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, 2023

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 December 20, 2023, 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	22
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
(Unaudited)
	September 30,			December 31,
	2023			2022
Assets
Current Assets:
Cash	$	145,534		$	482,908
Accounts receivable, net		25,605			-
Inventory, net		215,986			214,143
Prepaid expenses		83,805			41,751
Total Current Assets		470,930			738,802
Property and equipment, net		229			517
Right of-use asset - operating lease		52,715			77,677
Total Assets	$	523,874		$	816,996
Liabilities and Stockholders Deficit
Current Liabilities:
Accounts payable and accrued expenses	$	698,221		$	558,879
Accrued dividends		139,836			80,000
Deferred revenue		853,384			1,127,634
Convertible notes payable, current portion		444,444			444,444
Notes payable, current portion		625,283			158,672
Line of Credit		50,000			-
Right of use liability - operating lease, current portion		37,891			34,007
Derivative liability		822,719			491,913
Accrued liabilities - other		1,642,269			1,642,269
Subscription payable		499,999			499,999
Total Current Liabilities		5,814,046			5,037,817
Notes payable, net of current portion (net of discount $0 and $94,095 respectively)		138,852			580,105
Right of use liability - operating lease		17,230			46,233
Total Liabilities		5,970,128			5,664,155
Commitment
Mezzanine equity
Series A Preferred stock - 2,800,000 authorized, $0.001 par value, 2,800,000 and 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022		281,446			272,022
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, 2023 and December 31, 2022, respectively		100			100
Common stock - 200,000,000 authorized, $0.001 par value, 81,088,719 shares issued and outstanding as of September 30, 2023 and 2022, respectively		81,088			81,088
Additional paid-in capital		7,382,657			7,451,916
Accumulated deficit		(13,191,545	)		(12,652,285	)
Total Stockholders' Deficit		(5,727,700	)		(5,119,181	)
Total Liabilities and Stockholders' Deficit	$	523,874		$	816,996
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

4

Jacksam Corporation
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2023 and 2022
(Unaudited)
	Three Months Ended						Nine Months Ended
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Sales	$	190,747		$	492,891		$	1,221,782		$	3,737,275
Cost of sales		92,610			431,454			745,511			2,832,271
Gross profit		98,137			61,437			476,271			905,004
Operating expenses
Salaries and wages (including contractors)		23,059			222,731			187,220			764,211
Other selling, general and administrative expenses		88,780			174,832			310,592			550,312
Total operating expenses		111,839			397,563			497,812			1,314,523
Income (loss) from operations		(13,702	)		(336,126	)		(21,541	)		(409,519	)
Other income (expense)
Derivative gain (loss)		1,078,040			70,733			(330,806	)		435,730
Interest expense		(39,908	)		(53,030	)		(213,140	)		(350,153	)
Other income		26,227			-			26,227			-
Total other income (expense)		1,064,359			17,703			(517,719	)		85,577
Net income (loss)		1,050,657			(318,423	)		(539,260	)		(323,942	)
Preferred stock dividends		(23,340	)		(23,340	)		(69,259	)		(69,260	)
Net income (loss) available to common shareholders	$	1,027,317		$	(341,763	)	$	(608,519	)	$	(393,202	)
Net loss per share
Basic	$	0.01		$	(0.00	)	$	(0.01	)	$	(0.00	)
Diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.00	)
Weighted average shares outstanding
Basic		81,088,719			80,855,219			81,088,719			78,700,014
Diluted		214,896,127			80,855,219			81,088,719			78,700,014
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5

Jacksam Corporation
Condensed Consolidated Statements of Stockholders' Deficit
For the Three and Nine Months Ended September 30, 2023 and 2022
(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 and B 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 and B Preferred Stock		-		3,141		-		-		-		-		(23,087	)		-			-			(23,087	)
Net income		-		-		-		-		-		-		-			-			(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, 2022		2,800,000	$	272,022		1,000,000	$	100		81,088,719	$	81,088	$	7,451,916		$	-		$	(12,652,285	)	$	(5,119,181	)
Dividends on Series A and B Preferred Stock		-		3,107		-		-		-		-		(22,833	)		-			-			(22,833	)
Net income		-		-		-		-		-		-		-			-			55,429			55,429
Balance, March 31, 2023		2,800,000		275,129		1,000,000		100		81,088,719		81,088		7,429,083			-			(12,596,856	)		(5,086,585	)
Dividends on Series A and B Preferred Stock		-		3,141		-		-		-		-		(23,086	)		-			-			(23,086	)
Net income		-		-		-		-		-		-		-			-			(1,645,346	)		(1,645,346	)
Balance, June 30, 2023		2,800,000	$	278,270		1,000,000	$	100		81,088,719	$	81,088	$	7,405,997		$	-		$	(14,242,202	)	$	(6,755,017	)
Dividends on Series A and B Preferred Stock		-		3,176		-		-		-		-		(23,340	)		-			-			(23,340	)
Net income		-		-		-		-		-		-		-			-			1,050,657			1,050,657
Balance, September 30, 2023		2,800,000	$	281,446		1,000,000	$	100		81,088,719	$	81,088	$	7,382,657		$	-		$	(13,191,545	)	$	(5,727,700	)

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

6

Jacksam Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
	Nine Months Ended			Nine Months Ended
	September 30, 2023			September 30, 2022
Cash Flows from Operating Activities
Net income	$	(539,260	)	$	(323,942	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation expense		288			859
Stock based compensation		-			76,977
Amortization of debt discount		96,095			63,625
Amortization of right-of-use assets		24,962			20,225
Interest expense from derivative issuance		-			141,020
Derivative (gain) loss		330,806			(435,730	)
Inventory impairment		-			18,800
Net change in:
Accounts receivable		(25,605	)		(283,138	)
Inventory		(1,843	)		(30,545	)
Prepaid expenses		(42,054	)		(85,779	)
Right-of-use liabilities		(25,119	)		(17,916	)
Accounts payable and accrued expenses		139,343			324,327
Deferred revenue		(274,250	)		(23,999	)
Net cash used in operating activities		(316,637	)		(555,216	)
Cash Flows from Financing Activities
Proceeds from line of credit		50,000			-
Payments on convertible notes payable		-			(300,000	)
Payment of debt issuance costs		(1,000	)		-
Proceeds from notes payable		-			231,194
Payments on notes payable		(69,737	)		(312,009	)
Proceeds from issuance of Series A preferred stock		-			890,000
Net cash provided by financing activities		(20,737	)		509,185
Net Change in Cash		(337,374	)		(46,031	)
Cash, Beginning of Period		482,908			344,811
Cash, End of Period	$	145,534		$	298,780
Cash Paid For:
Income Taxes	$	-		$	-
Interest	$	8,691		$	13,709
Non-cash transactions:
Right of use asset and liability recognized, operating leases	$	-		$	105,822
Common stock issued for deferred finance costs	$	-		$	2,670
Common stock issued to settle share payable	$	-		$	331,600
Preferred stock dividends	$	69,259		$	45,920
The accompanying notes are an integral part of these unaudited condensed 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, and cartridges. 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 incorporated in the State of Nevada on September 21, 1989 under the name of Fulton Ventures, Inc. Since incorporated, the Company has engaged in a variety of businesses, but has been inactive since late 2014 through the Merger that closed on September 14, 2018. 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, 2022 in the Form 10-K filed on April 17, 2023. 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.

8

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. During the three months ended September 30, 2023 four customers accounted for 44%, 16%, 11% and 10% of revenue. During the three months ended September 30, 2022, two customers accounted for 14% and 11% of revenue. During the nine months ended September 30, 2023, three customers accounted for 27%, 16% and 14% of revenue. During the nine months ended September 30, 2022, three customers accounted for 11%, 10% and 10% of revenue.

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. The Company has no amounts in excess of the FDIC limit as of September 30, 2023

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, 2023 and December 31, 2022, the Company had recorded an allowance for doubtful accounts of $264,659, respectively.

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, 2023 and December 31, 2022 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, 2023 and December 31, 2022, the Company’s an inventory allowance was estimated at $18,800.

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

9

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 deferred revenue are an approximate of their fair values because of the short maturity of these instruments. The Company’s derivative liabilities recognized at fair value on a recurring basis are a level 3 measurement. See Note 6.

Binomial Calculation Model

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

Preferred Stock Subject to Possible Redemption

The Company accounts for its preferred stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity”. Preferred stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable preferred stock (including preferred stock that feature redemption rights that are either within the control of the holder or subject to the redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred stock is classified as stockholders’ equity.

