WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
Note 1 – Nature of Business and Significant Accounting
Policies
Nature of Business
WEED,
Inc. (the “Company”), (formerly United Mines, Inc.) was
incorporated under the laws of the State of Arizona on
August 20, 1999 (“Inception Date”) as Plae,
Inc. to engage in the exploration of gold and silver mining
properties. On November 26, 2014, the Company was renamed
from United Mines, Inc. to WEED, Inc. and was repurposed to pursue
a business involving the purchase of land, and building Commercial
Grade “Cultivation Centers” to consult, assist, manage
& lease to Licensed Dispensary owners and organic grow
operators on a contract basis, with a concentration on the legal
and medical marijuana sector. The Company’s plan is to become
a True “Seed-to-Sale” company providing infrastructure,
financial solutions and real estate options in this new emerging
market. The Company, under United Mines, was formerly in the
process of acquiring mineral properties or claims located in the
State of Arizona, USA. The name was previously changed on February
18, 2005 to King Mines, Inc. and then subsequently changed to
United Mines, Inc. on March 30, 2005. The Company trades
on the OTC Pink Sheets under the stock symbol: BUDZ.
On
April 20, 2017, the Company acquired Sangre AT, LLC, a Wyoming
company doing business as Sangre AgroTech. (“Sangre”).
Sangre is a plant genomic research and breeding company comprised
of top-echelon scientists with extensive expertise in genomic
sequencing, genetics-based breeding, plant tissue culture, and
plant biochemistry, utilizing the most advanced sequencing and
analytical technologies and proprietary bioinformatics data systems
available. Sangre is working on a cannabis genomic study to
complete a global genomic classification of the cannabis plant
genus.
The
accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States
of America. These statements reflect all adjustments, consisting of
normal recurring adjustments, which in the opinion of management
are necessary for fair presentation of the information contained
therein.
The
Company has a calendar year end for reporting
purposes.
Principles of Consolidation
The
accompanying consolidated financial statements include the accounts
of the following entities, all of which are under common control
and ownership:
|
|
State
of
|
|
|
|
Abbreviated
|
Name of
Entity
|
|
Incorporation
|
|
Relationship
(1)
|
|
Reference
|
WEED,
Inc.
|
|
Nevada
|
|
Parent
|
|
WEED
|
Sangre
AT, LLC
(2)
|
|
Wyoming
|
|
Subsidiary
|
|
Sangre
|
(1)
Sangre is a wholly-owned subsidiary of WEED,
Inc.
(2)
Sangre AT, LLC is doing business as Sangre
AgroTech.
The
consolidated financial statements herein contain the operations of
the wholly-owned subsidiary listed above. All significant
inter-company transactions have been eliminated in the preparation
of these financial statements. The parent company, WEED and
subsidiary, Sangre will be collectively referred to herein as the
“Company”, or “WEED”. The Company's
headquarters are located in Tucson, Arizona and its operations are
primarily within the United States, with minimal operations in
Australia.
These
statements reflect all adjustments, consisting of normal recurring
adjustments, which in the opinion of management are necessary for
fair presentation of the information contained
therein.
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and the disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
We
maintain cash balances in non-interest-bearing accounts, which do
not currently exceed federally insured limits. For the purpose of
the statements of cash flows, all highly liquid investments with an
original maturity of three months or less are considered to be cash
equivalents. There were no cash equivalents on hand for the periods
presented herein.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
Fair
Value of Financial Instruments
Under
FASB ASC 820-10-05, the Financial Accounting Standards Board
establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosures about fair
value measurements. This Statement reaffirms that fair value is the
relevant measurement attribute. The adoption of this standard did
not have a material effect on the Company’s financial
statements as reflected herein. The carrying amounts of cash,
prepaid expenses and accrued expenses reported on the balance sheet
are estimated by management to approximate fair value primarily due
to the short term nature of the instruments.
Property and Equipment
Property
and equipment is stated at the lower of cost or estimated net
recoverable amount. The cost of property, plant and equipment is
depreciated using the straight-line method based on the lesser of
the estimated useful lives of the assets or the lease term based on
the following life expectancy:
Automobiles
|
5
years
|
Furniture
and fixtures
|
5
years
|
Office
equipment
|
5
years
|
Lab
equipment
|
5
years
|
Property
|
15
years
|
Repairs
and maintenance expenditures are charged to operations as incurred.
Major improvements and replacements, which extend the useful life
of an asset, are capitalized and depreciated over the remaining
estimated useful life of the asset. When assets are retired or
sold, the cost and related accumulated depreciation and
amortization are eliminated and any resulting gain or loss is
reflected in operations.
Impairment of Long-Lived Assets
Long-lived
assets held and used by the Company are reviewed for possible
impairment whenever events or circumstances indicate the carrying
amount of an asset may not be recoverable or is impaired.
Recoverability is assessed using undiscounted cash flows based upon
historical results and current projections of earnings before
interest and taxes. Impairment is measured using discounted cash
flows of future operating results based upon a rate that
corresponds to the cost of capital. Impairments are recognized in
operating results to the extent that carrying value exceeds
discounted cash flows of future operations.
Goodwill
The
Company evaluates the carrying value of goodwill during the fourth
quarter of each year and between annual evaluations if events occur
or circumstances change that would more likely than not reduce the
fair value of the reporting unit below its carrying amount. Such
circumstances could include, but are not limited to (1) a
significant adverse change in legal factors or in business climate,
(2) unanticipated competition, or (3) an adverse action or
assessment by a regulator. When evaluating whether goodwill is
impaired, the Company compares the fair value of the reporting unit
to which the goodwill is assigned to the reporting unit’s
carrying amount, including goodwill. The fair value of the
reporting unit is estimated using a combination of the income, or
discounted cash flows, approach and the market approach, which
utilizes comparable companies’ data. If the carrying amount
of a reporting unit exceeds its fair value, then the amount of the
impairment loss must be measured. The impairment loss would be
calculated by comparing the implied fair value of reporting unit
goodwill to its carrying amount. In calculating the implied fair
value of reporting unit goodwill, the fair value of the reporting
unit is allocated to all of the other assets and liabilities of
that unit based on their fair values. The excess of the fair value
of a reporting unit over the amount assigned to its other assets
and liabilities is the implied fair value of goodwill. An
impairment loss would be recognized when the carrying amount of
goodwill exceeds its implied fair value. The Company’s
evaluation of goodwill completed during 2017 resulted in an
impairment loss of $1,015,910.
Basic and Diluted Loss Per Share
The
basic net loss per common share is computed by dividing the net
loss by the weighted average number of common shares outstanding.
Diluted net loss per common share is computed by dividing the net
loss adjusted on an “as if converted” basis, by the
weighted average number of common shares outstanding plus potential
dilutive securities. For the periods presented, potential dilutive
securities had an anti-dilutive effect and were not included in the
calculation of diluted net loss per common share.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
Stock-Based
Compensation
Under
FASB ASC 718-10-30-2, all share-based payments to employees,
including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure
is no longer an alternative. The Company’s stock based
compensation consisted of the following during the years ended
December 31, 2017 and 2016,
respectively:
|
|
|
|
|
|
|
|
|
Common stock issued
for down payment on land purchase
|
$
-
|
$
42,500
|
Common stock issued
for services, related parties
|
364,750
|
3,600,000
|
Common stock issued
for services
|
1,144,399
|
377,812
|
Total stock based
compensation
|
$
1,509,149
|
$
4,020,312
|
Revenue Recognition
Sales on fixed price contracts are recorded when services are
earned, the earnings process is complete or substantially complete,
and the revenue is measurable and collectability is reasonably
assured. Provisions for discounts and rebates to customers,
estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded. The
Company will defer any revenue from sales in which payment has been
received, but the earnings process has not occurred. Sales have not
yet commenced on the MMJ business. The Company also did not
recognize revenues from its previous mining operations during the
periods presented herein.
Advertising and Promotion
All
costs associated with advertising and promoting products are
expensed as incurred. These expenses were $4,139 and $-0- for the
years ended December 31, 2017 and 2016,
respectively.
Income Taxes
Deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. A valuation allowance is
provided for significant deferred tax assets when it is more likely
than not, that such asset will not be recovered through future
operations.
Uncertain Tax Positions
In
accordance with ASC 740, “Income Taxes” (“ASC
740”), the Company recognizes the tax benefit from an
uncertain tax position only if it is more likely than not that the
tax position will be capable of withstanding examination by the
taxing authorities based on the technical merits of the position.
These standards prescribe a recognition threshold and measurement
attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return.
