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 June 30, 2021

☐  Transition Report Under Section 13 or 15(d) of the Securities Exchange Act Of 1934

For the transition period from __________ to __________

Commission File Number: 333-212055

PURE HARVEST CORPORATE GROUP, INC.

(Exact name of registrant as specified in its charter)

Colorado	71-0942431
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

7400 E. Crestline Cir. Ste. 130

Greenwood Village, CO 80111

Address of principal executive offices

(800) 924-3716

(Registrant’s telephone number, including area code)

N/A

(Former name or former address if changed since last report)

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

Title of each class	Trading Symbol	Name of each exchange on which registered
N/A	N/A	N/A

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 June 30, 2021, there were 67,080,523 outstanding shares of the registrant’s common stock.

Pure Harvest Corporate Group, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

	As of June 30, 2021			As of December 31, 2020
ASSETS
Current assets
Cash	$	452,033		$	856,844
Accounts receivable		117,788			91,371
Inventory		1,087,846			1,047,690
Deferred rent		71,111			113,778
Prepaids and other current assets		319,356			235,335
Notes receivable and advances on pending acquisitions, net of allowance  of $533,000 and $33,000, respectively		2,250,000			2,750,000
Total current assets		4,298,134			5,095,018
Long-term assets
Property, plant and equipment		1,628,574			1,599,088
Accumulated depreciation		(622,670	)		(469,315	)
Deferred rent, net of current portion		—			26,446
Right of use asset		401,736			537,393
Goodwill		1,550,225			1,550,225
Intangible assets, net		2,321,398			2,399,524
Other assets		341,127			301,604
Total assets	$	9,918,524		$	11,039,983
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	275,575		$	91,741
Accrued expenses		1,283,079			1,324,936
Notes payable		334,074			431,919
Convertible notes payable, net of discount of $21,060 and $146,967, respectively		1,778,940			1,353,033
Related party convertible notes payable		1,427,504			1,412,504
Total current liabilities		5,099,172			4,614,133
Long term liabilities
Notes payable		—			6,000
Right of use liability		242,114			293,971
Convertible notes payable, net of discount of $1,865,146 and $1,723,835, respectively		743,604			226,165
Derivative liabilities		2,650,979			1,879,776
Total liabilities		8,735,869			7,020,045
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock; $0.01 par value; 25,000,000 shares authorized; no shares issued and outstanding, respectively		—			—
Series A Preferred stock; $0.01 par value; 40,000 shares authorized; 6,660 shares issued and outstanding at June 30, 2021.		538,842			—
Common stock, $0.01 par value; 250,000,000 shares authorized, 67,340,765 and 64,117,846 shares issued and outstanding, respectively		673,409			641,179
Additional paid-in capital		14,216,743			11,111,799
Accumulated deficit		(14,246,339	)		(7,733,040	)
Total stockholders’ equity		1,182,655			4,019,938
Total liabilities and stockholders’ equity	$	9,918,524		$	11,039,983

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

1

Pure Harvest Corporate Group, Inc.

Condensed Consolidated Statements of Operations

For the Three and Six Months Ended June 30, 2021 and 2020

(Unaudited)

	For the Three Months Ended June 30, 2021			For the Three Months Ended June 30, 2020			For the Six Months Ended June 30, 2021			For the Six Months Ended June 30, 2020
REVENUES
Product sales and royalty income	$	762,778		$	3,951		$	1,556,926		$	5,041
Cost of sales		612,118			40,066			1,080,070			40,066
Gross profit		150,660			(36,114	)		476,856			(35,024	)
OPERATING EXPENSES
Advertising and promotion		25,804			50,043			42,818			52,602
General and administrative expenses, including stock-based compensation of $1,262,077, $3,026,036, $1,612,485 and $3,039,538, respectively		2,487,327			3,892,549			4,043,885			4,448,199
Research and development		—			—			3,708			—
Depreciation expense		97,375			28,947			174,811			33,589
Total operating expenses		2,610,506			3,971,539			4,265,222			4,534,390
Loss from operations		(2,459,846	)		(4,007,653	)		(3,788,366	)		(4,569,414	)
Other income (expense):
Interest expense		(960,312	)		(194,608	)		(1,481,683	)		(325,349	)
Interest income		—			48,618			55,000			114,183
Loss on extinguishment of notes payable		—			(756,254	)		—			(756,254	)
Change in fair market value of derivative liabilities		(576,701	)		49,380			(731,203	)		49,380
Loss on equity method investment		—			—			(73,047	)		—
Other income (expense)		—			—			6,000			—
Bad debt expense		—						(500,000	)		(823	)
Total other income (expense)		(1,537,013	)		(852,864	)		(2,724,933	)		(918,863	)
Loss before provision for income taxes		(3,996,859	)		(4,860,517	)		(6,513,299	)		(5,488,277	)
Provision for income taxes		—			—			—			—
NET LOSS	$	(3,996,859	)	$	(4,860,517	)	$	(6,513,299	)	$	(5,488,277	)
Basic and diluted net loss per common share	$	(0.06	)	$	(0.10	)	$	(0.10	)	$	(0.13	)
Basic and diluted weighted-average number of common shares outstanding		66,775,124			46,826,515			66,016,310			42,338,456

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

2

Pure Harvest Corporate Group, Inc.

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2021 and 2020

(Unaudited)

	For the Six Months Ended June 30, 2021			For the Six Months Ended June 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(6,513,299	)	$	(5,488,277	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		328,166			33,589
Stock-based compensation		1,612,483			3,039,538
Common stock issued for services		(34,400	)		—
Amortization of debt discount		681,096			141,980
Common stock issued for debt extension		334,141			—
Allowance on notes receivable		500,000			—
Change in fair value of derivative liability		731,203			(49,380	)
Loss on extinguishment of note payable		—			756,254
Extension fee added to note payable		81,667			—
Changes in operating assets and liabilities:
Accounts receivable		(26,417	)		381
Interest receivable on notes receivable		—			(113,360	)
Inventory		(40,156	)		(40,935	)
Other assets		(151,372	)		—
Deferred rent		69,113			42,666
Prepaid and other current assets		(84,021	)		4,293
Accounts payable		183,834			37,272
Accrued expense		344,909			480,000
Royalty payable		—			(770	)
Right of use asset and liability		83,800			(73,139	)
Net cash used in operating activities		(1,899,253	)		(1,229,888	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable and advances of pending acquisitions		—			(1,274,793	)
Notes receivable					—
Net cash received (paid) in connection with acquisition		—			(382,010	)
Purchase of machinery and equipment		(29,486	)		(24,685	)
Intangible assets		(75,227	)		—
Net cash used in investing activities		(104,713	)		(1,681,488	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances (payments) from (to) related parties		—			(87,500	)
Proceeds from issuance of convertible notes payable		500,000			—
Proceeds from notes payable		—			1,586,000
Repayment of notes payable		(103,845	)		(500,000	)
Proceeds from related party notes payable		—			330,000
Proceeds from sale of common stock		543,000			100,000
Proceeds from sale of preferred stock		660,000			—
Net cash provided by financing activities		1,599,155			1,428,500
Change in cash and cash equivalents		(404,811	)		(1,482,876	)
Cash and cash equivalents, beginning of period		856,844			1,665,247
Cash and cash equivalents, end of period	$	452,033		$	182,371
Supplemental disclosures of cash flow information:
Cash paid for interest	$	160,541		$	5,217
Cash paid for income taxes	$	—		$	—
Non-cash investing and financing activities:
Discount on note payable due to common stock, warrants or derivatives	$	460,000		$	387,517
Common stock issued for accrued interest	$	3,363		$	31,762
Common stock issued for business acquisitions	$	—		$	2,436,000
Exchange of note receivable and accrued interest for business acquisition	$	—		$	1,650,000
Common stock and warrants issued in connection with note extensions	$	311,500		$	308,803
Accrued interest and extension fee added to principal balance	$	300,000		$	—
Warrants issued with preferred stock	$	121,158		$	—
Common stock issued for license	$	128,750		$	—

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

3

Pure Harvest Corporate Group, Inc.

Condensed Consolidated Statements of Stockholder’s Equity

For the Three and Six Months Ended June 30, 2021 and 2020

(Unaudited)

Three Months Ended June 30, 2021	Preferred Stock				Common Stock				Additional			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Paid-in Capital			Deficit			Equity
Balance, March 31, 2021		—		—		65,354,522	$	653,546	$	11,922,301		$	(10,249,480	)		2,326,367
Stock-based compensation		—		—		—		—		1,262,077			—			1,262,077
Issuance of common stock to note holder		—		—		1,600,000		16,000		732,000			—			748,000
Issuance of common stock for license		—		—		250,000		2,500		126,250			—			128,750
Issuance of common stock for cash		—		—		136,243		1,363		61,637			—			63,000
Issuance of preferred stock for cash		6,660		538,842		—		—		121,158			—			660,000
Series A preferred stock dividends		—		—		—		—		(8,680	)		—			(8,680	)
Net loss		—		—		—		—		—			(3,996,859	)		(3,996,859	)
Balance, June 30, 2021		6,660	$	538,842		67,340,765	$	673,409	$	14,216,743		$	(14,246,339	)	$	1,182,655

Three Months Ended June 30, 2020	Preferred Stock				Common Stock				Additional		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Paid-in Capital		Deficit			Equity
Balance, March 31, 2020		—	$	—		38,066,330	$	380,664	$	4,616,296	$	(2,013,940	)	$	2,983,020
Stock-based compensation		—		—		—		—		457,492		—			457,492
Issuance of common stock for services		—		—		6,528,000		65,280		2,505,264		—			2,570,544
Issuance of common stock for acquisition		—		—		7,000,000		70,000		2,366,000		—			2,436,000
Issuance of common stock for accrued interest		—		—		80,814		808		30,954		—			31,762
Issuance of common stock and warrants for extension of notes payable		—		—		400,000		4,000		304,803		—			308,803
Discount on convertible notes payable related party due to common stock issued and derivative liabilty		—		—		50,000		500		68,500		—			69,000
Extinguishment of related party notes payable		—		—		—		—		428,000		—			428,000
Net loss		—		—		—		—		—		(4,860,518	)		(4,860,517	)
Balance, June 30, 2020		—	$	—		52,125,144	$	521,252	$	10,777,309	$	(6,874,458	)	$	4,424,103

Six Months Ended June 30, 2021
	Preferred Stock, Series A				Common Stock						Additional			Accumulated			Stockholders’
	Shares		Amount		Shares			Amount			Paid-in Capital			Deficit			Deficit
Balance, December 31, 2020		—	$	—		64,117,846		$	641,179		$	11,111,799		$	(7,733,040	)	$	4,019,938
Stock-based compensation		—		—		—			—			1,612,483			—			1,612,483
Issuance of common stock for services		—		—		(80,000	)		(800	)		(33,600	)		—			(34,400	)
Issuance of common stock to note holder		—		—		1,650,000			16,500			755,000			—			771,500
Issuance of common stock for accrued interest		—		—		8,515			85			3,278			—			3,363
Issuance of common stock for license		—		—		250,000			2,500			126,250			—			128,750
Issuance of common stock for cash		—		—		1,394,404			13,945			529,055			—			543,000
Issuance of preferred stock for cash		6,660		538,842		—			—			121,158			—			660,000
Series A preferred stock dividends												(8,680	)					(8,680	)
Net loss		—		—		—			—			—			(6,513,299	)		(6,513,299	)
Balance, June 30, 2021		6,660	$	538,842		67,340,765		$	673,409		$	14,216,743		$	(14,246,339	)	$	1,182,655

Six Months Ended June 30, 2020
	Preferred Stock, Series A				Common Stock				Additional		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Paid-in Capital		Deficit			Deficit
Balance, December 31, 2019		—	$	—		37,716,330	$	377,164	$	4,391,587	$	(1,386,181	)	$	3,382,570
Stock-based compensation		—		—		—		—		468,994		—			468,994
Issuance of common stock for services		—		—		6,528,000		65,280		2,505,264		—			2,570,544
Issuance of common stock for acquisition		—		—		7,000,000		70,000		2,366,000		—			2,436,000
Issuance of common stock to note holder		—		—		150,000		1,500		115,207		—			116,707
Issuance of common stock for accrued interest		—		—		80,814		808		30,954		—			31,762
Issuance of common stock and warrants for extension of notes payable		—		—		400,000		4,000		304,803		—			308,803
Issuance of common stock to investor		—		—		200,000		2,000		98,000		—			100,000
Discount on convertible notes payable related party due to common stock issued and derivative liabilty		—		—		50,000		500		68,500		—			69,000
Extinguishment of related party notes payable		—		—		—		—		428,000		—			428,000
Net loss		—		—		—		—		—		(5,488,277	)		(5,488,277	)
Balance, June 30, 2020		—	$	—		52,125,144	$	521,252	$	10,777,309	$	(6,874,458	)	$	4,424,103

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

4

Pure Harvest Corporate Group, Inc.

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Pure Harvest Corporate Group, Inc. (the “Company”), formerly Pure Harvest Cannabis Group, Inc., was formed as a Colorado corporation in April 2004.  

On December 31, 2018, the Company acquired all the outstanding common stock of Pure Harvest Cannabis Producers, Inc., (“PHCP”) in exchange for 17,906,016 (post-split) shares of the Company’s common stock. The transaction was accounted for as a reverse acquisition.

As a result of the acquisition of PHCP, the Company now operates in various segments of the cannabis and hemp-CBD industries with a focus on health and wellness products and applying education, research and development, and technology to each sector. The Company’s new business also involves the acquisition and operation of licensed marijuana cultivation facilities, manufacturing facilities, and dispensaries.

The Company changed its name to Pure Harvest Cannabis Group, Inc. in February 2019.

The Company changed its name to Pure Harvest Corporate Group, Inc. on June 8, 2020.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all accruals and adjustments (each of which is of a normal, recurring nature) necessary for a fair presentation of the Company’s financial position as of June 30, 2021, and the results of its operations for the three and six months then ended. Significant accounting policies have been consistently applied in the interim consolidated financial statements. The results reported in these interim financial statements are not necessarily indicative of the expected results for the entire year. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2020 and notes thereto that are included in the Company’s Annual Report on Form 10-K.

Going Concern

The Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Management plans to fund future operations by raising capital and / or seeking joint venture opportunities.

Principles of Consolidation

The Company evaluates the need to consolidate affiliates based on standards set forth in Accounting Standards Codification (“ASC”) 810 Consolidation (“ASC 810”). The Consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant consolidated transactions and balances have been eliminated in consolidation.

5

Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated fair market value of assets and liabilities acquired under business combinations, useful lives and potential impairment of property and equipment, recoverability of goodwill and estimates of fair value of share-based payments.