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 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

10

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 September 30, 2023, 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, 2023, $853,384 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 any variable consideration in contracts and the standalone selling price among separate performance obligations. 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, 2023		Three Months ended September 30, 2022		Nine Months ended September 30, 2023		Nine Months Ended September 30, 2022
Machine sales	$	38,000	$	225,335	$	486,000	$	2,416,419
Non-Machine sales		152,747		267,556		735,782		1,320,856
Total sales	$	190,747	$	492,891	$	1,221,782		3,737,275

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 three and nine months September 30, 2023 and 2022:

	Three Months Ended						Nine Months Ended
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Net income (loss) attributable to common stockholders	$	1,027,317		$	(341,763	)	$	(608,519	)	$	(393,202	)
Preferred stock dividends		23,340			23,340			69,259			69,260
Derivative gain		(1,064,687	)		(70,733	)		339,540			(435,730	)
Interest expense associated with convertible debt		-			-			-			-
Net income (loss) for dilutive calculation	$	(14,030	)	$	(389,156	)		(199,720	)		(759,672	)
Weighted average shares outstanding		81,088,719			80,132,342			81,088,719			77,605,012
Dilutive effect of preferred stock		18,066,667			-			-			-
Dilutive effect of convertible debt		115,740,741			-			-			-
Dilutive effect of common stock warrants		-			-			-			-
Weighted average shares outstanding for diluted net income (loss) per share		214,896,127			80,132,342			81,088,719			77,605,012

During the three and nine months ended September 30, 2023, the impact of 15,189,056 warrants to purchase common stock, were excluded from the calculation, as their impact would be anti-dilutive. During the nine months ended 115,740,741 shares issuable under convertible debt and 18,066,667 shares issuable under convertible preferred stock  were excluded from the calculation 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. Additionally, 2,222,223 shares to be issued as part of the share payable equity balances as of September 30, 2022 are excluded from the calculation of weighted average shares outstanding for the three and six months ended September 30, 2022.

Income Tax Provision

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The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.  

The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Accrued interest and penalties are included within the related tax liability.

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 may 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.

Advertising and Marketing Expenses

The Company expenses the cost of advertising and promotions as incurred. Advertising and promotion expense was $0 and $1,000 for the three months ended September 30, 2023 and 2022, respectively, and was $220 and $26,500 for the nine months ended September 30, 2023 and 2022, respectively.

Research and Development Costs

Research and development costs are expensed as incurred. The Company incurred no research and development costs during the three and nine months ended September 30, 2023 and 2022.

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Lease arrangements

The Company follows the guidance of ASC 842 for accounting for leases. Transactions give rise to leases when the Company receives substantially all the economic benefits from and has the ability to direct the use of specified property and equipment. The Company determines if an arrangement is a lease at inception. The operating lease ROU assets are included within the Company’s non-current assets and lease liabilities are included in current or non-current liabilities on the Company’s consolidated balance sheets.

ROU assets represent the Company’s right to use, or control the use of, a specified asset for the lease term. Lease liabilities are the Company’s obligation to make lease payments arising from a lease and are measured on a discounted basis. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term on the commencement date. The operating lease ROU asset includes any lease payments made and initial direct costs incurred and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments continues to be recognized on a straight-line basis over the lease term.

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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”(“ASU 2016-13”). ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (“CECL”) model). Under the CECL model entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument. Further, ASU 2016-13 made certain targeted amendments to the existing impairment standards for available for sale (“AFS”) debt securities. An entity will apply the amendments in ASU 2016-13 through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company determined that the update applied to its trade accounts receivable and adopted the guidance on January 1, 2023 with no material impact to the Company’s financial statements or results of operations. The Company will estimate its expected credit losses based on the expected losses on its receivables based on a variety of data, including current economic conditions in the Company’s industry and the credit status of the Company’s customers.

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

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Property and equipment consist of the following:

	September 30, 2023			December 31, 2022
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		(20,415	)		(20,127	)
Property and equipment, net	$	229		$	517

Depreciation expense amounted to $288 and $859 for the nine months ended September 30, 2023 and 2022, respectively.

Note 4: Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

	September 30, 2022		December 31, 2022
Accounts payable	$	275,469	$	245,482
Accrued interest		278,199		168,844
Sales tax payable		144,553		144,553
Total Accounts payable and Accrued expenses	$	698,221	$	558,879

Note 5: Notes Payable and Line of Credit

A summary of Notes Payable are as follows:

	September 30, 2023			December 31, 2022
SBA loan May 2020	$	142,259		$	144,739
Note payable September 2021		621,876			635,658
Note Payable September 2022		-			52,475
Total notes payable		764,135			832,872
Less: discount and deferred finance costs		-			(94,095	)
Less: current portion		(625,283	)		(158,672	)
Long-term portion of notes payable	$	138,852			580,105

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, 2023 and December 31, 2022, the Company owed a principal amount of $142,259 and $144,739 under this loan.

On September 29, 2021, the Company entered into a Revenue Loan and Security Agreement (the “RSLA) 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.

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On March 13, 2023, the Company entered into an Amendment to the RSLA (the “Amended RSLA”) whereby, the lender agreed to a limited forbearance on the loan as a result of the existing defaults if the company were to meet certain criteria. As of September 30, 2023, the Company did not meet the criteria as outlined in the Amended RSLA, and therefore the Company is in default on the loan and the lender has the right to demand full repayment of the loan. As a result, the remaining deferred finance cost was amortized to interest expenses and the full amount of the loan is classified as a current liability.

As of September 30, 2023 and December 31, 2022, the Company owed a principal amount of $621,875 and $635,658 under this loan, with remaining unamortized discount of $0 and $94,095, respectively.

In December 2022, the Company received cash proceeds of $52,475 under an unsecured short term financing agreement. The Company repaid the loan in full during the nine months ended September 30, 2023.

On March 30^th, 2023, the Company entered into a line of credit agreement with a principal amount of $50,000, which was drawn in full as of September 30, 2023. The line of credit is unsecure, bears interest at 10% and matured on June 30, 2023. The Company paid $1,000 in financing costs associated with the loan. The Company is currently in default of this agreement.

The Company amortized $96,095 and $63,625 of debt discount and deferred finance costs to interest expense related to notes payable and the line of credit during the nine months ended September 30, 2023 and 2022, respectively.

Accrued interest on notes payable was $278,199 and $168,844 as of September 30, 2023 and December 31, 2022, respectively.

Note 6: Convertible Notes Payable and Derivative Liabilities

Convertible Notes Payable

The following table summarizes outstanding convertible notes as of September 30, 2023 and December 31, 2022:

	September 30, 2023			December 31, 2022
June 2019 Notes, due April 30, 2023	$	444,444		$	444,444
Total		444,444			444,444
Less: Debt discount and deferred finance costs on short-term convertible notes		-			-
Less: Current convertible notes payable, net of discount		(444,444	)		(444,444	)
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 March 31, 2023 and 2,777,778 were part of the subscriptions payable liability balance of $499,999 as of March 31, 2023 and December 31, 2022. See Note 7.

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The Company was in default of the convertible debt outstanding as of December 31, 2022, which resulted in the conversion price on the outstanding note adjusting to be 60% of the lowest trading price in the 25 days prior to a conversion notice. Following the previous extensions, the holder of $444,444 of the notes agreed to extend the repayment period to April 30, 2023. There were no other changes to terms of the convertible notes payable, and the amendments were accounted for as a debt modification. The Company is currently in default of this agreement.

Derivative Liabilities

The fair values of the conversion option of outstanding convertible notes payable and common stock warrants were determined to be derivative liabilities under ASC 815 due to the default on convertible notes payable disclosed above, which resulted in a variable conversion price on the outstanding convertible note payable. The fair value of the derivative liabilities was estimated using a binomial model with the following assumptions:

	As of September 30, 2023
	Conversion Option			Warrants
Volatility		100.79	%	95.85-100.79		%
Dividend Yield		0	%		0	%
Risk-free rate		5.53	%	4.80-5.53%
Expected term	0.5 year			0.5-3.40 years
Stock price	$	0.0108		$	0.0108
Exercise price	$	0.0038		$ 0.18-0.27
Derivative liability fair value	$	817,512		$	5,209

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, 2023:

Fair value as of December 31, 2022	$	491,913
Fair value on the date of issuance related to warrants issued
Extinguishment due to repayment of debt		-
Extinguishment due to conversion of debt		-
Change in fair value of derivatives		330,806
Fair value as of September 30, 2023	$	822,719

The total impact of derivative liabilities recognized in the Company’s consolidated statements of operations includes the change in fair value of derivatives, with the Company recognizing a total loss of $330,806 and a total gain of $435,730 during the nine months ended September 30, 2023 and 2022, respectively.

Note 7: Equity

Common Stock

The Company’s Article of Incorporation authorize the Company to issue from 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. 

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As of September 30, 2023 and December 31, 2022, 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.

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, 2023. Total accrued dividends at September 30, 2023 and December 31, 2022 were $29,446 and $20,022, respectively. The redemption value of the Series A Preferred Stock as of September 30, 2023 and December 31, 2022 was $281,446 and $272,022, 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 per share and carries a dividend of 8%. 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% of the Stated value plus 125% of any unpaid dividends.

18

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 $890,000 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 2,000,000 shares of common stock with a fair value of $139,800 to the investors, which were recorded as a cost of capital with no expense recognized. The Company granted to the Investors the piggy-back registration rights.

The Company accrued $139,836 and $80,000 in dividends on the Series B Preferred Stock as of September 30, 2023 and December 31, 2022, respectively.

