10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2022

OR

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

For the transition period from __________ to __________.

Commission File Number: 033-33263

Jacksam Corporation

(Exact name of registrant as specified in its charter)

Nevada	46-3566284
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
3100 Airway Avenue Suite 138 Costa Mesa, CA	92626
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (800) 605-3580

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

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	JKSM

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☐	Smaller reporting company	☒
Emerging Growth Company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of September 30, 2022, the registrant had 81,088,719 shares of common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders’ Deficit	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
Signatures		28

2

Forward-Looking Statements

For purposes of this report, unless otherwise indicated or the context otherwise requires, all references herein to “Jacksam Corporation”, “the Company”, “we”, “us”, and “our”, refer to Jacksam Corporation, a Nevada corporation.

This Quarterly Report on Form 10-Q, or this Report, contains forward-looking statements. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may”, “might”, “would”, “should”, “could”, “project”, “estimate”, “pro-forma”, “predict”, “potential”, “strategy”, “anticipate”, “attempt”, “develop”, “plan”, “help”, “believe”, “continue”, “intend”, “expect”, “future” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to the development of our cartridge filling machines, cartridge capping machines and cartridges, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties.

3

Jacksam Corporation
Condensed Consolidated Balance Sheets
	September 30,			December 31,
	2022			2021
	(Unaudited)			(Audited)
Assets
Current Assets:
Cash	$	298,780		$	344,811
Accounts receivable, net		874,307			591,169
Inventory, net		208,457			196,712
Prepaid expenses		94,379			8,600
Total Current Assets		1,475,923			1,141,292
Property and equipment, net		613			1,472
Right of use asset - operating lease		85,597			-
Total Assets	$	1,562,133		$	1,142,764
Liabilities and Stockholders’ Deficit
Current Liabilities:
Accounts payable and accrued expenses	$	1,010,234		$	641,690
Accrued dividends		59,835			-
Deferred revenue		147,772			171,771
Convertible notes payable, current portion (net of discount $0 and $43,269, respectively)		444,444			701,175
Notes payable, current portion		112,324			87,774
Right of use liability - operating lease, current portion		32,785			-
Derivative liability		31,098			325,808
Accrued liabilities - other		2,220,175			2,264,390
Subscription payable		499,999			499,999
Total Current Liabilities		4,558,666			4,692,607
Notes payable, net of current portion (net of discount $100,955 and $121,310, respectively)		620,028			705,038
Right of use liability - operating lease		55,121			-
Total Liabilities		5,233,815			5,397,645
Commitment
Mezzanine equity
Series A Preferred stock - 2,800,000 authorized, $0.001 par value, 2,800,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021		268,846			259,422
Stockholders' Deficit:
Preferred stock - 30,000,000 authorized, $0.001 par value, 0 shares issued and outstanding		-			-
Series B Preferred Stock - 1,000,000 authorized, $0.001 par value, $1 stated value, 1,000,000 and 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		100			-
Common stock - 200,000,000 authorized, $0.001 par value, 81,088,719 and 74,490,147 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		81,088			74,490
Additional paid-in capital		7,433,033			6,210,414
Shares payable, consisting of 0 and 2,222,223 shares of common shares as of September 30, 2022 and December 31, 2021		-			331,600
Accumulated deficit		(11,454,749	)		(11,130,807	)
Total Stockholders' Deficit		(3,940,528	)		(4,514,303	)
Total Liabilities and Stockholders' Deficit	$	1,562,133		$	1,142,764
The accompanying notes are an integral part of these unaudited consolidated financial statements

4

Jacksam Corporation
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Sales	$	492,891		$	1,949,392		$	3,737,275		$	5,380,615
Cost of Sales		431,454			1,354,084			2,832,271			3,767,498
Gross Profit		61,437			595,308			905,004			1,613,117
Operating Expenses
Salaries and wages		222,731			324,009			764,211			989,460
Other selling, general and administrative expenses		174,832			257,639			550,312			976,528
Total Operating Expenses		397,563			581,648			1,314,523			1,965,988
Income (Loss) from Operations		(336,126	)		13,660			(409,519	)		(352,871	)
Other Income (Expense)
Derivative gain		70,733			95,882			435,730			1,171,242
Interest expense		(53,030	)		(221,865	)		(350,153	)		(735,750	)
Loss on conversion of notes payable		-			-			-			(58,642	)
Gain on settlement of notes payable		-			-			-			160,164
Total Other Income (Expense)		17,703			(125,983	)		85,577			537,014
Net Income (Loss)	$	(318,423	)	$	(112,323	)	$	(323,942	)	$	184,143
Preferred stock dividends		(23,340	)		(3,107	)		(69,260	)		(4,315	)
Net Income (Loss) Available to Common Shareholders	$	(341,763	)	$	(115,430	)	$	(393,202	)	$	179,828
Net Income (Loss) Per Share
Basic	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	0.00
Diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	0.00
Weighted Average Shares Outstanding
Basic		80,855,219			73,645,455			78,700,014			71,490,810
Diluted		80,855,219			73,645,455			78,700,014			76,522,446

The accompanying notes are an integral part of these unaudited consolidated financial statements

5

Jacksam Corporation

Condensed Consolidated Statements of Stockholders' Deficit

For the Three and Nine Months Ended September 30, 2022 and 2021

(Unaudited)

	Series A Preferred Stock,				Series B Preferred Stock,				Common Stock, $0.001 Par Value						Paid-In			Share			Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Payable			Deficit			Deficit
Balance, December 31, 2021		2,800,000	$	259,422		-	$	-		74,490,147		$	74,490		$	6,210,414		$	331,600		$	(11,130,807	)	$	(4,514,303	)
Issuance of Series B Preferred Stock, net of fees		-		-		1,000,000		100		-			-			889,900			-			-			890,000
Common Stock and Warrants issued in connection with preferred stock		-		-		-		-		2,000,000			2,000			(2,000	)		-			-			-
Dividends on Series A Preferred Stock		-		3,107		-		-		-			-			(22,833	)		-			-			(22,833	)
Net income		-		-		-		-		-			-			-			-			29,384			29,384
Balance, March 31, 2022		2,800,000		262,529		1,000,000		100		76,490,147			76,490			7,075,481			331,600			(11,101,423	)		(3,617,752	)
Common stock issued for share payable		-		-		-		-		2,222,221			2,222			329,378			(331,600	)		-			-
Common stock issued for services		-		-		-		-		1,389,175			1,389			67,588			-			-			68,977
Common Stock and Warrants issued in connection with preferred stock		-		-		-		-		670,034			670			(670	)		-			-			-
Dividends on Series A Preferred Stock		-		3,141		-		-		-			-			(23,087	)		-			-			(23,087	)
Net loss		-		-		-		-		-			-			-			-			(34,903	)		(34,903	)
Balance, June 30, 2022		2,800,000		265,670		1,000,000		100		80,771,577			80,771			7,448,690			-			(11,136,326	)		(3,606,765	)
Common stock issued for services		-		-		-				317,142			317			7,683			-			-			8,000
Dividends on Series A Preferred Stock		-		3,176		-		-		-			-			(23,340	)		-			-			(23,340	)
Net loss																						(318,423	)		(318,423	)
Balance, September 30, 2022		2,800,000	$	268,846		1,000,000	$	100		81,088,719		$	81,088		$	7,433,033		$	-		$	(11,454,749	)	$	(3,940,528	)
Balance, December 31, 2020		-	$	-		-	$	-		66,366,419		$	66,366		$	4,708,323		$	645,192		$	(11,125,333	)	$	(5,705,452	)
Common stock issued for debt conversion		-		-		-		-		3,086,420			3,087			611,111			-			-			614,198
Common stock issued for deferred finance cost		-		-		-		-		200,000			200			71,800			-			-			72,000
Sale of common stock units		-		-		-		-		2,479,994			2,480			322,195			(136,875	)		-			187,800
Common stock and warrants issued for settlement of notes payable		-		-		-		-		414,930			415			140,703			-			-			141,118
Net loss		-		-		-		-		-			-			-			-			(8,682	)		(8,682	)
Balance, March 31, 2021		-		-		-		-		72,547,763			72,548			5,854,132			508,317			(11,134,015	)		(4,699,018	)
Common stock issued for services		-		-		-		-		57,895			58			6,153			-			-			6,211
Sale of common stock units		-		-		-		-		1,388,889			1,389			175,328			(176,717	)		-			-
Exercise of warrants		-		-		-		-		426,136			426			(426	)		-			-			-
Extinguishment of derivative liability due to conversion		-		-		-		-		-			-			72,958			-			-			72,958
Shares returned under share-lending agreement		-		-		-		-		(860,000	)		(860	)		860			-			-			-
Issuance of Series A preferred stock		2,800,000		252,000		-		-		-			-			-			-			-			-
Dividends on Series A preferred stock		-		1,208		-		-		-			-			(1,208	)		-			-			(1,208	)
Net loss		-		-		-		-		-			-			-			-			305,147			305,147
Balance, June 30, 2021		2,800,000		253,208		-		-		73,560,683			73,561			6,107,797			331,600			(10,828,868	)		(4,315,910	)
Common stock issued for services		-		-		-		-		85,714			86			8,931			-			-			9,017
Dividends on Series A preferred stock		-		3,107		-		-		-			-			(3,107	)		-			-			(3,107	)
Net loss		-		-		-		-		-			-			-			-			(112,323	)		(112,323	)
Balance, September 30, 2021		2,800,000	$	256,315		-	$	-		73,646,397		$	73,647		$	6,113,621		$	331,600		$	(10,941,191	)	$	(4,422,323	)

The accompanying notes are an integral part of these unaudited consolidated financial statements

6

Jacksam Corporation
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
	September 30,			September 30,
	2022			2021
Cash Flows from Operating Activities
Net income	$	(323,942	)	$	184,143
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation expense		859			1,512
Stock-based compensation		76,977			15,228
Gain on settlement of notes payable		-			(160,164	)
Loss on conversion of notes payable		-			58,642
Amortization of debt discount		63,625			599,052
Amortization of right-of-use assets		20,225			-
Interest expense from derivative issuance		141,020			-
Derivative (gain) loss		(435,730	)		(1,171,242	)
Inventory impairment		18,800			-
Net change in:
Accounts receivable		(283,138	)		(337,912	)
Inventory		(30,545	)		(42,326	)
Prepaid expenses		(85,779	)		134,609
Right-of-use liabilities		(17,916	)		-
Accounts payable and accrued expenses		324,327			34,614
Deferred revenue		(23,999	)		(325,486	)
Net cash used in operating activities		(555,216	)		(1,009,330	)
Cash Flows from Financing Activities
Proceeds from convertible notes payable		-			570,000
Payments on convertible notes payable		(300,000	)		(905,503	)
Payments on debt issuance costs		-			(5,000	)
Proceeds from notes payable		231,194			1,024,024
Payments on notes payable		(312,009	)		(53,605	)
Proceeds from sale of common stock units		-			250,000
Proceeds from issuance of Series A preferred stock		890,000			252,000
Net cash provided by financing activities		509,185			1,131,916
Net Change in Cash		46,031			122,586
Cash, Beginning of Period		344,811			489,560
Cash, End of Period	$	298,780		$	612,146
Cash Paid For:
Income Taxes	$	-		$	-
Interest	$	13,709		$	118,732
Non-cash transactions:
Right of use asset and liability recognized, operating leases	$	105,822		$	-
Common stock issued to settle convertible notes payable	$	-		$	614,198
Derivative liability recognized at issuance of warrants and conversion option	$	-		$	493,670
Extinguishment of derivative to warrant exercise	$	-		$	72,958
Common stock issued for deferred finance costs	$	2,670		$	72,000
Common stock issued to settle share payable	$	331,600		$	-
The accompanying notes are an integral part of these unaudited consolidated financial statements

7

 Jacksam Corporation

 Notes to Condensed Consolidated Financial Statements

Note 1: Organization and Nature of Operations

Jacksam Corporation dba Convectium is a technology company focused on developing and commercializing products of vaporizer cartridge filling & capping, pre-roll filling, and other automation systems. The Company’s product line primarily consisted of the 710 Shark cartridge filling machine, the 710 Captain cartridge capping machine, the “PreRoll-ER” pre-roll & cone filling machine, customizable and C-Cell cartridges, and accessories. The Company’s customers are primarily businesses operating in jurisdictions that have some form of cannabis legalization. These businesses include medical and recreational dispensaries, large and small-scale processors and growers, multi-state operators, and distributors. The Company utilizes its direct sales force, website, strategic partners’ sales force, independent sales representatives, and a wide range of referral network to sell its products.

The Company was originally organized under the laws of the State of Nevada on September 21, 1989 under the name of Fulton Ventures, Inc. Effective November 16, 2009, management at that time changed the name of Fulton Ventures, Inc. to China Grand Resorts, Inc. After the September 30, 2014 10-Q filing, the management of China Grand Resorts, Inc. abandoned the Company and its subsidiaries were taken back by Chinese national companies in China who owned them. The remaining parent company, China Grand Resorts, Inc., became a dormant company until 2016 when a new shareholder Bryan Glass became the majority shareholder and owner of the Company.

On September 14, 2018 (the “Merger”), the Company’s wholly owned subsidiary, Jacksam Acquisition Corp., a corporation formed in the State of Nevada on September 11, 2018, or the Acquisition Sub, merged with and into Jacksam, a corporation incorporated in the State of Delaware in August 2013.

On November 5, 2018, current management merged Jacksam into the parent Company, China Grand Resorts, Inc. In connection with the transaction, current management amended our articles of incorporation to change the Company’s name from China Grand Resorts, Inc. to Jacksam Corporation dba Convectium.

Since the Merger, the Company has been operated under the control of current management and continued to operate the business of Jacksam Corporation, described herein, as our sole business.

Note 2: Significant Accounting Policies

Basis of Preparation

The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) under the accrual basis of accounting. These financial statements are presented in U.S. dollars and are prepared on a historical cost basis, except for certain financial instruments which are carried at fair value. The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2021 in the Form 10-K filed on March 31, 2022. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the Form 10-K have been omitted.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Jacksam Corporation and its wholly owned subsidiary. All intercompany transactions and balances are eliminated in consolidation.

8

Use of Estimates

The preparation of financial statements is in conformity with U.S. GAAP and requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact both assets and liabilities, including but not limited to net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount and estimates of the probability and potential magnitude of contingent liabilities. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future nonconforming events. Accordingly, actual results could differ significantly from estimates.

Risks and Uncertainties

The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company has experienced, and in the future, expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold, (iii) general economic conditions, and (iv) the related volatility of prices pertaining to the cost of sales.

Cash and Cash Equivalents

Cash and cash equivalents are carried at cost and consist of cash on hand and demand deposits placed with banks or other financial institutions, and all highly liquid investments with an original maturity of three months or less. Federal Deposit Insurance Corporation (“FDIC”) deposit insurance covers $250,000 per depositor, per FDIC-insured bank, per ownership category.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future bad debts, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. As of September 30, 2022 and December 31, 2021, the Company had recorded an allowance for doubtful accounts of $74,000.