Fair Value of Financial Instruments

The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB” ACS 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.

The guidance also establishes a fair value hierarchy for measurements of fair value as follows:

● Level 1 - quoted market prices in active markets for identical assets or liabilities.

● Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amount of the Company’s financial instruments approximates their fair value as of June 30, 2021, and December 31, 2020, due to the short-term nature of these instruments. The Company’s derivative liabilities are considered a Level 2 liability.

Net Loss per Share

Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share”. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding during the period. For the three and six months ended June 30, 2021 and 2020, dilutive instruments consisted of convertible notes payable, options and warrants to purchase shares of the Company’s common stock totalling approximately 57.5 million and 28.4 million shares of common stock, respectively, the effects of which to the net loss are anti-dilutive.

Recent Accounting Pronouncements

In January 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, which clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting under Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The Company adopted the new standard on January 1, 2021, which did not have a significant impact on the Company.

The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs issued to date, including the one above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements.

6

NOTE 3 – ACQUISITIONS

During the three months ended March 31, 2021, and the three months ended June 30, 2021, the Company has not entered into any additional acquisitions other than those previously reported in its Form 10-K for the period ending December 31, 2020. For information regarding the Company’s prior year acquisitions see the Company’s Form 10-K for the period ending December 31, 2020.

NOTE 4 – NOTES RECEIVABLE

In May and June 2019, the Company advanced $28,593 to two unrelated individuals in connection with potential acquisitions for the Company. The amounts were to be repaid, without interest, in October 2019. As of June 30, 2021, and December 31, 2020, the Company has settled and received payment in kind for one of the notes and has continued collection efforts on the other note receivable, but has provided an allowance of such due to the unlikelihood of closing the acquisitions or collecting on the notes receivable.

In December 2019, the Company advanced $800,000 to How Smooth It Is, Inc. In January 2020, the Company advanced an additional $700,000 to HSII. The note receivable was due June 1, 2020 and incurs interest at 6% per annum for sixty days and then is increased to 10% per annum thereafter. In March 2020, the Company entered into an acquisition agreement to acquire the entity for which the note receivable was used to offset a portion of the purchase price see the Company’s Form 10-K for the period ending December 31, 2020 for more information. On April 9, 2020, the Company submitted the required applications to the Michigan Department of Licensing and Regulatory Affairs (LARA) to be approved and pre-qualified as a Processor to be added to the HSII license. Upon approval, PHCG will become 51% owners and can participate in revenue. The transaction will not close until the appropriate Michigan approvals are obtained. During the year ended December 31, 2020, the Company advanced HSII as an additional $247,845 for operations. The additional advances were due on November 1, 2020, and accrue interest at a rate of 7.5% per annum.

On March 12, 2020, the Company entered into an agreement to acquire fifty-one percent (51%) of the outstanding membership interests in How Smooth It Is, Inc. (“HSII”) for $1,500 ,000 in cash and 7,000,000 shares of the Company’s restricted common stock. On July 29, 2020, the Company terminated its agreement to acquire 51% of HSII. As a part of the termination agreement:

● The sole shareholder of HSII agreed to pay the Company $2,150,000 by August 7, 2020, and

● HSII agreed to manufacture up to 24 separate products for the Company (such as edibles and vaporizers) upon terms agreeable to both the Company and HSII. The products manufactured by HSII will be sold under Pure Harvest brands with the Company receiving royalties from the sale of the products.

On December 31, 2020, the Company entered into an amended note receivable loan and security agreement for $2,750,000 with an initial maturity date of March 31, 2021. The note incurs interest at 8% per annum through the initial maturity date. Under the agreement, if the loan is not repaid by March 31, 2021, if there have been no defaults, the loan will be extended to July 31, 2021. During the extended period, the interest rate increases to 12% per annum. In addition, with the extended period, the Company receives various royalties on products sold by the borrower for a period of three year commencing on April 1, 2021. On March 31, 2021, the note was extended to July 31, 2021, in accordance with the terms. The loan is secured by all the assets of HSII.

On April 14, 2021, the Company was sued by How Smooth It Is, Inc. in an effort to stall its obligations under the Business Loan and Security Agreement between the Company and HSII effective December 31, 2020. The Company has submitted its response and counterclaims to HSII’s complaint. The Company believes that the suit is meritless and that the Company will likely prevail should the case go to trial. In the interim, the Company has provided a default notice to HSII and increased the interest rate on the amounts due to 25% as provided by the Business Loan and Security Agreement. As of June 30, 2021, the Company has recorded a reserve of $500,000 against the outstanding note receivable.

In December 2019, the Company advanced $1,650,000 to EdenFlo, LLC in connection with the potential acquisition of that entity by the Company. The note receivable was due June 1, 2020, and incurs interest at 6% per annum for sixty days and then is increased to 10% per annum thereafter. In addition, the note receivable is secured by all the asset of EdenFlo, LLC. In April 2020, EdenFlo was acquired by the Company and the Note was consolidated into the acquisition, subsequently eliminating its balance on the Balance Sheet. See the Company’s Form 10-K for the period ending December 31, 2020 for more information regarding the acquisition of EdenFlo.

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In 2020, prior to SCT’s acquisition, the Company advanced SCT $476,507 for operations. The additional advances were not under a formal arrangement and thus did not incur interest and were due on demand. See the Company’s Form 10-K for the period ending December 31, 2020 for more information regarding the acquisition of SCT.

NOTE 5 – LEASE AGREEMENTS

In May 2019, the Company entered into a lease agreement for property to be used as a marijuana retail store. The initial term of the lease is for a period of three years. The Company has an option to purchase the property at prices ranging between $1,400,000 and $1,600,000 at various dates prior to May 1, 2022. The Company issued the landlord 400,000 shares of its post-split common stock in consideration for the option to purchase the property for which was recorded as deferred rent and is being amortized to rent expense using the straight-line method over the term of the lease. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 10% within the calculation.

In April 2020, in connection with the EdenFlo asset acquisition, the Company assumed a lease for a hemp processing facility. At inception of the lease, the Company recorded a right of use asset and liability of $140,988. The Company used an effective borrowing rate of 10% within the calculation. The lease runs through September 2021.

In May 2020, the Company entered into a lease for its corporate offices. The lease requires monthly payments ranging from $12,330 to $12,861 through the maturity of the lease in October 2023. At inception of the lease, the Company recorded a right of use asset and liability of $399,766. The Company used an effective borrowing rate of 10.35% within the calculation.

NOTE 6 –NOTES PAYABLE

Convertible Notes Payable

During the year ended December 31, 2019, the Company issued a series of convertible notes with original principal balances of $1,000,000. The convertible notes had original maturity dates ranging from November 1, 2021 to December 1, 2021 and incur interest at 20% per annum. In July 2020, the due date of the convertible notes was extended to November 1, 2023. In April 2021, the convertible notes were further amended to define the timing for quarterly interest payments due under the convertible notes and impose a penalty payable in cash and stock for late interest payments. In connection with this amendment, the Company increased the principal balance by $233,333 of accrued interest and $66,667 classified as an extension fee for the remaining accrued interest of $114,568 for which the payment was extended until early July 2021. The extension fee was recorded as interest expense during the six months ended June 30, 2021. As of June 30, 2021, the balance due on the convertible note was $1,300,000, net a discount of $21,060 recorded within convertible notes payable.

In addition, convertible notes are convertible upon issuance at a fixed price of $0.50 per common share. In connection with the issuance, the Company recorded a beneficial conversion feature of $44,000 resulting in a discount to the convertible notes. The discount is being amortized to interest expense using the straight-line method, due to the short-term nature of the convertible notes, over the term. During the six months ended June 30, 2021 and 2020, the Company amortized $7,092 and $11,424, respectively, to interest expense. The remaining discount of $21,060 is expected to be amortized throughout 2021 to 2023. The convertible notes include other provisions such as first right of refusal on additional capital raises, authorization of holder to incur debts senior to the convertible notes, etc. Additionally, should the holder exercise the option to exercise, a warrant to purchase an additional share of common stock for which the terms are not defined in the agreement. Thus, the issuance of the warrant is contingent to which the Company has not accounted for. Should warrants be ultimately issued, the Company expects to record the fair value of such as additional interest expense.

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In August 2020, the Company entered into an agreement for borrowings up to $4.0 million. Upon closing, the Company received $1,950,000 and provided for a six-month interest reserve. Additional amounts are advanced as varies milestones are reached. The borrowing incur interest at 15% per annum with principal and outstanding interest due three years from the date of issuance. The Company’s assets secure the borrowings. In addition, the borrowings have a variety of financial and non-financial covenants. In addition, the borrowings are convertible at the lesser of $2.00 or 75% of the average closing price of the Company’s common stock for the preceding 30 days. Additionally, for every dollar advanced under the borrowing, the holder receives two shares of common stock. In 2020, the Company issued the holder 4,192,500 shares of common stock in connection with the convertible note. The agreement also includes a variety of other provisions related to inventory sold with specific discounts, markups, etc.

In August 2021, the Company received an additional $500,000 under the terms of the initial agreement. In connection with this tranche, the Company issued 1.0 million shares of common stock. Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. Upon initial valuation, the derivative liabilities value of $395,891, as well as the fair market value of the 1.0 million shares of common stock exceeded the face values of the convertible notes payable by $355,891, which was recorded as a day one loss on derivative liabilities. The variables to value the derivatives on issuance were similar to those disclosed below. As of June 30, 2021, the principal balance due on the convertible notes was $2,450,000, and accrued interest of $158,750, net a discount of $1,865,146 recorded within long-term convertible notes payable.

The derivative liabilities are valued on the date the borrowings become convertible and revalued at each reporting period. During the six months ended June 30, 2021, the Company revalued the fair market value of the derivative liabilities at $2,379,080 resulting in a loss of $234,032. The valuation of the derivative liabilities was based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.34 our stock price on the date of revalue of $0.51, expected dividend yield of 0%, expected volatility of 98.00%, risk free interest rate of 0.01% and expected term of 2.12 years.

In connection with the derivative liabilities and common stock issued, the Company recorded a total discount related to the two notes of $2,450,000. The discount is being amortized over the term of the borrowings using the straight-line method due to the short-term nature. During the six months ended June 30, 2021, the Company amortized $358,689 of the discount to interest expense. As of June 30, 2021, a discount of $1,865,146 remained for which will be amortized in periods from 2021 to 2023.

Related Party Convertible Notes Payable

On June 15, 2020, the Company borrowed $30,000 from an individual related to a significant member of management. The loan is evidenced by a promissory note which bears interest at 10% per year and is due and payable on October 8, 2020. At the option of the lender, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by $0.40. On the date of issuance, the conversion price of $0.40 was the closing market price of the Company’s common stock and thus a beneficial conversion feature was not recorded. In September 2020, the note was converted into 75,000 shares of common stock.

At various times in 2020, the Company borrowed a total of $430,000 from an individual related to a director of the Company and a director of the Company. The loans are evidenced by a promissory note which bear interest at 12% per year and are due and payable at dates ranging from December 10, 2020, to January 10, 2021. The proceeds were used for operations. At the option of the holders, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser of $0.30 or 80% of the ten-day average closing price of the Company’s common stock immediately prior to the date of conversion. The holders also have the option to convert $900,000 owed to them from EdenFlo, LLC, as disclosed below, which debt was assumed the Company in connection with the acquisition of EdenFlo, at a price of $0.30 per share for a period of 12 months. Additionally, the holders were issued 215,000 shares of common stock in connection with the notes. On December 7, 2020, the loans were amended whereby the various promissory notes were consolidated into two notes with a maturity date of June 30, 2021, and the variable conversion price was removed. See below for additional accounting impact. On April 23, 2021, the consolidated promissory notes were amended to allow the Company to extend the maturity date of the consolidated notes to December 31, 2021, in exchange for an aggregate of 250,000 shares of common stock and $15,000 added to the principal balance of the note. The shares of common stock were valued at $115,000 ad recorded as interest expense during six months ended June 30, 2021. As of June 30, 2021, the principal balance due on the convertible notes was $1,427,504 and recorded within related party convertible notes payable.

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Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. The derivative liabilities are valued on the date the convertible note payable become convertible and revalued at each reporting period. During the year ended December 31, 2020, the Company recorded initial derivative liabilities of $298,913 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.30 our stock price on the date of grant ranging from $0.40 - $0.49, expected dividend yield of 0%, expected volatility of 103.00%, risk free interest rate of 0.64% and expected terms of 0.5 years. Upon initial valuation, the derivative liabilities, as well as the fair market value of the 215,000 shares of common stock exceeded the face values of the convertible notes payable by $2,940, which was recorded as a day one loss in derivative liability. On December 7, 2020, the derivative liabilities were revalued at $540,475 resulting in a loss of $241,562. The value of the derivatives of $540,475 was recorded as a gain on extinguishment due to the modification of the exercise price. The inputs to value the derivative liabilities were similar to those on the date of issuance.

In connection with the derivative liabilities and common stock issued, the Company recorded a $396,223 discount. The discount is being amortized over the term of the convertible note using the straight-line method due to the short-term nature. As of December 31, 2020, no discount remained.

In connection with the EdenFlo asset acquisition, the Company assumed two notes payable with the former shareholders. Under the terms of the agreements $600,000 is payable on June 1, 2021 and does not incur interest and $300,000 is due on August 1, 2022 and does not incur interest. As disclosed above, both notes were modified to include a conversion feature at a price of $0.30 per share. The modification was treated as an extinguishment of the original note for which a loss on extinguishment of $448,000 was recorded.

In connection with the SKM acquisition, the Company assumed four notes payable totalling $275,756 with the former membership. The notes do not incur interest and are due on demand.

Notes Payable

On March 6, 2020, the Company borrowed $1,500,000 from an unrelated third party. The loan is evidenced by a promissory note which bears interest at 8% per year.

The note is due and payable as follows:

● $500,000, together with all accrued and unpaid interest, on April 13, 2020

● $1,000,000, together with all accrued and unpaid interest, on May 6, 2020

Accrued interest will be paid in shares of the Company’s common stock based upon a 25% discount to the ten-day average closing price of the Company’s common stock immediately prior to May 6, 2020. Accrued interest will include 150,000 additional shares of the Company’s common stock and warrants to purchase 150,000 shares of the Company’s common stock. The warrants are exercisable at any time on or before January 1, 2025 at a price of $2.00 per share. The first payment of $500,000 was made on a timely basis.

On issuance, the Company valued the 150,000 shares of common stock and the 150,000 warrants for common stock and recorded the relative fair market of $116,707 as a discount to the note payable. The Company is amortizing the discount over the term of the note payable using the straight-line method due to the short term of the note. During the six months ended June 30, 2020, the Company amortized $92,256 to interest expense.

