions, the joint venture partners may not transfer their interests in HempSmart Brazil and HempSmart Uruguay.  

Cannabis Global, Inc. 

Joint Venture

On May 12, 2021, the Company entered into a joint venture agreement with Cannabis Global, Inc. (“Cannabis Global”) pursuant to which the Company will invest up to $250,000 into a newly formed entity (“MCOA Lynwood”) and Cannabis Global, through Natural Plant Extracts of California, Inc. (“Natural Plant”), an entity in which Cannabis Global owns a majority interest, will operate a regulated and licensed laboratory to manufacture various cannabis products in the State of California. As of June 30, 2022, the Company has invested $115,000.

Share Exchange

On September 30, 2020, the Company entered into a securities exchange agreement with Cannabis Global pursuant to which the Company issued 650,000,000 shares of its common stock to Cannabis Global in exchange for 7,222,222 shares of Cannabis Global common stock. In addition, the Company and Cannabis Global entered into a lock-up leak-out agreement which contains certain restrictions with respect to the sales of such securities.

F-59 

Eco Innovation Group Inc. – Share Exchange

On February 26, 2021, the Company entered into a Share Exchange Agreement with Eco Innovation Group, Inc., a Nevada corporation quoted on OTC Markets Pink (“ECOX”) dated February 26, 2021, to acquire the number of shares of ECOX’s common stock, par value $0.001, equal in value to $650,000 based on the per-share price of $0.06, in exchange for the number of shares of Company common stock, par value $0.001, equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date (the “Share Exchange Agreement”). For both parties, the Share Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event that a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant to the Share Exchange Agreement to fall below $650,000. As of June 30, 2021, the Company owed ECOX and additional 64,621,893 with an estimated value of $394,194 related to the ECOX Share Exchange Agreement. The investment balance is $650,000, with a liability of $394,194 included in subscriptions payable related to the value of the additional shares to be issued. The Company recognized a loss of $394,194 related to the shares to be issued.

Complementary to the Share Exchange Agreement, the Company and ECOX entered into a Lock-Up Agreement dated February 26, 2021 (the “Lock-Up Agreement”), providing that the shares of common stock acquired pursuant to the Share Exchange Agreement shall be subject to a lock-up period preventing its sale for a period of 12 months following issuance and limiting the subsequent sale to aggregate maximum sale value of $20,000 per week, or $80,000 per month.

For a period of two years following the Effective Date, at the closing of each fiscal quarter, should the per-share closing price of the common shares of the same class as the Shares or the Exchange Shares, as quoted by the OTC Markets for the last day of the relevant fiscal quarter, decrease below original issuance value with the effect that the aggregate value of the Shares or the Exchange Shares at the fiscal quarter close would be lower than $650,000, then either MCOA, in the case of the Shares, or ECOX, in the case of the Exchange Shares, shall issue the other party the number of shares of common stock necessary to cause the aggregate value of the Shares or the Exchange Shares, as applicable, be $650,000 as of the end of the relevant fiscal quarter. The parties shall irrevocably instruct their respective transfer agents to reserve and maintain authorized and unissued common stock in a reserve account designated for the purpose of issuing such shares pursuant to this share exchange adjustment provision. Such share reserve accounts shall be maintained with a number of authorized and unissued common stock not less than three (3) times the number of Shares or Exchange Shares, as the case may be, that are issued pursuant to the Share Exchange Closing.

On February 24, 2021, the closing price of the Company’s common stock was $0.0155, so that the number of shares of Company common stock issuable to ECOX under the Share Exchange Agreement is 41,935,484. As a result of the transactions pursuant to the Share Exchange Agreement, the Company will have 4,179,073,945 shares of common stock outstanding, with the shares issued to ECOX pursuant to the Share Exchange Agreement representing 1.00% of the Company’s outstanding shares.

For the quarter ended June 30, 2021, the Company recorded a Loss on Equity Investment and corresponding increase in Subscriptions Payable of $394,194 to address the decline in the Company's stock price from the original issuance price of $.0155.

Asset Purchase Agreement with VBF Brands, Inc.

On October 6, 2021, the Company, through its wholly owned subsidiary Salinas Diversified Ventures, Inc., a California corporation, entered into an Asset Purchase Agreement, Management Services Agreement, Cooperation Agreement and Employment Agreement with VBF Brands, Inc., a California corporation (“VBF”), a wholly owned subsidiary of Sunset Island Group, Inc., a Colorado corporation (“SIGO”). VBF and SIGO agreed to transfer to the Company all of VBF’s outstanding stock to the Company and appointed our CEO and CFO Jesus Quintero as President of VBF.

F-60 

VBF owns various fixed assets including machinery and equipment, a lease for a 10,000 square foot facility located at 20420 Spence Road, Salinas, California, 93908, leasehold improvements, good-will, inventory, tradenames including “VBF Brands,” trade secrets, intellectual property, and other tangible and intangible properties, including licenses issued by the City of Salinas, County of Monterey, and the State of California to operate a licensed cannabis nursery, cultivation facility, and operations for the manufacturing and distribution of cannabis and cannabis products.

VBF and SIGO agreed to sell and transfer to the Company all of VBF’s outstanding stock, and, by virtue of the Management Services Agreement, appoint Mr. Jesus Quintero as President of VBF, vesting management and control of VBF’s licensed cannabis operations in the Company. Concurrently, VBF and Livacich entered into a Cooperation Agreement, whereby VBF and Livacich agreed to cooperate to facilitate the transfer of ownership of VBF, which includes licenses issued by the City of Salinas, County of Monterey, and the State of California, to operate a cannabis nursery, cultivation facility and manufacturing and distribution operations to the Company. The Company also agreed to retain Livacich as Chief Executive Officer for a term of two years and agreed to compensate her with a salary including a signing cash bonus of $250,000, and a $250,000 performance cash bonus payable after six months after the Effective Date. The bonus is conditioned upon Livacich meeting an agreed to “Net Revenue” target of one million dollars ($1,000,000) from VBF’s operations during the six-month period after closing of the Asset Purchase Agreement, and her compliance with the terms and conditions of this Asset Purchase Agreement, the Management Services Agreement and the Cooperation Agreement.

As consideration for the transaction, the Company agreed to assume two secured convertible promissory notes issued by SIGO to St. George Investments, LLC, a Utah limited liability company (“St. George”) (the “SIGO Notes”). The first note was issued December 8, 2017, in the original face amount of $170,000.00, and the second was issued February 13, 2018, in the original face amount of $4,245,000.00. SIGO also issued warrants to St. George to purchase common shares in SIGO, and fifty (50) shares of SIGO’s preferred stock. St. George agreed to cancel the warrants and preferred shares upon the Company’s assumption of the SIGO Notes.

Under the Asset Purchase Agreement, the closing is conditioned upon certain conditions precedent, specifically (i) VBF and SIGO’s full corporate authorization, consent and execution of this Agreement; (ii) VBF’s sale to MCOA of 100% of the issued and outstanding shares of VBF; (iii) full corporate authorization, consent compliance with and execution of the Management Services Agreement and Cooperation Agreement; (iv) SIGO’s disclosure of the Agreement on Form 8-K with the Securities and Exchange Commission; (v) full cooperation in MCOA’s financial auditing of VBF in accordance with ASC 805, including providing unrestricted access to all VBF corporate and financial records and providing all necessary cooperation with VBF financial personnel; (vi) full cooperation in aiding and assisting Buyer with its change of ownership applications with the relevant licensing authorities; (vii) the warranty of truthful representations and execution of and compliance with the terms and conditions of the Executive Employment Agreement, Management Services Agreement and the Cooperation Agreement.