Inventory

Inventories are stated at the lower of cost, determined on the average cost basis or net realizable value. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand.

The September 30, 2022 and December 31, 2021 inventory consisted entirely of finished goods. The Company will maintain an allowance based on specific inventory items that have shown no activity over a 60-month period. The Company tracks inventory as it is disposed, scrapped or sold at below cost to determine whether additional items on hand should be reduced in value through an allowance method. As of September 30, 2022 and December 31, 2021, the Company has determined that an inventory allowance of $18,800 is required and was recognized during the nine months ended September 30, 2022.

9

Property and Equipment

Property and equipment are measured at cost, less accumulated depreciation, and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5 to 7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

Fair Value of Financial Instruments

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The following are the hierarchical levels of inputs to measure fair value:

· Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.

· Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; Quoted prices for similar assets or liabilities in active markets; Inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

· Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and an approximate of their fair values because of the short maturity of these instruments.

Binomial Calculation Model

The Company uses a binomial calculator model to determine fair market value of derivative liabilities, warrants and options issued.

Revenue Recognition

The Company derives revenues from the sale of machines and non-machine products (customizable and C-Cell cartridges and accessories). The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606. Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services.

Revenue is recognized based on the following five step model:

- Identification of the contract with a customer

- Identification of the performance obligations in the contract

- Determination of the transaction price

- Allocation of the transaction price to the performance obligations in the contract

- Recognition of revenue when, or as, the Company satisfies a performance obligation

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Performance Obligations

Sales of machines and non-machine products are recognized when all the following criteria are satisfied: (i) a contract with an end user exists which has commercial substance; (ii) it is probable the Company will collect the amount charged to the end user; and (iii) the Company has completed its performance obligation whereby the end user has obtained control of the product. A contract with commercial substance exists once the Company receives and accepts a purchase order or once it enters into a contract with an end user. If collectability is not probable, the sale is deferred and not recognized until collection is probable or payment is received. Control of products typically transfers when title and risk of ownership of the product has transferred to the customer. The customer has a 10-day period to inspect the equipment and may return the product if it does not meet the agreed-upon specifications. For contracts with multiple performance obligations, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. The Company uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. Historically, the Company’s contracts have not had multiple performance obligations. The large majority of the Company’s performance obligations are recognized at a point in time related to the sale of machines and non-machine products.

Sales, value add, and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. Payment terms between invoicing and when payment is due is less than one year. As of December 31, 2021, none of the Company’s contracts contained a significant financing component.

The Company elected the practical expedient to not adjust the amount of revenue to be recognized under a contract with an end user for the effects of time value of money when the timing difference between receipt of payment and recognition of revenue is less than one year.

The majority of the Company’s contracts offer an assurance-type warranty of the products at no additional cost for a period of 3 years. Assurance-type warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications. Such warranties do not represent a separate performance obligation. At the time a sale is recognized, the Company estimated future warranty costs, which were trivial.

Transaction Price Allocated to the Remaining Performance Obligations

At a given point in time, the Company may have collected payment for future sales of product to begin production. These transactions are deferred until the product transfers to the customer and the performance obligation is considered complete. As of September 30, 2022, $147,772 in revenue is expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. The Company expects to recognize all of our unsatisfied (or partially unsatisfied) performance obligations as revenue in the next twelve months.

Contract Costs

Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included within cost of goods and services.

Critical Accounting Estimates

Estimates are used to determine the amount of variable consideration in contracts, the standalone selling price among separate performance obligations and the measure of progress for contracts where revenue is recognized over time. The Company reviews and updates these estimates regularly.

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Disaggregation of Revenue

All machine sales and most non-machine sales are completed in North America.

	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Machine sales	$	225,335	$	1,280,139	$	2,416,419	$	4,465,754
Non-machine sales		267,556		699,253		1,320,856		914,861
Total sales	$	492,891	$	1,949,392	$	3,737,275	$	5,380,615

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Potential common stock equivalents are determined using the treasury stock method. For diluted net loss per share purposes, the Company excludes stock options and other stock-based awards, including shares issued as a result of option exercises that are subject to repurchase by the Company, whose effect would be anti-dilutive from the calculation.

The following table presents the effect of potential dilutive issuances for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended						Nine Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Net income (loss) attributable to common stockholders	$	(341,763	)	$	(115,430	)	$	(393,202	)	$	179,828
Preferred stock dividends		-			-			-			4,315
Derivative gain		-			-			-			(1,171,242	)
Interest expense associated with convertible debt		-			-			-			715,401
Net income (loss) for dilutive calculation	$	(341,763	)	$	(115,430	)		(393,202	)		(271,698	)
Weighted average shares outstanding		80,855,219			73,645,455			78,700,014			71,490,810
Dilutive effect of preferred stock		-			-			-			1,400,000
Dilutive effect of convertible debt		-			-			-			3,969,136
Dilutive effect of common stock warrants		-			-			-
Weighted average shares outstanding for diluted net income (loss) per share		80,855,219			73,645,455			78,700,014			76,859,946

During the three and nine months ended September 30, 2022, the impact of 14,279,965 warrants to purchase common stock, 2,469,136 shares issuable under convertible debt and 18,066,667 shares issuable under convertible preferred stock were excluded from the calculation above as their impact would be anti-dilutive. The calculation for each period presented also excludes 2,777,778 shares not yet issued related to conversions of debt that occurred in 2020. During the three and nine months ended September 30, 2021, the impact of 11,189,056 warrants to purchase common stock were excluded from the calculation as their impact would be anti-dilutive. During the nine months ended September 30, 2021, 3,969,136 shares issuable under convertible debt were excluded from the calculation above as their impact would be anti-dilutive.

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Going Concern

The Company’s financial statements are prepared using U.S. GAAP to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have a source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully execute the business plan and attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

In the coming year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the SEC, and the payment of expenses associated with operations and business developments. The Company is projected to experience a cash shortfall and be required to raise additional capital.

Historically, it has mostly relied upon convertible notes payable and cash flows from operations to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective and will not have a material effect on its consolidated financial position or results of operations upon adoption.

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 U.S. 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 of ASU 2020-06 on its financial statements.

Note 3: Property and Equipment

Property and equipment consist of the following:

	September 30, 2022			December 31, 2021
Furniture and fixtures	$	10,425		$	10,425
Equipment		7,579			7,579
Trade show display		2,640			2,640
Total		20,644			20,644
Less: Accumulated depreciation		(20,031	)		(19,172	)
Property and equipment, net	$	613		$	1,472

Depreciation expense amounted to $859 and $1,512 for the nine months ended September 30, 2022 and 2021, respectively.

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Note 4: Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

	September 30, 2022		December 31, 2021
Accounts payable	$	687,170	$	382,925
Accrued dividends		59,835		4,338
Sales tax payable		144,553		144,541
Accrued officer consulting cost		-		13,750
Other		42,223		42,221
Total Accounts payable and Accrued expenses	$	1,070,069	$	641,690

Note 5: Notes Payable

A summary of Notes Payable are as follows:

	September 30, 2022			December 31, 2021
Note payable April 2020		-			35,245
SBA loan May 2020		145,555			148,093
Note payable September 2021		679,010			730,783
Note payable September 2022		29,212			-
Total notes payable		833,307			914,121
Less: discount and deferred finance costs		(100,955	)		(121,309	)
Less: current portion		(112,324	)		(87,774	)
Long-term portion of notes payable	$	620,028			705,038

On December 31, 2019, the Company entered into an inventory financing arrangement with a single lender, whereby $150,000 was paid by the lender directly to a vendor to secure inventory for the sales to customers in January 2020. The Company will repay $164,835 of principal and interest by February 29, 2020. The interest and fees of $14,835 were recorded as debt discount and were amortized through the maturity date. The Company also paid a deferred finance cost of $5,000 which was amortized through the maturity date. The Company entered into a second agreement on February 6, 2020 with the same lander for an additional $43,000 of funding. The Company will repay $47,253 at maturity on April 6, 2020. On April 22, 2020, these two notes payable were refinanced with the lender into a single agreement whereby the Company will make an initial repayment of $74,231 and 24 monthly payments of $7,467, for total payments of $253,439. This amendment was accounted for as a modification of the debt. As of September 30, 2022 the company has repaid the balance of the note in full.

On June 2, 2020, the Company received $150,000 under the Small Business Administration’s Economic Injury Disaster Loan. The loan bears interest at a fixed rate of 3.75%, and matures on May 26, 2050, payable monthly with payments of $731 beginning twelve months after issuance. The loan gives the Small Business Administration a security interest in all assets of the Company. As of September 30, 2022 and December 31, 2021, the Company owed a principal amount of $145,555 and $148,093 under this loan.

On September 29, 2021, the Company entered into a Revenue Loan and Security Agreement with an investor for up to a total amount of $1,000,000. Upon drawing from the facility and continuing thereafter until maturity or earlier prepayment in full, the Company shall pay monthly to the lender an amount equal to the product of (i) all revenue of the Company for the immediately preceding month multiplied by (ii) an applicable revenue percentage. On September 29, 2021, the Company borrowed $750,000 under the agreement and received initial cash proceeds of $727,500. The Company also paid an additional $5,000 in fees to the investor to secure the loan for total deferred financing fees of $27,500. On November 12, 2021, the Company issued a total of 843,750 shares of common stock to a lender in connection with the note payable issued. These shares had a fair value of $100,744 and were recorded as deferred finance costs. As of September 30, 2022 and December 31, 2021, the Company owed a principal amount of $658,540 and $730,783 under this loan, with remaining unamortized discount of $100,955 and $121,309, respectively.

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In March 2022, the Company received cash proceeds of $82,081 under an unsecured short term financing agreement. The Company repaid $5,694 per week until repaid in full. This note was repaid in full as of September 30, 2022. The Company entered into a second unsecured short term finance arrangement and received cash proceeds of $81,907. This agreement was repaid in full as of September 30, 2022.  The Company entered into three additional unsecured short term finance arrangements and received total cash proceeds of $67,206. The Company has repaid two of the advances in full and has a remaining balance of $29,212 on the remaining advance as of September 30, 2022.

The Company amortized $20,355 and $16 of debt discount and deferred finance costs to interest expense related to notes payable during the nine months ended September 30, 2022 and 2021, respectively.

Note 6: Convertible Notes Payable and Derivative Liabilities

Convertible Notes Payable

The following table summarizes outstanding convertible notes as of September 30, 2022 and December 31, 2021:

	September 30, 2022			December 31, 2021
June 2019 Notes, due December 21, 2022	$	444,444		$	444,444
June 2020 Note 1, maturing June 4, 2021		-			-
June 2020 Note 2, maturing June 24, 2021		-			-
June 2020 Note 3, maturing June 24, 2021		-			-
November 2020 Note, maturing November 23, 2021		-			-
February 2021 Note, maturing February 15, 2022		-			300,000
Total		444,444			744,444
Less: Debt discount and deferred finance costs on short-term convertible notes		-			(43,269	)
Less: Current convertible notes payable, net of discount		(444,444	)		(701,175	)
Total long-term convertible notes payable, net	$	-		$	-

In June and July 2019, the Company issued convertible notes to 10 investors with an original principal amount of $2,388,889, receiving $1,583,333 in net cash proceeds (the “June 2019 Notes”). The June 2019 Notes matured on March 25, 2020 and are convertible into the Company’s common stock at a per share price of $0.35 at any time subsequent to the issuance date. The June 2019 Notes contain a down round feature, whereby any sale of common stock or common stock equivalent at a price per share lower than the conversion price of the June 2019 Notes will result in the conversion price being lowered to the new price. The warrants contain the same down round feature as the notes. As a result of a dilutive issuance during the year ended December 31, 2020, the exercise price of the remaining notes payable and the warrants is currently $0.18 per share.

During the year ended December 31, 2020, $1,500,000 of the principal on the June 2019 Notes was converted into the right to receive 7,883,599 shares of common stock, of which 5,105,821 were issued by December 31, 2021 and 2,777,778 were part of the subscriptions payable liability balance of $499,999 as of September 30, 2022. See Note 7.

Following two previous extensions and on July 9, 2021, the holder of $444,444 of the notes agreed to extend the repayment period to December 31, 2021. There were no other changes to terms of the convertible notes payable, and the amendments were accounted for as a debt modification.

15

On February 15, 2021, the Company entered into a convertible note agreement with an institutional investor for a principal amount of $675,000 (the “February 2021 Note”) bearing interest at 10% with an original issue discount of $67,500 and a maturity date of February 15, 2022. The Company paid $37,500 of deferred finance costs and issued 200,000 shares of common stock to the lender of the February 2021 Note as deferred finance costs, valued at $72,000 based on the closing price of the stock at the date of borrowing. This lender also received 767,045 common stock warrants with an exercise price of $0.44 and a term of 3 years valued at $179,699. If the note is in default, the holder has the right to convert the outstanding principal and accrued interest balance into shares of common stock at the closing bid price of the Company’s common stock immediately prior to conversion. As a result of the variable conversion price on the Company’s outstanding notes payable and reset provisions, the conversion option and the warrants were accounted for as a derivative liability. The original balance of this note was $675,000. The Company used proceeds from this note payable to pay in full the June 2020 Notes and the November 2020 Note. The Company repaid the remaining $300,000 of principal on this note during the nine months ended September 30, 2022.

The Company amortized $43,270 and $599,052 of debt discount and deferred finance costs to interest expense related to convertible notes payable during the nine months ended September 30, 2022 and 2021, respectively. Accrued interest on notes payable and convertible notes payable was $136,289 and $4,338 as of September 30, 2022 and December 31, 2021, respectively.

Derivative Liabilities

The fair values of the conversion option of outstanding convertible notes payable and common stock warrants with reset provisions were estimated using a binomial model with the following assumptions:

	As of September 30, 2022
	Conversion Option			Warrants
Volatility		69.26	%	69.26-105.11		%
Dividend Yield		0	%		0	%
Risk-free rate		3.92	%	3.92-4.06		%
Expected term	0.5 year			0.5-4.5 years
Stock price	$	0.018		$	0.018
Exercise price	$	0.18		$	0.18-0.30
Derivative liability fair value	$	-		$	31,098

All fair value measurements related to the derivative liabilities are considered significant unobservable inputs (Level 3) under the fair value hierarchy of ASC 820.

The table below presents the change in the fair value of the derivative liability during the nine months ended September 30, 2022:

Fair value as of December 31, 2021	$	325,808
Fair value on the date of issuance of new derivatives		141,020
Extinguishment due to repayment of debt		(7,655	)
Gain on change in fair value of derivatives		(428,075	)
Fair value as of September 30, 2022	$	31,098

The total impact of derivative liabilities recognized in the Company’s consolidated statements of operations includes extinguishments due to repayments and the change in fair value of derivatives, with the Company recognizing a total gain of $435,730 and $1,171,242 during the nine months ended September 30, 2022 and 2021, respectively.