On April 20, 2020, the holder of the Note agreed to extend the due date for the $1,000,000 payment from May 6, 2020 to June 15, 2020. In consideration for extending the repayment date for the second amount to June 15, 2020, the Company issued to the note holder 200,000 shares of its common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. A late payment penalty of $5,000 per day will be due if the $1,000,000 is not paid by June 15, 2020. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $157,784.

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On June 9, 2020, the holder of the Note agreed to further extend the due date for the $1,000,000 payment to July 15, 2020. In consideration for extending the repayment date, the Company issued to the note holder an additional 200,000 shares of the Company’s common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $170,470.

On July 14, 2020, the holder of the Note agreed to further extend the due date for the $1,000,000 payment to August 15, 2020. In consideration for extending the repayment date, the Company issued to the note holder an additional 100,000 shares of the Company’s common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $120,721.

In addition, during the twelve months ended December 31, 2020, the Company issued 124,425 shares of common stock in satisfaction of $52,293 in accrued interest.

The note was paid in full in August 2020.

Note Payable - $200,000

On October 9, 2020, the Company borrowed $200,000 from an unrelated third party. The note incurred interest at 12% per annum and was due by November 9, 2020. The note was repaid. As further consideration, the Company issued 100,000 shares of its restricted common stock to the lender. The Company recorded the fair market value of the shares as a discount of $40,000 to the note for which all was amortized to interest expense during the year ended December 31, 2020.

Note Payable - $173,705

On November 1, 2020, the Company entered into an agreement to convert accounts payable of $173,705 into a note payable. The note incurred interest at 8% per annum and is payable in monthly payments.

Convertible Note Payable - $500,000

On November 17, 2020, the Company borrowed $500,000 from an unrelated third party. The note incurs interest at 8% per annum and initially matured on January 31, 2021. See below for discussion regarding the extension of the note. At the option of the lender, the loan and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser of 75% of the ten-day average closing price of the Company’s common stock immediately prior to the date of conversion or $0.50. As of June 30, 2021, the principal balance due on the convertible note was $500,000 and recorded within convertible notes payable.

Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. The derivative liabilities are valued on the date the borrowings become convertible and revalued at each reporting period. On June 30, 2021, the derivative liabilities were revalued at $271,897 resulting in a gain of $13,223. The derivative liabilities were revalued based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.38 our stock price on the date of revalue of $0.51, expected dividend yield of 0%, expected volatility of 113.00%, risk free interest rate of 0.01% and expected term of 0.50 years.

In connection with the derivative liabilities and common stock issued, the Company recorded a $287,454 discount. The discount is being amortized over the term of the borrowings using the straight-line method due to the short-term nature. During the six months ended June 30, 2021, the Company amortized $118,815 of the discount to interest expense. As of June 30, 2021, no discount remained.

On January 31, 2021, the holder of the note agreed to extend the due date for the note to April 2, 2021. In consideration for extending the repayment date to April 2, 2021, the Company issued to the note holder 50,000 shares of its common stock and the interest rate of the Note was increased to 10% per annum. The Company recorded the fair market value of the common stock issued of $23,500 as a discount to the note for which was fully amortized to interest expense during the six months ended June 30, 2021.

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On April 16, 2021, the holder of the Note agreed to extend the due date for the note to June 18, 2021. In consideration for extending the repayment date, the Company issued to the note holder 100,000 shares of its common stock, 100,000 shares of common stock for accrued interest through execution date and provided the holder with the option to extend the payment to September 15, 2021, for which an additional 150,000 shares of common stock would be provided, if extended. The payment date was extended to September 15, 2021 at the option of the note holder in June 2021. The Company recorded the fair market value of the common stock issued of $173,000 as additional interest expense during the six months ended June 30, 2021.

NOTE 7 – STOCKHOLDER’S EQUITY

Stock-Based Compensation

The Company has entered into various employment and advisory agreements for which shares of common stock are issued with a variety of vesting provisions. The Company typically determines the fair market value of these awards on the date of grant and expensing that value over the vesting period which mirrors the service period.

In May 2020, the Company entered into two-year employment agreements with Matthew Gregarek, the Company’s Chairman and Chief Executive Officer, David Burcham, the Company’s President, and Daniel Garza, the Company’s Chief Marketing Officer. Among various other salary and bonus terms, the agreements also provide for the award of shares of the Company’s restricted common stock and options to purchase shares of the Company’s common stock. Under these agreements, a total of 6,300,000 fully vested shares of common stock were granted upon execution of the agreements. An additional 1,300,000 shares of common stock were awarded with a vesting date of April 1, 2021, 900,000 of which have vested. The agreements also provide for the future grant of 1,300,000 additional shares of common stock should the individuals remain employed following the April 1, 2021 expiration date, 400,000 of which have been cancelled and will not be subject to issuance. For the six months ended June 30, 2021, the Company recorded $20,664 as stock-based compensation. The remaining expense outstanding is $58,364 for which will be recorded through 2022.

During the year ended December 31, 2020, the Company entered into agreements with consultants for which provided investor awareness, research materials and other services. During the three months ended March 31, 2021, 80,000 shares of common stock were returned to the Company and cancelled. The Company recorded a reduction to stock-based compensation of $34,400 during the six months ended June 30, 2021.

On April 5, 2021 the Company issued 250,000 shares to a third party for assignment of intellectual property, including patents and patent applications, agreed to on January 26, 2021. The common stock was valued at $128,750 for which is being amortized over the term of the licensing agreement.

Options

In May 2020, effective April 1, 2020, the individuals noted above were also granted a total of 5,750,000 options to purchase shares of the Company’s common stock. These options vested in tranches at various dates through May 1, 2021 with escalating exercise prices ranging from $0.50 to $7.50 and are exercisable for approximately five 5 years. These options were valued at $1,056,695 using a Black-Scholes Options Pricing Model.

The fair value of the options granted in 2020 are estimated using a Black-Scholes Options Pricing Model with the following assumptions:

Exercise price per share	$	3.40
Expected life (years)		2.97
Risk-free interest rate		0.64	%
Expected volatility		135	%

In 2021, the Company granted options to purchase 9,647,500 shares of common stock to employees and consultants. Some of the grants had effective dates within the 2020 calendar year. These options will vest in tranches at various points through 2023 with escalating prices ranging from $0.05 to $7.50 and are exercisable through various points through 2023.

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These options were valued at $2,287,556 using a Black-Scholes Options Pricing Model. For the six months ended June 30, 2021, the Company recorded $1,591,819 as stock-based compensation. The remaining expense outstanding is $698,737 for which will be recorded through 2024.

The fair value of the options granted in 2021 are estimated using a Black-Scholes Options Pricing Model with the following assumptions:

Exercise price per share $ 0.96

Expected life (years)	2.56
Risk-free interest rate	0.64	%
Expected volatility	122	%

Offering of Common Stock and Warrants

In February 2019, the Company commenced a private offering of shares of common stock at a purchase price of $0.50 per share. In addition, for each share purchased the investor received a warrant to purchase one additional share of common stock at a price of $2.00 per share. The warrants expire on December 31, 2021, or sooner at the Company’s option, if the Company’s stock trades for a price of $3.00 per share for 10 days with an average volume of 100,000 shares per day. During the year ended December 31, 2020, the Company received $150,000 related to the sale of 300,000 shares of common stock and warrants.

On October 23, 2020, the Company sold 2,750,000 shares of its common stock to a private investor for $1,000,000 in proceeds.

Between December 28 and December 30, 2020, the Company received $100,000 related to the sale of 200,000 shares of common stock and warrants.

During the six months ended June 30, 2021, the Company received $543,000 related to the sale of 1,394,404 shares of common stock.

Offering of Preferred Stock

In March 2021, the Company commenced and subsequently closed a private offering of its preferred stock for up to $2 million in proceeds. The offering consisted of 20,000 shares of preferred stock at a price of $100 per share. The purchaser of the preferred stock has agreed to purchase the preferred stock in three tranches provided certain sales milestones are met. Concurrently with each issuance of preferred stock, the Company shall issue the preferred stockholder 500,000 warrants to purchase the Company’s common stock at a price of $0.75 per share. Preferred stockholders are entitled to a 10% dividend paid in additional shares of preferred stock on a quarterly basis and will receive dividend and liquidation preferences over the Company’s common stockholders. During the six months ended June 30, 2021, the Company received $660,000 related to the sale of 6,660 shares of preferred stock. In connection with the sale, the Company issued the holder warrants to purchase 500,000 shares of the Company’s common stock at $0.75 per share for a period of four years. The Company valued the warrants at $148,400 using the Black-Scholes pricing model for which a discount of $121,158 using the relative fair market value was recorded preferred stock and the offset to additional paid-in capital. In addition, the holders of the preferred stock receive dividends at a rate of 10% per annum. As of June 30, 2021, the Company recorded accrued dividends of $8,680 as an increase to accrued liabilities and an offset to additional paid-in capital. Each share of preferred stock is convertible into 200 shares of common stock.

Common Stock and Warrants Issued with Notes Payable

See Note 6 for issuance of shares in connection with note agreements.

NOTE 8 – RELATED PARTY TRANSACTIONS

See Note 7 for shares and options issued to management under employment contracts. In connection with the employment contracts, the Company accrued total deferred salaries and bonuses of $531,823 and $225,000 as of June 30, 2021, respectively.

See Note 6 for discussion related to related party convertible notes payable.

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NOTE 9 – SUBSEQUENT EVENTS

On July 2, 2021, the Company entered into an agreement with a third party for an equity investment of $30,000,000 in two tranches beginning August 16, 2021. For the first tranche, the investor will purchase preferred stock for $15,000,000, valued at $0.40 per share of common stock. For the second tranche, the investor will make an additional equity investment of $15,000,000, valued at $0.455 per share of common stock, within ninety (90) days of the funding of the first tranche.

On July 2, 2021, the Company entered into an assignment agreement with a third party under which the Company obtained the rights to provide CBD and other plant-based health and wellness products to patients covered under corporate health insurance plans. In consideration for assigning such rights, the Company entered into a profit-sharing arrangement with the third party whereby the Company shall receive 51% of the total profits and pay the third party 49% of the profits derived from such product sales.

On July 15, 2021, the Company borrowed a total of $400,000 from unrelated third parties. The loans are evidenced by two convertible promissory notes which bear total interest of $30,000, are convertible at $0.40 per share, and mature on August 20, 2021. 

In July 2021, the Company received $125,000 related to the sale of 290,787 shares of common stock.

The Company has evaluated subsequent events through the filing date of these consolidated financial statements and has disclosed that there are no other events that are material to the financial statements to be disclosed.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company’s business plan involves the acquisition of licensed medical and recreational marijuana dispensaries, cultivation facilities and production facilities in states which allow publicly traded companies to own and operate dispensaries, cultivation facilities and production facilities. Depending on the markets entered and state regulation, the Company’s business plan may also include asset purchases, management/consulting operating agreements, or similar allowable agreements. The Company plans to use a combination of cash, shares of common or preferred stock, notes, or other financing vehicles to complete these acquisitions.

Love Pharm, LLC

On February 12, 2020, the Company entered into an Operating Agreement with Dr. James Rouse, MD regarding the ownership, operation, and management of Love Pharm, LLC. Love Pharm was organized to formulate, develop, manufacture, and brand hemp/CBD products for sale and distribution as well as to form a multi-channel media platform for public and patient education regarding the endocannabinoid system utilizing Dr. Rouse’s name, public image and his extensive experience and expertise in medicine and entrepreneurship. Under the Operating Agreement between the Company and Dr. Rouse, the Company owns 51% of Love Pharm and has a right of first refusal to purchase the remaining 49% of Love Pharm from Dr. Rouse. Additionally, Dr. Rouse will become the Company’s Chief Medical Advisor. Dr. Rouse will receive 400,000 shares of the Company’s common stock for services provided to the Company.

As of June 30, 2021 Love Pharm had not generated any revenue.

Sofa King

On March 13, 2020, the Company entered into an agreement to acquire all of the outstanding membership interests in Sofa King Medicinal Wellness Products, LLC (“SKM”) for 3,000,000 shares of the Company’s common stock.

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On August 11, 2020, following receipt of approval of the transaction by the Colorado Marijuana Enforcement Division, the Company closed the acquisition of SKM and the change of ownership on SKM’s six licenses (now owned by the Company) was completed.

SKM is a vertically integrated cannabis operator located in Dumont, CO and recently moved its dispensary to a corner location along the busy I-70 corridor between Denver and Colorado’s world-class ski destinations.

EdenFlo

On April 24, 2020, the Company acquired substantially all the assets of EdenFlo, LLC, a producer of CBD extracts and concentrates, for 7,000,000 shares of the Company’s restricted common stock and the release of its obligation of a previous promissory note in the amount of $1,650,000.

EdenFlo will join Prolific Nutrition and Love Pharm, LLC to secure and expand the Company’s position in the national Hemp/CBD industry. EdenFlo can produce pure CBD isolate and full-spectrum hemp distillate. EdenFlo’s isolate is made from the highest quality ingredients, utilizing only the best extraction and distillation methods to ensure a final product of extreme purity. Their scientific procedures used for the remediation of THC provide some of the cleanest broad-spectrum (distillate) oil available in the cannabis extraction industry. The acquisition of EdenFlo will support the Company’s manufacturing operations by supplying the Company’s raw materials requirements for its branded products.

Test Kitchen

On August 17, 2020, the Company acquired all the outstanding shares of Test Kitchen, Inc. for 50,000 shares of its restricted common stock.

Test Kitchen’s only assets as of August 17, 2020, was a product containing CBD oil. Test Kitchen filed a provisional patent application for this product on June 12, 2020. There can be no assurance that a patent will be issued for this product.

Solar Cultivation Technologies, Inc.

On September 29, 2020, the Company acquired all the assets of Solar Cultivation Technologies, Inc. for 1,200,792 shares of the Company’s common stock. SCT provides commercial cannabis cultivators with solar, battery storage, and high-efficiency lighting.

On November 12, 2020, the Company contributed SCT’s assets valued at $530,000 less the cash consideration provided by DC Energy Group, LLC (“DCEG”) of $200,000 for a 40% interest in DC Energy Group, LLC, an entity which is focused on renewable energy generation, storage, and distribution. The investment is accounted for using the equity method.