Stock Warrants

A summary of stock warrant information is as follows:

	Aggregate Number			Aggregate Exercise Price			Weighted Average Exercise Price
Outstanding at December 31, 2022		14,279,965		$	2,946,044		$	0.21
Granted		-			-			-
Exercised		-			-			-
Forfeited and cancelled		(2,211,389	)		(631,200	)		0.29
Outstanding at September 30, 2023		12,068,576		$	2,314,844		$	0.19

The weighted average remaining contractual life is approximately 1.57 years for stock warrants outstanding with no intrinsic value of as of September 30, 2023. All of the above warrants were fully vested.

Note 8: Related Party

Mark Adams, CEO, invested $250,000 in the June 2019 Notes and converted his debt during the year ended December 31, 2020 into shares of common stock of 1,388,885, which have yet to be issued for a conversion value of $277,778. Mark Adams will also receive an additional 154,321 shares of common stock once the shares are issued. The Company’s former VP of sales also invested $100,000 in the June 2019 Notes and converted his debt during the year ended December 31, 2020 into shares of common stock of 555,556, which have yet to be issued for a conversion value of $111,111. The former VP of sales will also receive an additional 61,728 shares of common stock once the shares are issued.

Those shares were included in subscriptions payable on the Company’s consolidated balance sheet.

Mark Adams contributed $126,000 to purchase the Series A Preferred Stock during the year ended December 31, 2021, as discussed in Note 7.

Note 9: Leases, Commitments and Contingencies

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.

19

The components of lease cost for operating leases for the six months ended September 30, 2023 and 2022 were as follows:

	Nine Months Ended
	September 30,  2023		September 30,  2022
Operating lease cost	$	30,163	$	26,811
Short-term lease cost		5,837		24,220
Variable lease cost		—		—
Sublease income		—		—
Total lease cost	$	36,000	$	51,031

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at September 30, 2023 and December 31, 2022:

Lease Position	September 30, 2023		December 31, 2022
Operating Leases
Operating lease right-of-use assets	$	52,715	$	77,677
Right of use liability operating lease current portion	$	37,891	$	34,007
Right of use liability operating lease long term		17,230		46,233
Total operating lease liabilities	$	55,121	$	80,240

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 1.67 years and a weighted average rate of 10%.

The following table provides the maturities of lease liabilities at September 30, 2023:

	Operating
	Leases
2023 (3 months remaining)	$	10,193
2024		42,123
2025		7,065
2026		-
2027 and thereafter		-
Total future undiscounted lease payments		59,381
Less: Interest		(4,260	)
Present value of lease liabilities	$	55,121

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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 $1,642,269 but does not believe that is sufficient to remove the liability from the financial statements. Management does not intend to remove these liabilities of $1,642,269 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

On October 31, 2023, the Company entered into amendment agreements with certain existing debt holders. Following this event, the Company is no longer in default on the loans.

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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 the 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 the 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

The Company was originally incorporated in the State of Nevada on September 21, 1989 under the name of Fulton Ventures, Inc. Since incorporated, the Company has engaged in a variety of businesses, but has been inactive since late 2014 through the Merger that closed on September 14, 2018. 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. Our sole business has been the design, manufacturing and sale of vaporizer cartridge filling machines, capping machines, pre-roll & cone filling machines, and cartridges to customers in the medical and recreational cannabis, hemp, and CBD industries.

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.

22

Cost of Revenue

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

We expect our cost of goods sold 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, 2023 and 2022:

Revenue

Total revenue during the three months ended September 30, 2023 was $ $190,747 (comprised of machine sales of $38,000 and non-machine sales of $152,747), compared to the three months ended September 30, 2022 that generated sales of $492,891 (comprised of machine sales of $225,335 and non-machine sales of $267,556).

Cost of Revenue

Total cost of revenue decreased to $92,610 during the three months ended September 30, 2023, compared to the three months ended September 30, 2022 that had a cost of revenue of $431,454.

Operating Expenses

Operating expenses during the three months ended September 30, 2023 were $ 111,839 (comprised of Salaries of $ 23,059 and Other Sales, Marketing and General and Administrative (“SG&A”) expenses of $ 88,780), compared to the three months ended September 30, 2022 that produced $397,563 (comprised of Salaries of $222,731 and SG&A expenses of $174,832).

Loss from Operations

Total loss from operations was $13,702 during the three months ended September 30, 2023, compared to $336,126 for the three months ended September 30, 2022.

Derivative Gain

Derivative gain, a non-cash item, was $1,078,040 during the three months ended September 30, 2023, due to the fair value change of the debt and warrants driven by the stock price change between June 30, 2023 and September 30, 2023, compared to $70,733 during the three months ended September 30, 2022.

Interest Expense

Interest expense, a non-cash item, was $39,908 during the three months ended September 30, 2023, compared to $53,030 during the three months ended September 30, 2022.

Other Income

Other income was $26,227 during the three months ended September 30, 2023, compared to $0 during the three months ended September 30, 2022.

23

Net Income / (Loss)

Net income was $1,050,657 during the three months ended September 30, 2023, compared to a net loss of $318,423 during the three months ended September 30, 2022.

Results of Operations – Nine-month Periods

Comparison for the nine-month periods ended September 30, 2023 and 2022: 

Revenue

Total revenue during the nine months ended September 30, 2023 was $ $1,221,782 (comprised of machine sales of $486,000 and non-machine sales of $735,782), compared to the nine months ended September 30, 2022 that generated sales of $3,737,275 (comprised of machine sales of $2,416,419 and non-machine sales of $1,320,856).

Cost of Revenue

Total cost of revenue was $745,511 during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022 that had a cost of revenue of $2,832,271.

Operating Expenses

Operating expenses during the nine months ended September 30, 2023 were $497,812 (comprised of Salaries of $187,220 and Other SG&A expenses of $310,592), compared to the nine months ended September 30, 2022 that produced $1,314,523 (comprised of Salaries of $764,211 and Other SG&A expenses of $550,312).

Loss from Operations

Total loss from operations was $21,541 during the nine months ended September 30, 2023, compared to $409,519 for the nine months ended September 30, 2022.

Derivative Gain / (Loss)

Derivative loss, a non-cash item, was $330,806 during the nine months ended September 30, 2023, due to the fair value change of the debt and warrants driven by the stock price change between December 31, 2022 and September 30, 2023, compared to a derivative gain of $435,730 during the nine months ended September 30, 2022.

Interest Expense

Interest expense, a non-cash item, was $213,140 during the nine months ended September 30, 2023, compared to $350,153 during the nine months ended September 30, 2022.

Other Income

Other income was $26,227 during the nine months ended September 30, 2023, compared to $0 during the nine months ended September 30, 2022.

Net Loss

Net loss was $539,260 during the nine months ended September 30, 2023, compared to $323,942 during the nine months ended September 30, 2022.

24

Liquidity and Capital Resources

At September 30, 2023, we had cash and cash equivalents of $ $145,534. During the nine months ended September 30, 2023, we have financed our operations principally through receipts of customer payments and proceeds on the line of credit of $50,000.

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.

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, 2023, net cash used in operating activities was $316,637, compared to $555,216 during the nine months ended September 30, 2022.

Investing Activities

The Company had no investing activities in either period.

Financing Activities

During the nine months ended September 30, 2023, the Company received $50,000 in proceeds from the new line of credit, and made payments of $69,737 of convertible notes payable and $1,000 of debt issuance cost.

During the nine months ended September 30, 2022, the Company received $890,000 in proceeds from issuance of Series B Preferred Stock and $163,988 in proceeds from short-term debt and made payments of $300,000 of convertible notes payable and $252,751 of non-convertible debt.

Off-Balance Sheet Arrangements

During the nine months ended September 30, 2023 and the year ended December 31, 2022, we did not have any off-balance sheet arrangements as defined by applicable SEC regulations.

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 interim 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 ineffective 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 and 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, 2023
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: December 21, 2023	By:	/s/ Mark Adams
		Mark Adams
		Chief Executive Officer and interim 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: December 21, 2023	By:	/s/ Mark Adams
		Mark Adams
		Chief Executive Officer and interim 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, 2023 (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: December 21, 2023	By:	/s/ Mark Adams
		Mark Adams
		Chief Executive Officer and interim Chief Financial Officer

XML

Cover - shares	9 Months Ended
	Sep. 30, 2023	Dec. 20, 2023
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, 2023
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2023
Entity Ex Transition Period	false
Entity Common Stock Shares Outstanding		81,088,719
Entity File Number	033-33263
Entity Incorporation State Country Code	NV
Entity Tax Identification Number	46-3566284
Entity Address Address Line 1	3100 Airway Avenue
Entity Address Address Line 2	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
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes

XML

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Current Assets:
Cash	$ 145,534	$ 482,908
Accounts receivable, net	25,605	0
Inventory, net	215,986	214,143
Prepaid expenses	83,805	41,751
Total Current Assets	470,930	738,802
Property and equipment, net	229	517
Right of-use asset - operating lease	52,715	77,677
Total Assets	523,874	816,996
Current Liabilities:
Accounts payable and accrued expenses	698,221	558,879
Accrued dividends	139,836	80,000
Deferred revenue	853,384	1,127,634
Convertible notes payable, current portion	444,444	444,444
Notes payable, current portion	625,283	158,672
Line of Credit	50,000	0
Right of use liability - operating lease, current portion	37,891	34,007
Derivative liability	822,719	491,913
Accrued liabilities - other	1,642,269	1,642,269
Subscription payable	499,999	499,999
Total Current Liabilities	5,814,046	5,037,817
Notes payable, net of current portion (net of discount $0 and $94,095 respectively)	138,852	580,105
Right of use liability - operating lease	17,230	46,233
Total Liabilities	5,970,128	5,664,155
Mezzanine equity
Series A Preferred stock - 2,800,000 authorized, $0.001 par value, 2,800,000 and 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022	281,446	272,022
Stockholders' Deficit:
Preferred stock value	0	0
Common stock - 200,000,000 authorized, $0.001 par value, 81,088,719 shares issued and outstanding as of September 30, 2023 and 2022, respectively	81,088	81,088
Additional paid-in capital	7,382,657	7,451,916
Accumulated deficit	(13,191,545)	(12,652,285)
Total Stockholders' Deficit	(5,727,700)	(5,119,181)
Total Liabilities and Stockholders' Deficit	523,874	816,996
Series B Preferred Stock [Member]
Stockholders' Deficit:
Preferred stock value	$ 100	$ 100

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
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	81,088,719
Common stock, shares outstanding	81,088,719	81,088,719
Notes Payable [Member]
Notes payable, current portion (net of discount)	$ 0	$ 94,095
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	0
TemporaryEquity, shares outstanding	2,800,000	0

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Condensed Consolidated Statements of Operations (Unaudited)
Sales	$ 190,747	$ 492,891	$ 1,221,782	$ 3,737,275
Cost of sales	92,610	431,454	745,511	2,832,271
Gross profit	98,137	61,437	476,271	905,004
Operating expenses
Salaries and wages (including contractors)	23,059	222,731	187,220	764,211
Other selling, general and administrative expenses	88,780	174,832	310,592	550,312
Total operating expenses	111,839	397,563	497,812	1,314,523
Income (loss) from operations	(13,702)	(336,126)	(21,541)	(409,519)
Other income (expense)
Derivative gain (loss)	1,078,040	70,733	(330,806)	435,730
Interest expense	(39,908)	(53,030)	(213,140)	(350,153)
Other income	26,227	0	26,227	0
Total other income (expense)	1,064,359	17,703	(517,719)	85,577
Net income (loss)	1,050,657	(318,423)	(539,260)	(323,942)
Preferred stock dividends	(23,340)	(23,340)	(69,259)	(69,260)
Net income (loss) available to common shareholders	$ 1,027,317	$ (341,763)	$ (608,519)	$ (393,202)
Net loss per share
Per share- Basic	$ 0.01	$ (0.00)	$ (0.01)	$ (0.00)
Per share- Diluted	$ (0.00)	$ (0.00)	$ (0.01)	$ (0.00)
Weighted average shares outstanding
Basic	81,088,719	80,855,219	81,088,719	78,700,014
Diluted	214,896,127	80,855,219	81,088,719	78,700,014

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, 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)
Issuance of Series B Preferred Stock, net of fees, shares			1,000,000
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
Dividends on Series A and B Preferred Stock	(22,833)	3,107	0	0	0	(22,833)	0
Net income	29,384	$ 0	$ 0	$ 0	0	0	29,384
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)
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 income	(323,942)
Balance, shares at Sep. 30, 2022		2,800,000	1,000,000	81,088,719
Balance, amount at Sep. 30, 2022	(3,940,528)	$ 268,846	$ 100	$ 81,088	0	7,433,033	(11,454,749)
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)
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
Dividends on Series A and B Preferred Stock	(23,087)	3,141	0	0	0	(23,087)	0
Net income	(34,903)	0	0	$ 0	0	0	(34,903)
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
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
Balance, shares at Jun. 30, 2022		2,800,000	1,000,000	80,771,577
Balance, amount at Jun. 30, 2022	(3,606,765)	$ 265,670	$ 100	$ 80,771	0	7,448,690	(11,136,326)
Net income	(318,423)	0	0	$ 0	0	0	(318,423)
Common stock issued for services, shares				317,142
Common stock issued for services, amount	8,000	0	0	$ 317	0	7,683	0
Dividends on Series A Preferred Stock	(23,340)	$ 3,176	$ 0	$ 0	0	(23,340)	0
Balance, shares at Sep. 30, 2022		2,800,000	1,000,000	81,088,719
Balance, amount at Sep. 30, 2022	(3,940,528)	$ 268,846	$ 100	$ 81,088	0	7,433,033	(11,454,749)
Balance, shares at Dec. 31, 2022		2,800,000	1,000,000	81,088,719
Balance, amount at Dec. 31, 2022	(5,119,181)	$ 272,022	$ 100	$ 81,088	0	7,451,916	(12,652,285)
Dividends on Series A and B Preferred Stock	(22,833)	3,107	0	0	0	(22,833)	0
Net income	55,429	$ 0	$ 0	$ 0	0	0	55,429
Balance, shares at Mar. 31, 2023		2,800,000	1,000,000	81,088,719
Balance, amount at Mar. 31, 2023	(5,086,585)	$ 275,129	$ 100	$ 81,088	0	7,429,083	(12,596,856)
Balance, shares at Dec. 31, 2022		2,800,000	1,000,000	81,088,719
Balance, amount at Dec. 31, 2022	(5,119,181)	$ 272,022	$ 100	$ 81,088	0	7,451,916	(12,652,285)
Net income	(539,260)
Balance, shares at Sep. 30, 2023		2,800,000	1,000,000	81,088,719
Balance, amount at Sep. 30, 2023	(5,727,700)	$ 281,446	$ 100	$ 81,088	0	7,382,657	(13,191,545)
Balance, shares at Mar. 31, 2023		2,800,000	1,000,000	81,088,719
Balance, amount at Mar. 31, 2023	(5,086,585)	$ 275,129	$ 100	$ 81,088	0	7,429,083	(12,596,856)
Dividends on Series A and B Preferred Stock	(23,086)	3,141	0	0	0	(23,086)	0
Net income	(1,645,346)	$ 0	$ 0	$ 0	0	0	(1,645,346)
Balance, shares at Jun. 30, 2023		2,800,000	1,000,000	81,088,719
Balance, amount at Jun. 30, 2023	(6,755,017)	$ 278,270	$ 100	$ 81,088	0	7,405,997	(14,242,202)
Dividends on Series A and B Preferred Stock	(23,340)	3,176	0	0	0	(23,340)	0
Net income	1,050,657	$ 0	$ 0	$ 0	0	0	1,050,657
Balance, shares at Sep. 30, 2023		2,800,000	1,000,000	81,088,719
Balance, amount at Sep. 30, 2023	$ (5,727,700)	$ 281,446	$ 100	$ 81,088	$ 0	$ 7,382,657	$ (13,191,545)

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash Flows from Operating Activities
Net income	$ (539,260)	$ (323,942)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation expense	288	859
Stock based compensation	0	76,977
Amortization of debt discount	96,095	63,625
Amortization of right-of-use assets	24,962	20,225
Interest expense from derivative issuance	0	141,020
Derivative (gain) loss	330,806	(435,730)
Inventory impairment	0	18,800
Net change in:
Accounts receivable	(25,605)	(283,138)
Inventory	(1,843)	(30,545)
Prepaid expenses	(42,054)	(85,779)
Right-of-use liabilities	(25,119)	(17,916)
Accounts payable and accrued expenses	139,343	324,327
Deferred revenue	(274,250)	(23,999)
Net cash used in operating activities	(316,637)	(555,216)
Cash Flows from Financing Activities
Proceeds from line of credit	50,000	0
Payments on convertible notes payable	0	(300,000)
Payment of debt issuance costs	(1,000)	0
Proceeds from notes payable	0	231,194
Payments on notes payable	(69,737)	(312,009)
Proceeds from issuance of Series A preferred stock	0	890,000
Net cash provided by financing activities	(20,737)	509,185
Net Change in Cash	(337,374)	(46,031)
Cash, Beginning of Period	482,908	344,811
Cash, End of Period	145,534	298,780
Cash Paid For:
Income Taxes	0	0
Interest	8,691	13,709
Non-cash transactions:
Right of use asset and liability recognized, operating leases	0	105,822
Common stock issued for deferred finance costs	0	2,670
Common stock issued to settle share payable	0	331,600
Preferred stock dividends	$ 69,259	$ 45,920

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Organization and Nature of Operations

9 Months Ended

Sep. 30, 2023

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, and cartridges. 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 incorporated in the State of Nevada on September 21, 1989 under the name of Fulton Ventures, Inc. Since incorporated, the Company has engaged in a variety of businesses, but has been inactive since late 2014 through the Merger that closed on September 14, 2018. 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, 2023

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, 2022 in the Form 10-K filed on April 17, 2023. 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. During the three months ended September 30, 2023 four customers accounted for 44%, 16%, 11% and 10% of revenue. During the three months ended September 30, 2022, two customers accounted for 14% and 11% of revenue. During the nine months ended September 30, 2023, three customers accounted for 27%, 16% and 14% of revenue. During the nine months ended September 30, 2022, three customers accounted for 11%, 10% and 10% of revenue.