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Note 7: Equity

Common Stock

On December 31, 2021, the Board of Directors of the Company and shareholders holding a majority of the voting power of the Company both approved an amendment to the Company’s Article of Incorporation to increase the total number of authorized shares that the Company shall have authority to issue from 100,000,000 shares to 230,000,000 shares, consisting of two classes to be designated respectively, “Common Stock” and “Preferred Stock”, with all such shares having a par value of $0.001 per share, of which 200,000,000 shall be designated as Common stock and 30,000,000 designated as Preferred stock. 

During the years ended December 31, 2021 and 2020, the Company sold common stock units at $0.18 per unit. Each $0.18 unit consists of a share of common stock and a warrant to purchase half a share of common stock at an exercise price of $0.27, for a period of three years from issuance. During the nine months ended September 30, 2022 the Company issued 2,222,221 shares to settle the outstanding share payable. As of September 30, 2022 and December 31, 2021 there were zero and 2,222,221 shares remaining to be issued related to common stock units, respectively.

As of September 30, 2022 and December 31, 2021, there are 2,777,778 shares remaining to be issued related to 2020 debt conversions of $499,999, which is included in Subscription payable on the consolidated balance sheets, with 2,160,494 of those shares remaining to be issued to Mark Adams, CEO, and another investor. See Note 6.

During the nine months ended September 30, 2022, the Company issued 1,389,175 shares for services with a fair value of $68,977.

Series A Redeemable Preferred Stock

The Company created the 2,800,000 shares of Series A Preferred Stock out of the 10,000,000 shares of preferred stock authorized by the Company’s articles of incorporation by filing a certificate of designation as authorized by the Company’s board of directors (the “Certificate of Designation”). 

The Series A Preferred Stock bears a cumulative dividend of 5.0% per annum on the original purchase price and is redeemable by the Company or upon a class vote by the holders of the Series A Preferred Stock at the original purchase price, plus any unpaid dividends then owing, payable in 4 equal quarterly payments. The Series A Preferred Stock converts into the Company’s common stock at a ratio of 2:1, subject to revision on the basis of standard weighted average anti-dilution protective provisions, at the option of the holders of the Series A Preferred Stock or automatically upon the occurrence of a merger, sale of the Company’s assets, or upon another Deemed Liquidation Event as defined in the Certificate of Designation. In the absence of an anti-dilution adjustment, the 2,800,000 shares of Series A Preferred Stock will convert into 1,400,000 shares of the Company’s common stock.

The Series A Preferred Stock votes with the Company’s common stock, as a single class, at a rate of 20 votes for each share of Series A Preferred Stock. The Series A Preferred Stock carries a liquidation preference and is participating. The Series A Preferred Stock carries standard protective provisions that preclude the Company from amending its articles of incorporation, bylaws or the terms of the Certificate of Designation adversely to the holders of the Series A Preferred Stock without their prior approval.

Due to the redemption feature, the Company accounts for the Series A Preferred Stock as temporary equity in accordance with ASC 480. The Series A Preferred Stock is accounted for at redemption value.

On May 26, 2021, the Company, entered into a subscription agreement (the “Preferred Stock Agreement”) with Mark Adams, Chief Executive Officer, President, and a member of Board of Directors of the Company. Mark Adams paid $126,000 to purchase 1,400,000 shares of the Series A Preferred Stock, at a price per share of $0.09. Scott Wessler, former Chairman of Board of Directors of the Company, paid $126,000 to purchase 1,400,000 shares of the Series A Preferred Stock, at a price per share of $0.09.

The Company accrued $9,424 in dividends on the Series A Preferred Stock for the nine months ended September 30, 2022. The redemption value of the Series A Preferred Stock as of September 30, 2022 and December 31, 2021 was $268,846 and $259,422, reflected as temporary equity on the Company’s consolidated balance sheet.

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Series B Convertible Preferred Stock

In February 2022, the Company designated 1,000,000 shares of Series B Convertible Preferred Stock (“Series B”). The Series B has a par value of $0.0001 per share, a stated value of $1.00 per share and carries a dividend of 8.0%. The Series B are convertible into shares of common stock at a price of $0.06 per share, and contains an exercise price reset provision in the event of dilutive issuances of common stock or any common stock equivalent by the Company with a price below the exercise price.

The Series B holders do not have voting rights on matters other than those related to amending the certificate of incorporation of the Series B, altering voting or other powers of the Series B, or redemption or acquisition of outstanding Series B. For a period of one year following closing of the Series B funding, the Company may not authorize or create any class of stock that is senior to the Series B with respect to dividends, redemption or distribution of assets upon Liquidation. In the event of liquidation of the Company, the Series B holders shall be paid 125.0% of the Stated value plus 125.0% of any unpaid dividends.

During the nine months ended September 30, 2022, the Company sold a total of 1,000,000 shares of Series B to two investors for net cash proceeds of $885,000 after closing costs of $115,000 and issued warrants to purchase 4,000,000 shares of common stock at $0.20 per share for a period of five years. The Company also issued 2,670,034 shares of common stock with a fair value of $139,800 to the investors, which were recorded as a cost of capital. The Company granted to the investors the piggy-back registration rights.

Stock Warrants

A summary of stock warrant information is as follows:

	Aggregate Number			Aggregate Exercise Price			Weighted Average Exercise Price
Outstanding at December 31, 2021		11,189,056		$	2,646,044		$	0.24
Granted		4,000,000			800,000			0.20
Exercised		-			-			-
Less: forfeited and cancelled		(909,091	)		(500,000	)		0.55
Outstanding at September 30, 2022		14,279,965		$	2,946,044		$	0.21

The weighted average remaining contractual life is approximately 2.26 years for stock warrants outstanding with no intrinsic value of as of September 30, 2022. All of the above warrants were fully vested.

Note 8: Related Party

Mark Adams, CEO, invested in the June 2019 Notes. Mark Adams contributed $250,000 and converted his debt during the year ended December 31, 2020 into shares of common stock of 1,388,885 that have not yet to be issued. Mark Adams will also receive an additional 15,432 shares of common stock once the shares are issued. Those shares were in subscriptions payable and presented on the balance sheet. See Notes 6 and 7.

Mark Adams and Scott Wessler each contributed $126,000 to purchase the Series A Preferred Stock as discussed in Note 7.

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Note 9: Commitments

Leases

The Company entered into a lease agreement for office space on February 2, 2022, for a term beginning February 15, 2022 through February 28, 2025. The lease requires payments of $3,267 per month through the lease term, increasing by 4% each year, with an option to renew. The Company recognized an initial right of use asset and lease liability of $105,822, based on the present value of the minimum lease payments. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the Company will exercise those options. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial right-of-use (“ROU”) asset or lease liability. The Company’s lease agreements do not contain any material restrictive covenants. 

The components of lease cost for operating leases for the nine months ended September 30, 2022 and 2021 were as follows:

	Nine months ended
	September 30,  2022		September 30,  2021
Operating lease cost	$	26,811	$	-
Short-term lease cost		24,220		82,668
Variable lease cost		-		-
Sublease income		-		-
Total lease cost	$	51,031	$	82,668

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at September 30, 2022 and December 31, 2021:

Lease Position	September 30, 2022		December 31, 2021
Operating Leases
Operating lease right-of-use assets	$	85,597	$	-
Right of use liability operating lease current portion	$	32,785	$	-
Right of use liability operating lease long term		55,121		-
Total operating lease liabilities	$	87,906	$	-

The Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable. The Company estimated its incremental borrowing rate to be 10%. The lease has a remaining term of 2.42 years.

The following table provides the maturities of lease liabilities at September 30, 2022:

	Operating
	Leases
2022 (Three months remaining)	$	9,801
2023		40,511
2024		42,123
2025		7,065
2026 and thereafter		-
Total future undiscounted lease payments		99,500
Less: Interest		(11,594	)
Present value of lease liabilities	$	87,906

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Lawsuit

The Company has a pending lawsuit with one of its previous suppliers regarding defected cartridges. The Company is still evaluating the case and determining the impact of the case on the Company and as of the date of this report the amount or range of possible losses is not reasonably estimable.

Note 10: Accrued Liabilities – Other

Prior to the Merger, China Grand Resorts, Inc. recorded various liabilities that were incurred by former related parties. The current management team is not aware of any written agreements in place governing the terms of the loans nor have they been in contact with the debt holders however recognizes that China Grand Resorts, Inc. previously reported these amounts as liabilities of the Company. In accordance with ASC 405-20-40, the liabilities may only be removed from the Company’s financial statements if they are paid, formally settled or judicially released. Management believes the relevant statute of limitations has passed and that no enforceable legal claim exists in relation to these liabilities of $1,696,374 but does not believe that is sufficient to remove the liability from the financial statements. Management does not intend to remove these liabilities of $1,696,374 from the Company’s financial statements until such time that the liability is formally settled or judicially released in accordance with ASC 405-20-40. Due to the lack of written agreements and other factors noted above, management concluded to no longer accrue interest on these loans.

Note 11: Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have been no events that have occurred that would require adjustments to our disclosures in the financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations include several forward-looking statements that reflect management’s current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may”, “will”, “expect”, “anticipate”, “believe”, “estimate” and “continue”, or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC. Important factors currently known to management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing of our products, and competition.

The following discussion provides information that management believes is relevant to an assessment and understanding of our past financial condition and plan of operations. The discussion below should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this report.

Overview

From late August to September of 2022, we experienced a slowdown in sales. Our customers adjusted their capital equipment spending timeline due to capital funding constrains. Our total revenue was $0.5 million during the third quarter of 2022, down 75% compared to the same quarter in 2021. Our gross margin declined to 12% during the quarter largely due to a one-time write-off of uncollectable accounts receivable and an unfavorable product mix. And our business turned from an operating profitable status to an operating loss of $336,126. From the cost reduction perspective, we managed to reduce our payroll cost by 31% compared to the same quarter in 2021 and negotiated lower freight costs with our vendors.

21

Components of Statements of Operations

Revenue

Product revenue consists of sales of 710 Shark filling machines, 710 Captain capping machines, “PreRoll-ER” pre-roll & cone filling machines, cartridges, accessories, warranty, service and freight charges, net of returns, discounts and allowances. Once a sales order is negotiated and received by a sales representative, we generally collect a 50% deposit from the customer. When the product is ready to be shipped, the customer will generally pay the remaining balance. We recognize the revenue when the product leaves the warehouse on the way to the customer.

For the filling and capping machines, training is coordinated with the customers in accordance with their availability but generally completed within a week or two of the shipment. Standard warranties are offered at no cost to customers to cover parts for three years, and labor and maintenance are offered for one year for product defects.

Cost of Revenue

Cost of revenue represents costs directly related to supplies and materials, machines, freight and delivery, commissions, printing, packaging and other costs.

We expect our cost of revenue per unit to decrease as we continue to scale our operations, improve product designs and work with our third-party suppliers to lower costs.

Operating Expenses

Sales and Marketing. Sales and marketing expenses include costs associated with our business development efforts with our distributors and partners and costs related to trade shows and other marketing programs. We expense sales and marketing costs as incurred. We expect sales and marketing expenses to increase in future periods as we expand our sales and marketing teams and increase our participation in global trade shows and other marketing programs.

General and Administrative. Our general and administrative expenses consist primarily of compensation, benefits, travel and other costs for employees. In addition, general and administrative expenses include third-party consulting, legal, audit, accounting services, and allocations of overhead costs, such as rent, facilities and information technology. We expect general and administrative expenses to increase as our revenue increases.

Results of Operations – Three-month Periods

Comparison for the three-month periods ended September 30, 2022 and 2021: 

Revenue

Total revenue during the three months ended September 30, 2022 was $492,891 (comprised of machine sales of $225,335 and non-machine sales of $267,556), compared to the three months ended September 30, 2021 that generated sales of $1,949,392 (comprised of machine sales of $1,280,139 and non-machine sales of $699,253).

Cost of Revenue

Total cost of revenue was $431,454 during the three months ended September 30, 2022, compared to the three months ended September 30, 2021 that had a cost of revenue of $1,354,084. Our gross margin percentage decreased from 31% for the three months ended September 30, 2021 to 12% for the three months ended September 30, 2022. The decline in gross margin percentage was largely due to a one-time write-off of uncollectable accounts receivable and an unfavorable product mix.

22

Operating Expenses

Operating expenses during the three months ended September 30, 2022 decreased to $397,563 (comprised of Salaries of $222,731 and Other Sales, Marketing and General and Administrative (“SG&A”) expenses of $174,832), compared to the three months ended September 30, 2021 that produced $581,648 (comprised of Salaries of $324,009 and Other SG&A expenses of $257,639).

Loss / Income from Operations

Total loss from operations was $336,126 during the three months ended September 30, 2022, compared to an income from operations of $13,660 for the three months ended September 30, 2021.

Derivative Gain

Derivative gain, a non-cash item, was $70,733 during the three months ended September 30, 2022, due to the fair value change of the debt and warrants driven by the stock price change between June 30, 2022 and September 30, 2022, compared to $95,882 during the three months ended September 30, 2021.

Interest Expense

Interest expense was $53,030 during the three months ended September 30, 2022, compared to $221,865 during the three months ended September 30, 2021, primarily due to a reduction of the amortization of debt discount of the Notes, a non-cash item.

Loss on Settlement of Notes Payable

Loss on settlement of notes payable, a non-cash item, were both $0 during the three months ended September 30, 2022 and September 30, 2021.

Loss on Conversion of Notes Payable

Loss on conversion of notes payable, a non-cash item, were both $0 during the three months ended September 30, 2022 and the three months ended September 30, 2021.

Net Loss

Net loss was $318,423 during the three months ended September 30, 2022, compared to $112,323 during the three months ended September 30, 2021.

Results of Operations – Nine-month Periods

Comparison for the nine-month periods ended September 30, 2022 and 2021: 

Revenue

Total revenue during the nine months ended September 30, 2022 was $3,737,275 (comprised of machine sales of $2,416,419 and non-machine sales of $1,320,856), compared to the nine months ended September 30, 2021 that generated sales of $5,380,615 (comprised of machine sales of $4,465,754 and non-machine sales of $914,861).

Cost of Revenue

Total cost of revenue was $2,832,271 during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021 that had a cost of revenue of $3,767,498. Due to a more diversified product portfolio, our gross margin percentage decreased from 30% for the nine months ended September 30, 2021 to 24% for the nine months ended September 30, 2022.

23

Operating Expenses

Operating expenses during the nine months ended September 30, 2022 decreased to $1,314,523 (comprised of Salaries of $764,211 and Other SG&A expenses of $550,312, compared to the nine months ended September 30, 2021 that produced $1,965,988 (comprised of Salaries of $989,460 and Other SG&A expenses of $976,528).

During the nine months ended September 30, 2022, operating expenses included a one-time non-cash equity compensation of $76,977. During the nine months ended September 30, 2021, operating expenses included a one-time $219,606 payment to an insurance underwrite to cover previous 12-month periods (“Extended Period Coverage”) when the Company renew its Directors and Officers Liability Insurance (D&O Insurance).