Impact of the Coronavirus

The Company’s business could be disrupted and materially adversely affected by the recent outbreak of COVID-19. As a result of measures imposed by the governments in affected regions, businesses and schools have temporarily closed due to quarantines intended to contain this outbreak. The spread of COVID-19 from China to other countries has resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic on March 11, 2020. International stock markets have reflected the uncertainty associated with the slow-down in the world economies. The significant declines in the Dow Industrial Average were also largely attributed to the effects of COVID-19. The Company is still assessing the impact COVID-19 may have on its business, but there can be no assurance that this analysis will enable the Company to avoid part or all of any impact from the spread of COVID-019 or its consequences, including downturns in business sentiment generally. The extent to which the COVID-19 pandemic and global efforts to contain its spread will impact the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic.

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Results of Operations

Three Months Ended June 30, 2021, compared to the Three Months Ended June 30, 2020

Revenue

We generated $762,778 of revenues for the three-month period ended June 30, 2021, in comparison with $3,951 for the comparable quarter a year ago. The increase of $758,827 is primarily due to operational sales from the Company’s acquisition in SKM, as well as wholesale sales of hemp distillate product sold through Test Kitchen. During the three months ended June 30, 2021, approximately 84% of the Company’s revenue was from sales made by the Company’s SKM dispensary in Dumont, Colorado, and approximately 16% of the Company’s revenue was from sales made by Test Kitchen. During the three months ended June 30, 2021, no sales were generated by Prolific Nutrition, Gratus Living, Love Pharm or EdenFlo.

Cost of Goods Sold.

We generated $612,118 of cost of goods sold for the three-month period ended June 30, 2021, in comparison with $40,066 for the comparable quarter a year ago. The increase of $572,052 is due to sales activity stated above.

Gross Profit/(Loss).

We generated $150,660 gross profit for the three-month period ended June 30, 2021, in comparison with gross loss of ($36,114) for the comparable quarter a year ago. The increase of $186,774 is due to operational activity. The Company, in prior years did not have on-going sales operations.

General and Administrative Expenses

General and administrative expenses for the three-month period ended June 30, 2021, totalled $2,487,327 in comparison with $3,892,549, for the comparable quarter a year ago. The decrease of $1,405,222 or 36% is primarily due to a significant amount of stock-based compensation recorded in the prior year in connection with options and shares granted to officers.

Other Income / Expense

Other expense for the three-month period ended June 30, 2021, totalled $1,537,013, in comparison with $852,864, for the comparable quarter a year ago. The increased expense of $684,149, is primarily due to increased interest from additional funding and discount amortization, fair value of common stock issued for note extensions, losses on investment valuation, and changes in the fair market value of derivative liabilities incurred.

Six Months Ended June 30, 2021, compared to the Six Months Ended June 30, 2020

Revenue

We generated $1,556,926 of revenues for the six-month period ended June 30, 2021, in comparison with $5,041 for the comparable quarter a year ago. The increase of $1,551,885 is primarily due to operational sales from the Company’s acquisition in SKM, as well as wholesale sales of hemp distillate product sold through Test Kitchen. During the six months ended June 30, 2021, approximately 85% of the Company’s revenue was from sales made by the Company’s SKM dispensary in Dumont, Colorado, and approximately 15% of the Company’s revenue was from sales made by Test Kitchen. During the six months ended June 30, 2021, no sales were generated by Prolific Nutrition, Gratus Living, Love Pharm or EdenFlo.

Cost of Goods Sold.

We generated $1,080,070 of cost of goods sold for the six-month period ended June 30, 2021, in comparison with $40,066 for the comparable quarter a year ago. The increase of $1,040,004 is due to sales activity stated above.

Gross Profit/(Loss).

We generated $476,856 gross profit for the six-month period ended June 30, 2021, in comparison with gross loss of ($35,024) for the comparable quarter a year ago. The increase of $511,880 is due to operational activity. The Company, in prior years did not have on-going sales operations.

16

General and Administrative Expenses

General and administrative expenses for the six-month period ended June 30, 2021, totalled $4,043,885 in comparison with $4,448,199, for the comparable quarter a year ago. The decrease of $404,314 or 9% is primarily due to a significant amount of stock-based compensation recorded in the prior year in connection with options and shares granted to officers.

Research and Development Expenses

Research and development expenses for the six-month period ended June 30, 2021, totalled $3,708, in comparison with $0 for the comparable quarter a year ago. The increase of $3,708 is due to product creation in the current year.

Other Income / Expense

Other expense for the three-month period ended June 30, 2021, totalled $2,724,933, in comparison with $918,863, for the comparable quarter a year ago. The increased expense of $1,806,070, is primarily due to increased interest from additional funding, an allocation of bad debt expense on a note receivable, losses on investment valuation, and changes in the fair market value of derivative liabilities incurred.

Liquidity and Capital Resources

Our principal source of liquidity has been funds received from the sale of our common stock and issuance of notes including convertible notes. During the current reporting period and subsequent we have funded our operations through cash flows from operations and the following significant transactions.

On August 18, 2020, the Company entered into a Loan Agreement with an unrelated third party. The Loan Agreement provides the Company with the option, subject to certain conditions, to borrow up to $4,000,000 under the Loan Agreement. As of November 16, 2020 the Company had borrowed $1,950,000 pursuant to the Loan Agreement, which amount includes $146,250 which the Company will use to pay the first six month’s interest on the borrowed funds. The Company used $1,000,000 of the initial advance to repay the $1,000,000 loan described above. The funds remaining from the initial advance will be used to purchase raw materials for the Company’s products and for general corporate purposes. All funds borrowed bear interest at 15% per year, are secured by substantially all of the Company’s assets, and are due and payable on August 18, 2023. The Lender will receive two shares of the Company’s restricted common stock for every $1.00 loaned to the Company. At the option of the Lender, the amounts loaned to the Company may be converted into shares of the Company’s common stock. The number of shares to be issued will be determined by dividing the amount to be converted by the Conversion Price. The Conversion Price is the lessor of: (1) $2.00 or (2) 75% of the average closing price of the Company’s common stock for the 30 consecutive trading days ending on the last business day immediately prior to the conversion date.

On April 28, 2021, the Company received $500,000 related to additional borrowings under the Loan Agreement.

During the six months ended June 30, 2021, the Company received $543,000 related to the sale of 1,394,404 shares of common stock.

In March 2021, the Company commenced and subsequently closed a private offering of its preferred stock for up to $2 million in proceeds. The offering consisted of 20,000 shares of preferred stock at a price of $100 per share. The purchaser of the preferred stock has agreed to purchase the preferred stock in three tranches provided certain sales milestones are met. Concurrently with each issuance of preferred stock, the Company shall issue the preferred stockholder 500,000 warrants to purchase the Company’s common stock at a price of $0.75 per share. Preferred stockholders are entitled to a 10% dividend paid in additional shares of preferred stock on a quarterly basis and will receive dividend and liquidation preferences over the Company’s common stockholders.

On May 14, 2021, the Company received $660,000 related to the issuance of the first tranche of 660 shares of the Company’s preferred stock and 500,000 warrants to purchase the Company’s common stock at a price of $0.75.

17

Going forward we are dependent upon raising capital to the extent cash flows from our operations are not significant enough to our cash flow needs. We currently have two financing agreements in place, as disclosed above.

For the next 12 months our plan of operations is to expand our current activity at SKM and increase consumer product offerings in Test Kitchen. We believe that our current cash on hand, cash flows from operations and expected proceeds from financing agreements in place will allow us to meet our cash flow requirements for a period in excess of 12 months.

Cash Flows

Net Cash used in Operating Activities.

We used cash in our operating activities due to our losses from operations. Net cash used in operating activities was $1,899,253 for the six-month period ended June 30, 2021 in comparison to $1,229,888 for the comparable period a year ago, an increase of $669,365 or 54%. The increase in cash used in operations was primarily related to operating activities in the current year that did not exist in the prior year.

Net Cash used in Investing Activities.

Net cash used in our investing activities was $104,713 for the six-month period ended June 30, 2021 in comparison to $1,681,488 for the comparable period a year ago, a decrease of $1,576,775 or 94%. The decrease in cash was primarily related to the change in value of the note receivable with HSII.

Net Cash from Financing Activities.

Net cash provided by financing activities was $1,599,155 for the six-month period ended June 30, 2021 in comparison to $1,428,500 for the comparable period a year ago, an increase of $170,655 or 12%. In the six-month period ended June 30, 2021, we raised $543,000 primarily through the issuance of common stock, $660,000 through the sale of preferred stock and $500,000 from a convertible note payable. In the six-month period ended June 30, 2020, we raised $1,586,000 primarily through the issuance of notes.

Adjusted EBITDA, for the purposes of these financial statements, shall mean:

The Company’s loss before interest, taxes, depreciation, and amortization adjusted to exclude the impact of (a) loss on impairment of tangible or intangible assets; (b) gain or loss on disposal of assets, including notes receivables; (c) gain or loss from the early extinguishment, redemption or repurchase of debt, (d) stock-based compensation expense and (e) the loss from derivative liabilities. Adjusted EBITDA will also exclude any expenses incurred by the Company in connection with the Company’s evaluation, pursuit, or consummation of one or more acquisitions or transactions (which such expenses are considered to be incurred in connection with extraordinary, unusual, or infrequently occurring events reported in the Company’s public filings).

During the six months ended June 30, 2021, EBITDA decreased to $2,233,899 from $3,005,477 in the prior comparable year.

Off Balance Sheet Arrangements

As of June 30, 2021, the Company did not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

See Note 2 to the June 30, 2021, financial statements included as part of this report for a description of the Company’s critical accounting policies and estimates.

18

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports filed under the Securities Exchange Act of 1934, is recorded, processed, summarized, and reported within the time periods specified by the Commission’s rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. We evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act, as amended) as of the end of the period covered by this report. As a result of this evaluation, management concluded that our disclosure controls and procedures were not effective as of June 30, 2021, due to the following material weakness:

● Lack of appropriate segregation of duties,

● Lack of control procedures that include multiple levels of supervision and review, and

● An overreliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material, nonstandard transactions.

Changes in Internal Control over Financial Reporting

On January 11, 2021, the Company hired Alexander Glueckler as its CFO to reduce reliance on independent financial reporting consultants for review or critical accounting areas, disclosures, and material nonstandard transactions. The hiring of Mr. Glueckler has allowed the Company to take greater internal control over its financial reporting in the three months ended June 30, 2021.

There were no other changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2021, that materially affect, or are reasonably likely to materially affect, our internal control over financial reporting.

19

PART II

ITEM 1.       LEGAL PROCEEDINGS

See Note 4 to the Financial Statements included as part of this report.

ITEM 2.       UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company’s sale of unregistered securities during the six months ended June 30, 2021 are shown in the Statement of Stockholders Equity which is part of the financial statements included as part of this report. Refer also to Note 7 to these financial statements.

The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933 in connection with issuance of the shares described above. The persons who acquired the shares were sophisticated investors and were provided full information regarding the Company’s business and operations. There was no general solicitation in connection with the issuance of the shares. The persons who acquired the shares acquired them for their own accounts. No commissions or other form of remuneration was paid in consideration with the issuance of these shares.

ITEM 6. EXHIBITS

Exhibit
Number	Description
3.1	Articles of Incorporation (1)
3.2	Amended Articles of Incorporation (1)
3.3	Bylaws (1)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

(1) Incorporated by reference to the same exhibit filed with the Company’s annual report on Form 10-K for the year ended December 31, 2018

20

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on August 13 2021.

PURE HARVEST CORPORATE GROUP, INC.
By:	/s/ Matthew Gregarek
	Matthew Gregarek
	Principal Executive Officer

By:	/s/ Alexander Glueckler
	Alexander Glueckler
	Principal Financial and Accounting Officer

21

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Matthew Gregarek, certify that: 

1.	I have reviewed this quarterly report on Form 10-Q of Pure Harvest Corporate Group, Inc.;
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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	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
d)	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 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.

August 13, 2021	By:	/s/ Matthew Gregarek
		Matthew Gregarek
		Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Alexander Glueckler, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Pure Harvest Corporate Group, Inc.;
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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	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
d)	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 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.

August 13, 2021	By:	/s/ Alexander Glueckler
		Alexander Glueckler
		Principal Financial and Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the period ending June 30, 2021 of Pure Harvest Corporate Group, Inc., a Colorado corporation (the “Company”), as filed with the Securities and Exchange Commission (the “Quarterly Report”), Matthew Gregarek, the Principal Executive Officer of the Company and Alexander Glueckler, the Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

1.	This Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended; and
2.	The information contained in this Quarterly Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

August 13, 2021	By:	/s/ Matthew Gregarek
		Matthew Gregarek
		Principal Executive Officer

August 13, 2021	By:	/s/ Alexander Glueckler
		Alexander Glueckler
		Principal Financial and Accounting Officer

XML

Cover	6 Months Ended
	Jun. 30, 2021 shares
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2021
Current Fiscal Year End Date	--12-31
Entity File Number	333-212055
Entity Registrant Name	PURE HARVEST CORPORATE GROUP, INC.
Entity Central Index Key	0001351573
Entity Tax Identification Number	71-0942431
Entity Incorporation, State or Country Code	CO
Entity Address, Address Line One	7400 E. Crestline Cir. Ste. 130
Entity Address, Address Line Two	Ste. 130
Entity Address, City or Town	Greenwood Village
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80111
City Area Code	(800)
Local Phone Number	924-3716
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding	67,080,523

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Current assets
Cash	$ 452,033	$ 856,844
Accounts receivable	117,788	91,371
Inventory	1,087,846	1,047,690
Deferred rent	71,111	113,778
Prepaids and other current assets	319,356	235,335
Notes receivable and advances on pending acquisitions, net of allowance  of $533,000 and $33,000, respectively	2,250,000	2,750,000
Total current assets	4,298,134	5,095,018
Long-term assets
Property, plant and equipment	1,628,574	1,599,088
Accumulated depreciation	(622,670)	(469,315)
Deferred rent, net of current portion	0	26,446
Right of use asset	401,736	537,393
Goodwill	1,550,225	1,550,225
Intangible assets, net	2,321,398	2,399,524
Other assets	341,127	301,604
Total assets	9,918,524	11,039,983
Current liabilities
Accounts payable	275,575	91,741
Accrued expenses	1,283,079	1,324,936
Notes payable	334,074	431,919
Convertible notes payable, net of discount of $21,060 and $146,967, respectively	1,778,940	1,353,033
Related party convertible notes payable	1,427,504	1,412,504
Total current liabilities	5,099,172	4,614,133
Long term liabilities
Notes payable		6,000
Right of use liability	242,114	293,971
Convertible notes payable, net of discount of $1,865,146 and $1,723,835, respectively	743,604	226,165
Derivative liabilities	2,650,979	1,879,776
Total liabilities	8,735,869	7,020,045
Stockholders’ equity
Preferred stock, value	0	0
Common stock, $0.01 par value; 250,000,000 shares authorized, 67,340,765 and 64,117,846 shares issued and outstanding, respectively	673,409	641,179
Additional paid-in capital	14,216,743	11,111,799
Accumulated deficit	(14,246,339)	(7,733,040)
Total stockholders’ equity	1,182,655	4,019,938
Total liabilities and stockholders’ equity	9,918,524	11,039,983
Series A Preferred Stock [Member]
Stockholders’ equity
Preferred stock, value	$ 538,842	$ 0