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. The Company has no amounts in excess of the FDIC limit as of September 30, 2023

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, 2023 and December 31, 2022, the Company had recorded an allowance for doubtful accounts of $264,659, respectively.

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, 2023 and December 31, 2022 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, 2023 and December 31, 2022, the Company’s an inventory allowance was estimated at $18,800.

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 deferred revenue are an approximate of their fair values because of the short maturity of these instruments. The Company’s derivative liabilities recognized at fair value on a recurring basis are a level 3 measurement. See Note 6.

Binomial Calculation Model

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

Preferred Stock Subject to Possible Redemption

The Company accounts for its preferred stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity”. Preferred stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable preferred stock (including preferred stock that feature redemption rights that are either within the control of the holder or subject to the redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred stock is classified as stockholders’ equity.

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 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 September 30, 2023, 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, 2023, $853,384 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 any variable consideration in contracts and the standalone selling price among separate performance obligations. 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, 2023		Three Months ended September 30, 2022		Nine Months ended September 30, 2023		Nine Months Ended September 30, 2022
Machine sales	$	38,000	$	225,335	$	486,000	$	2,416,419
Non-Machine sales		152,747		267,556		735,782		1,320,856
Total sales	$	190,747	$	492,891	$	1,221,782		3,737,275

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 three and nine months September 30, 2023 and 2022:

	Three Months Ended						Nine Months Ended
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Net income (loss) attributable to common stockholders	$	1,027,317		$	(341,763	)	$	(608,519	)	$	(393,202	)
Preferred stock dividends		23,340			23,340			69,259			69,260
Derivative gain		(1,064,687	)		(70,733	)		339,540			(435,730	)
Interest expense associated with convertible debt		-			-			-			-
Net income (loss) for dilutive calculation	$	(14,030	)	$	(389,156	)		(199,720	)		(759,672	)
Weighted average shares outstanding		81,088,719			80,132,342			81,088,719			77,605,012
Dilutive effect of preferred stock		18,066,667			-			-			-
Dilutive effect of convertible debt		115,740,741			-			-			-
Dilutive effect of common stock warrants		-			-			-			-
Weighted average shares outstanding for diluted net income (loss) per share		214,896,127			80,132,342			81,088,719			77,605,012

During the three and nine months ended September 30, 2023, the impact of 15,189,056 warrants to purchase common stock, were excluded from the calculation, as their impact would be anti-dilutive. During the nine months ended 115,740,741 shares issuable under convertible debt and 18,066,667 shares issuable under convertible preferred stock  were excluded from the calculation 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. Additionally, 2,222,223 shares to be issued as part of the share payable equity balances as of September 30, 2022 are excluded from the calculation of weighted average shares outstanding for the three and six months ended September 30, 2022.

Income Tax Provision

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.  

The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Accrued interest and penalties are included within the related tax liability.

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 may 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.

Advertising and Marketing Expenses

The Company expenses the cost of advertising and promotions as incurred. Advertising and promotion expense was $0 and $1,000 for the three months ended September 30, 2023 and 2022, respectively, and was $220 and $26,500 for the nine months ended September 30, 2023 and 2022, respectively.

Research and Development Costs

Research and development costs are expensed as incurred. The Company incurred no research and development costs during the three and nine months ended September 30, 2023 and 2022.

Lease arrangements

The Company follows the guidance of ASC 842 for accounting for leases. Transactions give rise to leases when the Company receives substantially all the economic benefits from and has the ability to direct the use of specified property and equipment. The Company determines if an arrangement is a lease at inception. The operating lease ROU assets are included within the Company’s non-current assets and lease liabilities are included in current or non-current liabilities on the Company’s consolidated balance sheets.

ROU assets represent the Company’s right to use, or control the use of, a specified asset for the lease term. Lease liabilities are the Company’s obligation to make lease payments arising from a lease and are measured on a discounted basis. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term on the commencement date. The operating lease ROU asset includes any lease payments made and initial direct costs incurred and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments continues to be recognized on a straight-line basis over the lease term.

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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”(“ASU 2016-13”). ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (“CECL”) model). Under the CECL model entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument. Further, ASU 2016-13 made certain targeted amendments to the existing impairment standards for available for sale (“AFS”) debt securities. An entity will apply the amendments in ASU 2016-13 through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company determined that the update applied to its trade accounts receivable and adopted the guidance on January 1, 2023 with no material impact to the Company’s financial statements or results of operations. The Company will estimate its expected credit losses based on the expected losses on its receivables based on a variety of data, including current economic conditions in the Company’s industry and the credit status of the Company’s customers.

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, 2023

Property and Equipment

Property and Equipment

Note 3: Property and Equipment

Property and equipment consist of the following:

	September 30, 2023			December 31, 2022
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		(20,415	)		(20,127	)
Property and equipment, net	$	229		$	517

Depreciation expense amounted to $288 and $859 for the nine months ended September 30, 2023 and 2022, respectively.

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Accounts Payable and Accrued Expenses

9 Months Ended

Sep. 30, 2023

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, 2022
Accounts payable	$	275,469	$	245,482
Accrued interest		278,199		168,844
Sales tax payable		144,553		144,553
Total Accounts payable and Accrued expenses	$	698,221	$	558,879

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Notes Payable and Line of Credit

9 Months Ended

Sep. 30, 2023

Notes Payable and Line of Credit

Notes Payable and Line of Credit

Note 5: Notes Payable and Line of Credit

A summary of Notes Payable are as follows:

	September 30, 2023			December 31, 2022
SBA loan May 2020	$	142,259		$	144,739
Note payable September 2021		621,876			635,658
Note Payable September 2022		-			52,475
Total notes payable		764,135			832,872
Less: discount and deferred finance costs		-			(94,095	)
Less: current portion		(625,283	)		(158,672	)
Long-term portion of notes payable	$	138,852			580,105

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, 2023 and December 31, 2022, the Company owed a principal amount of $142,259 and $144,739 under this loan.

On September 29, 2021, the Company entered into a Revenue Loan and Security Agreement (the “RSLA) 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.

On March 13, 2023, the Company entered into an Amendment to the RSLA (the “Amended RSLA”) whereby, the lender agreed to a limited forbearance on the loan as a result of the existing defaults if the company were to meet certain criteria. As of September 30, 2023, the Company did not meet the criteria as outlined in the Amended RSLA, and therefore the Company is in default on the loan and the lender has the right to demand full repayment of the loan. As a result, the remaining deferred finance cost was amortized to interest expenses and the full amount of the loan is classified as a current liability.

As of September 30, 2023 and December 31, 2022, the Company owed a principal amount of $621,875 and $635,658 under this loan, with remaining unamortized discount of $0 and $94,095, respectively.

In December 2022, the Company received cash proceeds of $52,475 under an unsecured short term financing agreement. The Company repaid the loan in full during the nine months ended September 30, 2023.

On March 30^th, 2023, the Company entered into a line of credit agreement with a principal amount of $50,000, which was drawn in full as of September 30, 2023. The line of credit is unsecure, bears interest at 10% and matured on June 30, 2023. The Company paid $1,000 in financing costs associated with the loan. The Company is currently in default of this agreement.

The Company amortized $96,095 and $63,625 of debt discount and deferred finance costs to interest expense related to notes payable and the line of credit during the nine months ended September 30, 2023 and 2022, respectively.

Accrued interest on notes payable was $278,199 and $168,844 as of September 30, 2023 and December 31, 2022, respectively.

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Convertible Notes Payable and Derivative Liabilities

9 Months Ended

Sep. 30, 2023

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, 2023 and December 31, 2022:

	September 30, 2023			December 31, 2022
June 2019 Notes, due April 30, 2023	$	444,444		$	444,444
Total		444,444			444,444
Less: Debt discount and deferred finance costs on short-term convertible notes		-			-
Less: Current convertible notes payable, net of discount		(444,444	)		(444,444	)
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 March 31, 2023 and 2,777,778 were part of the subscriptions payable liability balance of $499,999 as of March 31, 2023 and December 31, 2022. See Note 7.

The Company was in default of the convertible debt outstanding as of December 31, 2022, which resulted in the conversion price on the outstanding note adjusting to be 60% of the lowest trading price in the 25 days prior to a conversion notice. Following the previous extensions, the holder of $444,444 of the notes agreed to extend the repayment period to April 30, 2023. There were no other changes to terms of the convertible notes payable, and the amendments were accounted for as a debt modification. The Company is currently in default of this agreement.