As of the date of this filing, the conditions precedent to the closing of the Asset Purchase Agreement remain in the process of implementation, so that the Asset Purchase Agreement closing has not yet occurred pursuant to its terms. Legal counsel for MCOA is currently in the process of working with VBF, Salinas Diversified Ventures, and the relevant state and local governments to effect the change of control and license transfers necessary to close the Asset Purchase Agreement. During the three months ended June 30, 2022, based on the remote likelihood of the Company closing this acquisition, the Company recognized a loss of $2,020,982 related to the preliminary fair value of the business that was recognized as an other current asset during the year ended December 31, 2021 when the Company assumed the convertible promissory notes from SIGO with St. George.

F-61 

MARIJUANA COMPANY OF AMERICA, INC.

INVESTMENT ROLL-FORWARD

AS OF JUNE 30, 2022

INVESTMENTS
	TOTAL			Consolidated			Cannabis Global						Hempsmart		Lynwood		Natural Plant			Salinas Ventures		VBF
	INVESTMENTS			Eliminations			Inc.		ECOX		C'Distro		Brazil		JV		Extract			Holding		BRANDS		Vivabuds
Investments made during quarter ended 03-31-19		0
Quarter 03-31-19 equity method Loss		0
Unrealized gains on trading securities - quarter ended 03-31-19		-			-			-		-		-		-		-		-			-		-		-
Balance @03-31-19	$	0		$	0		$	0	$	0	$	0	$	0	$	0	$	0		$	0	$	0	$	0
Investments made during quarter ended 06-30-19	$	3,073,588															$	3,000,000						$	73,588
Quarter 06-30-19 equity method Income (Loss)	($	29,414	)														($	6,291	)					($	23,123	)
Unrealized gains on trading securities - quarter ended 06-30-19	$	0			-			-		-		-		-		-		-			-		-		-
Balance @06-30-19	$	3,044,174		$	0		$	0	$	0	$	0	$	0	$	0	$	2,993,709		$	0	$	0	$	50,465
Investments made during quarter ended 09-30-19	$	186,263																						$	186,263
Quarter 09-30-19 equity method Income (Loss)	($	139,926	)														($	94,987	)					($	44,939	)
Sale of trading securities during quarter ended 09-30-19		-			-			-		-		-		-		-		-			-		-		-
Unrealized gains on trading securities - quarter ended 09-30-19	$	0
Balance @09-30-19	$	3,090,511		$	0		$	0	$	0	$	0	$	0	$	0	$	2,898,722		$	0	$	0	$	191,789
Investments made during quarter ended 12-31-19	$	129,812																						$	129,812
Quarter 12-31-19 equity method Income (Loss)	$	(102,944	)														$	(23,865	)					$	(79,079	)
Reversal of Equity method Loss for 2019	$	272,285															$	125,143						$	147,142
Impairment of investment in 2019	$	(2,306,085	)														$	(2,306,085	)					$	0
Loss on disposition of investment	$	(389,664	)																					$	(389,664	)
Sale of trading securities during quarter ended 12-31-19	$	0
Unrealized gains on trading securities - quarter ended 12-31-19	$	0			-			-		-		-		-		-		-			-		-		-
Balance @12-31-19	$	693,915		$	0		$	0	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Equity Loss for Quarter ended 03-31-20		0
Recognize Joint venture liabilities per JV agreement @03-31-20		0
Impairment of Equity Loss for Quarter ended 03-31-20		0
Unrealized gains on trading securities - quarter ended 03-31-19		-			-			-		-		-		-		-		-			-		-		-
Balance @03-31-20	$	693,915		$	0		$	0	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Equity Loss for Quarter ended 06-30-20		0
Impairment of Equity Loss for Quarter ended 06-30-20		0
Sales of of trading securities - quarter ended 06-30-20		-			-			-		-		-		-		-		-			-		-		-
Balance @06-30-20	$	693,915		$	0		$	0	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Global Hemp Group trading securities issued		650,000					$	650,000
Investment in Cannabis Global		0			-			-		-		-		-		-		-			-		-		-
Balance @09-30-20	$	1,343,915		$	0		$	650,000	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Unrealized gain on Global Hemp Group securities - 4th Quarter 2020		-			-			-		-		-		-		-		-			-		-		-
Unrealized gains on Cannabis Global Inc securities - 4th Quarter 2020		208,086					$	208,086
Balance @12-31-20	$	1,552,001		$	0		$	858,086	$	0	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Investment in ECOX		650,000			-			-	$	650,000		-		-		-		-			-		-		-
Balance @03-31-21	$	2,202,001		$	0		$	858,086	$	650,000	$	0	$	0	$	0	$	693,915		$	0	$	0	$	0
Investments made during quarter ended 06-30-21		30,898													$	30,898
Unrealized gain on Global Hemp Group securities - 2nd quarter 2021		-			-			-		-		-		-		-		-			-		-		-
Balance @06-30-21	$	2,232,899		$	0		$	858,086	$	650,000	$	0	$	0	$	30,898	$	693,915		$	0	$	0	$	0
Investments made during quarter ended 09-30-21		68,200					$	68,000												$	200
Sale of short-term investments in quarter ended 09-30-21		0			-			-		-		-		-		-		-			-		-		-
Balance @09-30-21	$	2,301,099		$	0		$	926,086	$	650,000	$	0	$	0	$	30,898	$	693,915		$	200	$	0	$	0
Investments made during quarter ended 12-31-21		5,087,079									$	2,975,174	$	90,923								$	2,020,982
Consolidated Eliminations @12/31/21		(5,060,821	)		(5,060,821	)		-		-		-		-		-		-			-		-		-
Balance @12-31-21	$	2,327,357		($	5,060,821	)	$	926,086	$	650,000	$	2,975,174	$	90,923	$	30,898	$	693,915		$	200	$	2,020,982	$	0
Investments made during quarter ended 03-31-22		(26,458	)		(26,458	)		-		-		-		-		-		-			-		-		-
Balance @03-31-22	$	2,300,899		($	5,087,279	)	$	926,086	$	650,000	$	2,975,174	$	90,923	$	30,898	$	693,915		$	200	$	2,020,982	$	0
Investments made during quarter ended 06-30-22		20,976			-			-		-		-	$	20,976		-		-			-		-		-
Balance @06-30-22	$	2,321,875		($	5,087,279	)	$	926,086	$	650,000	$	2,975,174	$	111,899	$	30,898	$	693,915		$	200	$	2,020,982	$	0

F-62 

NOTE 7 – NOTES PAYABLE, RELATED PARTY

As of June 30, 2022 and December 31, 2021, the Company’s officers and directors have provided advances and incurred expenses on behalf of the Company as such have been evidenced by the issuance of notes to such officers and directors. The notes are unsecured, due on demand and accrue interest at a rate of 5% per annum. The balance due to Notes Payable Related Party as of June 30, 2022 and December 31, 2021 was $20,000 and $20,000 respectively. These notes are payable to the estate of Charles Larsen.