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Notes receivable and advances on pending acquisitions, allowance	$ 533,000	$ 33,000
Preferred Stock, Par Value	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	25,000,000	25,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares, issued	67,340,765	64,117,846
Common stock, shares outstanding	67,340,765	64,117,846
Series A Preferred Stock [Member]
Preferred Stock, Par Value	$ 0.01
Preferred Stock, Shares Authorized	40,000
Preferred Stock, Shares Issued	6,660
Preferred Stock, Shares Outstanding	6,660
Convertible Notes Payable [Member]
Convertible notes payable, discount current	$ 21,060	$ 146,967
Convertible notes payable, discount noncurrent	$ 1,865,146	$ 1,723,835

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
REVENUES
Product sales and royalty income	$ 762,778	$ 3,951	$ 1,556,926	$ 5,041
Cost of sales	612,118	40,066	1,080,070	40,066
Gross profit	150,660	(36,114)	476,856	(35,024)
OPERATING EXPENSES
Advertising and promotion	25,804	50,043	42,818	52,602
General and administrative expenses, including stock-based compensation of $1,262,077, $3,026,036, $1,612,485 and $3,039,538, respectively	2,487,327	3,892,549	4,043,885	4,448,199
Research and development	0	0	3,708	0
Depreciation expense	97,375	28,947	174,811	33,589
Total operating expenses	2,610,506	3,971,539	4,265,222	4,534,390
Loss from operations	(2,459,846)	(4,007,653)	(3,788,366)	(4,569,414)
Other income (expense):
Interest expense	(960,312)	(194,608)	(1,481,683)	(325,349)
Interest income	0	48,618	55,000	114,183
Loss on extinguishment of notes payable	0	(756,254)	0	(756,254)
Change in fair market value of derivative liabilities	(576,701)	49,380	(731,203)	49,380
Loss on equity method investment	0	0	(73,047)	0
Other income (expense)	0	0	6,000	0
Bad debt expense			(500,000)	(823)
Total other income (expense)	(1,537,013)	(852,864)	(2,724,933)	(918,863)
Loss before provision for income taxes	(3,996,859)	(4,860,517)	(6,513,299)	(5,488,277)
Provision for income taxes	0	0	0	0
NET LOSS	$ (3,996,859)	$ (4,860,517)	$ (6,513,299)	$ (5,488,277)
Basic and diluted net loss per common share	$ (0.06)	$ (0.10)	$ (0.10)	$ (0.13)
Basic and diluted weighted-average number of common shares outstanding	66,775,124	46,826,515	66,016,310	42,338,456

XML

Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Statement [Abstract]
Stock-based compensation	$ 1,262,077	$ 3,026,036	$ 1,612,485	$ 3,039,538

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (3,996,859)	$ (4,860,517)	$ (6,513,299)	$ (5,488,277)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			328,166	33,589
Stock-based compensation			1,612,483	3,039,538
Common stock issued for services			(34,400)	0
Amortization of debt discount			681,096	141,980
Common stock issued for debt extension			334,141	0
Allowance on notes receivable			500,000
Change in fair value of derivative liability	576,701	(49,380)	731,203	(49,380)
Loss on extinguishment of note payable	0	756,254	0	756,254
Extension fee added to note payable			81,667	0
Changes in operating assets and liabilities:
Accounts receivable			(26,417)	381
Interest receivable on notes receivable			0	(113,360)
Inventory			(40,156)	(40,935)
Other assets			(151,372)	0
Deferred rent			69,113	42,666
Prepaid and other current assets			(84,021)	4,293
Accounts payable			183,834	37,272
Accrued expense			344,909	480,000
Royalty payable			0	(770)
Right of use asset and liability			83,800	(73,139)
Net cash used in operating activities			(1,899,253)	(1,229,888)
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable and advances of pending acquisitions			0	(1,274,793)
Notes receivable				0
Net cash received (paid) in connection with acquisition			0	(382,010)
Purchase of machinery and equipment			(29,486)	(24,685)
Intangible assets			(75,227)	0
Net cash used in investing activities			(104,713)	(1,681,488)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances (payments) from (to) related parties			0	(87,500)
Proceeds from issuance of convertible notes payable			500,000	0
Proceeds from notes payable			0	1,586,000
Repayment of notes payable			(103,845)	(500,000)
Proceeds from related party notes payable			0	330,000
Proceeds from sale of common stock			543,000	100,000
Proceeds from sale of preferred stock			660,000	0
Net cash provided by financing activities			1,599,155	1,428,500
Change in cash and cash equivalents			(404,811)	(1,482,876)
Cash and cash equivalents, beginning of period			856,844	1,665,247	$ 1,665,247
Cash and cash equivalents, end of period	$ 452,033	$ 182,371	452,033	182,371	$ 856,844
Supplemental disclosures of cash flow information:
Cash paid for interest			160,541	5,217
Cash paid for income taxes			0	0
Non-cash investing and financing activities:
Discount on note payable due to common stock, warrants or derivatives			460,000	387,517
Common stock issued for accrued interest			3,363	31,762
Common stock issued for business acquisitions			0	2,436,000
Exchange of note receivable and accrued interest for business acquisition			0	1,650,000
Common stock and warrants issued in connection with note extensions			311,500	308,803
Accrued interest and extension fee added to principal balance			300,000	0
Warrants issued with preferred stock			121,158	0
Common stock issued for license			$ 128,750	$ 0

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Condensed Consolidated Statements of Stockholder' s Equity (Unaudited) - USD ($)	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Beginning balance, value at Dec. 31, 2019		$ 377,164	$ 4,391,587	$ (1,386,181)	$ 3,382,570
Balance, sharesn at beginning at Dec. 31, 2019		37,716,330
Stock-based compensation			468,994		468,994
Issuance of common stock for services		$ 65,280	2,505,264		2,570,544
Issuance of common stock for services, shares		6,528,000
Issuance of common stock for acquisition		$ 70,000	2,366,000		2,436,000
Issuance of common stock for acquisition, shares		7,000,000
Issuance of common stock for accrued interest		$ 808	30,954		31,762
Issuance of common stock for accrued interest, shares		80,814
Issuance of common stock and warrants for extension of notes payable		$ 4,000	304,803		308,803
Issuance of common stock and warrants for extension of notes payable, shares		400,000
Discount on convertible notes payable related party due to common stock issued and derivative liabilty		$ 500	68,500		69,000
Discount on convertible notes payable related party due to common stock issued and derivative liabilty, shares		50,000
Extinguishment of related party notes payable			428,000		428,000
Issuance of common stock to note holder		$ 1,500	115,207		116,707
Issuance of common stock to note holder, shares		150,000
Issuance of common stock to investor		$ 2,000	98,000		100,000
Issuance of common stock to investor, shares		200,000
Net loss				(5,488,277)	(5,488,277)
Ending balance, value at Jun. 30, 2020		$ 521,252	10,777,309	(6,874,458)	4,424,103
Balance, shares at end at Jun. 30, 2020		52,125,144
Issuance of common stock for services		$ (65,280)	(2,505,264)		(2,570,544)
Beginning balance, value at Dec. 31, 2019		$ 377,164	4,391,587	(1,386,181)	3,382,570
Balance, sharesn at beginning at Dec. 31, 2019		37,716,330
Issuance of common stock for accrued interest		$ 52,293
Issuance of common stock for accrued interest, shares		124,425
Ending balance, value at Dec. 31, 2020		$ 641,179	11,111,799	(7,733,040)	4,019,938
Balance, shares at end at Dec. 31, 2020		64,117,846
Beginning balance, value at Mar. 31, 2020		$ 380,664	4,616,296	(2,013,940)	2,983,020
Balance, sharesn at beginning at Mar. 31, 2020		38,066,330
Stock-based compensation			457,492		457,492
Issuance of common stock for services		$ 65,280	2,505,264		2,570,544
Issuance of common stock for services, shares		6,528,000
Issuance of common stock for acquisition		$ 70,000	2,366,000		2,436,000
Issuance of common stock for acquisition, shares		7,000,000
Issuance of common stock for accrued interest		$ 808	30,954		31,762
Issuance of common stock for accrued interest, shares		80,814
Issuance of common stock and warrants for extension of notes payable		$ 4,000	304,803		308,803
Issuance of common stock and warrants for extension of notes payable, shares		400,000
Discount on convertible notes payable related party due to common stock issued and derivative liabilty		$ 500	68,500		69,000
Discount on convertible notes payable related party due to common stock issued and derivative liabilty, shares		50,000
Extinguishment of related party notes payable			428,000		428,000
Net loss				(4,860,518)	(4,860,517)
Ending balance, value at Jun. 30, 2020		$ 521,252	10,777,309	(6,874,458)	4,424,103
Balance, shares at end at Jun. 30, 2020		52,125,144
Issuance of common stock for services		$ (65,280)	(2,505,264)		(2,570,544)
Beginning balance, value at Dec. 31, 2020		$ 641,179	11,111,799	(7,733,040)	4,019,938
Balance, sharesn at beginning at Dec. 31, 2020		64,117,846
Stock-based compensation			1,612,483		1,612,483
Issuance of common stock for services		$ 800	33,600		34,400
Issuance of common stock for services, shares		(80,000)
Issuance of common stock for accrued interest		$ 85	3,278		3,363
Issuance of common stock for accrued interest, shares		8,515
Issuance of common stock to note holder		$ 16,500	755,000		771,500
Issuance of common stock to note holder, shares		1,650,000
Issuance of common stock for license		$ 2,500	126,250		128,750
Issuance of common stock for license, shares		250,000
Issuance of common stock to investor		$ 13,945	529,055		543,000
Issuance of common stock to investor, shares		1,394,404
Issuance of preferred stock for cash	$ 538,842		121,158		660,000
Issuance of preferred stock for cash, shares	6,660
Series A preferred stock dividends			(8,680)		(8,680)
Net loss				(6,513,299)	(6,513,299)
Ending balance, value at Jun. 30, 2021	$ 538,842	$ 673,409	14,216,743	(14,246,339)	1,182,655
Balance, shares at end at Jun. 30, 2021	6,660	67,340,765
Issuance of common stock for services		$ (800)	(33,600)		(34,400)
Beginning balance, value at Mar. 31, 2021		$ 653,546	11,922,301	(10,249,480)	2,326,367
Balance, sharesn at beginning at Mar. 31, 2021		65,354,522
Stock-based compensation			1,262,077		1,262,077
Issuance of common stock to note holder		$ 16,000	732,000		748,000
Issuance of common stock to note holder, shares		1,600,000
Issuance of common stock for license		$ 2,500	126,250		128,750
Issuance of common stock for license, shares		250,000
Issuance of common stock to investor		$ 1,363	61,637		63,000
Issuance of common stock to investor, shares		136,243
Issuance of preferred stock for cash	$ 538,842		121,158		660,000
Issuance of preferred stock for cash, shares	6,660
Series A preferred stock dividends			(8,680)		(8,680)
Net loss				(3,996,859)	(3,996,859)
Ending balance, value at Jun. 30, 2021	$ 538,842	$ 673,409	$ 14,216,743	$ (14,246,339)	$ 1,182,655
Balance, shares at end at Jun. 30, 2021	6,660	67,340,765

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ORGANIZATION AND DESCRIPTION OF BUSINESS

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

ORGANIZATION AND DESCRIPTION OF BUSINESS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Pure Harvest Corporate Group, Inc. (the “Company”), formerly Pure Harvest Cannabis Group, Inc., was formed as a Colorado corporation in April 2004.  

On December 31, 2018, the Company acquired all the outstanding common stock of Pure Harvest Cannabis Producers, Inc., (“PHCP”) in exchange for 17,906,016 (post-split) shares of the Company’s common stock. The transaction was accounted for as a reverse acquisition.

As a result of the acquisition of PHCP, the Company now operates in various segments of the cannabis and hemp-CBD industries with a focus on health and wellness products and applying education, research and development, and technology to each sector. The Company’s new business also involves the acquisition and operation of licensed marijuana cultivation facilities, manufacturing facilities, and dispensaries.

The Company changed its name to Pure Harvest Cannabis Group, Inc. in February 2019.

The Company changed its name to Pure Harvest Corporate Group, Inc. on June 8, 2020.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all accruals and adjustments (each of which is of a normal, recurring nature) necessary for a fair presentation of the Company’s financial position as of June 30, 2021, and the results of its operations for the three and six months then ended. Significant accounting policies have been consistently applied in the interim consolidated financial statements. The results reported in these interim financial statements are not necessarily indicative of the expected results for the entire year. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2020 and notes thereto that are included in the Company’s Annual Report on Form 10-K.

Going Concern

The Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Management plans to fund future operations by raising capital and / or seeking joint venture opportunities.

Principles of Consolidation

The Company evaluates the need to consolidate affiliates based on standards set forth in Accounting Standards Codification (“ASC”) 810 Consolidation (“ASC 810”). The Consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant consolidated transactions and balances have been eliminated in consolidation.

Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated fair market value of assets and liabilities acquired under business combinations, useful lives and potential impairment of property and equipment, recoverability of goodwill and estimates of fair value of share-based payments.

Fair Value of Financial Instruments

The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB” ACS 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.

The guidance also establishes a fair value hierarchy for measurements of fair value as follows:

● Level 1 - quoted market prices in active markets for identical assets or liabilities.

● Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amount of the Company’s financial instruments approximates their fair value as of June 30, 2021, and December 31, 2020, due to the short-term nature of these instruments. The Company’s derivative liabilities are considered a Level 2 liability.

Net Loss per Share

Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share”. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding during the period. For the three and six months ended June 30, 2021 and 2020, dilutive instruments consisted of convertible notes payable, options and warrants to purchase shares of the Company’s common stock totalling approximately 57.5 million and 28.4 million shares of common stock, respectively, the effects of which to the net loss are anti-dilutive.

Recent Accounting Pronouncements

In January 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, which clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting under Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The Company adopted the new standard on January 1, 2021, which did not have a significant impact on the Company.

The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs issued to date, including the one above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements.

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ACQUISITIONS

6 Months Ended

Jun. 30, 2021

Business Combination and Asset Acquisition [Abstract]

ACQUISITIONS

NOTE 3 – ACQUISITIONS

During the three months ended March 31, 2021, and the three months ended June 30, 2021, the Company has not entered into any additional acquisitions other than those previously reported in its Form 10-K for the period ending December 31, 2020. For information regarding the Company’s prior year acquisitions see the Company’s Form 10-K for the period ending December 31, 2020.