These standards also provide guidance on de-recognition,
classification, interest and penalties, accounting in interim
periods, disclosure, and transition.
Various
taxing authorities periodically audit the Company’s income
tax returns. These audits include questions regarding the
Company’s tax filing positions, including the timing and
amount of deductions and the allocation of income to various tax
jurisdictions. In evaluating the exposures connected with these
various tax filing positions, including state and local taxes, the
Company records allowances for probable exposures. A number of
years may elapse before a particular matter, for which an allowance
has been established, is audited and fully resolved. The Company
has not yet undergone an examination by any taxing
authorities.
The
assessment of the Company’s tax position relies on the
judgment of management to estimate the exposures associated with
the Company’s various filing positions.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
Recently
Issued Accounting Pronouncements
In May
2017, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standard Update (“ASU”)
No. 2017-09
,
Compensation — Stock Compensation (Topic
718): Scope of Modification Accounting.
ASU 2017-09, which
provides guidance about which changes to the terms or conditions of
a share-based payment award require an entity to apply modification
accounting in Topic 718.
Per ASU
2017-09, a
n entity should account for the effects of a
modification unless all the following are met: (1) the fair value
(or calculated value or intrinsic value, if such an alternative
measurement method is used) of the modified award is the same as
the fair value (or calculated value or intrinsic value, if such an
alternative measurement method is used) of the original award
immediately before the original award is modified. If the
modification does not affect any of the inputs to the valuation
technique that the entity uses to value the award, the entity is
not required to estimate the value immediately before and after the
modification, (2) the vesting conditions of the modified award are
the same as the vesting conditions of the original award
immediately before the original award is modified, and (3) the
classification of the modified award as an equity instrument or a
liability instrument is the same as the classification of the
original award immediately before the original award is modified.
The current disclosure requirements in Topic 718 apply regardless
of whether an entity is required to apply modification accounting
under the amendments in ASU 2017-9.
ASU 2017-9 is effective for public business
entities for annual and interim periods in fiscal years beginning
after December 15, 2017.
Early adoption is permitted,
including adoption in any interim period, for (1) public business
entities for reporting periods for which financial statements have
not yet been issued and (2) all other entities for reporting
periods for which financial statements have not yet been made
available for issuance. The amendments in this ASU should be
applied prospectively to an award modified on or after the adoption
date. The adoption of
ASU
2017-09
is not expected to have a material impact on the
Company’s financial statements or related
disclosures.
In
March 2017, the FASB issued ASU No. 2017-07,
Compensation - Retirement Benefits (Topic
715): Improving the Presentation of Net Periodic Pension Cost and
Net Periodic Postretirement Benefit Cost
. This ASU requires
that an employer report the service cost component in the same line
item or items as other compensation costs arising from services
rendered by the pertinent employees during the period. The other
components of net benefit cost, which include interest cost and
prior service cost or credit, among others, are required to be
presented in the income statement separately from the service cost
component and outside a subtotal of income from operations, if one
is presented. This ASU is effective for the Company’s fiscal
year 2018, including interim periods. The Company is currently
evaluating the effects that the adoption of this ASU will have on
its consolidated financial statements. The adoption of
ASU 2017-07
is not expected to have a
material impact on the Company’s financial statements or
related disclosures.
In
January 2017, the FASB issued ASU 2017-04,
Intangibles – Goodwill and Other (Topic
350)
. ASU 2017-04 simplifies the subsequent measurement of
goodwill by removing the second step of the two-step impairment
test. The amendment requires an entity to perform its annual, or
interim goodwill impairment test by comparing the fair value of a
reporting unit with its carrying amount. An impairment charge
should be recognized for the amount by which the carrying amount
exceeds the reporting unit's fair value; however, the loss
recognized should not exceed the total amount of goodwill allocated
to that reporting unit. An entity still has the option to perform
the qualitative assessment for a reporting unit to determine if the
quantitative impairment test is necessary. The amendment should be
applied on a prospective basis. ASU 2017-04 is effective for fiscal
years beginning after December 15, 2019, including interim periods
within those fiscal years. Early adoption is permitted for interim
or annual goodwill impairment tests performed on testing dates
after January 1, 2017. The adoption of
ASU 2017-04
is not expected to have a
material impact on the Company’s financial statements or
related disclosures.
In
January 2017, the FASB issued ASU 2017-01,
Business Combinations (Topic 805): Clarifying
the Definition of a Business
, which clarifies the definition
of a business to assist entities with evaluating whether
transactions should be accounted for as acquisitions (or disposals)
of assets or businesses. The standard will be effective for the
Company in the first quarter of 2018. Early adoption is permitted.
The adoption of
ASU 2017-01
is not expected to have a material impact on the Company’s
financial statements or related disclosures.
In May
2014 the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
.
Since ASU 2014-09 was issued, several additional ASUs have been
issued to clarify various elements of the guidance. These standards
provide guidance on recognizing revenue, including a five-step
model to determine when revenue recognition is appropriate. The
standard requires that an entity recognize revenue to depict the
transfer of control of promised goods or services to customers in
an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
Adoption of the new standard is effective for reporting periods
beginning after December 15, 2017. We plan to use the modified
retrospective method of adoption and will adopt the standard as of
January 1, 2018, the beginning of our next fiscal year. We have
completed an initial evaluation of the potential impact from
adopting the new standard, including a detailed review of
performance obligations for all material revenue streams. Based on
this initial evaluation, we do not expect adoption will have a
material impact on our financial position, results of operations,
or cash flows. Related disclosures will be expanded in line with
the requirements of the standard. The adoption of
ASU 2014-09
is not expected to have a
material impact on the Company’s financial statements or
related disclosures.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
No
other new accounting pronouncements, issued or effective during the
year ended December 31, 2017, have had or are expected to have
a significant impact on the Company’s financial
statements.
Note 2 – Going Concern
As
shown in the accompanying financial statements, the Company has no
revenues, incurred net losses from operations resulting in an
accumulated deficit of $19,081,288, and had negative working
capital of $753,951 at December 31, 2017. These factors
raise substantial doubt about the Company’s ability to
continue as a going concern. Management is actively pursuing new
products and services to begin generating revenues. In addition,
the Company is currently seeking additional sources of capital to
fund short term operations. The Company, however, is dependent upon
its ability to secure equity and/or debt financing and there are no
assurances that the Company will be successful; therefore, without
sufficient financing it would be unlikely for the Company to
continue as a going concern.
The
financial statements do not include any adjustments that might
result from the outcome of any uncertainty as to the
Company’s ability to continue as a going concern. The
financial statements also do not include any adjustments relating
to the recoverability and classification of recorded asset amounts,
or amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going
concern.
Note 3 – Business Combination
Business Combination – Sangre AT, LLC, April 20,
2017
On
April 20, 2017, the Company closed on a Share Exchange Agreement
(“SEA”) with Sangre AT, LLC, a Wyoming company doing
business as Sangre AgroTech. Pursuant to the SEA, we purchased all
of the outstanding membership interests in consideration for an a
total of 500,000 shares of common stock to seven individuals,
valued at $1,003,850 based on the closing price of the
Company’s common stock on the date of grant.
Sangre
is a plant genomic research and breeding company comprised of
top-echelon scientists with extensive expertise in genomic
sequencing, genetics-based breeding, plant tissue culture, and
plant biochemistry, utilizing the most advanced sequencing and
analytical technologies and proprietary bioinformatics data systems
available. Sangre is working on a cannabis genomic study to
complete a global genomic classification of the cannabis plant
genus.
In
connection with the SEA, two members of Sangre and the Company
entered into Consulting Agreements, pursuant to which the members
of Sangre agreed to provide consulting services to the Company for
a period of one year following closing, with the option to extend
for a two year period in annual increments, upon mutual written
agreement by both parties. Pursuant to the agreement, the members
were each awarded 50,000 shares of common stock with the issuances
deferred until January 1, 2018.