Loss from Operations

Total loss from operations was $409,519 during the nine months ended September 30, 2022, compared to $352,871 for the nine months ended September 30, 2021.

Derivative Gain

Derivative gain, a non-cash item, was $435,730 during the nine months ended September 30, 2022, due to the fair value change of the debt and warrants driven by the stock price change between December 31, 2021 and September 30, 2022, compared to $1,171,242 during the nine months ended September 30, 2021.

Interest Expense

Interest expense was $350,153 during the nine months ended September 30, 2022, compared to $735,750 during the nine months ended September 30, 2021, primarily due to the amortization of debt discount of the Notes, a non-cash item.

Loss on Settlement of Notes Payable

Loss on settlement of notes payable, a non-cash item, was $0 during the nine months ended September 30, 2022, compared to $160,164 during the nine months ended September 30, 2021.

Loss on Conversion of Notes Payable

Loss on conversion of notes payable, a non-cash item, was $0 during the nine months ended September 30, 2022, compared to $58,642 during the nine months ended September 30, 2021.

Net Income / (Loss)

Net loss was $323,942 during the nine months ended September 30, 2022, compared to a net income of $184,143 during the nine months ended September 30, 2021.

Liquidity and Capital Resources

At September 30, 2022, we had cash and cash equivalents of $298,780. During the nine months ended September 30, 2022, we have financed our operations principally through receipts of customer payments, short-term debt of $231,194, and issuance of preferred stock of $890,000.

We anticipate that we will need additional financing to continue as an ongoing entity over the next 12 months. Our future capital requirements and the adequacy of available funds will depend on many factors. There can be no assurance we will be able to obtain additional financing on favorable terms, or at all. If we are unable to obtain additional financing, our financial results and business prospects may be materially adversely affected.

24

Operating Activities

We have historically experienced negative cash outflows. Our net cash used in operating activities primarily results from our operating losses combined with changes in working capital components as we have grown our business and is influenced by the timing of cash payments for inventory purchases and cash receipts from our customers. Our primary source of cash flow from operating activities is cash down payments and final payments for our machines. Our primary uses of cash from operating activities are employee-related expenditures and amounts due to vendors for purchased components. Our cash flows from operating activities will continue to be affected principally by our working capital requirements and the extent to which we build up our inventory balances and increase spending on personnel and other operating activities as our business grows.

During the nine months ended September 30, 2022, net cash used in operating activities was $555,216, compared to $1,009,330 during the nine months ended September 30, 2021.

Investing Activities

The Company had no investing activities in either period.

Financing Activities

During the nine months ended September 30, 2022, the Company received $890,000 in proceeds from issuance of Series B Preferred Stock and $231,194 in proceeds from short-term debt and made payments of $300,000 of convertible debt and $312,009 of non-convertible debt.

During the nine months ended September 30, 2021, the Company received $570,000 in proceeds from convertible debt, $1,024,024 in proceeds from non-convertible debt, $252,000 in proceeds from issuance of Series A Preferred Stock, and $250,000 in proceeds from sale of common stock, and made payments of $905,503 of convertible debt, $5,000 of debt issuance costs, and $53,605 of non-convertible debt.

Off-Balance Sheet Arrangements

During the nine months ended September 30, 2022 and the year ended December 31, 2021, we did not have any off-balance sheet arrangements as defined by applicable SEC regulations.

COVID-19 Impact

Our business and operating results for 2020 to 2022 have been impacted by the COVID-19 pandemic. We expect improvements throughout 2022 and 2023.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

We do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts. Our financial instruments consist of cash and cash equivalents. We consider investments that, when purchased, have a remaining maturity of ninety (90) days or less to be cash equivalents. We do not believe that a notional or hypothetical 10% change in interest rates would have a material impact on our interest income.

Item 4. Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-Q, we have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

25

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The Company has a pending lawsuit with one of its previous suppliers regarding defected cartridges. The Company is still evaluating the case and determining the impact of the case on the Company and as of the date of this Report the amount or range of possible losses is not reasonably estimable. From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time and harm our business.

Item 1A. Risk Factors

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

26

Item 6. Exhibits

Exhibit Number	Exhibit Description
31.1	Certification of the Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022
31.2	Certification of the Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022
32.1	Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

27

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	JACKSAM CORPORATION
Dated: November 15, 2022	By:	/s/ Mark Adams
		Mark Adams
		Chief Executive Officer
Dated: November 15, 2022	By:	/s/ Steven Duo
		Steven Duo
		Chief Financial Officer

28

EX-31.1

EXHIBIT 31.1

CERTIFICATION

Pursuant to 18 U.S.C Section 1350

As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Mark Adams, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Jacksam Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 15, 2022

By:	/s/ Mark Adams
	Mark Adams
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

Pursuant to 18 U.S.C. Section 1350

 As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Steven Duo, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Jacksam Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 15, 2022

By:	/s/ Steven Duo
	Steven Duo
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Jacksam Corporation, a Nevada corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report for the period ended September 30, 2022 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 15, 2022	By:	/s/ Mark Adams
		Mark Adams
		Chief Executive Officer
Dated: November 15, 2022	By:	/s/ Steven Duo
		Steven Duo
		Chief Financial Officer

XML

Cover	9 Months Ended
	Sep. 30, 2022 shares
Cover [Abstract]
Entity Registrant Name	Jacksam Corporation
Entity Central Index Key	0000860543
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Current Reporting Status	Yes
Document Period End Date	Sep. 30, 2022
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2022
Entity Ex Transition Period	false
Entity Common Stock Shares Outstanding	81,088,719
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	033-33263
Entity Incorporation State Country Code	NV
Entity Tax Identification Number	46-3566284
Entity Interactive Data Current	Yes
Entity Address Address Line 1	3100 Airway Avenue Suite 138
Entity Address City Or Town	Costa Mesa
Entity Address State Or Province	CA
Entity Address Postal Zip Code	92626
City Area Code	800
Local Phone Number	605-3580
Security 12b Title	Common Stock, par value $0.001 per share
Trading Symbol	JKSM

XML

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Current Assets:
Cash	$ 298,780	$ 344,811
Accounts receivable, net	874,307	591,169
Inventory, net	208,457	196,712
Assets
Prepaid expenses	94,379	8,600
Total Current Assets	1,475,923	1,141,292
Property and equipment, net	613	1,472
Right of-use asset - operating lease	85,597	0
Total Assets	1,562,133	1,142,764
Current Liabilities:
Accounts payable and accrued expenses	1,010,234	641,690
Accrued dividends	59,835	0
Deferred revenue	147,772	171,771
Convertible notes payable, current portion (net of discount $0 and $43,269, respectively)	444,444	701,175
Notes payable, current portion	112,324	87,774
Right of use liability - operating lease, current portion	32,785	0
Derivative liability	31,098	325,808
Accrued liabilities - other	2,220,175	2,264,390
Subscription payable	499,999	499,999
Total Current Liabilities	4,558,666	4,692,607
Notes payable, net of current portion (net of discount $100,955 and $121,310, respectively)	620,028	705,038
Right of use liability - operating lease	55,121	0
Total Liabilities	5,233,815	5,397,645
Mezzanine equity
Series A Preferred stock - 2,800,000 authorized, $0.001 par value, 2,800,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021	268,846	259,422
Stockholders' Deficit:
Preferred stock, value	0	0
Common stock - 200,000,000 authorized, $0.001 par value, 81,088,719 and 74,490,147 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	81,088	74,490
Additional paid-in capital	7,433,033	6,210,414
Shares payable, consisting of 2,222,223 shares of common shares as of September 30, 2022 and December 31, 2021	0	331,600
Accumulated deficit	(11,454,749)	(11,130,807)
Total Stockholders' Deficit	(3,940,528)	(4,514,303)
Total Liabilities and Stockholders' Deficit	1,562,133	1,142,764
Series B Preferred Stock [Member]
Stockholders' Deficit:
Preferred stock, value	$ 100	$ 0

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Preferred stock, shares authorized	30,000,000	30,000,000
Preferred stock, par value per share	$ 0.001	$ 0.001
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, shares authorized	200,000,000	200,000,000
Common stock, par value per share	$ 0.001	$ 0.001
Common stock, shares issued	81,088,719	74,490,147
Common stock, shares outstanding	81,088,719	74,490,147
Shares payable	0	2,222,223
Notes Payable [Member]
Notes payable, current portion (net of discount)	$ 100,955	$ 121,310
Convertible Notes Payable [Member]
Notes payable, current portion (net of discount)	$ 0	$ 43,269
Series B Preferred Stock [Member]
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, par value per share	$ 0.001	$ 0.001
Preferred stock, shares issued	1,000,000	0
Preferred stock, shares outstanding	1,000,000	0
Preferred stock, stated value per share	$ 1	$ 1
Series A Preferred Stock [Member]
Temporary equity, shares authorized	2,800,000	2,800,000
Temporary equity, par value per share	$ 0.001	$ 0.001
Temporary equity, shares issued	2,800,000	2,800,000
Temporary equity, shares outstanding	2,800,000	2,800,000

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Condensed Consolidated Statements of Operations (Unaudited)
Sales	$ 492,891	$ 1,949,392	$ 3,737,275	$ 5,380,615
Cost of Sales	431,454	1,354,084	2,832,271	3,767,498
Gross Profit	61,437	595,308	905,004	1,613,117
Operating Expenses
Salaries and wages	222,731	324,009	764,211	989,460
Other selling, general and administrative expenses	174,832	257,639	550,312	976,528
Total Operating Expenses	397,563	581,648	1,314,523	1,965,988
Income (Loss) from Operations	(336,126)	13,660	(409,519)	(352,871)
Other Income (Expense)
Derivative gain	70,733	95,882	435,730	1,171,242
Interest expense	(53,030)	(221,865)	(350,153)	(735,750)
Loss on conversion of notes payable	0	0	0	(58,642)
Gain on settlement of notes payable	0	0	0	160,164
Total Other Income (Expense)	17,703	(125,983)	85,577	537,014
Net Income (Loss)	(318,423)	(112,323)	(323,942)	184,143
Preferred stock dividends	(23,340)	(3,107)	(69,260)	(4,315)
Net Income (Loss) Available to Common Shareholders	$ (341,763)	$ (115,430)	$ (393,202)	$ 179,828
Net Income (Loss) Per Share
Basic	$ (0.00)	$ (0.00)	$ (0.00)	$ 0.00
Diluted	$ (0.00)	$ (0.00)	$ (0.00)	$ 0.00
Weighted Average Shares Outstanding
Basic	80,855,219	73,645,455	78,700,014	71,490,810
Diluted	80,855,219	73,645,455	78,700,014	76,522,446

XML

Condensed Consolidated Statements of Stockholders' Deficit (Unaudited)) - USD ($)	Total	Series A Preferred Stock	Series B Preferred Stock	Common Stock $0.001 Par Value	Shares Payable	Paid-In Capital	Accumulated Deficit
Balance, shares at Dec. 31, 2020				66,366,419
Balance, amount at Dec. 31, 2020	$ (5,705,452)	$ 0	$ 0	$ 66,366	$ 645,192	$ 4,708,323	$ (11,125,333)
Common stock issued for debt conversion, shares				3,086,420
Common stock issued for debt conversion, amount	614,198	0	0	$ 3,087	0	611,111	0
Common stock issued for deferred finance cost, shares				200,000
Common stock issued for deferred finance cost, amount	72,000	0	0	$ 200	0	71,800	0
Sale of common stock units, shares				2,479,994
Sale of common stock units, amount	187,800	0	0	$ 2,480	(136,875)	322,195	0
Common stock and warrants issued for settlement of notes payable, shares				414,930
Common stock and warrants issued for settlement of notes payable, amount	141,118	0	0	$ 415	0	140,703	0
Net loss	(8,682)	0	0	0	0	0	(8,682)
Balance, amount at Mar. 31, 2021	(4,699,018)	0	0	$ 72,548	508,317	5,854,132	(11,134,015)
Balance, shares at Mar. 31, 2021				72,547,763
Balance, shares at Dec. 31, 2020				66,366,419
Balance, amount at Dec. 31, 2020	(5,705,452)	0	0	$ 66,366	645,192	4,708,323	(11,125,333)
Net loss	184,143
Balance, amount at Sep. 30, 2021	(4,422,323)	$ 256,315	0	$ 73,647	331,600	6,113,621	(10,941,191)
Balance, shares at Sep. 30, 2021		2,800,000		73,646,397
Balance, shares at Mar. 31, 2021				72,547,763
Balance, amount at Mar. 31, 2021	(4,699,018)	$ 0	0	$ 72,548	508,317	5,854,132	(11,134,015)
Sale of common stock units, shares				1,388,889
Sale of common stock units, amount	0	0	0	$ 1,389	(176,717)	175,328	0
Net loss	305,147	0	0	$ 0	0	0	305,147
Common stock issued for services, shares				57,895
Common stock issued for services, amount	6,211	0	0	$ 58	0	6,153	0
Exercise of warrants, shares				426,136
Exercise of warrants, amount	0	0	0	$ 426	0	(426)	0
Extinguishment of derivative liability due to conversion	72,958	0	0	$ 0	0	72,958	0
Shares returned under share-lending agreement, shares				(860,000)
Shares returned under share-lending agreement, amount	0	$ 0	0	$ (860)	0	860	0
Issuance of Series A preferred stock, shares		2,800,000
Issuance of Series A preferred stock, amount	0	$ 252,000	0	0	0	0	0
Dividends on Series A preferred stock	(1,208)	1,208	0	0	0	(1,208)	0
Balance, amount at Jun. 30, 2021	(4,315,910)	$ 253,208	0	$ 73,561	331,600	6,107,797	(10,828,868)
Balance, shares at Jun. 30, 2021		2,800,000		73,560,683
Net loss	(112,323)	$ 0	0	$ 0		0	(112,323)
Common stock issued for services, shares				85,714
Common stock issued for services, amount	9,017	0	0	$ 86	0	8,931	0
Dividends on Series A preferred stock	(3,107)	3,107	0	0	0	(3,107)	0
Balance, amount at Sep. 30, 2021	(4,422,323)	$ 256,315	0	$ 73,647	331,600	6,113,621	(10,941,191)
Balance, shares at Sep. 30, 2021		2,800,000		73,646,397
Balance, shares at Dec. 31, 2021		2,800,000		74,490,147
Balance, amount at Dec. 31, 2021	(4,514,303)	$ 259,422	0	$ 74,490	331,600	6,210,414	(11,130,807)
Net loss	29,384	0	0	0	0	0	29,384
Dividends on Series A preferred stock	(22,833)	3,107	$ 0	0	0	(22,833)	0
Issuance of Series B Preferred Stock, net of fees, shares			0
Issuance of Series B Preferred Stock, net of fees, amount	890,000	0	$ 100	$ 0	0	889,900	0
Common Stock and Warrants issued in connection with preferred stock, shares				2,000,000
Common Stock and Warrants issued in connection with preferred stock, amount	0	0	0	$ 2,000	0	(2,000)	0
Balance, amount at Mar. 31, 2022	(3,617,752)	$ 262,529	$ 100	$ 76,490	331,600	7,075,481	(11,101,423)
Balance, shares at Mar. 31, 2022		2,800,000	1,000,000	76,490,147
Balance, shares at Dec. 31, 2021		2,800,000		74,490,147
Balance, amount at Dec. 31, 2021	(4,514,303)	$ 259,422	$ 0	$ 74,490	331,600	6,210,414	(11,130,807)
Net loss	(323,942)
Balance, amount at Sep. 30, 2022	(3,940,528)	$ 268,846	$ 100	$ 81,088	0	7,433,033	(11,454,749)
Balance, shares at Sep. 30, 2022		2,800,000	1,000,000	81,088,719
Balance, shares at Mar. 31, 2022		2,800,000	1,000,000	76,490,147
Balance, amount at Mar. 31, 2022	(3,617,752)	$ 262,529	$ 100	$ 76,490	331,600	7,075,481	(11,101,423)
Net loss	(34,903)	0	0	$ 0	0	0	(34,903)
Common stock issued for services, shares				1,389,175
Common stock issued for services, amount	68,977	0	0	$ 1,389	0	67,588	0
Dividends on Series A preferred stock	(23,087)	3,141	0	$ 0	0	(23,087)	0
Common Stock and Warrants issued in connection with preferred stock, shares				670,034
Common Stock and Warrants issued in connection with preferred stock, amount	0	0	0	$ 670	0	(670)	0
Common stock issued for share payable, shares				2,222,221
Common stock issued for share payable, amount	0	0	0	$ 2,222	(331,600)	329,378	0
Balance, amount at Jun. 30, 2022	(3,606,765)	$ 265,670	$ 100	$ 80,771	0	7,448,690	(11,136,326)
Balance, shares at Jun. 30, 2022		2,800,000	1,000,000	80,771,577
Net loss	(318,423)						(318,423)
Common stock issued for services, shares				317,142
Common stock issued for services, amount	8,000	$ 0		$ 317	0	7,683	0
Dividends on Series A preferred stock	(23,340)	3,176	$ 0	0	0	(23,340)	0
Balance, amount at Sep. 30, 2022	$ (3,940,528)	$ 268,846	$ 100	$ 81,088	$ 0	$ 7,433,033	$ (11,454,749)
Balance, shares at Sep. 30, 2022		2,800,000	1,000,000	81,088,719