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NOTES RECEIVABLE

6 Months Ended

Jun. 30, 2021

Notes Receivable

NOTES RECEIVABLE

NOTE 4 – NOTES RECEIVABLE

In May and June 2019, the Company advanced $28,593 to two unrelated individuals in connection with potential acquisitions for the Company. The amounts were to be repaid, without interest, in October 2019. As of June 30, 2021, and December 31, 2020, the Company has settled and received payment in kind for one of the notes and has continued collection efforts on the other note receivable, but has provided an allowance of such due to the unlikelihood of closing the acquisitions or collecting on the notes receivable.

In December 2019, the Company advanced $800,000 to How Smooth It Is, Inc. In January 2020, the Company advanced an additional $700,000 to HSII. The note receivable was due June 1, 2020 and incurs interest at 6% per annum for sixty days and then is increased to 10% per annum thereafter. In March 2020, the Company entered into an acquisition agreement to acquire the entity for which the note receivable was used to offset a portion of the purchase price see the Company’s Form 10-K for the period ending December 31, 2020 for more information. On April 9, 2020, the Company submitted the required applications to the Michigan Department of Licensing and Regulatory Affairs (LARA) to be approved and pre-qualified as a Processor to be added to the HSII license. Upon approval, PHCG will become 51% owners and can participate in revenue. The transaction will not close until the appropriate Michigan approvals are obtained. During the year ended December 31, 2020, the Company advanced HSII as an additional $247,845 for operations. The additional advances were due on November 1, 2020, and accrue interest at a rate of 7.5% per annum.

On March 12, 2020, the Company entered into an agreement to acquire fifty-one percent (51%) of the outstanding membership interests in How Smooth It Is, Inc. (“HSII”) for $1,500 ,000 in cash and 7,000,000 shares of the Company’s restricted common stock. On July 29, 2020, the Company terminated its agreement to acquire 51% of HSII. As a part of the termination agreement:

● The sole shareholder of HSII agreed to pay the Company $2,150,000 by August 7, 2020, and

● HSII agreed to manufacture up to 24 separate products for the Company (such as edibles and vaporizers) upon terms agreeable to both the Company and HSII. The products manufactured by HSII will be sold under Pure Harvest brands with the Company receiving royalties from the sale of the products.

On December 31, 2020, the Company entered into an amended note receivable loan and security agreement for $2,750,000 with an initial maturity date of March 31, 2021. The note incurs interest at 8% per annum through the initial maturity date. Under the agreement, if the loan is not repaid by March 31, 2021, if there have been no defaults, the loan will be extended to July 31, 2021. During the extended period, the interest rate increases to 12% per annum. In addition, with the extended period, the Company receives various royalties on products sold by the borrower for a period of three year commencing on April 1, 2021. On March 31, 2021, the note was extended to July 31, 2021, in accordance with the terms. The loan is secured by all the assets of HSII.

On April 14, 2021, the Company was sued by How Smooth It Is, Inc. in an effort to stall its obligations under the Business Loan and Security Agreement between the Company and HSII effective December 31, 2020. The Company has submitted its response and counterclaims to HSII’s complaint. The Company believes that the suit is meritless and that the Company will likely prevail should the case go to trial. In the interim, the Company has provided a default notice to HSII and increased the interest rate on the amounts due to 25% as provided by the Business Loan and Security Agreement. As of June 30, 2021, the Company has recorded a reserve of $500,000 against the outstanding note receivable.

In December 2019, the Company advanced $1,650,000 to EdenFlo, LLC in connection with the potential acquisition of that entity by the Company. The note receivable was due June 1, 2020, and incurs interest at 6% per annum for sixty days and then is increased to 10% per annum thereafter. In addition, the note receivable is secured by all the asset of EdenFlo, LLC. In April 2020, EdenFlo was acquired by the Company and the Note was consolidated into the acquisition, subsequently eliminating its balance on the Balance Sheet. See the Company’s Form 10-K for the period ending December 31, 2020 for more information regarding the acquisition of EdenFlo.

In 2020, prior to SCT’s acquisition, the Company advanced SCT $476,507 for operations. The additional advances were not under a formal arrangement and thus did not incur interest and were due on demand. See the Company’s Form 10-K for the period ending December 31, 2020 for more information regarding the acquisition of SCT.

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LEASE AGREEMENTS

6 Months Ended

Jun. 30, 2021

Lease Agreements

LEASE AGREEMENTS

NOTE 5 – LEASE AGREEMENTS

In May 2019, the Company entered into a lease agreement for property to be used as a marijuana retail store. The initial term of the lease is for a period of three years. The Company has an option to purchase the property at prices ranging between $1,400,000 and $1,600,000 at various dates prior to May 1, 2022. The Company issued the landlord 400,000 shares of its post-split common stock in consideration for the option to purchase the property for which was recorded as deferred rent and is being amortized to rent expense using the straight-line method over the term of the lease. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 10% within the calculation.

In April 2020, in connection with the EdenFlo asset acquisition, the Company assumed a lease for a hemp processing facility. At inception of the lease, the Company recorded a right of use asset and liability of $140,988. The Company used an effective borrowing rate of 10% within the calculation. The lease runs through September 2021.

In May 2020, the Company entered into a lease for its corporate offices. The lease requires monthly payments ranging from $12,330 to $12,861 through the maturity of the lease in October 2023. At inception of the lease, the Company recorded a right of use asset and liability of $399,766. The Company used an effective borrowing rate of 10.35% within the calculation.

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NOTES PAYABLE

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

NOTES PAYABLE

NOTE 6 –NOTES PAYABLE

Convertible Notes Payable

During the year ended December 31, 2019, the Company issued a series of convertible notes with original principal balances of $1,000,000. The convertible notes had original maturity dates ranging from November 1, 2021 to December 1, 2021 and incur interest at 20% per annum. In July 2020, the due date of the convertible notes was extended to November 1, 2023. In April 2021, the convertible notes were further amended to define the timing for quarterly interest payments due under the convertible notes and impose a penalty payable in cash and stock for late interest payments. In connection with this amendment, the Company increased the principal balance by $233,333 of accrued interest and $66,667 classified as an extension fee for the remaining accrued interest of $114,568 for which the payment was extended until early July 2021. The extension fee was recorded as interest expense during the six months ended June 30, 2021. As of June 30, 2021, the balance due on the convertible note was $1,300,000, net a discount of $21,060 recorded within convertible notes payable.

In addition, convertible notes are convertible upon issuance at a fixed price of $0.50 per common share. In connection with the issuance, the Company recorded a beneficial conversion feature of $44,000 resulting in a discount to the convertible notes. The discount is being amortized to interest expense using the straight-line method, due to the short-term nature of the convertible notes, over the term. During the six months ended June 30, 2021 and 2020, the Company amortized $7,092 and $11,424, respectively, to interest expense. The remaining discount of $21,060 is expected to be amortized throughout 2021 to 2023. The convertible notes include other provisions such as first right of refusal on additional capital raises, authorization of holder to incur debts senior to the convertible notes, etc. Additionally, should the holder exercise the option to exercise, a warrant to purchase an additional share of common stock for which the terms are not defined in the agreement. Thus, the issuance of the warrant is contingent to which the Company has not accounted for. Should warrants be ultimately issued, the Company expects to record the fair value of such as additional interest expense.

In August 2020, the Company entered into an agreement for borrowings up to $4.0 million. Upon closing, the Company received $1,950,000 and provided for a six-month interest reserve. Additional amounts are advanced as varies milestones are reached. The borrowing incur interest at 15% per annum with principal and outstanding interest due three years from the date of issuance. The Company’s assets secure the borrowings. In addition, the borrowings have a variety of financial and non-financial covenants. In addition, the borrowings are convertible at the lesser of $2.00 or 75% of the average closing price of the Company’s common stock for the preceding 30 days. Additionally, for every dollar advanced under the borrowing, the holder receives two shares of common stock. In 2020, the Company issued the holder 4,192,500 shares of common stock in connection with the convertible note. The agreement also includes a variety of other provisions related to inventory sold with specific discounts, markups, etc.

In August 2021, the Company received an additional $500,000 under the terms of the initial agreement. In connection with this tranche, the Company issued 1.0 million shares of common stock. Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. Upon initial valuation, the derivative liabilities value of $395,891, as well as the fair market value of the 1.0 million shares of common stock exceeded the face values of the convertible notes payable by $355,891, which was recorded as a day one loss on derivative liabilities. The variables to value the derivatives on issuance were similar to those disclosed below. As of June 30, 2021, the principal balance due on the convertible notes was $2,450,000, and accrued interest of $158,750, net a discount of $1,865,146 recorded within long-term convertible notes payable.

The derivative liabilities are valued on the date the borrowings become convertible and revalued at each reporting period. During the six months ended June 30, 2021, the Company revalued the fair market value of the derivative liabilities at $2,379,080 resulting in a loss of $234,032. The valuation of the derivative liabilities was based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.34 our stock price on the date of revalue of $0.51, expected dividend yield of 0%, expected volatility of 98.00%, risk free interest rate of 0.01% and expected term of 2.12 years.

In connection with the derivative liabilities and common stock issued, the Company recorded a total discount related to the two notes of $2,450,000. The discount is being amortized over the term of the borrowings using the straight-line method due to the short-term nature. During the six months ended June 30, 2021, the Company amortized $358,689 of the discount to interest expense. As of June 30, 2021, a discount of $1,865,146 remained for which will be amortized in periods from 2021 to 2023.

Related Party Convertible Notes Payable

On June 15, 2020, the Company borrowed $30,000 from an individual related to a significant member of management. The loan is evidenced by a promissory note which bears interest at 10% per year and is due and payable on October 8, 2020. At the option of the lender, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by $0.40. On the date of issuance, the conversion price of $0.40 was the closing market price of the Company’s common stock and thus a beneficial conversion feature was not recorded. In September 2020, the note was converted into 75,000 shares of common stock.

At various times in 2020, the Company borrowed a total of $430,000 from an individual related to a director of the Company and a director of the Company. The loans are evidenced by a promissory note which bear interest at 12% per year and are due and payable at dates ranging from December 10, 2020, to January 10, 2021. The proceeds were used for operations. At the option of the holders, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser of $0.30 or 80% of the ten-day average closing price of the Company’s common stock immediately prior to the date of conversion. The holders also have the option to convert $900,000 owed to them from EdenFlo, LLC, as disclosed below, which debt was assumed the Company in connection with the acquisition of EdenFlo, at a price of $0.30 per share for a period of 12 months. Additionally, the holders were issued 215,000 shares of common stock in connection with the notes. On December 7, 2020, the loans were amended whereby the various promissory notes were consolidated into two notes with a maturity date of June 30, 2021, and the variable conversion price was removed. See below for additional accounting impact. On April 23, 2021, the consolidated promissory notes were amended to allow the Company to extend the maturity date of the consolidated notes to December 31, 2021, in exchange for an aggregate of 250,000 shares of common stock and $15,000 added to the principal balance of the note. The shares of common stock were valued at $115,000 ad recorded as interest expense during six months ended June 30, 2021. As of June 30, 2021, the principal balance due on the convertible notes was $1,427,504 and recorded within related party convertible notes payable.

Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. The derivative liabilities are valued on the date the convertible note payable become convertible and revalued at each reporting period. During the year ended December 31, 2020, the Company recorded initial derivative liabilities of $298,913 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.30 our stock price on the date of grant ranging from $0.40 - $0.49, expected dividend yield of 0%, expected volatility of 103.00%, risk free interest rate of 0.64% and expected terms of 0.5 years. Upon initial valuation, the derivative liabilities, as well as the fair market value of the 215,000 shares of common stock exceeded the face values of the convertible notes payable by $2,940, which was recorded as a day one loss in derivative liability. On December 7, 2020, the derivative liabilities were revalued at $540,475 resulting in a loss of $241,562. The value of the derivatives of $540,475 was recorded as a gain on extinguishment due to the modification of the exercise price. The inputs to value the derivative liabilities were similar to those on the date of issuance.

In connection with the derivative liabilities and common stock issued, the Company recorded a $396,223 discount. The discount is being amortized over the term of the convertible note using the straight-line method due to the short-term nature. As of December 31, 2020, no discount remained.

In connection with the EdenFlo asset acquisition, the Company assumed two notes payable with the former shareholders. Under the terms of the agreements $600,000 is payable on June 1, 2021 and does not incur interest and $300,000 is due on August 1, 2022 and does not incur interest. As disclosed above, both notes were modified to include a conversion feature at a price of $0.30 per share. The modification was treated as an extinguishment of the original note for which a loss on extinguishment of $448,000 was recorded.

In connection with the SKM acquisition, the Company assumed four notes payable totalling $275,756 with the former membership. The notes do not incur interest and are due on demand.

Notes Payable

On March 6, 2020, the Company borrowed $1,500,000 from an unrelated third party. The loan is evidenced by a promissory note which bears interest at 8% per year.

The note is due and payable as follows:

● $500,000, together with all accrued and unpaid interest, on April 13, 2020

● $1,000,000, together with all accrued and unpaid interest, on May 6, 2020

Accrued interest will be paid in shares of the Company’s common stock based upon a 25% discount to the ten-day average closing price of the Company’s common stock immediately prior to May 6, 2020. Accrued interest will include 150,000 additional shares of the Company’s common stock and warrants to purchase 150,000 shares of the Company’s common stock. The warrants are exercisable at any time on or before January 1, 2025 at a price of $2.00 per share. The first payment of $500,000 was made on a timely basis.

On issuance, the Company valued the 150,000 shares of common stock and the 150,000 warrants for common stock and recorded the relative fair market of $116,707 as a discount to the note payable. The Company is amortizing the discount over the term of the note payable using the straight-line method due to the short term of the note. During the six months ended June 30, 2020, the Company amortized $92,256 to interest expense.

On April 20, 2020, the holder of the Note agreed to extend the due date for the $1,000,000 payment from May 6, 2020 to June 15, 2020. In consideration for extending the repayment date for the second amount to June 15, 2020, the Company issued to the note holder 200,000 shares of its common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. A late payment penalty of $5,000 per day will be due if the $1,000,000 is not paid by June 15, 2020. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $157,784.

On June 9, 2020, the holder of the Note agreed to further extend the due date for the $1,000,000 payment to July 15, 2020. In consideration for extending the repayment date, the Company issued to the note holder an additional 200,000 shares of the Company’s common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $170,470.