This
acquisition was accounted for as a business combination under the
purchase method of accounting, given that substantially all of the
Company’s assets and ongoing operations were acquired. The
purchase resulted in $1,015,910 of goodwill, which was subsequently
impaired and expensed in the current period. According to the
purchase method of accounting, the Company recognized the
identifiable assets acquired and liabilities assumed as
follows:
|
|
|
|
Consideration:
|
|
Fair value of
common stock paid at closing
(1)
|
$
1,003,850
|
Short term
liabilities assumed
(2)
|
25,929
|
Fair
value of total consideration exchanged
|
$
1,029,779
|
|
|
Fair
value of identifiable assets acquired assumed:
|
|
Cash
|
$
54
|
Fixed
assets
|
13,815
|
Total fair value of
assets assumed
|
13,869
|
Consideration paid in excess of fair value
(Goodwill)
(3)
|
$
1,015,910
|
|
(1)
Consideration consisted of 500,000 shares of the
Company’s common stock valued at $1,003,850 based on the
closing price of the Company’s common stock on the date of
grant.
|
|
|
(2)
Assumed liabilities consisted of trade payables and
outstanding credit card debt.
|
|
|
(3)
The consideration paid in excess of the net fair value of
assets acquired and liabilities assumed has been recognized as
goodwill and was expensed due to economic uncertainties and the
absence of a revenue stream.
|
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
Management
believes the intangible assets acquired, consisting of the
personnel of Sangre, will enable the Company to launch their
business model and take advantage of additional growth
opportunities.
The
unaudited supplemental pro forma results of operations of the
combined entities had the dates of the acquisitions been January 1,
2017 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
$
-
|
$
-
|
|
|
|
Expenses:
|
|
|
Operating
expenses
|
582,180
|
2,396,462
|
|
|
|
Net operating
loss
|
(582,180
)
|
(2,396,462
)
|
|
|
|
Other income
(expense)
|
(7,052
)
|
(1,097,758
)
|
|
|
|
Net
loss
|
$
(589,232
)
|
$
(3,494,220
)
|
|
|
|
Weighted average
number of common shares
|
|
|
Outstanding –
basic and fully diluted
|
100,711,076
|
101,364,930
|
|
|
|
Net loss per share
– basic and fully diluted
|
$
(0.01
)
|
$
(0.03
)
|
Note 4 – Related Party
Notes Payable
From
time to time, the Company has received short term loans from
officers and directors as disclosed in Note 10 below.
Capital Contributions
The
Company imputed interest on non-interest bearing, related party
loans, resulting in a total of $421 and $583 of contributed capital
during the years ended December 31, 2017 and 2016,
respectively.
Common Stock Issued for Bartered Assets
On
January 18, 2017, the Company exchanged 66,000 units, consisting of
66,000 shares of common stock and warrants to purchase 66,000
shares of common stock at an exercise price of $3.00 per share,
exercisable until January 18, 2018, in exchange for a
2017 Audi Q7 and a 2017 Audi A4 driven by the
Officers. The total fair value received, based on the market price
of the stock at $4.02 per share, was allocated to the $105,132
purchase price of the vehicles and the $160,188 excess value of the
common stock and warrants was expensed as stock based
compensation.
Common Stock
On
August 1, 2017, the Company granted 150,000 shares of common stock
to Mary Williams, a principal of Sangre AT, LLC, for services
performed. The fair value of the common stock was $154,500 based on
the closing price of the Company’s common stock on the date
of grant.
On
January 7, 2017, the Company granted 50,000 shares of common stock
to Pat Williams. PhD, a principal of Sangre AT, LLC, for services
performed. The total fair value of the common stock was $210,250
based on the closing price of the Company’s common stock on
the date of grant.
On
October 1, 2016, the Company granted 7,000,000 shares of common
stock to our CEO, Glenn E. Martin, as a bonus for services
performed pursuant to an amended employment agreement. The total
fair value of the common stock was $700,000 based on the closing
price of the Company’s common stock on the date of
grant.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
In
addition, on October 1, 2016, the Company granted a total of
14,000,000 shares of common stock to Mr. Martin for services
performed pursuant to his previous employment agreement. The total
fair value of the common stock was $1,400,000 based on the closing
price of the Company’s common stock on the date of
grant.
On
October 1, 2016, the Company granted 4,000,000 shares of common
stock to a related party as a bonus for services performed pursuant
to an amended employment agreement. The total fair value of the
common stock was $400,000 based on the closing price of the
Company’s common stock on the date of grant.
In
addition, on October 1, 2016, the Company granted a total of
8,000,000 shares of common stock to a related party for services
performed pursuant to their previous employment agreement. The
total fair value of the common stock was $800,000 based on the
closing price of the Company’s common stock on the date of
grant.
On
October 1, 2016, the Company granted 1,000,000 shares of common
stock to a related party as a bonus for services performed pursuant
to an amended employment agreement. The total fair value of the
common stock was $100,000 based on the closing price of the
Company’s common stock on the date of grant.
In
addition, on October 1, 2016, the Company granted a total of
2,000,000 shares of common stock to a related party for services
performed pursuant to their previous employment agreement. The
total fair value of the common stock was $200,000 based on the
closing price of the Company’s common stock on the date of
grant.
A total
of $179,331 and $157,505 of officer compensation was unpaid and
outstanding at December 31, 2017 and 2016,
respectively.
Note 5 – Fair Value of Financial Instruments
Under
FASB ASC 820-10-5, fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date (an exit price). The standard outlines a valuation framework
and creates a fair value hierarchy in order to increase the
consistency and comparability of fair value measurements and the
related disclosures. Under GAAP, certain assets and liabilities
must be measured at fair value, and FASB ASC 820-10-50 details the
disclosures that are required for items measured at fair
value.
The
Company has certain financial instruments that must be measured
under the new fair value standard. The Company’s financial
assets and liabilities are measured using inputs from the three
levels of the fair value hierarchy. The three levels are as
follows:
Level 1
- Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to
access at the measurement date.
Level 2
- Inputs include quoted prices for similar assets and liabilities
in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than
quoted prices that are observable for the asset or liability (e.g.,
interest rates, yield curves, etc.), and inputs that are derived
principally from or corroborated by observable market data by
correlation or other means (market corroborated
inputs).
Level 3
- Unobservable inputs that reflect our assumptions about the
assumptions that market participants would use in pricing the asset
or liability.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
The
following schedule summarizes the valuation of financial
instruments at fair value on a recurring basis in the balance
sheets as of December 31, 2017 and 2016, respectively:
|
Fair
Value Measurements at December 31, 2017
|
|
|
|
|
Assets
|
|
|
|
Cash
|
$
161,178
|
$
-
|
$
-
|
Total
assets
|
161,178
|
-
|
-
|
Liabilities
|
|
|
|
Notes payable,
related parties
|
-
|
49,000
|
-
|
Notes
payable
|
-
|
475,000
|
-
|
Total
liabilities
|
-
|
524,000
|
-
|
|
$
161,178
|
$
(524,000
)
|
$
-
|
|
Fair
Value Measurements at December 31, 2016
|
|
|
|
|
Assets
|
|
|
|
Cash
|
$
231
|
$
-
|
$
-
|
Total
assets
|
231
|
-
|
-
|
Liabilities
|
|
|
|
Convertible notes
payable
|
-
|
35,000
|
-
|
Notes payable,
related parties
|
-
|
16,300
|
-
|
Total
liabilities
|
-
|
51,300
|
-
|
|
$
231
|
$
(51,300
)
|
$
-
|
The
fair values of our related party debts are deemed to approximate
book value, and are considered Level 2 inputs as defined by
ASC Topic 820-10-35.
There
were no transfers of financial assets or liabilities between Level
1, Level 2 and Level 3 inputs for the years ended
December 31, 2017 or the year ended December 31,
2016.
Note 6 – Prepaid Expenses
Prepaid
expenses consisted of the following as of December 31, 2017 and
2016, respectively:
|
|
|
|
|
|
Annual license
fees
|
$
2,733
|
$
3,400
|
Prepaid
professional services
|
21,766
|
-
|
Prepaid
insurance
|
3,848
|
-
|
Annual mining claim
fees
|
1,653
|
1,653
|
Down payment on
purchase of property
|
3,000
|
-
|
|
$
32,999
|
$
5,053
|
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
Note 7 – Investment in Land and Property
On July
26, 2017, the Company closed on the purchase of property,
consisting of a home, recreational facility and RV park located at
5535 State Highway 12 in La Veta, Colorado to be developed into a
bioscience center. The home has 4 Bedrooms and 2 Baths, and the
recreational facility has showers, laundry, and reception area with
an additional equipment barn attached, in addition to another
facility with 9,500 square feet. The RV Park has 24 sites with full
hook-ups including water, sewer, and electric, which the Company
plans to convert into a series of small research pods.