Derivative Liabilities

The fair values of the conversion option of outstanding convertible notes payable and common stock warrants were determined to be derivative liabilities under ASC 815 due to the default on convertible notes payable disclosed above, which resulted in a variable conversion price on the outstanding convertible note payable. The fair value of the derivative liabilities was estimated using a binomial model with the following assumptions:

	As of September 30, 2023
	Conversion Option			Warrants
Volatility		100.79	%	95.85-100.79		%
Dividend Yield		0	%		0	%
Risk-free rate		5.53	%	4.80-5.53%
Expected term	0.5 year			0.5-3.40 years
Stock price	$	0.0108		$	0.0108
Exercise price	$	0.0038		$ 0.18-0.27
Derivative liability fair value	$	817,512		$	5,209

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, 2023:

Fair value as of December 31, 2022	$	491,913
Fair value on the date of issuance related to warrants issued
Extinguishment due to repayment of debt		-
Extinguishment due to conversion of debt		-
Change in fair value of derivatives		330,806
Fair value as of September 30, 2023	$	822,719

The total impact of derivative liabilities recognized in the Company’s consolidated statements of operations includes the change in fair value of derivatives, with the Company recognizing a total loss of $330,806 and a total gain of $435,730 during the nine months ended September 30, 2023 and 2022, respectively.

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Equity

9 Months Ended

Sep. 30, 2023

Equity

Equity

Note 7: Equity

Common Stock

The Company’s Article of Incorporation authorize the Company to issue from 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. 

As of September 30, 2023 and December 31, 2022, 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.

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, 2023. Total accrued dividends at September 30, 2023 and December 31, 2022 were $29,446 and $20,022, respectively. The redemption value of the Series A Preferred Stock as of September 30, 2023 and December 31, 2022 was $281,446 and $272,022, 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 per share and carries a dividend of 8%. 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% of the Stated value plus 125% 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 $890,000 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 2,000,000 shares of common stock with a fair value of $139,800 to the investors, which were recorded as a cost of capital with no expense recognized. The Company granted to the Investors the piggy-back registration rights.

The Company accrued $139,836 and $80,000 in dividends on the Series B Preferred Stock as of September 30, 2023 and December 31, 2022, respectively.

Stock Warrants

A summary of stock warrant information is as follows:

	Aggregate Number			Aggregate Exercise Price			Weighted Average Exercise Price
Outstanding at December 31, 2022		14,279,965		$	2,946,044		$	0.21
Granted		-			-			-
Exercised		-			-			-
Forfeited and cancelled		(2,211,389	)		(631,200	)		0.29
Outstanding at September 30, 2023		12,068,576		$	2,314,844		$	0.19

The weighted average remaining contractual life is approximately 1.57 years for stock warrants outstanding with no intrinsic value of as of September 30, 2023. All of the above warrants were fully vested.

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Related Party

9 Months Ended

Sep. 30, 2023

Related Party

Related Party

Note 8: Related Party

Mark Adams, CEO, invested $250,000 in the June 2019 Notes and converted his debt during the year ended December 31, 2020 into shares of common stock of 1,388,885, which have yet to be issued for a conversion value of $277,778. Mark Adams will also receive an additional 154,321 shares of common stock once the shares are issued. The Company’s former VP of sales also invested $100,000 in the June 2019 Notes and converted his debt during the year ended December 31, 2020 into shares of common stock of 555,556, which have yet to be issued for a conversion value of $111,111. The former VP of sales will also receive an additional 61,728 shares of common stock once the shares are issued.

Those shares were included in subscriptions payable on the Company’s consolidated balance sheet.

Mark Adams contributed $126,000 to purchase the Series A Preferred Stock during the year ended December 31, 2021, as discussed in Note 7.

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Leases Commitments and Contingencies

9 Months Ended

Sep. 30, 2023

Leases Commitments and Contingencies

Leases, Commitments and Contingencies

Note 9: Leases, Commitments and Contingencies

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 six months ended September 30, 2023 and 2022 were as follows:

	Nine Months Ended
	September 30,  2023		September 30,  2022
Operating lease cost	$	30,163	$	26,811
Short-term lease cost		5,837		24,220
Variable lease cost		—		—
Sublease income		—		—
Total lease cost	$	36,000	$	51,031

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at September 30, 2023 and December 31, 2022:

Lease Position	September 30, 2023		December 31, 2022
Operating Leases
Operating lease right-of-use assets	$	52,715	$	77,677
Right of use liability operating lease current portion	$	37,891	$	34,007
Right of use liability operating lease long term		17,230		46,233
Total operating lease liabilities	$	55,121	$	80,240

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 1.67 years and a weighted average rate of 10%.

The following table provides the maturities of lease liabilities at September 30, 2023:

	Operating
	Leases
2023 (3 months remaining)	$	10,193
2024		42,123
2025		7,065
2026		-
2027 and thereafter		-
Total future undiscounted lease payments		59,381
Less: Interest		(4,260	)
Present value of lease liabilities	$	55,121

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, 2023

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 $1,642,269 but does not believe that is sufficient to remove the liability from the financial statements. Management does not intend to remove these liabilities of $1,642,269 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, 2023

Subsequent Events

Subsequent Events

Note 11: Subsequent Events

On October 31, 2023, the Company entered into amendment agreements with certain existing debt holders. Following this event, the Company is no longer in default on the loans.

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

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, 2022 in the Form 10-K filed on April 17, 2023. 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. During the three months ended September 30, 2023 four customers accounted for 44%, 16%, 11% and 10% of revenue. During the three months ended September 30, 2022, two customers accounted for 14% and 11% of revenue. During the nine months ended September 30, 2023, three customers accounted for 27%, 16% and 14% of revenue. During the nine months ended September 30, 2022, three customers accounted for 11%, 10% and 10% of revenue.

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. The Company has no amounts in excess of the FDIC limit as of September 30, 2023

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, 2023 and December 31, 2022, the Company had recorded an allowance for doubtful accounts of $264,659, respectively.

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, 2023 and December 31, 2022 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, 2023 and December 31, 2022, the Company’s an inventory allowance was estimated at $18,800.

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 deferred revenue are an approximate of their fair values because of the short maturity of these instruments. The Company’s derivative liabilities recognized at fair value on a recurring basis are a level 3 measurement. See Note 6.

Binomial Calculation Model

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

Preferred Stock Subject to Possible Redemption

The Company accounts for its preferred stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity”. Preferred stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable preferred stock (including preferred stock that feature redemption rights that are either within the control of the holder or subject to the redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred stock is classified as stockholders’ equity.

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 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 September 30, 2023, 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, 2023, $853,384 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 any variable consideration in contracts and the standalone selling price among separate performance obligations. 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, 2023		Three Months ended September 30, 2022		Nine Months ended September 30, 2023		Nine Months Ended September 30, 2022
Machine sales	$	38,000	$	225,335	$	486,000	$	2,416,419
Non-Machine sales		152,747		267,556		735,782		1,320,856
Total sales	$	190,747	$	492,891	$	1,221,782		3,737,275

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 three and nine months September 30, 2023 and 2022:

	Three Months Ended						Nine Months Ended
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Net income (loss) attributable to common stockholders	$	1,027,317		$	(341,763	)	$	(608,519	)	$	(393,202	)
Preferred stock dividends		23,340			23,340			69,259			69,260
Derivative gain		(1,064,687	)		(70,733	)		339,540			(435,730	)
Interest expense associated with convertible debt		-			-			-			-
Net income (loss) for dilutive calculation	$	(14,030	)	$	(389,156	)		(199,720	)		(759,672	)
Weighted average shares outstanding		81,088,719			80,132,342			81,088,719			77,605,012
Dilutive effect of preferred stock		18,066,667			-			-			-
Dilutive effect of convertible debt		115,740,741			-			-			-
Dilutive effect of common stock warrants		-			-			-			-
Weighted average shares outstanding for diluted net income (loss) per share		214,896,127			80,132,342			81,088,719			77,605,012

During the three and nine months ended September 30, 2023, the impact of 15,189,056 warrants to purchase common stock, were excluded from the calculation, as their impact would be anti-dilutive. During the nine months ended 115,740,741 shares issuable under convertible debt and 18,066,667 shares issuable under convertible preferred stock  were excluded from the calculation 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. Additionally, 2,222,223 shares to be issued as part of the share payable equity balances as of September 30, 2022 are excluded from the calculation of weighted average shares outstanding for the three and six months ended September 30, 2022.

Income Tax Provision

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.  

The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Accrued interest and penalties are included within the related tax liability.

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 may 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.

Advertising and Marketing Expenses

The Company expenses the cost of advertising and promotions as incurred. Advertising and promotion expense was $0 and $1,000 for the three months ended September 30, 2023 and 2022, respectively, and was $220 and $26,500 for the nine months ended September 30, 2023 and 2022, respectively.

Research and Development Costs

Research and development costs are expensed as incurred. The Company incurred no research and development costs during the three and nine months ended September 30, 2023 and 2022.

Lease arrangements

The Company follows the guidance of ASC 842 for accounting for leases. Transactions give rise to leases when the Company receives substantially all the economic benefits from and has the ability to direct the use of specified property and equipment. The Company determines if an arrangement is a lease at inception. The operating lease ROU assets are included within the Company’s non-current assets and lease liabilities are included in current or non-current liabilities on the Company’s consolidated balance sheets.

ROU assets represent the Company’s right to use, or control the use of, a specified asset for the lease term. Lease liabilities are the Company’s obligation to make lease payments arising from a lease and are measured on a discounted basis. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term on the commencement date. The operating lease ROU asset includes any lease payments made and initial direct costs incurred and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments continues to be recognized on a straight-line basis over the lease term.