On July 14, 2020, the holder of the Note agreed to further extend the due date for the $1,000,000 payment to August 15, 2020. In consideration for extending the repayment date, the Company issued to the note holder an additional 100,000 shares of the Company’s common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $120,721.

In addition, during the twelve months ended December 31, 2020, the Company issued 124,425 shares of common stock in satisfaction of $52,293 in accrued interest.

The note was paid in full in August 2020.

Note Payable - $200,000

On October 9, 2020, the Company borrowed $200,000 from an unrelated third party. The note incurred interest at 12% per annum and was due by November 9, 2020. The note was repaid. As further consideration, the Company issued 100,000 shares of its restricted common stock to the lender. The Company recorded the fair market value of the shares as a discount of $40,000 to the note for which all was amortized to interest expense during the year ended December 31, 2020.

Note Payable - $173,705

On November 1, 2020, the Company entered into an agreement to convert accounts payable of $173,705 into a note payable. The note incurred interest at 8% per annum and is payable in monthly payments.

Convertible Note Payable - $500,000

On November 17, 2020, the Company borrowed $500,000 from an unrelated third party. The note incurs interest at 8% per annum and initially matured on January 31, 2021. See below for discussion regarding the extension of the note. At the option of the lender, the loan and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser of 75% of the ten-day average closing price of the Company’s common stock immediately prior to the date of conversion or $0.50. As of June 30, 2021, the principal balance due on the convertible note was $500,000 and recorded within convertible notes payable.

Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. The derivative liabilities are valued on the date the borrowings become convertible and revalued at each reporting period. On June 30, 2021, the derivative liabilities were revalued at $271,897 resulting in a gain of $13,223. The derivative liabilities were revalued based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.38 our stock price on the date of revalue of $0.51, expected dividend yield of 0%, expected volatility of 113.00%, risk free interest rate of 0.01% and expected term of 0.50 years.

In connection with the derivative liabilities and common stock issued, the Company recorded a $287,454 discount. The discount is being amortized over the term of the borrowings using the straight-line method due to the short-term nature. During the six months ended June 30, 2021, the Company amortized $118,815 of the discount to interest expense. As of June 30, 2021, no discount remained.

On January 31, 2021, the holder of the note agreed to extend the due date for the note to April 2, 2021. In consideration for extending the repayment date to April 2, 2021, the Company issued to the note holder 50,000 shares of its common stock and the interest rate of the Note was increased to 10% per annum. The Company recorded the fair market value of the common stock issued of $23,500 as a discount to the note for which was fully amortized to interest expense during the six months ended June 30, 2021.

On April 16, 2021, the holder of the Note agreed to extend the due date for the note to June 18, 2021. In consideration for extending the repayment date, the Company issued to the note holder 100,000 shares of its common stock, 100,000 shares of common stock for accrued interest through execution date and provided the holder with the option to extend the payment to September 15, 2021, for which an additional 150,000 shares of common stock would be provided, if extended. The payment date was extended to September 15, 2021 at the option of the note holder in June 2021. The Company recorded the fair market value of the common stock issued of $173,000 as additional interest expense during the six months ended June 30, 2021.

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STOCKHOLDER’S EQUITY

6 Months Ended

Jun. 30, 2021

Equity [Abstract]

STOCKHOLDER’S EQUITY

NOTE 7 – STOCKHOLDER’S EQUITY

Stock-Based Compensation

The Company has entered into various employment and advisory agreements for which shares of common stock are issued with a variety of vesting provisions. The Company typically determines the fair market value of these awards on the date of grant and expensing that value over the vesting period which mirrors the service period.

In May 2020, the Company entered into two-year employment agreements with Matthew Gregarek, the Company’s Chairman and Chief Executive Officer, David Burcham, the Company’s President, and Daniel Garza, the Company’s Chief Marketing Officer. Among various other salary and bonus terms, the agreements also provide for the award of shares of the Company’s restricted common stock and options to purchase shares of the Company’s common stock. Under these agreements, a total of 6,300,000 fully vested shares of common stock were granted upon execution of the agreements. An additional 1,300,000 shares of common stock were awarded with a vesting date of April 1, 2021, 900,000 of which have vested. The agreements also provide for the future grant of 1,300,000 additional shares of common stock should the individuals remain employed following the April 1, 2021 expiration date, 400,000 of which have been cancelled and will not be subject to issuance. For the six months ended June 30, 2021, the Company recorded $20,664 as stock-based compensation. The remaining expense outstanding is $58,364 for which will be recorded through 2022.

During the year ended December 31, 2020, the Company entered into agreements with consultants for which provided investor awareness, research materials and other services. During the three months ended March 31, 2021, 80,000 shares of common stock were returned to the Company and cancelled. The Company recorded a reduction to stock-based compensation of $34,400 during the six months ended June 30, 2021.

On April 5, 2021 the Company issued 250,000 shares to a third party for assignment of intellectual property, including patents and patent applications, agreed to on January 26, 2021. The common stock was valued at $128,750 for which is being amortized over the term of the licensing agreement.

Options

In May 2020, effective April 1, 2020, the individuals noted above were also granted a total of 5,750,000 options to purchase shares of the Company’s common stock. These options vested in tranches at various dates through May 1, 2021 with escalating exercise prices ranging from $0.50 to $7.50 and are exercisable for approximately five 5 years. These options were valued at $1,056,695 using a Black-Scholes Options Pricing Model.

The fair value of the options granted in 2020 are estimated using a Black-Scholes Options Pricing Model with the following assumptions:

Exercise price per share	$	3.40
Expected life (years)		2.97
Risk-free interest rate		0.64	%
Expected volatility		135	%

In 2021, the Company granted options to purchase 9,647,500 shares of common stock to employees and consultants. Some of the grants had effective dates within the 2020 calendar year. These options will vest in tranches at various points through 2023 with escalating prices ranging from $0.05 to $7.50 and are exercisable through various points through 2023.

These options were valued at $2,287,556 using a Black-Scholes Options Pricing Model. For the six months ended June 30, 2021, the Company recorded $1,591,819 as stock-based compensation. The remaining expense outstanding is $698,737 for which will be recorded through 2024.

The fair value of the options granted in 2021 are estimated using a Black-Scholes Options Pricing Model with the following assumptions:

Exercise price per share $ 0.96

Expected life (years)	2.56
Risk-free interest rate	0.64	%
Expected volatility	122	%

Offering of Common Stock and Warrants

In February 2019, the Company commenced a private offering of shares of common stock at a purchase price of $0.50 per share. In addition, for each share purchased the investor received a warrant to purchase one additional share of common stock at a price of $2.00 per share. The warrants expire on December 31, 2021, or sooner at the Company’s option, if the Company’s stock trades for a price of $3.00 per share for 10 days with an average volume of 100,000 shares per day. During the year ended December 31, 2020, the Company received $150,000 related to the sale of 300,000 shares of common stock and warrants.

On October 23, 2020, the Company sold 2,750,000 shares of its common stock to a private investor for $1,000,000 in proceeds.

Between December 28 and December 30, 2020, the Company received $100,000 related to the sale of 200,000 shares of common stock and warrants.

During the six months ended June 30, 2021, the Company received $543,000 related to the sale of 1,394,404 shares of common stock.

Offering of Preferred Stock

In March 2021, the Company commenced and subsequently closed a private offering of its preferred stock for up to $2 million in proceeds. The offering consisted of 20,000 shares of preferred stock at a price of $100 per share. The purchaser of the preferred stock has agreed to purchase the preferred stock in three tranches provided certain sales milestones are met. Concurrently with each issuance of preferred stock, the Company shall issue the preferred stockholder 500,000 warrants to purchase the Company’s common stock at a price of $0.75 per share. Preferred stockholders are entitled to a 10% dividend paid in additional shares of preferred stock on a quarterly basis and will receive dividend and liquidation preferences over the Company’s common stockholders. During the six months ended June 30, 2021, the Company received $660,000 related to the sale of 6,660 shares of preferred stock. In connection with the sale, the Company issued the holder warrants to purchase 500,000 shares of the Company’s common stock at $0.75 per share for a period of four years. The Company valued the warrants at $148,400 using the Black-Scholes pricing model for which a discount of $121,158 using the relative fair market value was recorded preferred stock and the offset to additional paid-in capital. In addition, the holders of the preferred stock receive dividends at a rate of 10% per annum. As of June 30, 2021, the Company recorded accrued dividends of $8,680 as an increase to accrued liabilities and an offset to additional paid-in capital. Each share of preferred stock is convertible into 200 shares of common stock.

Common Stock and Warrants Issued with Notes Payable

See Note 6 for issuance of shares in connection with note agreements.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2021

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 8 – RELATED PARTY TRANSACTIONS

See Note 7 for shares and options issued to management under employment contracts. In connection with the employment contracts, the Company accrued total deferred salaries and bonuses of $531,823 and $225,000 as of June 30, 2021, respectively.

See Note 6 for discussion related to related party convertible notes payable.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2021

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 9 – SUBSEQUENT EVENTS

On July 2, 2021, the Company entered into an agreement with a third party for an equity investment of $30,000,000 in two tranches beginning August 16, 2021. For the first tranche, the investor will purchase preferred stock for $15,000,000, valued at $0.40 per share of common stock. For the second tranche, the investor will make an additional equity investment of $15,000,000, valued at $0.455 per share of common stock, within ninety (90) days of the funding of the first tranche.

On July 2, 2021, the Company entered into an assignment agreement with a third party under which the Company obtained the rights to provide CBD and other plant-based health and wellness products to patients covered under corporate health insurance plans. In consideration for assigning such rights, the Company entered into a profit-sharing arrangement with the third party whereby the Company shall receive 51% of the total profits and pay the third party 49% of the profits derived from such product sales.

On July 15, 2021, the Company borrowed a total of $400,000 from unrelated third parties. The loans are evidenced by two convertible promissory notes which bear total interest of $30,000, are convertible at $0.40 per share, and mature on August 20, 2021. 

In July 2021, the Company received $125,000 related to the sale of 290,787 shares of common stock.

The Company has evaluated subsequent events through the filing date of these consolidated financial statements and has disclosed that there are no other events that are material to the financial statements to be disclosed.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all accruals and adjustments (each of which is of a normal, recurring nature) necessary for a fair presentation of the Company’s financial position as of June 30, 2021, and the results of its operations for the three and six months then ended. Significant accounting policies have been consistently applied in the interim consolidated financial statements. The results reported in these interim financial statements are not necessarily indicative of the expected results for the entire year. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2020 and notes thereto that are included in the Company’s Annual Report on Form 10-K.

Going Concern

Going Concern

The Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Management plans to fund future operations by raising capital and / or seeking joint venture opportunities.

Principles of Consolidation

Principles of Consolidation

The Company evaluates the need to consolidate affiliates based on standards set forth in Accounting Standards Codification (“ASC”) 810 Consolidation (“ASC 810”). The Consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant consolidated transactions and balances have been eliminated in consolidation.

Use of Estimates

Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated fair market value of assets and liabilities acquired under business combinations, useful lives and potential impairment of property and equipment, recoverability of goodwill and estimates of fair value of share-based payments.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB” ACS 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.

The guidance also establishes a fair value hierarchy for measurements of fair value as follows:

● Level 1 - quoted market prices in active markets for identical assets or liabilities.

● Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amount of the Company’s financial instruments approximates their fair value as of June 30, 2021, and December 31, 2020, due to the short-term nature of these instruments. The Company’s derivative liabilities are considered a Level 2 liability.

Net Loss per Share

Net Loss per Share

Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share”. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding during the period. For the three and six months ended June 30, 2021 and 2020, dilutive instruments consisted of convertible notes payable, options and warrants to purchase shares of the Company’s common stock totalling approximately 57.5 million and 28.4 million shares of common stock, respectively, the effects of which to the net loss are anti-dilutive.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In January 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, which clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting under Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The Company adopted the new standard on January 1, 2021, which did not have a significant impact on the Company.

The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs issued to date, including the one above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements.

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STOCKHOLDER’S EQUITY (Tables)

6 Months Ended

Jun. 30, 2021

Equity [Abstract]

Schedule of Fair Value Black-Scholes Options Pricing

Exercise price per share	$	3.40
Expected life (years)		2.97
Risk-free interest rate		0.64	%
Expected volatility		135	%

In 2021, the Company granted options to purchase 9,647,500 shares of common stock to employees and consultants. Some of the grants had effective dates within the 2020 calendar year. These options will vest in tranches at various points through 2023 with escalating prices ranging from $0.05 to $7.50 and are exercisable through various points through 2023.

These options were valued at $2,287,556 using a Black-Scholes Options Pricing Model. For the six months ended June 30, 2021, the Company recorded $1,591,819 as stock-based compensation. The remaining expense outstanding is $698,737 for which will be recorded through 2024.