Under the terms of the purchase agreement, the Company paid
$525,000 down, including 25,000 shares of our common stock, and
Sangre took immediate possession of the property. Under the terms
of the original purchase agreement, the Company was obligated to
pay an additional $400,000 in cash and issue an additional 75,000
shares of our common stock over the next two years in order to pay
the entire purchase price. On January 12, 2018, the Company entered
into an Amendment No. 1 to the $475,000 principal amount promissory
note issued by the Company to the seller of the property, under
which both parties agreed to amend the purchase and the promissory
note to allow the Company to payoff the note in full if it paid
$100,000 in cash on or before January 15, 2018 and issued the
seller 125,000 shares of common stock, restricted in accordance
with Rule 144, on before January 20, 2018. Through an escrow
process, the Company paid the seller $100,000 in cash and issued
him 125,000 shares of common stock in accordance with the Amendment
No. 1, in exchange for a full release of the deed of trust that was
securing the promissory note, on January 17, 2018. As a result, the
$475,000 principal promissory note issued to the seller was deemed
paid-in-full and fully satisfied and the Company owned the property
without encumbrances as of that date. T
he total purchase
price was as follows:
|
|
|
|
Consideration:
|
|
Common stock
payment of 25,000 shares
(1)
|
$
30,000
|
Cash payment of
down payment
|
50,000
|
Cash paid at
closing
|
444,640
|
Short term
liabilities assumed and paid at closing
(2)
|
5,360
|
Note
payable
(3)
|
475,000
|
Total
purchase price
|
$
1,005,000
|
|
(1)
Consideration consisted of an advance payment of 25,000
shares of the Company’s common stock valued at $30,000 based
on the closing price of the Company’s common stock on the
July 18, 2017 date of grant.
|
|
|
(2)
Purchaser’s shares of closing costs, including the
seller’s prepaid property taxes.
|
|
|
(3)
As disclosed in Note 11, the seller financed $475,000
with a promissory note bearing interest at 5%, payable in four
consecutive semi-annual installments in the amount of $118,750 plus
accrued interest commencing on January 26, 2018 and continuing on
the 26th day of July and the 26th day of January each year until
the debt is repaid on July 26, 2019. The note carries a late fee of
$5,937.50 in the event any installment payment is more than 30 days
late, and upon default the interest rate shall increase to 12% per
annum.
|
Note 8 – Property and Equipment
Property
and equipment consist of the following at December 31, 2017 and
2016, respectively:
|
|
|
|
|
|
Property
improvements
|
$
28,934
|
$
-
|
Automobiles
|
105,132
|
-
|
Office
equipment
|
4,934
|
650
|
Lab
equipment
|
15,202
|
-
|
Property
|
891,250
|
-
|
|
1,045,452
|
650
|
Less accumulated
depreciation
|
(45,040
)
|
(386
)
|
|
$
1,000,412
|
$
264
|
Non-depreciable
land with an appraised value of $113,750 was acquired with the La
Veta property on July 26, 2017.
Depreciation
and amortization expense totaled $44,654 and $130 for the years
ended December 31, 2017 and 2016, respectively.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
Note
9 – Convertible Notes Payable
Convertible
notes payable consist of the following at December 31, 2017 and
2016, respectively:
|
|
|
|
|
|
|
|
|
On December 7,
2007, the Company issued a 10% note payable to the Lebrecht Group,
PC (“Lebrecht Note”) for services rendered related to
the registration of certain securities of the Company. The note and
accrued interest were due December 7, 2008 and at the option of the
holder payable in full on the maturity date or in 12 monthly
payments beginning on the maturity date. The note and accrued
interest are convertible to common shares at any time at the option
of the holder at 75% of the average closing bid price on the five
trading days immediately preceding the conversion. Management
estimates, at this time, that 1,650,000 shares may be issued if
this conversion feature is exercised. In accordance with generally
accepted accounting principles, the 25% discount to market related
to the beneficial conversion feature has been reported as a
component of additional paid in capital. Additionally, since this
represents a prepayment for services related to a future public
offering, management had elected to offset the cost to future
capital raised as a result of the offering, if any. Furthermore,
the Company confirmed and agreed with Lebrecht Law Group, PC that
they would not force the Company to settle in shares of common
stock in the event there are not enough authorized shares at time
of conversion.
|
$
-
|
$
35,000
|
The
Company recognized interest expense of $1,759 and $3,500 related to
the convertible debts for the years ended
December 31, 2017 and 2016, respectively.
On June
16, 2017, the note was assigned to another party and the debt,
consisting of $35,000 of principal and $33,250 of interest, was
exchanged for 70,000 shares of common stock and warrants to acquire
70,000 more shares at $3 per share over the following twelve
months. The securities exchanged were valued at $136,233 based on
the closing price of the Company’s common stock on the date
of exchange, resulting in a loss on extinguishment of
$67,983.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
Note 10 – Notes Payable, Related Parties
Notes
payable, related parties consist of the following at
December 31, 2017 and 2016,
respectively:
|
|
|
|
|
|
|
|
|
On various dates, the
Company received advances from the Company’s CEO, Glenn
Martin. Mr. Martin owns approximately 56% of our common stock. The
unsecured non-interest bearing loans were due on demand. A detailed
list of advances and repayments follows:
|
|
|
|
|
|
|
|
|
March 14,
2016
|
$
10,000
|
March 15,
2016
|
$
(6,000
)
|
|
|
April 18,
2016
|
1,800
|
October 20,
2016
|
(3,000
)
|
|
|
June 16,
2016
|
1,100
|
October 27,
2016
|
(3,000
)
|
|
|
February 13,
2017
|
8,000
|
November 3,
2016
|
(900
)
|
|
|
March 10,
2017
|
1,000
|
March 23,
2017
|
(3,813
)
|
|
|
|
|
March 27,
2017
|
(360
)
|
|
|
|
|
July 3,
2017
|
(4,826
)
|
|
|
|
$
21,900
|
|
$
(21,900
)
|
$
-
|
$
-
|
|
|
|
On
December 29, 2017, the Company received an unsecured loan, bearing
interest at 2% in the amount of $37,000, due on demand from Dr. Pat
Williams, PhD. The largest aggregate amount outstanding was $37,000
during the periods ended December 31, 2017 and December 31, 2016.
Mr. Williams is a founding member and principal of our wholly-owned
subsidiary, Sangre AT, LLC
|
37,000
|
-
|
|
|
|
On
August 23, 2016, the Company received an unsecured, non-interest
bearing loan in the amount of $3,000, due on demand from Wendy
Seabre, bearing interest at 10% per annum. Repaid on June 15, 2017.
The largest aggregate amount outstanding was $3,000 during the
periods ended September 30, 2017 and December 31, 2016. Mrs. Seabre
is the wife of Mr. Roger Seabre, who owns approximately 2% of our
common stock and has been a significant investor
recently.
|
-
|
3,000
|
|
|
|
On
January 21, 2015, the Company received an unsecured loan in the
amount of $1,300, due on demand from Wendy Seabre, bearing interest
at 10% per annum. Repaid on June 15, 2017. The largest aggregate
amount outstanding was $1,300 during the periods ended September
30, 2017 and December 31, 2016. Mrs. Seabre is the wife of Mr.
Roger Seabre, who owns approximately 2% of our common stock and has
been a significant investor recently.
|
-
|
1,300
|
|
|
|
On
April 12, 2010, the Company received an unsecured, non-interest
bearing loan in the amount of $2,000, due on demand from Robert
Leitzman. Interest is being imputed at the Company’s
estimated borrowing rate, or 10% per annum. The largest aggregate
amount outstanding was $2,000 during the periods ended September
30, 2017 and December 31, 2016. Mr. Leitzman owns less than 1% of
the Company’s common stock, however, the Mr. Leitzman is
deemed to be a related party given the non-interest bearing nature
of the loan and the materiality of the debt at the time of
origination.
|
2,000
|
2,000
|
|
|
|
Over
various dates in 2011 and 2012, the Company received unsecured
loans in the aggregate amount of $10,000, due on demand, bearing
interest at 10%, from Sandra Orman. The largest aggregate amount
outstanding was $10,000 during the periods ended September 30, 2017
and December 31, 2016. Mrs. Orman owns less than 1% of the
Company’s common stock, however, Mrs. Orman is deemed to be a
related party given the nature of the loan and the materiality of
the debt at the time of origination.
|
10,000
|
10,000
|
|
|
|
Notes
payable, related parties
|
$
49,000
|
$
16,300
|
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
The
Company recorded interest expense in the amount of $1,059 and
$1,821 for the years ended December 31, 2017 and 2016,
respectively, including imputed interest expense in the amount of
$421 and $583 for the years ended December 31, 2017 and
2016, respectively related to notes payable, related
parties.