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash Flows from Operating Activities
Net income	$ (323,942)	$ 184,143
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation expense	859	1,512
Stock-based compensation	76,977	15,228
Gain on settlement of notes payable	0	(160,164)
Loss on conversion of notes payable	0	58,642
Amortization of debt discount	63,625	599,052
Amortization of right-of-use assets	20,225	0
Interest expense from derivative issuance	141,020	0
Derivative (gain) loss	(435,730)	(1,171,242)
Inventory impairment	18,800	0
Net change in:
Accounts receivable	(283,138)	(337,912)
Inventory	(30,545)	(42,326)
Prepaid expenses	(85,779)	134,609
Right-of-use liabilities	(17,916)	0
Accounts payable and accrued expenses	324,327	34,614
Deferred revenue	(23,999)	(325,486)
Net cash used in operating activities	(555,216)	(1,009,330)
Cash Flows from Financing Activities
Proceeds from convertible notes payable	0	570,000
Payments on convertible notes payable	(300,000)	(905,503)
Payments on debt issuance costs	0	(5,000)
Proceeds from notes payable	231,194	1,024,024
Payments on notes payable	(312,009)	(53,605)
Proceeds from sale of common stock units	0	250,000
Proceeds from issuance of Series A preferred stock	890,000	252,000
Net cash provided by financing activities	509,185	1,131,916
Net Change in Cash	46,031	122,586
Cash, Beginning of Period	344,811	489,560
Cash, End of Period	298,780	612,146
Cash Paid For:
Income Taxes	0	0
Interest	13,709	118,732
Non-cash transactions:
Right of use asset and liability recognized, operating leases	105,822	0
Common stock issued to settle convertible notes payable	0	614,198
Derivative liability recognized at issuance of warrants and conversion option	0	493,670
Extinguishment of derivative to warrant exercise	0	72,958
Common stock issued for deferred finance costs	$ 2,670	$ 72,000
Common stock issued to settle share payable	331,600

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Organization and Nature of Operations

9 Months Ended

Sep. 30, 2022

Organization and Nature of Operations

Organization and Nature of Operations

Note 1: Organization and Nature of Operations

Jacksam Corporation dba Convectium is a technology company focused on developing and commercializing products of vaporizer cartridge filling & capping, pre-roll filling, and other automation systems. The Company’s product line primarily consisted of the 710 Shark cartridge filling machine, the 710 Captain cartridge capping machine, the “PreRoll-ER” pre-roll & cone filling machine, customizable and C-Cell cartridges, and accessories. The Company’s customers are primarily businesses operating in jurisdictions that have some form of cannabis legalization. These businesses include medical and recreational dispensaries, large and small-scale processors and growers, multi-state operators, and distributors. The Company utilizes its direct sales force, website, strategic partners’ sales force, independent sales representatives, and a wide range of referral network to sell its products.

The Company was originally organized under the laws of the State of Nevada on September 21, 1989 under the name of Fulton Ventures, Inc. Effective November 16, 2009, management at that time changed the name of Fulton Ventures, Inc. to China Grand Resorts, Inc. After the September 30, 2014 10-Q filing, the management of China Grand Resorts, Inc. abandoned the Company and its subsidiaries were taken back by Chinese national companies in China who owned them. The remaining parent company, China Grand Resorts, Inc., became a dormant company until 2016 when a new shareholder Bryan Glass became the majority shareholder and owner of the Company.

On September 14, 2018 (the “Merger”), the Company’s wholly owned subsidiary, Jacksam Acquisition Corp., a corporation formed in the State of Nevada on September 11, 2018, or the Acquisition Sub, merged with and into Jacksam, a corporation incorporated in the State of Delaware in August 2013.

On November 5, 2018, current management merged Jacksam into the parent Company, China Grand Resorts, Inc. In connection with the transaction, current management amended our articles of incorporation to change the Company’s name from China Grand Resorts, Inc. to Jacksam Corporation dba Convectium.

Since the Merger, the Company has been operated under the control of current management and continued to operate the business of Jacksam Corporation, described herein, as our sole business.

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Significant Accounting Policies

Significant Accounting Policies

Note 2: Significant Accounting Policies

Basis of Preparation

The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) under the accrual basis of accounting. These financial statements are presented in U.S. dollars and are prepared on a historical cost basis, except for certain financial instruments which are carried at fair value. The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2021 in the Form 10-K filed on March 31, 2022. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the Form 10-K have been omitted.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Jacksam Corporation and its wholly owned subsidiary. All intercompany transactions and balances are eliminated in consolidation.

Use of Estimates

The preparation of financial statements is in conformity with U.S. GAAP and requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact both assets and liabilities, including but not limited to net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount and estimates of the probability and potential magnitude of contingent liabilities. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future nonconforming events. Accordingly, actual results could differ significantly from estimates.

Risks and Uncertainties

The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company has experienced, and in the future, expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold, (iii) general economic conditions, and (iv) the related volatility of prices pertaining to the cost of sales.

Cash and Cash Equivalents

Cash and cash equivalents are carried at cost and consist of cash on hand and demand deposits placed with banks or other financial institutions, and all highly liquid investments with an original maturity of three months or less. Federal Deposit Insurance Corporation (“FDIC”) deposit insurance covers $250,000 per depositor, per FDIC-insured bank, per ownership category.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future bad debts, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. As of September 30, 2022 and December 31, 2021, the Company had recorded an allowance for doubtful accounts of $74,000.

Inventory

Inventories are stated at the lower of cost, determined on the average cost basis or net realizable value. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand.

The September 30, 2022 and December 31, 2021 inventory consisted entirely of finished goods. The Company will maintain an allowance based on specific inventory items that have shown no activity over a 60-month period. The Company tracks inventory as it is disposed, scrapped or sold at below cost to determine whether additional items on hand should be reduced in value through an allowance method. As of September 30, 2022 and December 31, 2021, the Company has determined that an inventory allowance of $18,800 is required and was recognized during the nine months ended September 30, 2022.

Property and Equipment

Property and equipment are measured at cost, less accumulated depreciation, and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5 to 7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

Fair Value of Financial Instruments

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The following are the hierarchical levels of inputs to measure fair value:

· Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.

· Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; Quoted prices for similar assets or liabilities in active markets; Inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

· Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and an approximate of their fair values because of the short maturity of these instruments.

Binomial Calculation Model

The Company uses a binomial calculator model to determine fair market value of derivative liabilities, warrants and options issued.

Revenue Recognition

The Company derives revenues from the sale of machines and non-machine products (customizable and C-Cell cartridges and accessories). The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606. Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services.

Revenue is recognized based on the following five step model:

- Identification of the contract with a customer

- Identification of the performance obligations in the contract

- Determination of the transaction price

- Allocation of the transaction price to the performance obligations in the contract

- Recognition of revenue when, or as, the Company satisfies a performance obligation

Performance Obligations

Sales of machines and non-machine products are recognized when all the following criteria are satisfied: (i) a contract with an end user exists which has commercial substance; (ii) it is probable the Company will collect the amount charged to the end user; and (iii) the Company has completed its performance obligation whereby the end user has obtained control of the product. A contract with commercial substance exists once the Company receives and accepts a purchase order or once it enters into a contract with an end user. If collectability is not probable, the sale is deferred and not recognized until collection is probable or payment is received. Control of products typically transfers when title and risk of ownership of the product has transferred to the customer. The customer has a 10-day period to inspect the equipment and may return the product if it does not meet the agreed-upon specifications. For contracts with multiple performance obligations, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. The Company uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. Historically, the Company’s contracts have not had multiple performance obligations. The large majority of the Company’s performance obligations are recognized at a point in time related to the sale of machines and non-machine products.

Sales, value add, and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. Payment terms between invoicing and when payment is due is less than one year. As of December 31, 2021, none of the Company’s contracts contained a significant financing component.

The Company elected the practical expedient to not adjust the amount of revenue to be recognized under a contract with an end user for the effects of time value of money when the timing difference between receipt of payment and recognition of revenue is less than one year.

The majority of the Company’s contracts offer an assurance-type warranty of the products at no additional cost for a period of 3 years. Assurance-type warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications. Such warranties do not represent a separate performance obligation. At the time a sale is recognized, the Company estimated future warranty costs, which were trivial.

Transaction Price Allocated to the Remaining Performance Obligations

At a given point in time, the Company may have collected payment for future sales of product to begin production. These transactions are deferred until the product transfers to the customer and the performance obligation is considered complete. As of September 30, 2022, $147,772 in revenue is expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. The Company expects to recognize all of our unsatisfied (or partially unsatisfied) performance obligations as revenue in the next twelve months.

Contract Costs

Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included within cost of goods and services.

Critical Accounting Estimates

Estimates are used to determine the amount of variable consideration in contracts, the standalone selling price among separate performance obligations and the measure of progress for contracts where revenue is recognized over time. The Company reviews and updates these estimates regularly.

Disaggregation of Revenue

All machine sales and most non-machine sales are completed in North America.

	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Machine sales	$	225,335	$	1,280,139	$	2,416,419	$	4,465,754
Non-machine sales		267,556		699,253		1,320,856		914,861
Total sales	$	492,891	$	1,949,392	$	3,737,275	$	5,380,615

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Potential common stock equivalents are determined using the treasury stock method. For diluted net loss per share purposes, the Company excludes stock options and other stock-based awards, including shares issued as a result of option exercises that are subject to repurchase by the Company, whose effect would be anti-dilutive from the calculation.

The following table presents the effect of potential dilutive issuances for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended						Nine Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Net income (loss) attributable to common stockholders	$	(341,763	)	$	(115,430	)	$	(393,202	)	$	179,828
Preferred stock dividends		-			-			-			4,315
Derivative gain		-			-			-			(1,171,242	)
Interest expense associated with convertible debt		-			-			-			715,401
Net income (loss) for dilutive calculation	$	(341,763	)	$	(115,430	)		(393,202	)		(271,698	)
Weighted average shares outstanding		80,855,219			73,645,455			78,700,014			71,490,810
Dilutive effect of preferred stock		-			-			-			1,400,000
Dilutive effect of convertible debt		-			-			-			3,969,136
Dilutive effect of common stock warrants		-			-			-
Weighted average shares outstanding for diluted net income (loss) per share		80,855,219			73,645,455			78,700,014			76,859,946

During the three and nine months ended September 30, 2022, the impact of 14,279,965 warrants to purchase common stock, 2,469,136 shares issuable under convertible debt and 18,066,667 shares issuable under convertible preferred stock were excluded from the calculation above as their impact would be anti-dilutive. The calculation for each period presented also excludes 2,777,778 shares not yet issued related to conversions of debt that occurred in 2020. During the three and nine months ended September 30, 2021, the impact of 11,189,056 warrants to purchase common stock were excluded from the calculation as their impact would be anti-dilutive. During the nine months ended September 30, 2021, 3,969,136 shares issuable under convertible debt were excluded from the calculation above as their impact would be anti-dilutive.

Going Concern

The Company’s financial statements are prepared using U.S. GAAP to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have a source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully execute the business plan and attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

In the coming year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the SEC, and the payment of expenses associated with operations and business developments. The Company is projected to experience a cash shortfall and be required to raise additional capital.

Historically, it has mostly relied upon convertible notes payable and cash flows from operations to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective and will not have a material effect on its consolidated financial position or results of operations upon adoption.

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 U.S. 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 of ASU 2020-06 on its financial statements.

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Property and Equipment

9 Months Ended

Sep. 30, 2022

Property and Equipment

Property and Equipment

Note 3: Property and Equipment

Property and equipment consist of the following:

	September 30, 2022			December 31, 2021
Furniture and fixtures	$	10,425		$	10,425
Equipment		7,579			7,579
Trade show display		2,640			2,640
Total		20,644			20,644
Less: Accumulated depreciation		(20,031	)		(19,172	)
Property and equipment, net	$	613		$	1,472

Depreciation expense amounted to $859 and $1,512 for the nine months ended September 30, 2022 and 2021, respectively.