The fair value of the options granted in 2021 are estimated using a Black-Scholes Options Pricing Model with the following assumptions:

Exercise price per share $ 0.96

Expected life (years)	2.56
Risk-free interest rate	0.64	%
Expected volatility	122	%

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ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative)	Dec. 31, 2018 shares
Pure Harvest Cannabis Producers Inc [Member] | Postsplit [Member]
Acquired Indefinite-lived Intangible Assets [Line Items]
Number of common stock shares acquired	17,906,016

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - shares	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Accounting Policies [Abstract]
Antidilutive securities excluded from computation of earnings per share amount	57,500,000	28,400,000

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NOTES RECEIVABLE (Details Narrative) - USD ($)			1 Months Ended		12 Months Ended
	Dec. 31, 2020	Mar. 12, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2019	Jun. 30, 2021	Aug. 07, 2020	Jul. 29, 2020	Jun. 15, 2020	Apr. 09, 2020	Jan. 31, 2020	Jun. 30, 2019
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Debt interest rate									10.00%
Ownership interest percentage										51.00%
Note Receivable Loan and Security Agreement [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Debt maturity date	Mar. 31, 2021
Debt interest rate	8.00%		8.00%
Debt instrument, face amount	$ 2,750,000		$ 2,750,000
Debt instrument, description	Under the agreement, if the loan is not repaid by March 31, 2021, if there have been no defaults, the loan will be extended to July 31, 2021. During the extended period, the interest rate increases to 12% per annum. In addition, with the extended period, the Company receives various royalties on products sold by the borrower for a period of three year commencing on April 1, 2021. On March 31, 2021, the note was extended to July 31, 2021, in accordance with the terms. The loan is secured by all the assets of HSII
Loan And Security Agreement [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Notes receivable						$ 500,000
Debt interest rate	25.00%		25.00%
How Smooth Inc [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Advances to related party	$ 247,845		$ 247,845	$ 800,000	$ 800,000						$ 700,000
Debt maturity date			Nov. 01, 2020	Jun. 01, 2020
Debt interest rate				1000.00%	1000.00%
How Smooth Inc [Member] | Sixty Days [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Debt interest rate				6.00%	6.00%
How Smooth It Is, Inc. [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Ownership interest percentage	7.50%	51.00%	7.50%					51.00%
Payment to acquire membership interests		$ 1,500
Note payable							$ 2,150,000
How Smooth It Is, Inc. [Member] | Restricted Stock [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Number of shares issued for membership interests		7,000,000
EdenFlo, LLC [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Advances to related party				$ 1,650,000	$ 1,650,000
Debt maturity date					Jun. 01, 2020
Debt interest rate				10.00%	10.00%
EdenFlo, LLC [Member] | Sixty Days [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Debt interest rate				6.00%	6.00%
Two Unrelated Individuals [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Notes receivable												$ 28,593

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LEASE AGREEMENTS (Details Narrative) - USD ($)	1 Months Ended
	May 31, 2020	May 31, 2019	Jun. 30, 2021	Dec. 31, 2020	Apr. 30, 2020
SEC Schedule, 12-18, Supplemental Information, Property-Casualty Insurance Underwriters [Line Items]
Number of commitment fee shares		400,000
Effective borrowing rate	10.35%	10.00%			10.00%
Right of use asset	$ 399,766		$ 401,736	$ 537,393	$ 140,988
Lease liability	399,766				$ 140,988
Minimum [Member]
SEC Schedule, 12-18, Supplemental Information, Property-Casualty Insurance Underwriters [Line Items]
Property purchase price		$ 1,400,000
Monthly lease payments	12,330
Maximum [Member]
SEC Schedule, 12-18, Supplemental Information, Property-Casualty Insurance Underwriters [Line Items]
Property purchase price		$ 1,600,000
Monthly lease payments	$ 12,861

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NOTES PAYABLE (Details Narrative) - USD ($)											1 Months Ended				3 Months Ended		6 Months Ended		12 Months Ended
	Apr. 16, 2021	Jan. 31, 2021	Dec. 07, 2020	Nov. 17, 2020	Oct. 09, 2020	Jul. 14, 2020	Jun. 15, 2020	Jun. 09, 2020	Apr. 20, 2020	Mar. 06, 2020	Dec. 07, 2020	Sep. 30, 2020	Aug. 31, 2020	Jul. 31, 2020	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020	Dec. 31, 2019	Nov. 02, 2020
Debt Instrument [Line Items]
Debt interest rate							10.00%
Convertible notes payable															$ 1,778,940		$ 1,778,940		$ 1,353,033
Debt discount															21,060		21,060
Conversion price per share							$ 0.40
Amortization of interest expense																	7,092	$ 11,424
Proceeds from issuance of debt																	500,000	0
Accrued interest															158,750		158,750
Debt discount															1,865,146		1,865,146
Amortized discount on interest expense																	681,096	141,980
Short term borrowing							$ 30,000
Issuance of common stock for cash, shares							215,000
Extinguishment loss															$ 0	$ (756,254)	0	(756,254)
Payment of notes payable																	103,845	500,000
Issuance of common stock for accrued interest																$ 31,762	3,363	$ 31,762
Additional interest expense																	$ 173,000
Common Stock [Member]
Debt Instrument [Line Items]
Issuance of common stock for cash, shares															136,243		1,394,404	200,000
Issuance of common stock for accrued interest, shares																80,814	8,515	80,814	124,425
Issuance of common stock for accrued interest																$ 808	$ 85	$ 808	$ 52,293
Eden Flo Asset Acquisition [Member]
Debt Instrument [Line Items]
Extinguishment loss																			$ 448,000
Individual Related To Director [Member]
Debt Instrument [Line Items]
Debt interest rate																			12.00%
Short term borrowing																			$ 430,000
The Holder [Member]
Debt Instrument [Line Items]
Debt interest rate							80.00%
Conversion price per share							$ 0.30
Unrelated Third Party [Member]
Debt Instrument [Line Items]
Convertible notes principal balance amount							$ 900,000
Debt interest rate										8.00%
Short term borrowing										$ 1,500,000
Note Holder [Member]
Debt Instrument [Line Items]
Convertible notes mature dates						Aug. 15, 2020		Jul. 15, 2020	Jun. 15, 2020
Issuance of common stock for cash, shares								200,000	200,000
Extinguishment loss						$ 120,721		$ 170,470	$ 157,784
Notes payable						$ 1,000,000		$ 1,000,000	$ 1,000,000
Warrants to purchase common stock						200,000		200,000	200,000
Warrants exercise price						$ 2.00		$ 2.00	$ 2.00
Payment of notes payable									$ 1,000,000
Debt instrument maturity date description									payment from May 6, 2020 to June 15, 2020
Warrant exercisable date						Jan. 01, 2025		Jan. 01, 2025	Jan. 01, 2025
Penalty payment									$ 5,000
Measurement Input, Exercise Price [Member]
Debt Instrument [Line Items]
Derivative liability, stock price																			$ 0.30
Convertible Notes Payables [Member]
Debt Instrument [Line Items]
Convertible notes principal balance amount															$ 2,450,000		2,450,000
Minimum [Member] | Measurement Input, Share Price [Member]
Debt Instrument [Line Items]
Derivative liability, stock price																			0.40
Maximum [Member] | Measurement Input, Share Price [Member]
Debt Instrument [Line Items]
Derivative liability, stock price																			$ 0.49
Convertible Notes Payable [Member]
Debt Instrument [Line Items]
Convertible notes principal balance amount															1,427,504		1,427,504			$ 1,000,000
Convertible notes mature dates														Nov. 01, 2023
Debt interest rate													15.00%							20.00%
Extension fee																	66,667
Accrued interest																	114,568
Convertible notes payable															1,300,000		1,300,000
Debt discount															21,060		21,060
Conversion price per share													$ 2.00							$ 0.0050
Beneficial conversion feature														$ 44,000
Debt maximum borrowing capacity													$ 4,000,000.0
Proceeds from issuance of debt													$ 1,950,000
Closing price percentage													75.00%
Shares owed to holders																			4,192,500
Derivative liabilities															$ 2,379,080		2,379,080
Loss on derivative liability																	234,032
Amortized amount																	2,450,000
Amortized discount on interest expense																	358,689
Amortized discount																	$ 1,865,146
Convertible Notes Payable [Member] | Measurement Input, Exercise Price [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input, exercise price															$ 0.34		$ 0.34
Convertible Notes Payable [Member] | Measurement Input, Risk Free Interest Rate [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input, stock price															0.0051		0.0051
Convertible Notes Payable [Member] | Measurement Input, Expected Dividend Rate [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input, dividend yield percentage															0		0
Convertible Notes Payable [Member] | Measurement Input, Price Volatility [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input, expected volatility percentage															$ 0.9800		$ 0.9800
Convertible Notes Payable [Member] | Measurement Input, Share Price [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input, risk free percentage															1.00%		1.00%
Convertible Notes Payable [Member] | Measurement Input, Expected Term [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input term																	2 years 1 month 13 days
Convertible Notes Payable [Member] | Minimum [Member]
Debt Instrument [Line Items]
Convertible notes mature dates																				Nov. 01, 2021
Convertible Notes Payable [Member] | Maximum [Member]
Debt Instrument [Line Items]
Convertible notes mature dates																				Dec. 01, 2021
Convertible Note Payable [Member]
Debt Instrument [Line Items]
Convertible notes principal balance amount															$ 233,333		$ 233,333
Related Party Convertible Notes Payable [Member]
Debt Instrument [Line Items]
Convertible notes mature dates											Jun. 30, 2021
Derivative liabilities																			$ 298,913
Loss on derivative liability																			2,940
Amortized discount																			$ 396,223
Number of shares issued upon debt conversion												75,000
Issuance of common stock for cash, shares																			215,000
Revalued derivative liability			$ 540,475
Gain on derivative liability			241,562
Extinguishment loss			$ 540,475
Related Party Convertible Notes Payable [Member] | Minimum [Member]
Debt Instrument [Line Items]
Convertible notes mature dates																			Dec. 10, 2020
Related Party Convertible Notes Payable [Member] | Maximum [Member]
Debt Instrument [Line Items]
Convertible notes mature dates																			Jan. 10, 2021
Notes Payable One [Member]
Debt Instrument [Line Items]
Convertible notes mature dates										Apr. 13, 2020
Amortized amount																	287,454
Amortized discount on interest expense																	118,815
Notes payable										$ 500,000
Notes Payable One [Member] | Eden Flo Asset Acquisition [Member]
Debt Instrument [Line Items]
Convertible notes principal balance amount																			$ 600,000
Convertible notes mature dates																			Jun. 01, 2021
Conversion price per share																			$ 0.30
Notes Payable Two [Member]
Debt Instrument [Line Items]
Convertible notes mature dates										May 06, 2020
Notes payable										$ 1,000,000
Notes Payable Two [Member] | Eden Flo Asset Acquisition [Member]
Debt Instrument [Line Items]
Convertible notes mature dates																			Aug. 01, 2022
Four Notes Payable [Member] | Sofa King Medicinal Wellness Products L L C [Member]
Debt Instrument [Line Items]
Notes payable																			$ 275,756
Notes Payable [Member]
Debt Instrument [Line Items]
Amortization of interest expense																	92,256
Derivative liabilities															$ 271,897		271,897
Loss on derivative liability																	$ 13,223
Number of additional shares included in accrued interest										150,000
Warrants to purchase common stock										150,000
Warrants exercise price										$ 2.00
Payment of notes payable										$ 150,000
Fair value of discount on note payable										$ 116,707
Notes Payable [Member] | Measurement Input, Exercise Price [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input, exercise price															$ 0.38		$ 0.38
Notes Payable [Member] | Measurement Input, Risk Free Interest Rate [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input, risk free interest rate percentage															0.01%		0.01%
Notes Payable [Member] | Measurement Input, Expected Dividend Rate [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input, dividend yield percentage															$ 0		$ 0
Notes Payable [Member] | Measurement Input, Price Volatility [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input, volatility percentage															113.00%		113.00%
Notes Payable [Member] | Measurement Input, Share Price [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input, stock price															$ 0.51		$ 0.51
Notes Payable [Member] | Measurement Input, Expected Term [Member]
Debt Instrument [Line Items]
Derivative liability, measurement input term																	6 months
Note Payable Two Lakhs [Member]
Debt Instrument [Line Items]
Convertible notes mature dates					Nov. 09, 2020
Debt interest rate					12.00%
Amortized discount on interest expense					$ 40,000
Notes payable					$ 200,000
Note Payable Two Lakhs [Member] | Lender [Member] | Restricted Stock [Member]
Debt Instrument [Line Items]
Stock issued during the period restricted stock					100,000
Note Payable One Lakhs Seventy Three Thousand Seven Hundered And Five [Member]
Debt Instrument [Line Items]
Debt interest rate																					8.00%
Notes payable																					$ 173,705
Note Payable - $500,000 [Member]
Debt Instrument [Line Items]
Convertible notes mature dates	Jun. 18, 2021	Apr. 02, 2021		Jan. 31, 2021
Debt interest rate		10.00%		8.00%
Convertible notes payable															$ 500,000		$ 500,000
Debt discount		$ 23,500
Conversion price per share				$ 0.50
Issuance of common stock for cash, shares	100,000
Notes payable				$ 500,000
Number of additional shares included in accrued interest	150,000
Issuance of common stock for accrued interest, shares	100,000
Debt instrument trading price days				75.00%

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STOCKHOLDER’S EQUITY (Details Narrative) - USD ($)				1 Months Ended		3 Months Ended			6 Months Ended		9 Months Ended
	Dec. 30, 2020	Oct. 23, 2020	Jun. 15, 2020	Apr. 02, 2021	May 31, 2020	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Sep. 30, 2020	Feb. 28, 2019
Subsidiary, Sale of Stock [Line Items]
Stock-based compensation						$ 1,262,077		$ 3,026,036	$ 1,612,485	$ 3,039,538
Share Based Compensation									$ 698,737
Number of granted common stock					5,750,000				9,647,500
Options expiration period					5 years
Fair value of stock options					$ 1,056,695				$ 2,287,556
Stock-based compensation									$ 1,591,819
Consideration received on sale of stock	$ 200,000
Number of share sold									6,660
Proceeds from issuance of common stock	$ 100,000								$ 543,000	100,000
Issuance of common stock for cash, shares			215,000
Proceed from sales of equity									660,000	$ 0
Dividends						$ 8,680			$ 8,680
Private Investor [Member]
Subsidiary, Sale of Stock [Line Items]
Number of common stock issued		2,750,000
Proceeds from issuance of common stock		$ 1,000,000
Common Stock And Warrants [Member]
Subsidiary, Sale of Stock [Line Items]
Consideration received on sale of stock											$ 150,000
Number of share sold											300,000
Common Stock [Member]
Subsidiary, Sale of Stock [Line Items]
Issuance of common stock for cash, shares						136,243			1,394,404	200,000
Private Offering [Member]
Subsidiary, Sale of Stock [Line Items]
Sale of stock price per share												$ 0.50
Warrant exercise price												$ 2.00
Warrant expiration date												Dec. 31, 2021
Common stock trade price per share												$ 3.00
Average volume shares per day												100,000
Minimum [Member]
Subsidiary, Sale of Stock [Line Items]
Stock option exercise price					$ 0.05				$ 0.50
Maximum [Member]
Subsidiary, Sale of Stock [Line Items]
Stock option exercise price					$ 7.50				$ 7.50
Two Year Employment Agreements [Member]
Subsidiary, Sale of Stock [Line Items]
Number of common stock issued					6,300,000
Number of common stock awarded					1,300,000
Vesting period, description					vesting date of April 1, 2021
Number of share vested				900,000
Future granted share expiration date					Apr. 01, 2021
Stock-based compensation									$ 20,664
Remaining prepaid expenses									58,364
Number of common stock returned							80,000
Share Based Compensation									$ 34,400

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RELATED PARTY TRANSACTIONS (Details Narrative)	Jun. 30, 2021 USD ($)
Related Party Transactions [Abstract]
Accrued deferred salaries	$ 531,823
Accrued bonuses	$ 225,000

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SUBSEQUENT EVENTS (Details Narrative) - USD ($)		1 Months Ended	6 Months Ended
	Dec. 30, 2020	Jul. 31, 2021	Jun. 30, 2021	Jun. 30, 2020
Subsequent Event [Line Items]
Proceeds from sale of common stock			$ 660,000	$ 0
Number of common stock sold	$ 200,000
Subsequent Event [Member]
Subsequent Event [Line Items]
Proceeds from sale of common stock		$ 125,000
Number of common stock sold		$ 290,787