NOTE 8 – CONVERTIBLE NOTES PAYABLE

During the six months ended June 30, 2022, the Company issued an aggregate of 1,303,931,600 shares of its common stock in settlement of issued convertible notes payable and accrued interest.  

For the six months ended June 30, 2022 and June 30, 2021, the Company recorded amortization of debt discounts of $1,370,366 and $744,783, respectively, as a charge to interest expense.

Convertible notes payable are comprised of the following:

	June 30,			December 31,
	2022			2021
Lender	(Unaudited)			(Audited)
Convertible note payable – Labrys	$	—		$	99,975
Convertible note payable – FF Global Opportunities fund		—			243,750
Convertible note payable - Crown Bridge Partners		—			35,000
Convertible note payable – Beach Labs		458,334			583,333
Convertible note payable - GS Capital Partners LLC		70,000			82,000
Convertible note payable – Pinnacle Consulting Services, Inc.		30,000			30,000
Convertible note payable – Geneva Roth		—			97,939
Convertible note payable – Dutchess Capital		110,000			60,709
Convertible note payable – Coventry		68,572			100,000
Convertible note payable - GW Holdings		45,000			120,750
Convertible note payable – Sixth Street Lending		56,444			60,737
Convertible note payable – Fourth Man LLC		60,000			—
Convertible note payable – 1800 Diagonal Lending LLC		137,037			—
Convertible note payable – Mast Hill Fund		550,000			—
Convertible note payable - St. George		4,048,878			3,914,878
Total		5,589,265			5,429,071
Less debt discounts		(1,055,819	)		(1,659,622	)
Net		4,533,446			3,769,449
Less current portion		(4,533,446	)		(3,769,449	)
Long term portion	$	—		$	—

Convertible Note Payable-Mast Hill Fund

In May 2022, the Company issued a convertible promissory note in the aggregate principal amount of $550,000 to Mast Hill Fund, L.P (“Mast Hill”). The promissory note accrues interest at 12% per annum, is due one year from the issuance date and includes an original issuance discount in the aggregate amount of $55,000. The Company also paid $39,700 in deferred financing fees and received $455,300 of net proceeds. In the event of default, as defined in the agreement, the note is convertible at a conversion price of $0.0004 per share. The Company also issued a five-year warrants to purchase up to 200,000,000 shares of its common stock to Mast Hill, at an exercise price of $0.0004 per share. The aggregate debt discount of $391,835 is being amortized to interest expense over the respective terms of the note.

The Company is prohibited from effecting a conversion of the note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note. The Company is prohibited from effecting an exercise of the warrant to the extent that, as a result of such exercise, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon exercise of the note.

As of June 30, 2022 the Company owed an aggregate of $550,000 of principal. As of June 30, 2022, the Company owed $7,486 in accrued interest.

Convertible Note Payable-Labrys

In June 2021, the Company issued a convertible promissory note in the aggregate principal amount of $537,500 to Labrys Funds, LP (“Labrys”). The promissory note accrues interest at 12% per annum, is due one year from the issuance date and includes an original issuance discount in the aggregate amount of $53,750. The Company also paid $33,750 in deferred financing fees and received $450,000 of net proceeds. The note is convertible at any time at a conversion price of $0.005 per share. The Company also issued a five-year warrants to purchase up to 76,349,431 shares of its common stock to Labrys, at an exercise price of $0.00704 per share. In addition, the Company issued five-year warrants to purchase up to 76,349,431 shares of its common stock to an investment banker for services, which warrants have an exercise price of $0.008448 per share. The aggregate debt discount of $533,526 is being amortized to interest expense over the respective terms of the note.

The Company is prohibited from effecting a conversion of the note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note. The Company is prohibited from effecting an exercise of the warrant to the extent that, as a result of such exercise, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon exercise of the note.

As of June 30, 2022 and December 31, 2021, the Company owed an aggregate of $0 and $99,975 of principal after the note was converted into common stock in full. As of June 30, 2022, the Company owed $0 in accrued interest.

F-63 

Convertible Notes Payable-Crown Bridge Partners

From October 1 through December 31, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $225,000 to Crown Bridge Partners LLC (“Crown Bridge”). The promissory notes accrue interest at a rate of 10% per annum, were due one year from the respective issuance date and include an original issuance discount in aggregate amount of $22,500. Interest accrues from the issuance date, but interest shall not become payable until the notes becomes payable. The notes are convertible at any time at a conversion price equal to 60% of the market price of the Company’s common stock, defined as the lowest trading price during the 15-trading-day period prior to the conversion date. Upon the issuance of these convertible notes, the Company determined that the features associated with the embedded conversion option embedded in the debentures should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares of common stock would be available to settle all potential future conversion transactions. As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $88,674 was being amortized to interest expense over the respective terms of the notes. The Company also issued a warrants to purchase up to 519,230 shares of the Company’s common stock with an initial exercise price of $0.26, with reset provisions based on issuances of common stock subsequent to the issuance date. Due to the reset provision, the exercise option of these warrants is also accounted for as a derivative liability. See Note 10.

The Company has the right to prepay the notes for an amount ranging from 125% to 140% multiplied by the outstanding balance (all principal and accrued interest) depending on the prepayment period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note.

During the three months ended June 30, 2022, the Company repaid Crown Bridge $50,000 in full settlement of the outstanding note. As of June 30, 2022 and December 31, 2021, the Company owed an aggregate of $0 and $35,000 of principal, respectively, on the notes.

Convertible Notes Payable-GS Capital Partners LLC

In August 2021, the Company issued convertible promissory notes in the aggregate principal amount of $82,000 to GS Capital. The promissory notes bear interest at 10% per annum and is due one year from the respective issuance date and include an original issuance discount in aggregate of $7,000. In connection with the Note, the Company issued 5,000,000 warrants to purchase common stock with a fair value of $18,086, which was recorded as a debt discount. During the three months ended March 31, 2022, the Company issued 216,820,755 shares of common stock for the full settlement of the note along with the accrued interest on the note.

The Holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 62% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 52% instead of 62% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor).

As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $25,086 is being amortized to interest expense over the respective terms of the notes.

In January 2022, the Company issued convertible promissory notes in the aggregate principal amount of $105,000 to GS Capital. The promissory notes bear interest at 10% per annum and is due one year from the respective issuance date and includes an original issuance discount in aggregate of $10,000.

The Holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to $0.001. To the extent the Company’s Common Stock closes below $0.001 for three consecutive days, the conversion price will be reset to $0.005.

In February 2022, the Company issued a convertible promissory note in the aggregate principal amount of $70,000 to GS Capital. The promissory notes bear interest at 8% per annum and is due one year from the respective issuance date and includes an original issuance discount in aggregate of $20,000.

The Holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to $0.0008.

As of June 30, 2022 and December 31, 2021, the Company owed an aggregate of $70,000 and $82,000 of principal, respectively. As of June 30, 2022, the Company owed accrued interest of $2,302 on these convertible promissory notes. During the six months ended June 30, 2022, the lender converted $82,000 of principal and $46,112 of accrued interest into common stock, and the Company repaid $105,000 of principal with cash.