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Accounts Payable and Accrued Expenses

9 Months Ended

Sep. 30, 2022

Accounts Payable and Accrued Expenses

Accounts Payable and Accrued Expenses

Note 4: Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

	September 30, 2022		December 31, 2021
Accounts payable	$	687,170	$	382,925
Accrued dividends		59,835		4,338
Sales tax payable		144,553		144,541
Accrued officer consulting cost		-		13,750
Other		42,223		42,221
Total Accounts payable and Accrued expenses	$	1,070,069	$	641,690

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Notes Payable

9 Months Ended

Sep. 30, 2022

Notes Payable

Notes Payable

Note 5: Notes Payable

A summary of Notes Payable are as follows:

	September 30, 2022			December 31, 2021
Note payable April 2020		-			35,245
SBA loan May 2020		145,555			148,093
Note payable September 2021		679,010			730,783
Note payable September 2022		29,212			-
Total notes payable		833,307			914,121
Less: discount and deferred finance costs		(100,955	)		(121,309	)
Less: current portion		(112,324	)		(87,774	)
Long-term portion of notes payable	$	620,028			705,038

On December 31, 2019, the Company entered into an inventory financing arrangement with a single lender, whereby $150,000 was paid by the lender directly to a vendor to secure inventory for the sales to customers in January 2020. The Company will repay $164,835 of principal and interest by February 29, 2020. The interest and fees of $14,835 were recorded as debt discount and were amortized through the maturity date. The Company also paid a deferred finance cost of $5,000 which was amortized through the maturity date. The Company entered into a second agreement on February 6, 2020 with the same lander for an additional $43,000 of funding. The Company will repay $47,253 at maturity on April 6, 2020. On April 22, 2020, these two notes payable were refinanced with the lender into a single agreement whereby the Company will make an initial repayment of $74,231 and 24 monthly payments of $7,467, for total payments of $253,439. This amendment was accounted for as a modification of the debt. As of September 30, 2022 the company has repaid the balance of the note in full.

On June 2, 2020, the Company received $150,000 under the Small Business Administration’s Economic Injury Disaster Loan. The loan bears interest at a fixed rate of 3.75%, and matures on May 26, 2050, payable monthly with payments of $731 beginning twelve months after issuance. The loan gives the Small Business Administration a security interest in all assets of the Company. As of September 30, 2022 and December 31, 2021, the Company owed a principal amount of $145,555 and $148,093 under this loan.

On September 29, 2021, the Company entered into a Revenue Loan and Security Agreement with an investor for up to a total amount of $1,000,000. Upon drawing from the facility and continuing thereafter until maturity or earlier prepayment in full, the Company shall pay monthly to the lender an amount equal to the product of (i) all revenue of the Company for the immediately preceding month multiplied by (ii) an applicable revenue percentage. On September 29, 2021, the Company borrowed $750,000 under the agreement and received initial cash proceeds of $727,500. The Company also paid an additional $5,000 in fees to the investor to secure the loan for total deferred financing fees of $27,500. On November 12, 2021, the Company issued a total of 843,750 shares of common stock to a lender in connection with the note payable issued. These shares had a fair value of $100,744 and were recorded as deferred finance costs. As of September 30, 2022 and December 31, 2021, the Company owed a principal amount of $658,540 and $730,783 under this loan, with remaining unamortized discount of $100,955 and $121,309, respectively.

In March 2022, the Company received cash proceeds of $82,081 under an unsecured short term financing agreement. The Company repaid $5,694 per week until repaid in full. This note was repaid in full as of September 30, 2022. The Company entered into a second unsecured short term finance arrangement and received cash proceeds of $81,907. This agreement was repaid in full as of September 30, 2022.  The Company entered into three additional unsecured short term finance arrangements and received total cash proceeds of $67,206. The Company has repaid two of the advances in full and has a remaining balance of $29,212 on the remaining advance as of September 30, 2022.

The Company amortized $20,355 and $16 of debt discount and deferred finance costs to interest expense related to notes payable during the nine months ended September 30, 2022 and 2021, respectively.

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Convertible Notes Payable and Derivative Liabilities

9 Months Ended

Sep. 30, 2022

Convertible Notes Payable and Derivative Liabilities

Convertible Notes Payable and Derivative Liabilities

Note 6: Convertible Notes Payable and Derivative Liabilities

Convertible Notes Payable

The following table summarizes outstanding convertible notes as of September 30, 2022 and December 31, 2021:

	September 30, 2022			December 31, 2021
June 2019 Notes, due December 21, 2022	$	444,444		$	444,444
June 2020 Note 1, maturing June 4, 2021		-			-
June 2020 Note 2, maturing June 24, 2021		-			-
June 2020 Note 3, maturing June 24, 2021		-			-
November 2020 Note, maturing November 23, 2021		-			-
February 2021 Note, maturing February 15, 2022		-			300,000
Total		444,444			744,444
Less: Debt discount and deferred finance costs on short-term convertible notes		-			(43,269	)
Less: Current convertible notes payable, net of discount		(444,444	)		(701,175	)
Total long-term convertible notes payable, net	$	-		$	-

In June and July 2019, the Company issued convertible notes to 10 investors with an original principal amount of $2,388,889, receiving $1,583,333 in net cash proceeds (the “June 2019 Notes”). The June 2019 Notes matured on March 25, 2020 and are convertible into the Company’s common stock at a per share price of $0.35 at any time subsequent to the issuance date. The June 2019 Notes contain a down round feature, whereby any sale of common stock or common stock equivalent at a price per share lower than the conversion price of the June 2019 Notes will result in the conversion price being lowered to the new price. The warrants contain the same down round feature as the notes. As a result of a dilutive issuance during the year ended December 31, 2020, the exercise price of the remaining notes payable and the warrants is currently $0.18 per share.

During the year ended December 31, 2020, $1,500,000 of the principal on the June 2019 Notes was converted into the right to receive 7,883,599 shares of common stock, of which 5,105,821 were issued by December 31, 2021 and 2,777,778 were part of the subscriptions payable liability balance of $499,999 as of September 30, 2022. See Note 7.

Following two previous extensions and on July 9, 2021, the holder of $444,444 of the notes agreed to extend the repayment period to December 31, 2021. There were no other changes to terms of the convertible notes payable, and the amendments were accounted for as a debt modification.

On February 15, 2021, the Company entered into a convertible note agreement with an institutional investor for a principal amount of $675,000 (the “February 2021 Note”) bearing interest at 10% with an original issue discount of $67,500 and a maturity date of February 15, 2022. The Company paid $37,500 of deferred finance costs and issued 200,000 shares of common stock to the lender of the February 2021 Note as deferred finance costs, valued at $72,000 based on the closing price of the stock at the date of borrowing. This lender also received 767,045 common stock warrants with an exercise price of $0.44 and a term of 3 years valued at $179,699. If the note is in default, the holder has the right to convert the outstanding principal and accrued interest balance into shares of common stock at the closing bid price of the Company’s common stock immediately prior to conversion. As a result of the variable conversion price on the Company’s outstanding notes payable and reset provisions, the conversion option and the warrants were accounted for as a derivative liability. The original balance of this note was $675,000. The Company used proceeds from this note payable to pay in full the June 2020 Notes and the November 2020 Note. The Company repaid the remaining $300,000 of principal on this note during the nine months ended September 30, 2022.

The Company amortized $43,270 and $599,052 of debt discount and deferred finance costs to interest expense related to convertible notes payable during the nine months ended September 30, 2022 and 2021, respectively. Accrued interest on notes payable and convertible notes payable was $136,289 and $4,338 as of September 30, 2022 and December 31, 2021, respectively.

Derivative Liabilities

The fair values of the conversion option of outstanding convertible notes payable and common stock warrants with reset provisions were estimated using a binomial model with the following assumptions:

	As of September 30, 2022
	Conversion Option			Warrants
Volatility		69.26	%	69.26-105.11		%
Dividend Yield		0	%		0	%
Risk-free rate		3.92	%	3.92-4.06		%
Expected term	0.5 year			0.5-4.5 years
Stock price	$	0.018		$	0.018
Exercise price	$	0.18		$	0.18-0.30
Derivative liability fair value	$	-		$	31,098

All fair value measurements related to the derivative liabilities are considered significant unobservable inputs (Level 3) under the fair value hierarchy of ASC 820.

The table below presents the change in the fair value of the derivative liability during the nine months ended September 30, 2022:

Fair value as of December 31, 2021	$	325,808
Fair value on the date of issuance of new derivatives		141,020
Extinguishment due to repayment of debt		(7,655	)
Gain on change in fair value of derivatives		(428,075	)
Fair value as of September 30, 2022	$	31,098

The total impact of derivative liabilities recognized in the Company’s consolidated statements of operations includes extinguishments due to repayments and the change in fair value of derivatives, with the Company recognizing a total gain of $435,730 and $1,171,242 during the nine months ended September 30, 2022 and 2021, respectively.

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Equity

9 Months Ended

Sep. 30, 2022

Equity

Equity

Note 7: Equity

Common Stock

On December 31, 2021, the Board of Directors of the Company and shareholders holding a majority of the voting power of the Company both approved an amendment to the Company’s Article of Incorporation to increase the total number of authorized shares that the Company shall have authority to issue from 100,000,000 shares to 230,000,000 shares, consisting of two classes to be designated respectively, “Common Stock” and “Preferred Stock”, with all such shares having a par value of $0.001 per share, of which 200,000,000 shall be designated as Common stock and 30,000,000 designated as Preferred stock. 

During the years ended December 31, 2021 and 2020, the Company sold common stock units at $0.18 per unit. Each $0.18 unit consists of a share of common stock and a warrant to purchase half a share of common stock at an exercise price of $0.27, for a period of three years from issuance. During the nine months ended September 30, 2022 the Company issued 2,222,221 shares to settle the outstanding share payable. As of September 30, 2022 and December 31, 2021 there were zero and 2,222,221 shares remaining to be issued related to common stock units, respectively.

As of September 30, 2022 and December 31, 2021, there are 2,777,778 shares remaining to be issued related to 2020 debt conversions of $499,999, which is included in Subscription payable on the consolidated balance sheets, with 2,160,494 of those shares remaining to be issued to Mark Adams, CEO, and another investor. See Note 6.

During the nine months ended September 30, 2022, the Company issued 1,389,175 shares for services with a fair value of $68,977.

Series A Redeemable Preferred Stock

The Company created the 2,800,000 shares of Series A Preferred Stock out of the 10,000,000 shares of preferred stock authorized by the Company’s articles of incorporation by filing a certificate of designation as authorized by the Company’s board of directors (the “Certificate of Designation”). 

The Series A Preferred Stock bears a cumulative dividend of 5.0% per annum on the original purchase price and is redeemable by the Company or upon a class vote by the holders of the Series A Preferred Stock at the original purchase price, plus any unpaid dividends then owing, payable in 4 equal quarterly payments. The Series A Preferred Stock converts into the Company’s common stock at a ratio of 2:1, subject to revision on the basis of standard weighted average anti-dilution protective provisions, at the option of the holders of the Series A Preferred Stock or automatically upon the occurrence of a merger, sale of the Company’s assets, or upon another Deemed Liquidation Event as defined in the Certificate of Designation. In the absence of an anti-dilution adjustment, the 2,800,000 shares of Series A Preferred Stock will convert into 1,400,000 shares of the Company’s common stock.

The Series A Preferred Stock votes with the Company’s common stock, as a single class, at a rate of 20 votes for each share of Series A Preferred Stock. The Series A Preferred Stock carries a liquidation preference and is participating. The Series A Preferred Stock carries standard protective provisions that preclude the Company from amending its articles of incorporation, bylaws or the terms of the Certificate of Designation adversely to the holders of the Series A Preferred Stock without their prior approval.

Due to the redemption feature, the Company accounts for the Series A Preferred Stock as temporary equity in accordance with ASC 480. The Series A Preferred Stock is accounted for at redemption value.

On May 26, 2021, the Company, entered into a subscription agreement (the “Preferred Stock Agreement”) with Mark Adams, Chief Executive Officer, President, and a member of Board of Directors of the Company. Mark Adams paid $126,000 to purchase 1,400,000 shares of the Series A Preferred Stock, at a price per share of $0.09. Scott Wessler, former Chairman of Board of Directors of the Company, paid $126,000 to purchase 1,400,000 shares of the Series A Preferred Stock, at a price per share of $0.09.

The Company accrued $9,424 in dividends on the Series A Preferred Stock for the nine months ended September 30, 2022. The redemption value of the Series A Preferred Stock as of September 30, 2022 and December 31, 2021 was $268,846 and $259,422, reflected as temporary equity on the Company’s consolidated balance sheet.

Series B Convertible Preferred Stock

In February 2022, the Company designated 1,000,000 shares of Series B Convertible Preferred Stock (“Series B”). The Series B has a par value of $0.0001 per share, a stated value of $1.00 per share and carries a dividend of 8.0%. The Series B are convertible into shares of common stock at a price of $0.06 per share, and contains an exercise price reset provision in the event of dilutive issuances of common stock or any common stock equivalent by the Company with a price below the exercise price.

The Series B holders do not have voting rights on matters other than those related to amending the certificate of incorporation of the Series B, altering voting or other powers of the Series B, or redemption or acquisition of outstanding Series B. For a period of one year following closing of the Series B funding, the Company may not authorize or create any class of stock that is senior to the Series B with respect to dividends, redemption or distribution of assets upon Liquidation. In the event of liquidation of the Company, the Series B holders shall be paid 125.0% of the Stated value plus 125.0% of any unpaid dividends.

During the nine months ended September 30, 2022, the Company sold a total of 1,000,000 shares of Series B to two investors for net cash proceeds of $885,000 after closing costs of $115,000 and issued warrants to purchase 4,000,000 shares of common stock at $0.20 per share for a period of five years. The Company also issued 2,670,034 shares of common stock with a fair value of $139,800 to the investors, which were recorded as a cost of capital. The Company granted to the investors the piggy-back registration rights.

Stock Warrants

A summary of stock warrant information is as follows:

	Aggregate Number			Aggregate Exercise Price			Weighted Average Exercise Price
Outstanding at December 31, 2021		11,189,056		$	2,646,044		$	0.24
Granted		4,000,000			800,000			0.20
Exercised		-			-			-
Less: forfeited and cancelled		(909,091	)		(500,000	)		0.55
Outstanding at September 30, 2022		14,279,965		$	2,946,044		$	0.21

The weighted average remaining contractual life is approximately 2.26 years for stock warrants outstanding with no intrinsic value of as of September 30, 2022. All of the above warrants were fully vested.

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Related Party

9 Months Ended

Sep. 30, 2022

Related Party

Related Party

Note 8: Related Party

Mark Adams, CEO, invested in the June 2019 Notes. Mark Adams contributed $250,000 and converted his debt during the year ended December 31, 2020 into shares of common stock of 1,388,885 that have not yet to be issued. Mark Adams will also receive an additional 15,432 shares of common stock once the shares are issued. Those shares were in subscriptions payable and presented on the balance sheet. See Notes 6 and 7.

Mark Adams and Scott Wessler each contributed $126,000 to purchase the Series A Preferred Stock as discussed in Note 7.

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Commitments

9 Months Ended

Sep. 30, 2022

Commitment

Commitments

Note 9: Commitments

Leases

The Company entered into a lease agreement for office space on February 2, 2022, for a term beginning February 15, 2022 through February 28, 2025. The lease requires payments of $3,267 per month through the lease term, increasing by 4% each year, with an option to renew. The Company recognized an initial right of use asset and lease liability of $105,822, based on the present value of the minimum lease payments. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the Company will exercise those options. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial right-of-use (“ROU”) asset or lease liability. The Company’s lease agreements do not contain any material restrictive covenants. 