Note 11 – Note Payable
Note
payable consist of the following at December 31, 2017 and 2016,
respectively:
|
|
|
|
|
|
|
|
|
On July 26, 2017,
the Company issued a $475,000 note payable, bearing interest at 5%
per annum, to A.R. Miller (“Miller Note”) pursuant to
the purchase of land and property in La Veta, Colorado. The note is
to be paid in four consecutive semi-annual installments in the
amount of $118,750 plus accrued interest commencing on January 26,
2018 and continuing on the 26th day of July and the 26th day of
January each year until the debt is repaid on July 26, 2019. The
note carries a late fee of $5,937.50 in the event any installment
payment is more than 30 days late, and upon default the interest
rate shall increase to 12% per annum.
|
$
475,000
|
$
-
|
The
Company recognized interest expense of $10,281 and $-0- related to
the note payable for the years ended December 31, 2017
and 2016, respectively.
Note 12 – Commitments and Contingencies
On
November 8, 2016, the Company entered into an agreement with
Gregory DiPaolo’s Pro Am Golf, LLC to acquire improved
property located in Westfield, New York. The total purchase price
of $1,600,000 is to be paid with a deposit of 50,000 shares of
common stock, followed by cash of $1,250,000 and 300,000 shares of
the Company’s common stock to be delivered at closing. The
deposit of 50,000 shares issued as a deposit was $42,500 based on
the closing price of the Company’s common stock on the date
of grant. Subsequently, we entered into an amended Purchase and
Sale Agreement on October 24, 2017, under which we amended the
total purchase price to Eight Hundred Thousand Dollars ($800,000)
and forfeited our previous deposit of stock. Under the terms of the
amended agreement, we paid an additional Ten Thousand Dollar
($10,000) deposit on October 26, 2017, with the remaining purchase
price to be paid on or before the date closing date, which is
scheduled for February 1, 2018. The property is approximately 43
acres and has unlimited water extraction rights from the State of
New York. We plan to use this property as our inroads to the New
York hemp and infused beverage markets in the future. There are no
current plans or budget to proceed with operations in New York, and
there will not be until proper funding is secured after acquiring
this property.
On January 19,
2018, the Company was sued in the United States District Court for
the District of Arizona (
William
Martin v. WEED, Inc..
, Case No. 4:18-cv-00027-RM) by the
listed Plaintiff. The Company was served with the Verified
Complaint on January 26, 2018. The Complaint alleges claims for
breach of contract-specific performance, breach of
contract-damages, breach of the covenant of good faith and fair
dealing, conversion, and injunctive relief. In addition to the
Verified Complaint, the Company was served with an application to
show cause for a temporary restraining order. The Verified
Complaint alleges the Company entered into a contract with the
Plaintiff on October 1, 2014 for the Plaintiff to perform certain
consulting services for the Company in exchange for 500,000 shares
of its common stock up front and an additional 700,000 shares of
common stock to be issued on May 31, 2015. The Plaintiff alleges he
completed the requested services under the agreement and received
the initial 500,000 shares of common stock, but not the additional
700,000 shares. The request for injunctive relief asks the Court to
Order the Company to issue the Plaintiff 700,000 shares of its
common stock, and possibly include them in its Registration
Statement on Form S-1, or, in the alternative, issue the shares and
have them held by the Court pending resolution of the litigation,
or, alternatively, sell the shares and deposit the sale proceeds in
an account that the Court will control. The hearing on the
Temporary Restraining Order occurred on January 29, 2018. On
January 30, 2018, the Court issued its ruling denying the
application for a Temporary Restraining Order. Currently, there is
no further hearing scheduled in this matter
.
On February 13, 2018,
the Company filed an Answer to the Verified Complaint and
Counterclaim. On February 15, 2018, the Company filed a Motion to
Dismiss the Verified Complaint. On February 23, 2018, the Company
filed a Motion to Amend Counterclaim to add W. Martin’s wife,
Joanna Martin as a counterdefendant. On March 9, 2018, William
Martin filed a Motion to Dismiss the Counterclaim. On March 12,
2018, William Martin filed a Motion to Amend the Verified Complaint
to, among other things, add claims against Glenn Martin and Nicole
and Ryan Breen. On March 27, 2018, the Court granted both William
Martin and WEED, Inc.’s Motions to Amend. On March 27, 2018,
the Company filed an Amended Counterclaim adding Joanna Martin. On
April 2, 2018, the Company filed a Motion to Amend our Counterclaim
to add a breach of contract claim. On April 10, 2018, the Company
filed an Answer to First Amended Verified Complaint. On April 23,
2018, Glenn Martin and Nicole and Ryan Breen filed their Answer to
the First Amended Complaint. On May 31, 2018, the Court issued an
Order: (a) granting the Company’s Motion to Dismiss thereby
dismissing the Plaintiff’s claims for breach of the covenant
of good faith and fair dealing and the claim for conversion, (b)
denying William Martin’s Motion to Dismiss the counterclaim
as to the claims for fraudulent concealment and fraudulent
misrepresentation, but granting the Motion to Dismiss only as to
the claim for fraudulent nondisclosure, and (c) granting the
Company’s Motion to Amend its Counterclaim to add a breach of
contract claim. On June 1, 2018, William Martin and his wife filed
their Answer to the First Amended Counterclaim. On June 1, 2018,
William Martin and his wife filed their Answer to the Second
Amended Counterclaim. In addition to the above pleadings and
motions, the parties have exchanged disclosure statements and
served and responded to written discovery. The Company
denies the Plaintiff’s allegations in the Verified Complaint
in their entirety and plan to vigorously defend against this
lawsuit.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
Note 13 – Stockholders’ Equity
Preferred Stock
On
December 5, 2014, the Company amended the Articles of
Incorporation, pursuant to which 20,000,000 shares of “blank
check” preferred stock with a par value of $0.001 were
authorized. No series of preferred stock has been designated to
date.
Common Stock
On
December 5, 2014, the Company amended the Articles of
Incorporation, and increased the authorized shares to 200,000,000
shares of $0.001 par value common stock.
Common Stock Sales (2017)
On November 10, 2017, the Company sold 125,000 units at $1.00 per
unit, consisting of 125,000 shares of common stock and warrants to
purchase 125,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until November 10, 2019, in exchange
for total proceeds of $125,000.
The proceeds received were allocated between the
common stock and warrants on a relative fair value
basis.
On October 24, 2017, the Company sold 13,333 units at $0.75 per
unit, consisting of 13,333 shares of common stock and warrants to
purchase 13,333 shares of common stock at an exercise price of
$3.00 per share, exercisable until October 24, 2019, in exchange
for total proceeds of $10,000.
The proceeds received were
allocated between the common stock and warrants on a relative fair
value basis.
On
September 29, 2017, the Company sold 300,000 units at $0.50 per
unit, consisting of 300,000 shares of common stock and warrants to
purchase 300,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until September 29, 2019, in exchange
for total proceeds of $150,000. The proceeds received were
allocated between the common stock and warrants on a relative fair
value basis.
On
September 24, 2017, the Company sold 133,000 units at $0.7519 per
unit, consisting of 133,000 shares of common stock and warrants to
purchase 133,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until September 24, 2019, in exchange
for total proceeds of $100,000. The proceeds received were
allocated between the common stock and warrants on a relative fair
value basis.
On
September 5, 2017, the Company sold 40,000 units at $0.50 per unit,
consisting of 40,000 shares of common stock and warrants to
purchase 40,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until September 5, 2019, in exchange
for total proceeds of $20,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On
August 2, 2017, the Company sold 100,000 units at $0.50 per unit,
consisting of 100,000 shares of common stock and warrants to
purchase 100,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until August 2, 2019, in exchange for
total proceeds of $50,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On July
7, 2017, the Company sold 200,000 units at $0.50 per unit,
consisting of 200,000 shares of common stock and warrants to
purchase 200,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until July 7, 2019, in exchange for
total proceeds of $100,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May
31, 2017, the Company sold 20,000 units at $0.50 per unit,
consisting of 20,000 shares of common stock and warrants to
purchase 20,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 31, 2019, in exchange for
total proceeds of $10,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May
31, 2017, the Company sold 300,000 units at $0.50 per unit,
consisting of 300,000 shares of common stock and warrants to
purchase 150,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 31, 2019, in exchange for
total proceeds of $150,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May
25, 2017, the Company sold 20,000 units at $0.50 per unit,
consisting of 20,000 shares of common stock and warrants to
purchase 20,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 25, 2019, in exchange for
total proceeds of $10,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On May
25, 2017, the Company sold 20,000 units at $0.50 per unit,
consisting of 100,000 shares of common stock and warrants to
purchase 100,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until May 25, 2019, in exchange for
total proceeds of $50,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
On
April 20, 2017, the Company sold 500,000 units at $1.00 per unit,
consisting of 500,000 shares of common stock and warrants to
purchase 500,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until April 20, 2018, in exchange for
total proceeds of $500,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
On
January 23, 2017, the Company sold 2,000 units at $2.00 per unit,
consisting of 2,000 shares of common stock and warrants to purchase
2,000 shares of common stock at an exercise price of $3.00 per
share, exercisable until January 23, 2018, in exchange for total
proceeds of $4,000. The proceeds received were allocated between
the common stock and warrants on a relative fair value
basis.