F-64 

Convertible Notes Payable-St. George Investments

In January and March 2021, the Company entered into three convertible promissory notes in the aggregate amount of $567,500 of principal with Bucktown Capital LLC, entity controlled by the owners of St. George. The Company received net proceeds of $535,000. The notes mature in January and March 2022 and bear interest at 8% or 22% in the event of default. The notes are convertible at the lender’s option at any time at a fixed price of $0.002 per common share, subject to normal adjustment for common stock splits. As a result of default, the company recorded and additional $135,000 of principal on the note as interest expense during the three months ended March 31, 2022.

Effective October 6, 2021, the Company issued a secured convertible promissory note in the amount of $3,492,378 with Chicago Ventures. The Company received cash proceeds of $1,100,000 and included an original issue discount of $574,916 and paid legal fees of $10,000. This note agreement was assumed by the Company as part of the VBF Acquisition discussed in Note 13 and includes $1,770,982 which reflects the initial consideration towards the future closing of the VBF Acquisition. The note bears interest at 8% and is due upon maturity on October 6, 2023. The note is convertible at a fixed price of $0.002 per share. In the event of default as defined in the agreement, the lender has the right to convertible principal and accrued interest at 70% of the lowest closing trading price over the 10 days preceding the conversion notice.

In March 2022, the Company issued a convertible promissory note in the amount of $266,500 of principal with Bucktown, Capital LLC. The Company received net proceeds of $240,000 after and original issue discount of $24,000 and fees of $2,500. The note matures in March 2023 and bear interest at 8% or 22% in the event of default. The note is convertible at the lender’s option at any time at a fixed price of $0.001 per common share, subject to normal adjustment for common stock splits.

In May 2022, the Company issued a convertible promissory note in the amount of $57,500 of principal with Bucktown, Capital LLC. The Company received net proceeds of $50,000 after and original issue discount and fees of $7,500. The note matures in February 2023 and bear interest at 8% or 22% in the event of default. The note is convertible at the lender’s option at any time at a fixed price of $0.001 per common share, subject to normal adjustment for common stock splits.

 As of June 30, 2022 and December 31, 2021, the Company owed $4,048,878 and $3,914,878 of principal, respectively. As of June 30, 2022, the Company owed accrued interest of $248,341 on these convertible promissory notes. During the six months ended June 30, 2022, the lender converted $325,000 of principal into common stock.

Convertible Notes Payable - Robert L. Hymers III

On December 27, 2021, the Company issued convertible promissory notes in the aggregate principal amount of $30,000 to Pinnacle Consulting Services, Inc. (“Pinnacle”). The promissory note bears interest at 12.5% per annum, and is due one year from the respective issuance date of the note along with accrued and unpaid interest and includes an original issue discount (“OID”) of $5,000. Principal and interest to be payable as provided below on that date which is one year from the date of issuance (the “Maturity Date”).

For so long as there remains any amount due hereunder, the Holder shall have the option to convert all or any portion of the unpaid principal amount of this Note, plus accrued interest (together with the unpaid principal amount, the “Converted Amount”), into shares of the Company’s common stock. The conversion price (the “Conversion Price”) shall be equal to a $0.006. The Conversion price, and any other economic terms will be adjusted on a ratchet basis if the Company offers a more favorable conversion or stock issuance price, prepayment rate, interest rate, additional securities, look back period or more favorable terms to another party for any financings while this note is in effect.

The aggregate debt discount of $5,000 is being amortized to interest expense over the respective term of the note.

As of June 30, 2022, and December 31, 2021, the Company owed an aggregate of $30,000 and $30,000 respectively. As of June 30, 2022, the Company owed accrued interest of $948 on this convertible promissory note.

F-65 

Convertible Note Payable – GW Holdings Group

On January 6, 2020, the Company entered into a convertible promissory note in the principal amount of $57,750 with GW Holdings Group, LLC, a New York limited liability company (“GW”). GW has the option, beginning on the six month anniversary of the issuance date of, to convert all or any amount of the principal amountof the note then outstanding together with any accrued interest thereon into shares of the Company's common stock at a conversion price equal to a 40% discount of the lowest trading price for fifteen trading days prior to the date of conversion. The note bears interest at a rate of 10% per annum and include a $5,250 such that the price of the note was $57,750. During the three months ended March 31, 2022, $75,750 of principal and $4,449 of accrued interest on the notes was converted into 100,248,801 shares of common stock.

As of June 30, 2022 and December 31, 2021, the Company owed principal of $0 and $120,750, respectively. As of June 30, 2022, the Company owed $0 in accrued interest. During the six months ended June 30, 2022, the lender converted $75,750 of principal and $4,449 of accrued interest into common stock, and the Company repaid $45,000 of principal and $27,068 of accrued interest with cash.

Convertible Note Payable- Beach Labs

On November 24, 2021, the Company issued a convertible promissory note in the aggregate principal amount of $625,000 to Beach Labs in connection with the modification of the cDistro acquisition agreement discussion in Note 13. The promissory note accrues interest at 10% per annum and is due four years from the issuance date.

The holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 70% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer.

The Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $625,000 is being amortized to interest expense over the respective terms of the notes.

As of June 30, 2022, and December 31, 2021, the Company owed principal of $458,334 and $583,333, respectively. As of June 30, 2022, the Company owed $43,502 in accrued interest. During the six months ended June 30, 2022, the Company repaid $125,000 of this convertible note payable in cash.

Convertible Note Payable- Sixth Street Lending

On November 16, 2021, the Company issued a promissory note in the aggregate principal amount of $60,737 to Sixth Street Lending (“SSL”). The promissory note has a one-time interest charge of 7,896 and is due one year from the issuance date. The Company paid $10,738 in deferred financing fees and received $50,000 of net proceeds. Upon default, the note is convertible at a price ("Conversion Price") for each share of Common Stock equal to 73% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the five prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer.

On January 10, 2022, the Company issued a promissory note in the aggregate principal amount of $43,750 to SSL. The promissory note bears interest at a rate of 8% and is due one year from the issuance date. The Company paid $3,750 in deferred financing fees and received $40,000 of net proceeds. The note is convertible at a price ("Conversion Price") for each share of Common Stock equal to $.0055 for the first 180 days and then at 65% of the average of the two lowest trading prices of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer.

As of June 30, 2022, and December 31, 2021, the Company owed principal of $56,444 and $60,737, respectively. As of June 30, 2022, the Company owed $9,558 in accrued interest. During the six months ended June 30, 2022, the Company repaid $48,043 of principal with cash.

Convertible Note Payable- Coventry

On December 29, 2021, the Company issued a promissory note in the aggregate principal amount of $100,000 to Coventry (“Coventry”). The promissory note has a one-time interest charge of 10,000 and is due one year from the issuance date. The Company paid $20,000 in deferred financing fees and received $80,000 of net proceeds. The note is convertible at a price ("Conversion Price") for each share of Common Stock equal to 90% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the five prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer. In January 2022, the Company issued 10,000,000 shares of common stock for deferred financing fees with a value of $13,000 which was recorded as a debt discount to be amortized over the remaining term of the note.

As of June 30, 2022 and December 31, 2021, the Company owed an aggregate of $68,572 and $100,000 of principal. As of June 30, 2022, the Company owed $10,000 in accrued interest. During the six months ended June 30, 2022, the Company repaid $31,428 of principal with cash.