The components of lease cost for operating leases for the nine months ended September 30, 2022 and 2021 were as follows:

	Nine months ended
	September 30,  2022		September 30,  2021
Operating lease cost	$	26,811	$	-
Short-term lease cost		24,220		82,668
Variable lease cost		-		-
Sublease income		-		-
Total lease cost	$	51,031	$	82,668

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at September 30, 2022 and December 31, 2021:

Lease Position	September 30, 2022		December 31, 2021
Operating Leases
Operating lease right-of-use assets	$	85,597	$	-
Right of use liability operating lease current portion	$	32,785	$	-
Right of use liability operating lease long term		55,121		-
Total operating lease liabilities	$	87,906	$	-

The Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable. The Company estimated its incremental borrowing rate to be 10%. The lease has a remaining term of 2.42 years.

The following table provides the maturities of lease liabilities at September 30, 2022:

	Operating
	Leases
2022 (Three months remaining)	$	9,801
2023		40,511
2024		42,123
2025		7,065
2026 and thereafter		-
Total future undiscounted lease payments		99,500
Less: Interest		(11,594	)
Present value of lease liabilities	$	87,906

Lawsuit

The Company has a pending lawsuit with one of its previous suppliers regarding defected cartridges. The Company is still evaluating the case and determining the impact of the case on the Company and as of the date of this report the amount or range of possible losses is not reasonably estimable.

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Accrued Liabilities Other

9 Months Ended

Sep. 30, 2022

Accrued Liabilities Other

Accrued Liabilities - Other

Note 10: Accrued Liabilities – Other

Prior to the Merger, China Grand Resorts, Inc. recorded various liabilities that were incurred by former related parties. The current management team is not aware of any written agreements in place governing the terms of the loans nor have they been in contact with the debt holders however recognizes that China Grand Resorts, Inc. previously reported these amounts as liabilities of the Company. In accordance with ASC 405-20-40, the liabilities may only be removed from the Company’s financial statements if they are paid, formally settled or judicially released. Management believes the relevant statute of limitations has passed and that no enforceable legal claim exists in relation to these liabilities of $1,696,374 but does not believe that is sufficient to remove the liability from the financial statements. Management does not intend to remove these liabilities of $1,696,374 from the Company’s financial statements until such time that the liability is formally settled or judicially released in accordance with ASC 405-20-40. Due to the lack of written agreements and other factors noted above, management concluded to no longer accrue interest on these loans.

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Subsequent Events

9 Months Ended

Sep. 30, 2022

Subsequent Events

Subsequent Events

Note 11: Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have been no events that have occurred that would require adjustments to our disclosures in the financial statements.

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Significant Accounting Policies

Basis of Preparation

The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) under the accrual basis of accounting. These financial statements are presented in U.S. dollars and are prepared on a historical cost basis, except for certain financial instruments which are carried at fair value. The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2021 in the Form 10-K filed on March 31, 2022. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the Form 10-K have been omitted.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Jacksam Corporation and its wholly owned subsidiary. All intercompany transactions and balances are eliminated in consolidation.

Use of Estimates

The preparation of financial statements is in conformity with U.S. GAAP and requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact both assets and liabilities, including but not limited to net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount and estimates of the probability and potential magnitude of contingent liabilities. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future nonconforming events. Accordingly, actual results could differ significantly from estimates.

Risks and Uncertainties

The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company has experienced, and in the future, expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold, (iii) general economic conditions, and (iv) the related volatility of prices pertaining to the cost of sales.

Cash and Cash Equivalents

Cash and cash equivalents are carried at cost and consist of cash on hand and demand deposits placed with banks or other financial institutions, and all highly liquid investments with an original maturity of three months or less. Federal Deposit Insurance Corporation (“FDIC”) deposit insurance covers $250,000 per depositor, per FDIC-insured bank, per ownership category.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future bad debts, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. As of September 30, 2022 and December 31, 2021, the Company had recorded an allowance for doubtful accounts of $74,000.

Inventory

Inventories are stated at the lower of cost, determined on the average cost basis or net realizable value. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand.

The September 30, 2022 and December 31, 2021 inventory consisted entirely of finished goods. The Company will maintain an allowance based on specific inventory items that have shown no activity over a 60-month period. The Company tracks inventory as it is disposed, scrapped or sold at below cost to determine whether additional items on hand should be reduced in value through an allowance method. As of September 30, 2022 and December 31, 2021, the Company has determined that an inventory allowance of $18,800 is required and was recognized during the nine months ended September 30, 2022.

Property and Equipment

Property and equipment are measured at cost, less accumulated depreciation, and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5 to 7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

Fair Value of Financial Instruments

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The following are the hierarchical levels of inputs to measure fair value:

· Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.

· Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; Quoted prices for similar assets or liabilities in active markets; Inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

· Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and an approximate of their fair values because of the short maturity of these instruments.

Binomial Calculation Model

The Company uses a binomial calculator model to determine fair market value of derivative liabilities, warrants and options issued.

Revenue Recognition

The Company derives revenues from the sale of machines and non-machine products (customizable and C-Cell cartridges and accessories). The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606. Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services.

Revenue is recognized based on the following five step model:

- Identification of the contract with a customer

- Identification of the performance obligations in the contract

- Determination of the transaction price

- Allocation of the transaction price to the performance obligations in the contract

- Recognition of revenue when, or as, the Company satisfies a performance obligation

Sales of machines and non-machine products are recognized when all the following criteria are satisfied: (i) a contract with an end user exists which has commercial substance; (ii) it is probable the Company will collect the amount charged to the end user; and (iii) the Company has completed its performance obligation whereby the end user has obtained control of the product. A contract with commercial substance exists once the Company receives and accepts a purchase order or once it enters into a contract with an end user. If collectability is not probable, the sale is deferred and not recognized until collection is probable or payment is received. Control of products typically transfers when title and risk of ownership of the product has transferred to the customer. The customer has a 10-day period to inspect the equipment and may return the product if it does not meet the agreed-upon specifications. For contracts with multiple performance obligations, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. The Company uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. Historically, the Company’s contracts have not had multiple performance obligations. The large majority of the Company’s performance obligations are recognized at a point in time related to the sale of machines and non-machine products.

Sales, value add, and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. Payment terms between invoicing and when payment is due is less than one year. As of December 31, 2021, none of the Company’s contracts contained a significant financing component.

The Company elected the practical expedient to not adjust the amount of revenue to be recognized under a contract with an end user for the effects of time value of money when the timing difference between receipt of payment and recognition of revenue is less than one year.

The majority of the Company’s contracts offer an assurance-type warranty of the products at no additional cost for a period of 3 years. Assurance-type warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications. Such warranties do not represent a separate performance obligation. At the time a sale is recognized, the Company estimated future warranty costs, which were trivial.

Transaction Price Allocated to the Remaining Performance Obligations

At a given point in time, the Company may have collected payment for future sales of product to begin production. These transactions are deferred until the product transfers to the customer and the performance obligation is considered complete. As of September 30, 2022, $147,772 in revenue is expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. The Company expects to recognize all of our unsatisfied (or partially unsatisfied) performance obligations as revenue in the next twelve months.

Contract Costs

Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included within cost of goods and services.

Critical Accounting Estimates

Estimates are used to determine the amount of variable consideration in contracts, the standalone selling price among separate performance obligations and the measure of progress for contracts where revenue is recognized over time. The Company reviews and updates these estimates regularly.

Disaggregation of Revenue

All machine sales and most non-machine sales are completed in North America.

	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Machine sales	$	225,335	$	1,280,139	$	2,416,419	$	4,465,754
Non-machine sales		267,556		699,253		1,320,856		914,861
Total sales	$	492,891	$	1,949,392	$	3,737,275	$	5,380,615

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Potential common stock equivalents are determined using the treasury stock method. For diluted net loss per share purposes, the Company excludes stock options and other stock-based awards, including shares issued as a result of option exercises that are subject to repurchase by the Company, whose effect would be anti-dilutive from the calculation.

The following table presents the effect of potential dilutive issuances for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended						Nine Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Net income (loss) attributable to common stockholders	$	(341,763	)	$	(115,430	)	$	(393,202	)	$	179,828
Preferred stock dividends		-			-			-			4,315
Derivative gain		-			-			-			(1,171,242	)
Interest expense associated with convertible debt		-			-			-			715,401
Net income (loss) for dilutive calculation	$	(341,763	)	$	(115,430	)		(393,202	)		(271,698	)
Weighted average shares outstanding		80,855,219			73,645,455			78,700,014			71,490,810
Dilutive effect of preferred stock		-			-			-			1,400,000
Dilutive effect of convertible debt		-			-			-			3,969,136
Dilutive effect of common stock warrants		-			-			-
Weighted average shares outstanding for diluted net income (loss) per share		80,855,219			73,645,455			78,700,014			76,859,946

During the three and nine months ended September 30, 2022, the impact of 14,279,965 warrants to purchase common stock, 2,469,136 shares issuable under convertible debt and 18,066,667 shares issuable under convertible preferred stock were excluded from the calculation above as their impact would be anti-dilutive. The calculation for each period presented also excludes 2,777,778 shares not yet issued related to conversions of debt that occurred in 2020. During the three and nine months ended September 30, 2021, the impact of 11,189,056 warrants to purchase common stock were excluded from the calculation as their impact would be anti-dilutive. During the nine months ended September 30, 2021, 3,969,136 shares issuable under convertible debt were excluded from the calculation above as their impact would be anti-dilutive.

Going Concern

The Company’s financial statements are prepared using U.S. GAAP to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have a source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully execute the business plan and attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

In the coming year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the SEC, and the payment of expenses associated with operations and business developments. The Company is projected to experience a cash shortfall and be required to raise additional capital.

Historically, it has mostly relied upon convertible notes payable and cash flows from operations to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective and will not have a material effect on its consolidated financial position or results of operations upon adoption.

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 U.S. 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 of ASU 2020-06 on its financial statements.

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Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2022

Significant Accounting Policies

Schedule of disaggregation of revenue

	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Machine sales	$	225,335	$	1,280,139	$	2,416,419	$	4,465,754
Non-machine sales		267,556		699,253		1,320,856		914,861
Total sales	$	492,891	$	1,949,392	$	3,737,275	$	5,380,615

Summary of effect of potential dilutive issuances

	Three Months Ended						Nine Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Net income (loss) attributable to common stockholders	$	(341,763	)	$	(115,430	)	$	(393,202	)	$	179,828
Preferred stock dividends		-			-			-			4,315
Derivative gain		-			-			-			(1,171,242	)
Interest expense associated with convertible debt		-			-			-			715,401
Net income (loss) for dilutive calculation	$	(341,763	)	$	(115,430	)		(393,202	)		(271,698	)
Weighted average shares outstanding		80,855,219			73,645,455			78,700,014			71,490,810
Dilutive effect of preferred stock		-			-			-			1,400,000
Dilutive effect of convertible debt		-			-			-			3,969,136
Dilutive effect of common stock warrants		-			-			-
Weighted average shares outstanding for diluted net income (loss) per share		80,855,219			73,645,455			78,700,014			76,859,946

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Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2022

Property and Equipment

Schedule of property and equipment

	September 30, 2022			December 31, 2021
Furniture and fixtures	$	10,425		$	10,425
Equipment		7,579			7,579
Trade show display		2,640			2,640
Total		20,644			20,644
Less: Accumulated depreciation		(20,031	)		(19,172	)
Property and equipment, net	$	613		$	1,472

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Accounts payable and accrued expenses (Tables)

9 Months Ended

Sep. 30, 2022

Accounts payable and accrued expenses (Tables)

Schedule of accounts payable and accrued expenses

	September 30, 2022		December 31, 2021
Accounts payable	$	687,170	$	382,925
Accrued dividends		59,835		4,338
Sales tax payable		144,553		144,541
Accrued officer consulting cost		-		13,750
Other		42,223		42,221
Total Accounts payable and Accrued expenses	$	1,070,069	$	641,690

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2022

Notes Payable (Tables)

Summary of notes payable

	September 30, 2022			December 31, 2021
Note payable April 2020		-			35,245
SBA loan May 2020		145,555			148,093
Note payable September 2021		679,010			730,783
Note payable September 2022		29,212			-
Total notes payable		833,307			914,121
Less: discount and deferred finance costs		(100,955	)		(121,309	)
Less: current portion		(112,324	)		(87,774	)
Long-term portion of notes payable	$	620,028			705,038

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Convertible Notes Payable and Derivative Liabilities (Tables)

9 Months Ended

Sep. 30, 2022

Convertible Notes Payable and Derivative Liabilities

Schedule of outstanding convertible notes

	September 30, 2022			December 31, 2021
June 2019 Notes, due December 21, 2022	$	444,444		$	444,444
June 2020 Note 1, maturing June 4, 2021		-			-
June 2020 Note 2, maturing June 24, 2021		-			-
June 2020 Note 3, maturing June 24, 2021		-			-
November 2020 Note, maturing November 23, 2021		-			-
February 2021 Note, maturing February 15, 2022		-			300,000
Total		444,444			744,444
Less: Debt discount and deferred finance costs on short-term convertible notes		-			(43,269	)
Less: Current convertible notes payable, net of discount		(444,444	)		(701,175	)
Total long-term convertible notes payable, net	$	-		$	-

Schedule of fair values of conversion option and warrants

	As of September 30, 2022
	Conversion Option			Warrants
Volatility		69.26	%	69.26-105.11		%
Dividend Yield		0	%		0	%
Risk-free rate		3.92	%	3.92-4.06		%
Expected term	0.5 year			0.5-4.5 years
Stock price	$	0.018		$	0.018
Exercise price	$	0.18		$	0.18-0.30
Derivative liability fair value	$	-		$	31,098

Schedule of fair value of derivative liability

Fair value as of December 31, 2021	$	325,808
Fair value on the date of issuance of new derivatives		141,020
Extinguishment due to repayment of debt		(7,655	)
Gain on change in fair value of derivatives		(428,075	)
Fair value as of September 30, 2022	$	31,098

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Equity (Tables)

9 Months Ended

Sep. 30, 2022

Equity

Summary of stock warrant

	Aggregate Number			Aggregate Exercise Price			Weighted Average Exercise Price
Outstanding at December 31, 2021		11,189,056		$	2,646,044		$	0.24
Granted		4,000,000			800,000			0.20
Exercised		-			-			-
Less: forfeited and cancelled		(909,091	)		(500,000	)		0.55
Outstanding at September 30, 2022		14,279,965		$	2,946,044		$	0.21

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Commitments (Tables)

9 Months Ended

Sep. 30, 2022

Commitments (Tables)

Schedule of operating lease cost

	Nine months ended
	September 30,  2022		September 30,  2021
Operating lease cost	$	26,811	$	-
Short-term lease cost		24,220		82,668
Variable lease cost		-		-
Sublease income		-		-
Total lease cost	$	51,031	$	82,668