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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”(“ASU 2016-13”). ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (“CECL”) model). Under the CECL model entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument. Further, ASU 2016-13 made certain targeted amendments to the existing impairment standards for available for sale (“AFS”) debt securities. An entity will apply the amendments in ASU 2016-13 through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company determined that the update applied to its trade accounts receivable and adopted the guidance on January 1, 2023 with no material impact to the Company’s financial statements or results of operations. The Company will estimate its expected credit losses based on the expected losses on its receivables based on a variety of data, including current economic conditions in the Company’s industry and the credit status of the Company’s customers.

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, 2023

Significant Accounting Policies

Schedule of disaggregation of revenue

	Three Months ended September 30, 2023		Three Months ended September 30, 2022		Nine Months ended September 30, 2023		Nine Months Ended September 30, 2022
Machine sales	$	38,000	$	225,335	$	486,000	$	2,416,419
Non-Machine sales		152,747		267,556		735,782		1,320,856
Total sales	$	190,747	$	492,891	$	1,221,782		3,737,275

Summary of effect of potential dilutive issuances

	Three Months Ended						Nine Months Ended
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Net income (loss) attributable to common stockholders	$	1,027,317		$	(341,763	)	$	(608,519	)	$	(393,202	)
Preferred stock dividends		23,340			23,340			69,259			69,260
Derivative gain		(1,064,687	)		(70,733	)		339,540			(435,730	)
Interest expense associated with convertible debt		-			-			-			-
Net income (loss) for dilutive calculation	$	(14,030	)	$	(389,156	)		(199,720	)		(759,672	)
Weighted average shares outstanding		81,088,719			80,132,342			81,088,719			77,605,012
Dilutive effect of preferred stock		18,066,667			-			-			-
Dilutive effect of convertible debt		115,740,741			-			-			-
Dilutive effect of common stock warrants		-			-			-			-
Weighted average shares outstanding for diluted net income (loss) per share		214,896,127			80,132,342			81,088,719			77,605,012

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Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2023

Property and Equipment

Schedule of property and equipment

	September 30, 2023			December 31, 2022
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		(20,415	)		(20,127	)
Property and equipment, net	$	229		$	517

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Accounts payable and accrued expenses (Tables)

9 Months Ended

Sep. 30, 2023

Accounts Payable and Accrued Expenses

Schedule of accounts payable and accrued expenses

	September 30, 2022		December 31, 2022
Accounts payable	$	275,469	$	245,482
Accrued interest		278,199		168,844
Sales tax payable		144,553		144,553
Total Accounts payable and Accrued expenses	$	698,221	$	558,879

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Notes Payable and Line of Credit (Tables)

9 Months Ended

Sep. 30, 2023

Notes Payable and Line of Credit

Summary of notes payable

	September 30, 2023			December 31, 2022
SBA loan May 2020	$	142,259		$	144,739
Note payable September 2021		621,876			635,658
Note Payable September 2022		-			52,475
Total notes payable		764,135			832,872
Less: discount and deferred finance costs		-			(94,095	)
Less: current portion		(625,283	)		(158,672	)
Long-term portion of notes payable	$	138,852			580,105

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Convertible Notes Payable and Derivative Liabilities (Tables)

9 Months Ended

Sep. 30, 2023

Convertible Notes Payable and Derivative Liabilities

Schedule of outstanding convertible notes

	September 30, 2023			December 31, 2022
June 2019 Notes, due April 30, 2023	$	444,444		$	444,444
Total		444,444			444,444
Less: Debt discount and deferred finance costs on short-term convertible notes		-			-
Less: Current convertible notes payable, net of discount		(444,444	)		(444,444	)
Total long-term convertible notes payable, net	$	-		$	-

Schedule of assumptions

	As of September 30, 2023
	Conversion Option			Warrants
Volatility		100.79	%	95.85-100.79		%
Dividend Yield		0	%		0	%
Risk-free rate		5.53	%	4.80-5.53%
Expected term	0.5 year			0.5-3.40 years
Stock price	$	0.0108		$	0.0108
Exercise price	$	0.0038		$ 0.18-0.27
Derivative liability fair value	$	817,512		$	5,209

Schedule of fair value of derivative liability

Fair value as of December 31, 2022	$	491,913
Fair value on the date of issuance related to warrants issued
Extinguishment due to repayment of debt		-
Extinguishment due to conversion of debt		-
Change in fair value of derivatives		330,806
Fair value as of September 30, 2023	$	822,719

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Equity (Tables)

9 Months Ended

Sep. 30, 2023

Equity

Summary of stock warrant

	Aggregate Number			Aggregate Exercise Price			Weighted Average Exercise Price
Outstanding at December 31, 2022		14,279,965		$	2,946,044		$	0.21
Granted		-			-			-
Exercised		-			-			-
Forfeited and cancelled		(2,211,389	)		(631,200	)		0.29
Outstanding at September 30, 2023		12,068,576		$	2,314,844		$	0.19

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Leases Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2023

Leases Commitments and Contingencies

Schedule of operating lease cost

	Nine Months Ended
	September 30,  2023		September 30,  2022
Operating lease cost	$	30,163	$	26,811
Short-term lease cost		5,837		24,220
Variable lease cost		—		—
Sublease income		—		—
Total lease cost	$	36,000	$	51,031

Summary of lease related assets and liabilities

Lease Position	September 30, 2023		December 31, 2022
Operating Leases
Operating lease right-of-use assets	$	52,715	$	77,677
Right of use liability operating lease current portion	$	37,891	$	34,007
Right of use liability operating lease long term		17,230		46,233
Total operating lease liabilities	$	55,121	$	80,240

Schedule of maturities of lease liabilities

	Operating
	Leases
2023 (3 months remaining)	$	10,193
2024		42,123
2025		7,065
2026		-
2027 and thereafter		-
Total future undiscounted lease payments		59,381
Less: Interest		(4,260	)
Present value of lease liabilities	$	55,121

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Significant Accounting Policies (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenues	$ 190,747	$ 492,891	$ 1,221,782	$ 3,737,275
Machine Sales [Member]
Revenues	38,000	225,335	486,000	2,416,419
Non Machine Sales [Member]
Revenues	$ 152,747	$ 267,556	$ 735,782	$ 1,320,856

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Significant Accounting Policies (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Significant Accounting Policies
Net income (loss) attributable to common stockholders	$ 1,027,317	$ (341,763)	$ (608,519)	$ (393,202)
Preferred stock dividends	23,340	23,340	69,259	69,260
Derivative gain	(1,064,687)	(70,733)	339,540	(435,730)
Interest expense associated with convertible debt	0	0	0	0
Net income (loss) for dilutive calculation	$ (14,030)	$ (389,156)	$ (199,720)	$ (759,672)
Weighted average shares outstanding	81,088,719	80,132,342	81,088,719	77,605,012
Dilutive effect of preferred stock	$ 18,066,667	$ 0	$ 0	$ 0
Dilutive effect of convertible debt	115,740,741
Weighted average shares outstanding for diluted net income (loss) per share	$ 214,896,127	$ 80,132,342	$ 81,088,719	$ 77,605,012

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Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Allowance for Doubtful Accounts	$ 264,659				$ 264,659
Inventory allowance			$ 18,800		$ 18,800
Revenue expected to be recognized in the future			$ 853,384
Common stock purchase	15,189,056	14,279,965	15,189,056	14,279,965
Convertible debt shares issued	115,740,741	2,469,136		2,469,136
Convertible preferred stock shares issued	18,066,667	18,066,667		18,066,667
FDIC insurance amount	$ 250,000		$ 250,000
Shares issuable	2,777,778
Shares payable equity to be issue		2,222,223		2,222,223
Advertising and marketing Expenses	$ 0	$ 1,000	$ 220	$ 26,500
Revenue | Customer One [Member]
Revenue percentage	44.00%	14.00%	27.00%	11.00%
Revenue | Customer Two [Member]
Revenue percentage	16.00%	11.00%	16.00%	10.00%
Revenue | Customer Three [Member]
Revenue percentage	11.00%		14.00%	10.00%
Revenue | Customer Four [Member]
Revenue percentage	10.00%
Maximum [Member]
Property and equipment, estimated useful lives			7 years
Minimum [Member]
Property and equipment, estimated useful lives			5 years

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Property and Equipment (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Property and equipment	$ 20,644	$ 20,644
Less: Accumulated Depreciation	(20,415)	(20,127)
Property and Equipment net	229	517
Furniture and Fixtures [Member]
Property and equipment	10,425	10,425
Equipments [Member]
Property and equipment	7,579	7,579
Trade Show Displays [Member]
Property and equipment	$ 2,640	$ 2,640

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Property and Equipment (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Property and Equipment
Depreciation expense	$ 288	$ 859

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Accounts Payable and Accrued Expenses (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Total Accounts payable and Accrued expenses	$ 698,221	$ 558,879
Accounts payable [Member]
Total Accounts payable and Accrued expenses	275,469	245,482
Accrued interest [Member]
Total Accounts payable and Accrued expenses	278,199	168,844
Sales tax payable [Member]
Total Accounts payable and Accrued expenses	$ 144,553	$ 144,553