F-66 

Convertible Note Payable-Firstfire

In July 2021, the Company issued a convertible promissory note in the aggregate principal amount of $268,750 to Firstfire Global Opportunities Fund LLC (“Firstfire”). The promissory note accrues interest at 12% per annum, is due one year from the issuance date and includes an original issuance discount and financing fees in the aggregate amount of $44,888 and received $200,963 of net proceeds. The note is convertible at any time at a conversion price of $0.005 per share. The Company also issued a five-year warrants to purchase up to 38,174,715 shares of its common stock to Firstfire, at an exercise price of $0.00704 per share. The aggregate debt discount of $245,851 is being amortized to interest expense over the respective terms of the note.

The Company is prohibited from effecting a conversion of the note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note. The Company is prohibited from effecting an exercise of the warrant to the extent that, as a result of such exercise, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon exercise of the note.

As of June 30, 2022 and December 31, 2021, the Company owed an aggregate of $0 and $243,750 of principal. As of June 30, 2022, the Company owed $0 in accrued interest. During the six months ended June 30, 2022, the lender converted $183,750 of principal and $32,250 of accrued interest into common stock, and the Company repaid $60,000 of principal with cash.

Convertible Note Payable- Dutchess Capital Growth Fund LP

On May 25, 2021, the Company issued a convertible promissory note in the aggregate principal amount of $135,000 to Dutchess Capital Growth Fund LP (“Dutchess”). The promissory note accrues interest at 8% per annum, is due one year from the issuance date. The Company paid $13,750 in deferred financing fees and received $121,250 of net proceeds.

Beginning six months after date of issue, the holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 55% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer.

The Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $135,000 is being amortized to interest expense over the respective terms of the notes.

On May 5, 2022, the Company issued a convertible promissory note in the aggregate amount of $110,000 to Dutchess. The promissory note accrues interest at 10% per annum, is due one year from the issuance date. The Company paid $10,000 in deferred financing fees and received $100,000 of net proceeds. The Company also issued 87,500,00 shares of common stock to the lender as a deferred finance cost, with a fair value of $61,250. The shares and deferred financing fees are being amortized through the maturity date of the note.

In the event of default on the note by the Company, the holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 80% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the 25 prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer.

As of June 30, 2022 and December 31, 2021, the Company owed an aggregate of $110,000 and $60,709 of principal. As of June 30, 2022, the Company owed $11,000 in accrued interest. During the six months ended June 30, 2022, the lender converted $14,302 of principal and $815 into common stock, and the Company repaid $46,407 of principal and $28,594 of accrued interest with cash.

Convertible Note Payable- Geneva Roth Holdings

On July 28, 2021, the Company issued a promissory note in the aggregate principal amount of $169,125 to Geneva Roth Holdings (“Geneva”). The promissory note accrues interest at 10% per annum, is due one year from the issuance date. The Company paid $13,750 in deferred financing fees and received $153,750 of net proceeds. The Company also issued five-year warrants to purchase up to 10,147,500 shares of its common stock to Geneva, at an exercise price of $0.001 per share. The aggregate debt discount of $67,253 is being amortized to interest expense over the respective terms of the note.

As of June 30, 2022 and December 31, 2021, the Company owed an aggregate of $0 and $97,939 of principal. As of June 30, 2022, the Company owed $0 in accrued interest. The principal of $97,939 and accrued interest of $52,639 during the six months ended June 30, 2022.

F-67 

Convertible Note Payable - Fourth Man LLC

In January 2022, the Company issued a convertible promissory note in the aggregate principal amount of $60,000 to Fourth Man, LLC (“Fourth Man”). The promissory note accrues interest at 12% per annum, is due one year from the issuance date and includes an original issuance discount in the aggregate amount of $6,000. The Company also paid $6,240 in deferred financing fees and received $47,760 of net proceeds. The note is convertible at any time at a conversion price of $0.0006 per share. The Company also issued 25,000,000 shares of its common stock for deferred financing fee. The aggregate debt discount of $42,240 is being amortized to interest expense over the respective terms of the note.

As of June 30, 2022, the Company owed an aggregate of $60,000 of principal. As of June 30, 2022, the Company owed $9,020 in accrued interest.

Convertible Note Payable- 1800 Diagonal Lending LLC

On May 18, 2022, the Company issued a promissory note in the aggregate principal amount of $137,037 to 1800 Diagonal Lending LLC (“DLL”). The promissory note has a one-time interest charge of $16,444 and is due one year from the issuance date, and had an original issue discount of $18,433. The Company paid $3,750 in deferred financing fees and received $100,000 of net proceeds. Upon default, the note is convertible at a price ("Conversion Price") for each share of Common Stock equal to 73% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the five prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer.

As of June 30, 2022, and December 31, 2021, the Company owed principal of $56,444 and $60,738, respectively. As of June 30, 2022, the Company owed $9,558 in accrued interest.

Revenue share agreement – Money Well Group

In March 2022, the Company entered into a revenue share in the aggregate principal amount of $89,940 to Money Well Group (“Money Well”). The agreement requires daily payments in the amount of $1,285 and includes an original issuance discount in the aggregate amount of $35,940 and received $54,000 of net proceeds. The aggregate debt discount of $35,940 is being amortized to interest expense over the respective terms of the note. The note was fully repaid in cash by June 30, 2022.

Summary:

The Company has identified the embedded derivatives related to the above described notes and warrants. These embedded derivatives included certain conversion and reset features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the note and to fair value as of each subsequent reporting date. See Note 10.

Subscriptions Payable

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

On February 26, 2021, the Company entered into a share exchange agreement (“ECOX Share Exchange Agreement”) with Eco Innovation Group, Inc. (“ECOX”) dated February 26, 2021, to acquire the number of shares of ECOX’s common stock, equal in value to $650,000 based on the per-share price of $0.06, in exchange for the number of shares of Company common stock equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date of the ECOX Share Exchange Agreement.  For both parties, the ECOX Share Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event that a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant to the ECOX Share Exchange Agreement to fall below $650,000. Based on the value of ECOX shares in the market as of June 30, 2021, the Company recorded a value for additional shares owed to ECOX pursuant to the ECOX Share Exchange Agreement of $329,572 as a subscription agreement along with a loss from equity investment of $391,194. As of June 30, 2022 41,935,484 shares of the Company’s common stock have been issued. As a result, the balance of subscriptions payable as of June 30, 2022 and December 31, 2021 was $772,961 and $989,594, respectively.

F-68 

NOTE 9 – STOCKHOLDERS’ DEFICIT

Preferred Stock

The Company is authorized to issue 50,000,000 shares of $0.001 par value preferred stock (“Series A Preferred Stock”) as of June 30, 2022 and December 31, 2021 of which 10,000,000 shares are outstanding as of June 30, 2021. As of June 30, 2022 and December 31, 2021, the Company is authorized to issue 5,000,000 shares of Class B Preferred Stock of which 2,000,000 shares are issued and outstanding as of June 30, 2021.

 Each share of Class A Preferred Stock is entitled to 100 votes on all matters submitted to a vote to the stockholders of the Company and does not have conversion, dividend or distribution upon liquidation rights.

Each share of Class B Preferred Stock is entitled to 1,000 votes on all matters submitted to a vote to the stockholders of the Company and does not have conversion, dividend or distribution upon liquidation rights.