Summary of lease related assets and liabilities

Lease Position	September 30, 2022		December 31, 2021
Operating Leases
Operating lease right-of-use assets	$	85,597	$	-
Right of use liability operating lease current portion	$	32,785	$	-
Right of use liability operating lease long term		55,121		-
Total operating lease liabilities	$	87,906	$	-

Schedule of maturities of lease liabilities

	Operating
	Leases
2022 (Three months remaining)	$	9,801
2023		40,511
2024		42,123
2025		7,065
2026 and thereafter		-
Total future undiscounted lease payments		99,500
Less: Interest		(11,594	)
Present value of lease liabilities	$	87,906

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Significant Accounting Policies (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Significant Accounting Policies (Details)
Machine sales	$ 225,335	$ 1,280,139	$ 2,416,419	$ 4,465,754
Non-machine sales	267,556	699,253	1,320,856	914,861
Total sales	$ 492,891	$ 1,949,392	$ 3,737,275	$ 5,380,615

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Significant Accounting Policies (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Significant Accounting Policies (Details)
Net income (loss) attributable to common stockholders	$ (341,763)	$ (115,430)	$ (393,202)	$ 179,828
Preferred stock dividends	0	0	0	4,315
Derivative gain	0	0	0	(1,171,242)
Interest expense associated with convertible debt	0	0	0	715,401
Net income (loss) for dilutive calculation	(341,763)	(115,430)	(393,202)	(271,698)
Weighted average shares outstanding	80,855,219	73,645,455	78,700,014	71,490,810
Dilutive effect of preferred stock	0	0	0	1,400,000
Dilutive effect of convertible debt	0	0	0	3,969,136
Dilutive effect of common stock warrants	0	0	0
Weighted average shares outstanding for diluted net income (loss) per share	$ 80,855,219	$ 73,645,455	$ 78,700,014	$ 76,859,946

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Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Allowance for Doubtful Accounts			$ 74,000
Inventory allowance			$ 18,800
Common stock purchase	14,279,965	11,189,056	14,279,965	11,189,056
Shares issuable under convertible debt excluded from calculation	2,469,136		2,469,136
Convertible preferred stock	18,066,667		18,066,667
FDIC insurance amount			$ 250,000
Revenue	$ 147,772		$ 147,772		$ 171,771
Shares issuable			2,777,778	3,969,136
Minimum [Member]
Property and equipment , estimated useful lives			5 years
Maximum [Member]
Property and equipment , estimated useful lives			7 years

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Property and Equipmentt (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Total	$ 20,644	$ 20,644
Less: Accumulated Depreciation	(20,031)	(19,172)
Property and Equipment net	613	1,472
Furniture and Fixtures [Member]
Total	10,425	10,425
Equipments [Member]
Total	7,579	7,579
Trade Show Displays [Member]
Total	$ 2,640	$ 2,640

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Property and Equipmentt (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Property and Equipmentt (Details)
Depreciation expense	$ 859	$ 1,512

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Accounts Payable and Accrued Expenses (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Total Accounts payable and Accrued expenses	$ 1,070,069	$ 641,690
Accounts payable [Member]
Total Accounts payable and Accrued expenses	687,170	382,925
Accrued interest [Member]
Total Accounts payable and Accrued expenses	59,835	4,338
Sales tax payable [Member]
Total Accounts payable and Accrued expenses	144,553	144,541
Accrued officer consulting cost [Member]
Total Accounts payable and Accrued expenses	0	13,750
Other [Member]
Total Accounts payable and Accrued expenses	$ 42,223	$ 42,221

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Notes Payable (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Less: discount and deferred finance costs	$ (100,955)	$ (121,309)
Less: current portion	(112,324)	(87,774)
Long term portion of notes payable	620,028	705,038
Total notes payable	833,307	914,121
Note Payable April 2020 [Member]
Total notes payable	0	35,245
SBA loan May 2020 [Member]
Total notes payable	145,555	148,093
Note Payable September 2021 [Member]
Total notes payable	679,010	730,783
Note Payable September 2022 [Member]
Total notes payable	$ 29,212	$ 0

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Notes Payable (Details Narrative) - USD ($)			1 Months Ended				9 Months Ended
	Jun. 02, 2020	Feb. 06, 2020	Mar. 31, 2022	Sep. 29, 2021	Apr. 22, 2020	Dec. 31, 2019	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Amortization of debt discount							$ 20,355	$ 16
Unamortized discount							100,955		$ 121,309
Repayment of notes							312,009	$ 53,605
Payroll Protection Program [Member]
Maturity date	May 26, 2050
Interest rate	3.75%
Proceeds from loan	$ 150,000
Debt description	payable monthly with payments of $731 beginning twelve months after issuance.			all revenue of the Company for the immediately preceding month multiplied by (ii) an applicable revenue percentage. On September 29, 2021, the Company borrowed $750,000 under the agreement and received initial cash proceeds of $727,500.
Inventory Financing Agreement [Member] | Lender [Member]
Principal amount							145,555		148,093
Maturity date					Apr. 22, 2020
Frequency of payment					24 monthly
Periodic payment, monthly					$ 7,467
Total outstanding payment					253,439
Repayment of debt					$ 74,231
Inventory financing arrangement, Description		The Company will repay $47,253 at maturity on April 6, 2020.				The Company will repay $164,835 of principal and interest by February 29, 2020. The interest and fees of $14,835 were recorded as debt discount and were amortized through the maturity date. The Company also paid a deferred finance cost of $5,000 which was amortized through the maturity date.
Proceeds from lender		$ 43,000				$ 150,000
Revenue Loan and Security Agreement [Member]
Investor fees				$ 5,000
Financing fees				$ 27,500
Common stock to a lender				843,750
Deferred finance costs				$ 100,744
Proceeds from loan				$ 1,000,000
Principal amount							658,540		730,783
Unamortized discount							100,955		$ 121,309
Unsecured short term finance agreement [Member]
Proceeds from loan			$ 67,206
Repayment of notes			5,694				29,212
Cash proceeds from an unsecured short term financing agreement			$ 82,081				$ 81,907

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Convertible Notes Payable and Derivative Liabilities (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Total	$ 444,444	$ 744,444
Less: Debt discount and deferred finance costs on short-term convertible notes	0	(43,269)
Less: Current convertible notes payable, net of discount	(444,444)	(701,175)
Total long-term convertible notes payable, net	0	0
June 2020 Note 3, maturing June 24, 2021 [Member]
Total	0	0
November 2020 Note, maturing November 23, 2021 [Member]
Total	0	0
June 2019 Notes, Due December 21, 2022 [Member]
Total	444,444	444,444
February 2021 Note, Maturing February 15, 2022 [Member]
Total	0	300,000
June 2020 Note 2, maturing June 24, 2021 [Member]
Total	0	0
June 2020 Note 2, maturing June 24, 2021 [Member]
Total	$ 0	$ 0

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Convertible Notes Payable and Derivative Liabilities (Details 1)	9 Months Ended
	Sep. 30, 2022 USD ($) $ / shares
Exercise price	$ 0
Conversion Option [Member]
Exercise price	$ 0.18
Volatility	69.26%
Dividend Yield	0.00%
Risk-free rate	3.92%
Expected term	6 months
Stock price	$ 0.018
Derivative Liability fair value | $	$ 0
Warrants [Member]
Dividend Yield	0.00%
Stock price	$ 0.018
Derivative Liability fair value | $	$ 31,098
Warrants [Member] | Minimum [Member]
Exercise price	$ 0.18
Volatility	69.26%
Risk-free rate	3.92%
Expected term	6 months
Warrants [Member] | Maximum [Member]
Exercise price	$ 0.30
Volatility	105.11%
Risk-free rate	4.06%
Expected term	4 years 6 months

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Convertible Notes Payable and Derivative Liabilities (Details 2) - Fair Value [Member]	9 Months Ended
	Sep. 30, 2022 USD ($)
Fair value, Beginning balance	$ 325,808
Fair value on the date of issuance of new derivatives	141,020
Extinguishment due to repayment of debt	(7,655)
Gain on change in fair value of derivatives	(428,075)
Fair value, Ending balance	$ 31,098

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Convertible Notes Payable and Derivative Liabilities (Details Narrative) - USD ($)		1 Months Ended		3 Months Ended	9 Months Ended		12 Months Ended
	Jul. 09, 2021	Feb. 28, 2021	Feb. 15, 2021	Sep. 30, 2022	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2020	Dec. 31, 2021
Accrued interest				$ 136,289	$ 136,289			$ 4,338
Convertible notes payable	$ 444,444				435,730	$ 1,171,242
Subscriptions payable liability balance				$ 499,999	$ 499,999
Shares issued upon conversion of debt				18,066,667	18,066,667
Amortization of debt discount					$ 63,625	599,052
Common stock, shares par value				$ 0.001	$ 0.001			$ 0.001
Convertible notes (June 2019 Notes) [Member]
Common stock shares issued for conversion of debt, shares							7,883,599
Subscriptions payable liability balance				$ 499,999	$ 499,999
Shares issued upon conversion of debt					5,105,821
Common stock shares issued for conversion of debt, Amount							$ 1,500,000
Amortization of debt discount					$ 43,270	$ 599,052
Convertible notes [Member] | Investors [Member]
Amortization of debt discount			$ 67,500
Principal amount			$ 675,000		675,000
Bearing interest			10.00%
Maturity date			Feb. 15, 2022
Note balance				$ 300,000	300,000
Deferred finance cost and issued, shares		200,000
Deferred finance cost and issued, amount		$ 72,000
Deferred finance		$ 37,500
Common stock warrants		767,045
Warrant exercise price		$ 0.44
Warrant term		3 years
Note defaults		$ 179,699
Convertible notes (June and July 2019 Notes) [Member]
Principal amount					$ 2,388,889
Maturity date					Mar. 25, 2020
Common stock, shares par value				$ 0.35	$ 0.35
Proceeds from convertible notes payable					$ 1,583,333
Exercise price							$ 0.18

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Equity (Details)	9 Months Ended
	Sep. 30, 2022 USD ($) $ / shares shares
Aggregate Number
Aggregate number, Beginning | shares	11,189,056
Granted | shares	4,000,000
Exercised1	$ 0
Less: forfeited and cancelled	$ (909,091)
Aggregate number, Ending | shares	14,279,965
Aggregate Exercise Price
Aggregate exercise price, Beginning	$ 2,646,044
Granted	800,000
Exercised	0
Forfeited and cancelled	(500,000)
Aggregate exercise price, Ending	$ 2,946,044
Weighted average exercise price, Beginning | $ / shares	$ 0.24
Granted | $ / shares	0.20
Exercised | $ / shares	0
Forfeited and cancelled | $ / shares	0.55
Weighted average exercise price, Ending | $ / shares	$ 0.21

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Equity (Details Narrative) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021	May 26, 2021
Common stock designated			200,000,000
Common stock issued for services, shares	1,389,175
Common stock issued for services, amount	$ 68,977
Preferred stock designated			30,000,000
Common stock, shares par value	$ 0.001		$ 0.001
Shares remaining to be issued	2,222,221		2,222,221
Fair value of common stock	$ 139,800
Subscriptions payable liability balance	$ 499,999
Weighted average remaining contractual life	2 years 3 months 3 days
Share price			$ 0.18
Price per unit			0.18
Common stock shares issued	2,670,034
Stock exercise price			0.27
Par value, preferred stock	$ 0.001		$ 0.001
Preferred stock values	$ 0		$ 0
Preferred stock, shares issued	0		0
Mr Mark Adamsand Mr David Hall [Member]
Shares issued for subscriptions payable	2,777,778		2,777,778
Convertible debt converted and stock	2,160,494
Scott Wessler [Member] | Series A Redeemable Preferred Stock [Member] | Subscription Agreement [Member]
DIvidend percent	5.00%
Preferred stock values				$ 126,000
Preferred stock, shares issued				1,400,000
Price per share				$ 0.09
Preferred stock, Description		The Company created the 2,800,000 shares of Series A Preferred Stock out of the 10,000,000 shares of preferred stock authorized by the Company’s articles of incorporation by filing a certificate of designation as authorized by the Company’s board of directors (the “Certificate of Designation”).
Mr Adams [Member] | Series A Redeemable Preferred Stock [Member] | Subscription Agreement [Member]
Preferred stock values				$ 126,000
Preferred stock, shares issued				1,400,000
Price per share				$ 0.09
Series B
Par value, preferred stock	$ 0.0001
Warrants to purchase shares of common stock	4,000,000
Designated preferred shares	$ 1,000,000
Preferred stock,shares stated value	$ 1.00
Conversion price	$ 0.06
DIvidend percent	8.00%
Sold of warrant share	1,000,000
Net cash proceeds from invester	$ 885,000
Closing Costs	$ 115,000
Common stock as purchase price	$ 0.20
Minimum [Member]
Increased the authorized common shares	230,000,000		100,000,000
Series A Preferred Stock [Member]
Accrued interest	$ 9,424
Redemption value	$ 268,846		$ 259,422

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Related Party (Details Narrative) - Mr. Adams [Member]	9 Months Ended
	Sep. 30, 2022 USD ($) shares
Contribution amount | $	$ 250,000
Conversion of debt into common stock | shares	1,388,885
Additional common stock to be issued to related party | shares	15,432
Contribution from related parties to purchase preferred stock | $	$ 126,000

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Commitments (Details) - USD ($)	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Commitments (Details)
Operating lease cost	$ 26,811	$ 0
Short-term lease cost	24,220	82,668
Variable lease cost	0	0
Sublease income	0	0
Total lease cost	$ 51,031	$ 82,668

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Commitments (Details 1) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Commitments (Details)
Operating lease right-of-use assets	$ 85,597	$ 0
Right of use liability operating lease current portion	32,785	0
Right of use liability operating lease long term	55,121	0
Total operating lease liabilities	$ 87,906	$ 0

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Commitments (Details 2)	Sep. 30, 2022 USD ($)
Commitments (Details)
2022 (Six months remaining)	$ 9,801
2023	40,511
2024	42,123
2025	7,065
2026 and thereafter	0
Total future undiscounted lease payments	99,500
Less: Interest	(11,594)
Present value of lease liabilities	$ 87,906

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Commitments (Details Narrative)	9 Months Ended
	Sep. 30, 2022 USD ($)
Commitments (Details)
Lease payments per month	$ 3,267
Lease payments increased percentage	4.00%
Right of use asset and lease liability	$ 105,822
Incremental borrowing rate, percentage	10.00%
Lease remaining term	2 years 5 months 1 day
Description for the extention of the lease term	beginning February 15, 2022 through February 28, 2025

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Accrued Liabilities Other (Details Narrative)	9 Months Ended
	Sep. 30, 2022 USD ($)
Significant Accounting Policies
Description of management intention of not removing accrued liabilities	Management does not intend to remove these liabilities of $1,696,374 from the Company’s financial statements until such time that the liability is formally settled or judicially released in accordance with ASC 405-20-40. Due to the lack of written agreements and other factors noted above, management concluded to no longer accrue interest on these loans.
Accrued Liabilities, Other	$ 1,696,374