On
January 9, 2017, the Company sold 50,000 units at $1.00 per unit,
consisting of 50,000 shares of common stock and warrants to
purchase 50,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until January 9, 2018, in exchange for
total proceeds of $50,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
Warrants Exercised (2017)
On
January 7, 2017, a warrant holder exercised warrants to purchase
2,666 shares of common stock at a strike price of $1.50 in exchange
for proceeds of $3,999.
Common Stock Sales (2016)
On
October 31, 2016, the Company sold 50,000 units at $0.10 per unit,
consisting of 50,000 shares of common stock and warrants to
purchase 50,000 shares of common stock at an exercise price of
$1.50 per share over a one (1) year period from the date of
purchase in exchange for total proceeds of $5,000. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
On
October 25, 2016, the Company sold 150,000 units at $0.3333 per
unit, consisting of 150,000 shares of common stock and warrants to
purchase 150,000 shares of common stock at an exercise price of
$1.50 per share over a one (1) year period from the date of
purchase in exchange for total proceeds of $50,000. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
On
October 19, 2016, the Company sold 25,000 units at $0.20 per unit,
consisting of 25,000 shares of common stock and warrants to
purchase 25,000 shares of common stock at an exercise price of
$1.50 per share over a one (1) year period from the date of
purchase in exchange for total proceeds of $5,000. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
On
October 19, 2016, the Company sold 100,000 units at $0.10 per unit,
consisting of 100,000 shares of common stock and warrants to
purchase 100,000 shares of common stock at an exercise price of
$1.50 per share over a one (1) year period from the date of
purchase in exchange for total proceeds of $10,000. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
Common Stock in Satisfaction of Subscriptions Payable
(2016)
On
October 27, 2016, the Company issued a total of 1,770,000 shares of
common stock in satisfaction of common stock granted during the
year ended December 31, 2015, in the aggregate value of
$114,990.
Common Stock Issued for Acquisitions and Property Purchases
(2017)
On July
18, 2017, the Company issued 25,000 shares of common stock as a
good faith deposit toward the purchase of land and property located
in La Veta, CO that closed on July 26, 2017, which were valued at
$30,000 based on the closing price of the Company’s common
stock on the date of grant.
On
April 20, 2017, the Company issued a total of 500,000 shares of
common to seven individuals pursuant to the closing of an
acquisition of Sangre AT, LLC, a Wyoming limited liability company
(“Sangre”) in exchange for 100% of the interests in
Sangre. The total fair value of the common stock was $1,003,850
based on the closing price of the Company’s common stock on
the date of grant.
Common Stock Issued for Bartered Assets (2017)
On
January 18, 2017, the Company exchanged 66,000 units, consisting of
66,000 shares of common stock and warrants to purchase 66,000
shares of common stock at an exercise price of $3.00 per share,
exercisable until January 18, 2018, in exchange for a
2017 Audi Q7 and a 2017 Audi A4. The total fair
value received, based on the market price of the stock at $4.02 per
share, was allocated to the $105,132 purchase price of the vehicles
and the $160,188 excess value of the common stock and warrants was
expensed as stock based compensation.
Common Stock and Warrants Issued for Settlement of Convertible Debt
(2017)
On June
16, 2017, a convertible note, consisting of $35,000 of principal
and $33,250 of unpaid interest, was assigned to a third party and
the debt was exchanged for a unit offering, consisting of 70,000
shares of common stock and warrants to purchase 70,000 shares of
common stock at an exercise price of $3.00 per share, exercisable
until June 16, 2018. The stock was valued at $86,800 based on the
closing price of the Company’s common stock on the date of
exchange and the warrants were valued at $49,433 using the
Black-Scholes option-pricing model was $49,433, or $0.70618 per
share, based on a volatility rate of 211%, a risk-free interest
rate of 1.21% and an expected term of 1.0 year, resulting in a loss
on extinguishment of $67,983.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
Common
Stock Issued as Down Payment for Land Purchase (2016)
On
November 8, 2016, the Company granted 50,000 shares of common stock
as a good faith deposit on a potential land purchase agreement that
has not yet closed, as the Company does not currently have
sufficient resources. The total fair value of the common stock was
$42,500 based on the closing price of the Company’s common
stock on the date of grant.
Common Stock Issued for Services, Related Parties
(2017)
On
August 1, 2017, the Company granted 150,000 shares of common stock
to Mary Williams, a principal of Sangre AT, LLC, for services
performed. The fair value of the common stock was $154,500 based on
the closing price of the Company’s common stock on the date
of grant.
On
January 7, 2017, the Company granted 50,000 shares of common stock
to Pat Williams. PhD, a principal of Sangre AT, LLC, for services
performed. The total fair value of the common stock was $210,250
based on the closing price of the Company’s common stock on
the date of grant.
Common Stock Issued for Services, Related Parties
(2016)
On
October 1, 2016, the Company granted 7,000,000 shares of common
stock to our CEO, Glenn E. Martin, as a bonus for services
performed pursuant to an amended employment agreement. The total
fair value of the common stock was $700,000 based on the closing
price of the Company’s common stock on the date of
grant.
In
addition, on October 1, 2016, the Company granted a total of
14,000,000 shares of common stock to Mr. Martin for services
performed pursuant to his previous employment agreement. The total
fair value of the common stock was $1,400,000 based on the closing
price of the Company’s common stock on the date of
grant.
On
October 1, 2016, the Company granted 4,000,000 shares of common
stock to a related party as a bonus for services performed pursuant
to an amended employment agreement. The total fair value of the
common stock was $400,000 based on the closing price of the
Company’s common stock on the date of grant.
In
addition, on October 1, 2016, the Company granted a total of
8,000,000 shares of common stock to a related party for services
performed pursuant to their previous employment agreement. The
total fair value of the common stock was $800,000 based on the
closing price of the Company’s common stock on the date of
grant.
On
October 1, 2016, the Company granted 1,000,000 shares of common
stock to a related party as a bonus for services performed pursuant
to an amended employment agreement. The total fair value of the
common stock was $100,000 based on the closing price of the
Company’s common stock on the date of grant.
In
addition, on October 1, 2016, the Company granted a total of
2,000,000 shares of common stock to a related party for services
performed pursuant to their previous employment agreement. The
total fair value of the common stock was $200,000 based on the
closing price of the Company’s common stock on the date of
grant.
Common Stock Issued for Services (2017)
On December 27, 2017, the Company granted an aggregate of 24,882
shares of common stock to an individual as repayment for travel and
hotel expenses incurred by the individual during a trip to India on
company business.
The total fair value of the common stock
was $89,078 based on the closing price of the Company’s
common stock on the date of grant.
On November 7, 2017, the Company granted 60,000 shares of common
stock to a consultant for services performed.
The total fair
value of the common stock was $79,800 based on the closing price of
the Company’s common stock on the date of grant.
On
August 1, 2017, the Company granted an aggregate of 199,000 shares
of common stock to seven consultants for services performed. The
aggregate fair value of the common stock was $204,970 based on the
closing price of the Company’s common stock on the date of
grant.
On
April 20, 2017, the Company granted an aggregate of 116,000 shares
of common stock to eleven consultants for services performed. The
aggregate fair value of the common stock was $232,893 based on the
closing price of the Company’s common stock on the date of
grant.
On
March 2, 2017, the Company granted 50,000 shares of common stock to
a consultant for services performed. The total fair value of the
common stock was $142,500 based on the closing price of the
Company’s common stock on the date of grant.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
On
March 2, 2017, the Company granted 12,000 shares of common stock to
a consultant for services performed. The total fair value of the
common stock was $34,200 based on the closing price of the
Company’s common stock on the date of grant.
Common Stock Issued for Services (2016)
On
October 19, 2016, the Company granted 10,000 shares of common stock
to a consultant for services performed. The total fair value of the
common stock was $8,500 based on the closing price of the
Company’s common stock on the date of grant.
On
September 28, 2016, the Company granted 600,000 shares of common
stock to a consultant for services performed. The total fair value
of the common stock was $60,000 based on the closing price of the
Company’s common stock on the date of grant.