Common stock

The Company is authorized to issue 32,000,000,000 shares of no par value common stock as of June 30, 2022. As of December 31, 2021, the Company was authorized to issue 10,000,000,000 shares of $0.001 par value common stock. As of June 30, 2022, and December 31, 2021, the Company had 12,380,532,543 and 7,122,806,264 shares of common stock issued and outstanding, respectively. As of August 22, 2022, there were 13,316,028,930 shares of the Company’s common stock issued and outstanding.

During the six months ended June 30, 2022, the Company issued an aggregate of 122,256,410 shares of its common stock for services with an estimated fair value of $152,000.

During the six months ended June 30, 2022, the Company issued an aggregate of 1,303,931,600 shares of its common stock, including shares related to warrants accounted for as liabilities, in settlement of $780,777 of principal on convertible notes payable, accrued interest of $108,777 and reclassified derivative liabilities of $233,069 to common stock in connection with the conversions.

During the six months ended June 30, 2022, the Company sold 2,660,000,000 of its common stock for an aggregate value of $1,066,010.

During the six months ended June 30, 2022, the Company issued 303,185,000 of its common stock for an aggregate value of $248,796 for deferred finance costs.

During the six months ended June 30, 2022, the Company reacquired its common stock of $60,000 returned as Treasury stock.

During the six months ended June 30, 2022, the Company’s officer cancelled 30,000,000 in commons stock.

During the six months ended June 30, 2022, the Company had Debt discount from warrants issued with convertible notes payable with an aggregate value of $152,587.

During the six months ended June 30, 2022, the Company issued 717,866,439 of its Common stock for contingent consideration for an aggregate value of $500,000.

During the six months ended June 30, 2022, the Company issued 180,486,830 of its common stock for subscriptions payable for an aggregate value of $234,633.

Options

As of June 30, 2022, the Company has no outstanding stock options.

F-69 

Warrants

The following table summarizes the stock warrant activity for the six months ended June 30, 2022:

	Shares			Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2021		145,302,385		$	0.0033		2.80	$	70,200
Granted		200,000,000			0.0004		5.00		—
Cancelled/Expired		(87,516,667	)		0.0004		1.65		—
Increase due to reset provision		—			—		—		—
Exercised		—			—		—		—
Outstanding at June 30, 2022		257,785,718		$	0.002		4.68	$	—
Exercisable at June 30, 2022		257,785,718		$	0.002		4.68	$	—

Certain warrants issued to debt holders have reset provisions whereby upon subsequent issuances of common stock at a price below the current exercise price, the number of warrants increase and the exercise price is reduced to the new price. The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $0.0004 as of June 30, 2022, which would have been received by the option holders had those option holders exercised their options as of that date.

NOTE 10 — FAIR VALUE MEASUREMENT

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

All items required to be recorded or measured on a recurring basis are based upon level 3 inputs.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the financial statements.

The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

As of June 30, 2022 and December 31, 2021, the Company did not have any items that would be classified as level 1 or 2 disclosures.

F-70 

The Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed in Note 3. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 3 are that of volatility and market price of the underlying common stock of the Company.

As of June 30, 2022 and December 31, 2021, the Company did not have any derivative instruments that were designated as hedges.

The derivative liability as of June 30, 2022 and December 31, 2021, in the amount of $688,264 and $749,756, respectively, have a level 3 classification.

The fair values were determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 171.74% to 199.29%, (3) weighted average risk-free interest rate of 2.51% to 2.99%, (4) expected life of 0.5 to 4.0 years, (5) conversion prices of $0.00033 to $0.006 and (6) the Company's common stock price of $0.0004 per share as of June 30, 2022.

For the six-month period ended June 30, 2022, the Company recorded a loss on the change in fair value of derivative liabilities of $69,067, which included a loss of $157,001 related to convertible notes payable, a gain of $87,934 related to the settlement of the fair value of derivatives as a result of repayments on the convertible notes, and also recognized a loss of $22,558 related to the excess of the fair value of derivatives at issuance above convertible note principle as a charge to interest expense. During the six months ended June 30, 2022, derivative liabilities of $233,069 were reclassified to common stock as a result of conversions of the underlying notes payable into common stock.

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the three months ended June 30, 2022:

		Debt Derivative
Balance, January 1, 2022	$	749,756
Increase resulting from initial issuance of additional convertible notes payable recorded as debt discount		79,952
Increase resulting from initial issuances of additional convertible notes payable recorded as day one loss		22,558
Decreases resulting from conversion or payoff of convertible notes payable		(233,069	)
Decreases resulting from payoff of convertible notes payable		(87,934	)
Loss due to change in fair value included in earnings		157,001
Balance, June 30, 2022	$	688,264

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. During the period ended June 30, 2022, the Company’s stock price decreased significantly from initial valuations. As the stock price decreases for each of the related derivative instruments, the value to the holder of the instrument generally decreases. Stock price is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.

NOTE 11 — RELATED PARTY TRANSACTIONS

The Company’s current officers and stockholders advanced funds to the Company for travel related   to business meetings and due diligence with respect to acquisition targets and working capital purposes. As of June 30, 2022 and December 31, 2021, the balance due to officers for travel and working capital purposes was $0 and $0, respectively.

As of June 30, 2022 and December 31, 2021, accrued compensation due to officers and executives included as accrued compensation was $121,111 and $42,925, respectively.

Related party sales contributed $0 and $0 to revenues for the three months ended June 30, 2022 and 2021, respectively, while related party sales contributed $0 and $0 to revenues for the six months ended June 30, 2022 and 2021, respectively. Related party sales were comprised of sales of the Company’s hempSMART products to the Company’s directors, officers, employees, and sales team members. No related party sales were for services. All sales were made at listed retail prices and were for cash consideration. 

NOTE 12 – SUBSEQUENT EVENTS 

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

F-71 

 

MARIJUANA COMPANY OF AMERICA, INC.

Best Efforts Offering of

$2,000,000 (10,000,000,000 Shares of Common Stock)