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Notes Payable and Line of Credit (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Total notes payable	$ 764,135	$ 832,872
Less: discount and deferred finance costs	0	(94,095)
Less: current portion	(625,283)	(158,672)
Long term portion of notes payable	138,852	580,105
SBA loan May 2020 [Member]
Total notes payable	142,259	144,739
Note Payable September 2021 [Member]
Total notes payable	621,876	635,658
Note Payable September 2022 [Member]
Total notes payable	$ 0	$ 52,475

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Notes Payable and Line of Credit (Details Narrative) - USD ($)			1 Months Ended	9 Months Ended
	Nov. 12, 2021	Jun. 02, 2020	Sep. 29, 2021	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Deferred finance costs				$ 1,000
Debt discount				96,095	$ 63,625
Accrued interest on notes payable				278,199		$ 168,844
Principal amount				$ 50,000
Maturity date				Jun. 30, 2023
Interest rate				10.00%
Revenue Loan and Security Agreement [Member]
Investor fees			$ 5,000
Financing fees			27,500
Common stock issued to a lender	843,750
Deferred finance costs	$ 100,744
Proceeds from loan			$ 1,000,000
Unsecured short term finance agreement [Member]
Proceeds from loan						52,475
Inventory Financing Agreement [Member] | Lender [Member]
Principal amount				$ 142,259		144,739
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	(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
Note Payable September 2021 [Member]
Total notes payable				621,875		635,658
Unamortized discount				$ 0		$ 94,095

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Convertible Notes Payable and Derivative Liabilities (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Total	$ 444,444	$ 444,444
Less: Debt discount and deferred finance costs on short-term convertible notes	0	0
Less: Current convertible notes payable, net of discount	(444,444)	(444,444)
Total long-term convertible notes payable, net	0	0
June 2019 Notes, due April 30, 2023 [Member]
Total	$ 444,444	$ 444,444

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Convertible Notes Payable and Derivative Liabilities (Details 1)	9 Months Ended
	Sep. 30, 2023 USD ($) $ / shares
Exercise price	$ 0
Conversion Option [Member]
Volatility	100.79%
Dividend Yield	0.00%
Risk-free rate	5.53%
Expected term	6 months
Stock price	$ 0.0108
Derivative Liability fair value | $	$ 817,512
Exercise price	$ 0.0038
Warrants [Member]
Dividend Yield	0.00%
Stock price	$ 0.0108
Derivative Liability fair value | $	$ 5,209
Warrants [Member] | Minimum [Member]
Volatility	95.85%
Risk-free rate	4.80%
Expected term	6 months
Exercise price	$ 0.18
Warrants [Member] | Maximum [Member]
Volatility	100.79%
Risk-free rate	5.53%
Expected term	3 years 4 months 24 days
Exercise price	$ 0.27

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Convertible Notes Payable and Derivative Liabilities (Details 2) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Change in fair value of derivatives	$ 1,078,040	$ 70,733	$ (330,806)	$ 435,730
Fair Value [Member]
Fair value, Beginning balance			491,913
Extinguishment due to repayment of debt			0
Extinguishment due to conversion of debt			0
Change in fair value of derivatives			330,806
Fair value, Ending balance	$ 822,719		$ 822,719

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Convertible Notes Payable and Derivative Liabilities (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2020	Dec. 31, 2022
Convertible notes payable			$ 444,444
Changes in fair value derivatives			$ (330,806)	$ (435,730)
Common stock shares issued for conversion of debt, shares	115,740,741	2,469,136		2,469,136
Shares issued for subscriptions payable	18,066,667	18,066,667		18,066,667
Subscriptions payable liability balance in shares	2,777,778		2,777,778
Subscriptions payable liability balance						$ 499,999
Maturity date			Jun. 30, 2023
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
Shares issued for subscriptions payable			5,105,821
Subscriptions payable liability balance in shares	2,777,778		2,777,778
Subscriptions payable liability balance	$ 499,999		$ 499,999
Common stock shares issued for conversion of debt, Amount					$ 1,500,000
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, 2023 USD ($) $ / shares shares
Aggregate Number
Aggregate number, Beginning | shares	14,279,965
Less: forfeited and cancelled | shares	(2,211,389)
Aggregate number, Ending | shares	12,068,576
Aggregate Exercise Price
Aggregate exercise price, Beginning | $	$ 2,946,044
Granted | $	0
Exercised | $	0
Forfeited and cancelled | $	(631,200)
Aggregate exercise price, Ending | $	$ 2,314,844
Weighted average exercise price, Beginning | $ / shares	$ 0.21
Granted | $ / shares	0
Exercised | $ / shares	0
Forfeited and cancelled | $ / shares	0.29
Weighted average exercise price, Ending | $ / shares	$ 0.19

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Equity (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	May 26, 2021
Common stock designated	200,000,000		200,000,000
Preferred stock designated	30,000,000		30,000,000
Common stock, shares par value	$ 0.001		$ 0.001		$ 0.001
Shares remaining to be issued			2,000,000
Fair value of common stock			$ 139,800
Subscriptions payable liability balance					$ 499,999
Subscriptions payable liability balance in shares	2,777,778		2,777,778
Weighted average remaining contractual life			1 year 6 months 25 days
Redemption value			$ 281,446		272,022
Dividends			9,424
Accrued dividends	$ 29,446		$ 29,446		$ 20,022
Par value, preferred stock	$ 0.001		$ 0.001		$ 0.001
Shares issued for subscriptions payable	18,066,667	18,066,667		18,066,667
Preferred stock values	$ 0		$ 0		$ 0
Preferred stock, shares issued	0		0		0
Increased the authorized common shares	230,000,000		230,000,000		230,000,000
Mr Mark Adamsand Mr David Hall [Member]
Shares issued for subscriptions payable			2,800,000
Convertible debt converted and stock			1,400,000
Series A Redeemable Preferred Stock [Member] | Subscription Agreement [Member] | Scott Wessler [Member]
DIvidend percent			5.00%
Preferred stock values						$ 126,000
Preferred stock, shares issued						1,400,000
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”).
Price per share						$ 0.09
Series A Redeemable Preferred Stock [Member] | Subscription Agreement [Member] | Mr Adams [Member]
Preferred stock values						$ 126,000
Preferred stock, shares issued						1,400,000
Price per share						$ 0.09
Series B
Accrued interest			$ 139,836		$ 80,000
Par value, preferred stock	$ 0.0001		$ 0.0001
Warrants to purchase shares of common stock	4,000,000		4,000,000
Designated preferred shares			$ 1,000,000
Preferred stock,shares stated value	$ 1		$ 1
Conversion price	0.06		$ 0.06
DIvidend percent			8.00%
Sold of warrant share			1,000,000
Net cash proceeds from invester			$ 890,000
Common stock as purchase price	$ 0.20		$ 0.20

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Related Party (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2023	Dec. 31, 2022	Dec. 31, 2021
Preferred stock value	$ 0	$ 0
VP [Member]
Contribution amount	$ 100,000
Common stock, shares	555,556
Additional shares received	61,728
Conversion of Common stock, Issued	$ 111,111
Mr. Adams [Member]
Contribution amount	$ 250,000
Common stock, shares	1,388,885
Additional shares received	154,321
Conversion of Common stock, Issued	$ 277,778
Preferred stock value			$ 126,000

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Leases Commitments and Contingencies (Details) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Leases Commitments and Contingencies
Operating lease cost	$ 30,163	$ 26,811
Short-term lease cost	5,837	24,220
Variable lease cost	0	0
Sublease income	0	0
Total lease cost	$ 36,000	$ 51,031

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Leases Commitments and Contingencies (Details 1) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Leases Commitments and Contingencies
Operating lease right-of-use assets	$ 52,715	$ 77,677
Right of use liability operating lease current portion	37,891	34,007
Right of use liability operating lease long term	17,230	46,233
Total operating lease liabilities	$ 55,121	$ 80,240

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Leases Commitments and Contingencies (Details 2) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Leases Commitments and Contingencies
2023 (6 months remaining)	$ 10,193
2024	42,123
2025	7,065
2026	0
2027 and thereafter	0
Total future undiscounted lease payments	59,381
Less: Interest	(4,260)
Present value of lease liabilities	$ 55,121	$ 80,240

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Leases Commitments and Contingencies (Details Narrative)	9 Months Ended
	Sep. 30, 2023 USD ($)
Leases Commitments and Contingencies
Lease agreemnet term	beginning February 15, 2022 through February 28, 2025
Lease payments per month	$ 3,267
Lease payments increased percentage	4.00%
Weighted average rate	10.00%
Right of use asset and lease liability	$ 105,822
Incremental borrowing rate, percentage	10.00%
Lease remaining term	1 year 8 months 1 day

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Accrued Liabilities Other (Details Narrative) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Accrued Liabilities - other	$ 1,642,269	$ 1,642,269
China Grand Resorts Member
Accrued Liabilities - other	$ 1,642,269