On
September 28, 2016, the Company granted 600,000 shares of common
stock to another consultant for services performed. The total fair
value of the common stock was $60,000 based on the closing price of
the Company’s common stock on the date of grant.
On
September 28, 2016, the Company granted 600,000 shares of common
stock to a third consultant for services performed. The total fair
value of the common stock was $60,000 based on the closing price of
the Company’s common stock on the date of grant.
On July
1, 2016, the Company granted 500,000 shares of common stock to a
consultant for services performed. The total fair value of the
common stock was $35,000 based on the closing price of the
Company’s common stock on the date of grant.
On July
1, 2016, the Company granted 500,000 shares of common stock to
another consultant for services performed. The total fair value of
the common stock was $35,000 based on the closing price of the
Company’s common stock on the date of grant.
On
March 18, 2016, the Company granted 60,000 shares of common stock
to a consultant for services performed. The total fair value of the
common stock was $5,820 based on the closing price of the
Company’s common stock on the date of grant.
On
March 18, 2016, the Company granted 500,000 shares of common stock
to a consultant for services performed. The total fair value of the
common stock was $48,500 based on the closing price of the
Company’s common stock on the date of grant.
On
March 18, 2016, the Company granted 120,000 shares of common stock
to a consultant for services performed. The total fair value of the
common stock was $11,640 based on the closing price of the
Company’s common stock on the date of grant.
On
February 12, 2016, the Company granted 120,000 shares of common
stock to a consultant for services performed. The total fair value
of the common stock was $5,832 based on the closing price of the
Company’s common stock on the date of grant.
On
February 1, 2016, the Company granted 500,000 shares of common
stock to a consultant for services performed. The total fair value
of the common stock was $22,000 based on the closing price of the
Company’s common stock on the date of grant.
On
February 1, 2016, the Company granted 500,000 shares of common
stock to another consultant for services performed. The total fair
value of the common stock was $22,000 based on the closing price of
the Company’s common stock on the date of grant.
On
February 1, 2016, the Company granted 20,000 shares of common stock
to a consultant for services performed. The total fair value of the
common stock was $880 based on the closing price of the
Company’s common stock on the date of grant.
On
February 1, 2016, the Company granted 60,000 shares of common stock
to a consultant for services performed. The total fair value of the
common stock was $2,640 based on the closing price of the
Company’s common stock on the date of grant.
Capital Contributions
The
Company imputed interest on non-interest bearing, related party
loans, resulting in a total of $421 and $583 of contributed capital
during the years ended December 31, 2017 and 2016,
respectively.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
Note
14 – Common Stock Warrants
Common Stock Warrants Granted (2017)
On
November 10, 2017, the Company sold warrants to purchase 125,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$125,000 in conjunction with the sale of 125,000 shares of common
stock. The relative fair value of the 125,000 common stock warrants
using the Black-Scholes option-pricing model was $172,403, or
$1.37922 per share, based on a volatility rate of 206%, a risk-free
interest rate of 1.67% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
October 24, 2017, the Company sold warrants to purchase 13,333
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$10,000 in conjunction with the sale of 13,333 shares of common
stock. The relative fair value of the 13,333 common stock warrants
using the Black-Scholes option-pricing model was $13,089, or
$0.98167 per share, based on a volatility rate of 206%, a risk-free
interest rate of 1.60% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
September 29, 2017, the Company sold warrants to purchase 300,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$150,000 in conjunction with the sale of 300,000 shares of common
stock. The relative fair value of the 300,000 common stock warrants
using the Black-Scholes option-pricing model was $303,242, or
$1.01081 per share, based on a volatility rate of 206%, a risk-free
interest rate of 1.47% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
September 24, 2017, the Company sold warrants to purchase 133,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$100,000 in conjunction with the sale of 133,000 shares of common
stock. The relative fair value of the 133,000 common stock warrants
using the Black-Scholes option-pricing model was $152,795, or
$1.14884 per share, based on a volatility rate of 206%, a risk-free
interest rate of 1.46% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
September 5, 2017, the Company sold warrants to purchase 40,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$20,000 in conjunction with the sale of 40,000 shares of common
stock. The relative fair value of the 40,000 common stock warrants
using the Black-Scholes option-pricing model was $27,215, or
$0.68039 per share, based on a volatility rate of 207%, a risk-free
interest rate of 1.30% and an expected term of 2.0 years. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
August 2, 2017, the Company sold warrants to purchase 100,000
shares of common stock at $3.00 per share over a two (2) year
period from the date of sale, in exchange for total proceeds of
$50,000 in conjunction with the sale of 100,000 shares of common
stock. The relative fair value of the 100,000 common stock warrants
using the Black-Scholes option-pricing model was $80,872, or
$0.80872 per share, based on a volatility rate of 210%, a risk-free
interest rate of 1.36% and an expected term of 2.0 years.. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On July
7, 2017, the Company sold warrants to purchase 200,000 shares of
common stock at $3.00 per share over a two (2) year period from the
date of sale, in exchange for total proceeds of $100,000 in
conjunction with the sale of 200,000 shares of common stock. The
relative fair value of the 200,000 common stock warrants using the
Black-Scholes option-pricing model was $156,339, or $0.78169 per
share, based on a volatility rate of 209%, a risk-free interest
rate of 1.40% and an expected term of 2.0 years. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
On June
16, 2017, the Company issued warrants to purchase 70,000 shares of
common stock at $3.00 per share over a one (1) year period from the
date of exchange in conjunction with the issuance of 70,000 shares
of common stock in exchange for the settlement of a convertible
note, consisting of $35,000 of principal and $33,250 of interest.
The relative fair value of the 70,000 common stock warrants using
the Black-Scholes option-pricing model was $49,433, or $0.70618 per
share, based on a volatility rate of 211%, a risk-free interest
rate of 1.21% and an expected term of 1.0 year. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
On May
31, 2017, the Company sold warrants to purchase 20,000 shares of
common stock at $3.00 per share over a two (2) year period from the
date of sale, in exchange for total proceeds of $10,000 in
conjunction with the sale of 20,000 shares of common stock. The
relative fair value of the 20,000 common stock warrants using the
Black-Scholes option-pricing model was $8,946, or $0.44730 per
share, based on a volatility rate of 209%, a risk-free interest
rate of 1.28% and an expected term of 2.0 years. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
WEED, INC.
(Formerly
United Mines, Inc.)
Notes
to Financial Statements
For the
Years Ended December 31, 2017 and 2016
On May
31, 2017, the Company sold warrants to purchase 300,000 shares of
common stock at $3.00 per share over a two (2) year period from the
date of sale, in exchange for total proceeds of $150,000 in
conjunction with the sale of 300,000 shares of common stock. The
relative fair value of the 300,000 common stock warrants using the
Black-Scholes option-pricing model was $134,190, or $0.44730 per
share, based on a volatility rate of 209%, a risk-free interest
rate of 1.28% and an expected term of 2.0 years. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
On May
25, 2017, the Company sold warrants to purchase 20,000 shares of
common stock at $3.00 per share over a two (2) year period from the
date of sale, in exchange for total proceeds of $10,000 in
conjunction with the sale of 20,000 shares of common stock. The
relative fair value of the 20,000 common stock warrants using the
Black-Scholes option-pricing model was $5,887, or $0.29434 per
share, based on a volatility rate of 205%, a risk-free interest
rate of 1.30% and an expected term of 2.0 years. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
On May
25, 2017, the Company sold warrants to purchase 100,000 shares of
common stock at $3.00 per share over a two (2) year period from the
date of sale, in exchange for total proceeds of $50,000 in
conjunction with the sale of 100,000 shares of common stock. The
relative fair value of the 100,000 common stock warrants using the
Black-Scholes option-pricing model was $29,434, or $0.29434 per
share, based on a volatility rate of 205%, a risk-free interest
rate of 1.30% and an expected term of 2.0 years. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
On
April 20, 2017, the Company sold warrants to purchase 500,000
shares of common stock at $3.00 per share over a one (1) year
period from the date of sale, in exchange for total proceeds of
$500,000 in conjunction with the sale of 500,000 shares of common
stock. The relative fair value of the 500,000 common stock warrants
using the Black-Scholes option-pricing model was $626,641, or
$1.25328 per share, based on a volatility rate of 202%, a risk-free
interest rate of 1.01% and an expected term of 1.0 year. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
January 23, 2017, the Company sold warrants to purchase 2,000
shares of common stock at $3.00 per share over a one (1) year
period from the date of sale, in exchange for total proceeds of
$4,000 in conjunction with the sale of 2,000 shares of common
stock. The relative fair value of the 2,000 common stock warrants
using the Black-Scholes option-pricing model was $5,106, or
$2.55281 per share, based on a volatility rate of 211%, a risk-free
interest rate of 0.79% and an expected term of 1.0 year. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
January 9, 2017, the Company sold warrants to purchase 50,000
shares of common stock at $3.00 per share over a one (1) year
period from the date of sale, in exchange for total proceeds of
$50,000 in conjunction with the sale of 50,000 shares of common
stock. The relative fair value of the 50,000 common stock warrants
using the Black-Scholes option-pricing model was $108,228, or
$2.16456 per share, based on a volatility rate of 210%, a risk-free
interest rate of 0.82% and an expected term of 1.0 year. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
Common Stock Warrants Granted (2016)
On
October 31, 2016, the Company sold warrants to purchase 50,000
shares of common stock at $1.50 per share over a one (1) year
period from the date of sale, in exchange for total proceeds of
$5,000 in conjunction with the sale of 50,000 shares of common
stock. The relative fair value of the 50,000 common stock warrants
using the Black-Scholes option-pricing model was $914, or $0.01828
per share, based on a volatility rate of 217%, a risk-free interest
rate of 0.66% and an expected term of 1.0 year. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
On
October 25, 2016, the Company sold warrants to purchase 150,000
shares of common stock at $1.50 per share over a one (1) year
period from the date of sale, in exchange for total proceeds of
$50,000 in conjunction with the sale of 150,000 shares of common
stock. The relative fair value of the 150,000 common stock warrants
using the Black-Scholes option-pricing model was $2,725, or
$0.01817 per share, based on a volatility rate of 217%, a risk-free
interest rate of 0.66% and an expected term of 1.0 year. The
proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On
October 19, 2016, the Company sold warrants to purchase 25,000
shares of common stock at $1.50 per share over a one (1) year
period from the date of sale, in exchange for total proceeds of
$5,000 in conjunction with the sale of 25,000 shares of common
stock. The relative fair value of the 25,000 common stock warrants
using the Black-Scholes option-pricing model was $608, or $0.02432
per share, based on a volatility rate of 216%, a risk-free interest
rate of 0.65% and an expected term of 1.0 year. The proceeds
received were allocated between the common stock and warrants on a
relative fair value basis.