OFFERING CIRCULAR

December 31, 2021

PART III – EXHIBITS

Index to Exhibits

Exhibit No.	Exhibit Description
2.1	Certificate of Incorporation (incorporated by reference from our Registration Statement on Form 1012g filed on  May 23, 2017).
2.2	Amendment to Certificate of Incorporation dated February 2009 (incorporated by reference to our Form 1012g filed on May 23, 2017).
2.3	Amendment to Certificate of Incorporation dated July 2013 (incorporated by reference to our Form 1012g filed on May 23, 2017).
2.4	Amendment to Certificate of Incorporation dated August 2015 (incorporated by reference to our Form 1012g filed on May 23, 2017).
2.5	Amendment to Certificate of Incorporation dated September 2015 (incorporated by reference to our Form  1012g filed on May 23, 2017).
2.6	Certificate of Amendment dated June 26, 2020 (incorporated by reference from our Form 8-K filed on June 29, 2020).
2.7	By Laws (incorporated by reference to our Form  1012g filed on May 23, 2017).
2.8	Agreement and Plan of Merger, dated June 29, 2021, by and among Marijuana Company of America, Inc., cDistro Merger Sub, Inc. and cDistro, Inc. (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 1, 2021)
2.9	Certificate of Merger merging cDistro Merger Sub, Inc. with and into cDistro, Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 1, 2021)
4.1*	Form of Subscription Agreement
6.1	Joint Venture Agreement by and between the Company and Bougainville Ventures, Inc. dated March 16, 2017 (Incorporated by reference to the Company’s Registration Statement on Form 10-12G filed with the SEC on May 23, 2017)
6.2	Amendment No. 1 to Joint Venture Agreement by and between the Company and Bougainville Ventures, Inc. dated November 6, 2017 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on November 8, 2017)
6.3+	Independent Director Agreement by and between the Company and Edward Manolos dated February 28, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 6, 2020)
6.4+	Executive Employment Agreement by and between the Company and Jesus Quintero dated February 3, 2020 (Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC on May 14, 2020)
6.5	Settlement & Release of All Claims Agreement by and between the Company and Natural Plant Extract of California dated January 28, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on February 10, 2020)
6.6+	First Amendment to Executive Employment Agreement by and between the Company and Jesus Quintero dated April 27, 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 27, 2021)
6.7	Joint Venture Agreement by and between the Company and Cannabis Global, Inc. dated May 12, 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2021)
6.8	Form of Earn Out Agreement (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 1, 2021)
6.9	Form of Lock-Up and Leak-Out Agreement (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 1, 2021)
6.10+	Form of Employment Agreement by and between cDistro, Inc. and Ronald P. Russo, Jr. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 1, 2021)
6.11	Promissory Note dated July 10, 2021 (Incorporated by reference to the Company’s Form 1-A filed with the SEC on September 30, 2021)
6.12	Promissory Note dated June 23, 2021 (Incorporated by reference to the Company’s Form 1-A filed with the SEC on September 30, 2021)
7.1	Agreement and Plan of Merger by and among the Company, cDistro Merger Sub, Inc. and cDistro, Inc. dated June 29, 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 1, 2021)
10.1*	Power of Attorney
11.1*	Consent of L&L CPAS, PA
12.1*	Opinion of Legality from Independent Law PLLC

* Filed herewith.

** To be filed by amendment.

+ Indicates a management contract or any compensatory plan, contract or arrangement.

67 

SIGNATURES

Pursuant to the requirements of Regulation A, the registrant has duly caused this Amendment No. 5 to Form 1-A to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on September 30, 2022.

MARIJUANA COMPANY OF AMERICA, INC.
By:	/s/ Jesus Quintero
	Jesus Quintero Chief Executive Officer and Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jesus Quintero as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Amendment No. 5 to Form 1-A Offering Statement and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact and agent or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of Regulation A, this Amendment No. 5 to Form 1-A has been signed by the following persons in the capacities and on the dates indicated below.

Signature	Title	Date
/s/ Jesus Quintero	Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors	September 30, 2022
Jesus Quintero	(Principal Executive Officer and Principal Accounting and Financial Officer)
/s/ Edward Manolos	Director	September 30, 2022
Edward Manolos
/s/ Tad Mailander	Director	September 30, 2022
Tad Mailander

68

EX1A-4 SUBS AGMT

Exhibit 4.1

Subscription Agreement of Marijuana Company of America, Inc. Common Stock

This subscription (this “Subscription”) is dated                , 2022, by and between the investor identified on the signature page hereto (the “Investor”) and Marijuana Company of America, Inc., a Utah corporation (the “Company”), whereby the parties agree as follows:

1. Subscription

Investor agrees to buy and the Company agrees to sell and issue to Investor such number of shares (the “Shares”) of the Company’s common stock, $0.001 par value per share, as set forth on the signature page hereto, for an aggregate purchase price (the “Purchase Price”) equal to the product of (x) the aggregate number of Shares the Investor has agreed to purchase and (y) the purchase price per share (the “Purchase Price”) as set forth on the signature page hereto. The Purchase Price is set forth on the signature page hereto. The Shares are being offered pursuant to an offering statement on Form 1-A, File No. 024-11668 (the “Offering Statement”). The Offering Statement will have been qualified by the Securities and Exchange Commission (the “Commission”) prior to issuance of any Shares and acceptance of Investor’s subscription. The offering circular (the “Offering Circular”) which forms a part of the Offering Statement, however, is subject to change. A final Offering Circular and/or supplement to Offering Circular will be delivered to the Investor as required by law. The Shares are being offered by the Company on a “best efforts” basis. The completion of the purchase and sale of the Shares (the “Closing”) shall take place at a place and time (the “Closing Date”) to be specified by the Company in accordance with Rule 15c6-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The Purchase Price for the Shares shall be paid simultaneously with the execution and delivery to the Company of the signature page of this Subscription Agreement. Investor shall deliver a signed copy of this Subscription Agreement, along with payment for the aggregate Purchase Price of the Shares by a check for available funds made payable to “Marijuana Company of America, Inc.”, by ACH electronic transfer or wire transfer to an account designated by the Company, or by any combination of such methods.

Payment for the Shares shall be received by the Company from the undersigned by transfer of immediately available funds, or other means approved by the Company at least two (2) days prior to the closing date, in the amount as set forth on the signature page hereto. Upon satisfaction or waiver of all the conditions to closing set forth in the Offering Statement, at the Closing, the Company shall cause the Shares to be delivered to the Investor with the delivery of the Shares to be made through the facilities of The Depository Trust Company’s DWAC system in accordance with the instructions set forth on the signature page attached hereto under the heading “DWAC Instructions.”

2. Certifications, Representations and Warranties

In order to induce the Company to accept this Subscription Agreement for the Shares and as further consideration for such acceptance, the undersigned hereby makes, adopts, confirms and agrees to all of the following covenants, acknowledgments, representations and warranties with the full knowledge that the Company and its affiliates will expressly rely thereon in making a decision to accept or reject this Subscription Agreement:

I understand that to purchase Shares, I must either be an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended, or I must limit my investment in the Shares to a maximum of: (i) 10% of my net worth or annual income, whichever is greater, if I am a natural person; or (ii) 10% of my revenues or net assets, whichever is greater, for my most recently completed fiscal year, if I am a non-natural person.

I understand that if I am a natural person I should determine my net worth for purposes of these representations by calculating the difference between my total assets and total liabilities. I understand this calculation must exclude the value of my primary residence and may exclude any indebtedness secured by my primary residence (up to an amount equal to the value of my primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase of the Shares.

I hereby represent and warrant that I meet the qualifications to purchase Shares because:

[  ]	The aggregate purchase price for the Shares I am purchasing in the Offering does not exceed 10% of my net worth or annual income, whichever is greater, if I am a natural person.
[  ]	The aggregate purchase price for the Shares I am purchasing in the Offering does not exceed 10% of my revenues or net assets, whichever is greater, if I am a non-natural person.
[  ]	I am an  “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended.

I understand that the Company reserves the right to, in its sole discretion, accept or reject this Subscription, in whole or in part, for any reason whatsoever, and to the extent not accepted, unused funds transmitted herewith shall be returned to the undersigned in full, with any interest accrued thereon.

I have received the Offering Circular.

I am purchasing the Shares for my own account.

I hereby represent and warrant that I am not, and am not acting as an agent, representative, intermediary or nominee for any person identified on the list of blocked persons maintained by the Office of Foreign Assets Control, U.S. Department of Treasury. In addition, I have complied with all applicable U.S. laws, regulations, directives, and executive orders relating to anti-money laundering including, but not limited to the following laws: (1) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56; and (2) Executive Order 13224 (Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism) of September 23, 2001.

By making the foregoing representations you have not waived any right of action you may have under federal or state securities law. Any such waiver would be unenforceable. The Company will assert your representations as a defense in any subsequent litigation where such assertion would be relevant. This Subscription Agreement and all rights hereunder shall be governed by, and interpreted in accordance with, the laws of the State of New York without giving effect to the principles of conflict of laws.

3. Miscellaneous.

This Subscription Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. Execution may be made by delivery by facsimile or via electronic format.

All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing and shall be mailed, hand delivered, sent by a recognized overnight courier service such as FedEx, or sent via facsimile and confirmed by letter, to the party to whom it is addressed at the following addresses or such other address as such party may advise the other in writing:

To the Company: as set forth on the signature page hereto.

To the Investor: as set forth on the signature page hereto.

All notices hereunder shall be effective upon receipt by the party to which it is addressed.

If the foregoing correctly sets forth the parties’ agreement, please confirm this by signing and returning to the Company the duplicate copy of this Subscription Agreement.

[Signature Page Follows]

[Signature Page to Investor Subscription Agreement for Marijuana Company of America, Inc.]

If the foregoing correctly sets forth the parties’ agreement, please confirm this by signing and returning to us the duplicate copy of this Subscription Agreement.

Number of Shares:___________________________

Purchase Price per Share: $0.0001

Aggregate Purchase Price: $____________________

Investor Signature:

___________________________________________

Print Name Above

____________________________________________

Sign Above

If Holder is an Entity, specify name and title below:

Name:______________________________________

Title:_______________________________________

[  ] Check Method of Payment: Check enclosed        or

[  ] Please wire $__________________ from my account held at:________________________________

Account Title:____________________________; Account Number:___________________________

To the following instructions:

Bank Name
Address
Routing Number
Account Number
Account Name	Marijuana Company of America, Inc.
Reference	REF: MCOA – [Investor Name]

Select method of delivery of Shares: DRS or DWAC

DWAC DELIVERY DWAC Instructions:

1.	Name of DTC Participant (broker dealer at which the account or accounts to be credited with the Shares are maintained):
2.	DTC Participant Number:
3.	Name of Account at DTC Participant being credited with the Shares:
4.	Account Number of DTC Participant being credited with the Shares:

Or DRS Electronic Book Entry Delivery Instructions: 

Name in which Shares should be issued:

Address:___________________________________; Street__________________________________

City/State/Zip:_________________________________; Attention:_______________________________

Telephone No.:_____________________________________

The foregoing subscription is hereby accepted by the Company:

Marijuana Company of America, Inc.

By:

Name:

Title:

Address Notice: 633 West Fifth Street, Suite 2826, Los Angeles, California 90071

EX1A-11 CONSENT

Exhibit 11.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the inclusion in this Registration Statement on Form REG 1-A Amendment 5 of Marijuana Company of America, Inc. of our report dated April 15, 2022, relating to our audits of the December 31, 2021 and 2020 consolidated financial statements, which report appears in the Prospectus that is part of this Registration Statement.

We also consent to the reference to our firm under the caption “Experts” in such Prospectus.

/s/ L&L CPAs, PS
L&L CPAs, PA
Plantation, FL
September 30, 2022

EX1A-12 OPN CNSL

Exhibit 12.1

  Independent Law PLLC Alan T. Hawkins, Esq. ahawkins@independent.law www.independent.law (352) 353-4048 2106 NW 4th Place, Gainesville, Florida 32603  

September 30, 2022

MARIJUANA COMPANY OF AMERICA, INC.

633 W. 5^th Street, Suite 2826

Los Angeles, CA  90071

Re: Amendment No. 5 to Offering Circular on Form 1-A

To The Board of Directors:

On the date hereof, Marijuana Company of America, Inc., a Utah corporation (the "Company"), intends to transmit to the Securities and Exchange Commission (the "Commission") an Amendment No.5 to its Offering Circular on Form 1-A, as qualified on October 20, 2021 (the "Offering Circular"), relating to 10,000,000,000 shares of the Company's common stock, no par value per share (the "Common Stock”). We consent to the inclusion of this opinion as an exhibit to the amended Offering Circular.

We have at times acted as counsel to the Company with respect to certain corporate and securities matters, and in such capacity we are familiar with the various corporate and other proceedings taken by or on behalf of the Company in connection with the proposed offering as contemplated by the Offering Circular, as amended.

In connection with this opinion, we have examined and are familiar with originals or copies, certified, or otherwise identified to our satisfaction, of the Offering Circular, as amended, the Certificate of Incorporation and Bylaws of the Company, the records of corporate proceedings of the Company and such other statutes, certificates, instruments and such other documents relating to the Company and matters of law as we have deemed necessary to the issuance of this opinion.

In such examination, we have assumed, without independent investigation, the genuineness of all signatures, the legal capacity of all individuals who have executed any of the aforesaid documents, the authenticity of all documents submitted to us as originals, the conformity with originals of all documents submitted to us as copies (and the authenticity of the originals of such copies), and all public records reviewed are accurate and complete. As to factual matters, we have relied upon statements or representations of officers and other representatives of the Company, public officials or others and have not independently verified the matters stated therein. Insofar as this opinion relates to securities to be issued in the future, we have assumed that all applicable laws, rules and regulations in effect at the time of such issuance are the same as such laws, rules and regulations in effect as of the date hereof.

Based on the foregoing, and subject to the qualifications herein stated, we are of the opinion that the of 10,000,000,000 shares of the Company's common stock offered will, when issued, be validly issued, fully paid and nonassessable.

This opinion is limited in all respects to the laws of the United States and the State of Utah, and I express no opinion as to the laws, statutes, rules or regulations of any other jurisdiction.

This opinion is limited to the matters expressly stated herein and is provided solely for purposes of complying with the requirements of the Securities Act, and no opinions may be inferred or implied beyond the matters expressly stated herein. This opinion is based on facts and law existing as of the first date written above and rendered as of such date. We assume no obligation to advise the Company of any fact, circumstance, event or change in the law subsequent to the date of qualification of the Offering Circular, as amended, compliance with any continuing disclosure requirements that may be applicable, or of any facts that may thereafter be brought to our attention whether or not such occurrence would affect or modify the opinion expressed herein. We further assume no obligation to update or supplement this opinion to reflect any changes of law or fact that may occur following the date hereof.

We hereby consent to the filing of this opinion as an exhibit to the Offering Circular, as amended, and to the reference to this firm under the caption “Legal Matters” in the Offering Statement. In giving such consent, we do not believe that we are “experts” within the meaning of such term as used in the Securities Act or the rules and regulations of the Commission issued thereunder with respect to any part of the Offering Statement, including this opinion as an exhibit or otherwise.

This opinion is expressed as of the date hereof unless otherwise expressly stated, and we disclaim any undertaking to advise you of any subsequent changes in the facts stated or assumed herein or of any subsequent changes in applicable laws.

Very truly yours,

/s/ Alan T. Hawkins, Esq.

Alan T. Hawkins, Esq.

Independent Law PLLC

Copy: Marijuana Company of America, Inc., Mr. Jesus M. Quintero, CEO, CFO