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note
1 – Nature of Business and Significant Accounting
Policies
Nature of Business
WEED, Inc. (the
“Company”), (formerly United Mines, Inc.) was
incorporated under the laws of the State of Arizona on
August 20, 1999 (“Inception Date”) as Plae,
Inc. to engage in the exploration of gold and silver mining
properties. On November 26, 2014, the Company was renamed
from United Mines, Inc. to WEED, Inc. and was repurposed to pursue
a business involving the purchase of land, and building Commercial
Grade “Cultivation Centers” to consult, assist, manage
& lease to Licensed Dispensary owners and organic grow
operators on a contract basis, with a concentration on the legal
and medical marijuana sector. The Company’s plan is to become
a True “Seed-to-Sale” company providing infrastructure,
financial solutions and real estate options in this new emerging
market. The Company, under United Mines, was formerly in the
process of acquiring mineral properties or claims located in the
State of Arizona, USA. The name was previously changed on February
18, 2005 to King Mines, Inc. and then subsequently changed to
United Mines, Inc. on March 30, 2005. The Company trades
on the OTC Pink Sheets under the stock symbol:
BUDZ.
On April 20, 2017,
the Company acquired Sangre AT, LLC, a Wyoming company doing
business as Sangre AgroTech. (“Sangre”). Sangre is a
plant genomic research and breeding company comprised of
top-echelon scientists with extensive expertise in genomic
sequencing, genetics-based breeding, plant tissue culture, and
plant biochemistry, utilizing the most advanced sequencing and
analytical technologies and proprietary bioinformatics data systems
available. Sangre is working on a cannabis genomic study to
complete a global genomic classification of the cannabis plant
genus.
The accompanying
financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America. These statements reflect all adjustments, consisting of
normal recurring adjustments, which in the opinion of management
are necessary for fair presentation of the information contained
therein.
The Company has a
calendar year end for reporting purposes.
Basis of Presentation:
The accompanying
condensed consolidated balance sheet at December 31, 2017, has been
derived from audited consolidated financial statements and the
unaudited condensed consolidated financial statements as of March
31, 2018 and 2017, have been prepared in accordance with generally
accepted accounting principles generally accepted in the United
States of America (“GAAP”) for interim financial
information and with the instructions to Form 10-Q and Article 8 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements and should be read in conjunction with the audited
consolidated financial statements and related footnotes included in
our Registration Statement on Form S-1 for the year ended December
31, 2017 (the “2017 Annual Report”), filed with the
Securities and Exchange Commission (the “SEC”). It is
management’s opinion, however, that all material adjustments
(consisting of normal recurring adjustments), have been made which
are necessary for a fair financial statements presentation. The
condensed consolidated financial statements include all material
adjustments (consisting of normal recurring accruals) necessary to
make the condensed consolidated financial statements not misleading
as required by Regulation S-X, Rule 10-01. Operating results for
the three months ended March 31, 2018, are not necessarily
indicative of the results of operations expected for the year
ending December 31, 2018.
Principles of Consolidation
The accompanying
consolidated financial statements include the accounts of the
following entities, all of which are under common control and
ownership:
|
|
State
of
|
|
|
|
Abbreviated
|
Name of
Entity
|
|
Incorporation
|
|
Relationship
(1)
|
|
Reference
|
WEED,
Inc.
|
|
Nevada
|
|
Parent
|
|
WEED
|
Sangre AT, LLC
(2)
|
|
Wyoming
|
|
Subsidiary
|
|
Sangre
|
(1)
Sangre is a wholly-owned subsidiary of
WEED, Inc.
(2)
Sangre AT, LLC is doing business as
Sangre AgroTech.
The consolidated
financial statements herein contain the operations of the
wholly-owned subsidiary listed above. All significant inter-company
transactions have been eliminated in the preparation of these
financial statements. The parent company, WEED and subsidiary,
Sangre will be collectively referred to herein as the
“Company”, or “WEED”. The Company's
headquarters are located in Tucson, Arizona and its operations are
primarily within the United States, with minimal operations in
Australia.
These statements
reflect all adjustments, consisting of normal recurring
adjustments, which in the opinion of management are necessary for
fair presentation of the information contained
therein.
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note
1 – Nature of Business and Significant Accounting Policies
(continued)
Use of Estimates
The preparation of
financial statements in conformity with accounting principles
generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, and the disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
Under FASB ASC
820-10-05, the Financial Accounting Standards Board establishes a
framework for measuring fair value in generally accepted accounting
principles and expands disclosures about fair value measurements.
This Statement reaffirms that fair value is the relevant
measurement attribute. The adoption of this standard did not have a
material effect on the Company’s financial statements as
reflected herein. The carrying amounts of cash, prepaid expenses
and accrued expenses reported on the balance sheet are estimated by
management to approximate fair value primarily due to the short
term nature of the instruments.
Impairment of Long-Lived Assets
Long-lived assets
held and used by the Company are reviewed for possible impairment
whenever events or circumstances indicate the carrying amount of an
asset may not be recoverable or is impaired. Recoverability is
assessed using undiscounted cash flows based upon historical
results and current projections of earnings before interest and
taxes. Impairment is measured using discounted cash flows of future
operating results based upon a rate that corresponds to the cost of
capital. Impairments are recognized in operating results to the
extent that carrying value exceeds discounted cash flows of future
operations.
Basic and Diluted Loss Per Share
The basic net loss
per common share is computed by dividing the net loss by the
weighted average number of common shares outstanding. Diluted net
loss per common share is computed by dividing the net loss adjusted
on an “as if converted” basis, by the weighted average
number of common shares outstanding plus potential dilutive
securities. For the periods presented, potential dilutive
securities had an anti-dilutive effect and were not included in the
calculation of diluted net loss per common
share.
Stock-Based Compensation
Under FASB ASC
718-10-30-2, all share-based payments to employees, including
grants of employee stock options, to be recognized in the income
statement based on their fair values. Pro forma disclosure is no
longer an alternative.
Revenue Recognition
On January 1, 2018,
the Company adopted the new revenue recognition standard ASU
2014-09, “Revenue from Contracts with Customers (Topic
606)”, using the cumulative effect (modified retrospective)
approach. Modified retrospective adoption requires entities to
apply the standard retrospectively to the most current period
presented in the financial statements, requiring the cumulative
effect of the retrospective application as an adjustment to the
opening balance of retained earnings at the date of initial
application. No cumulative-effect adjustment in retained earnings
was recorded as the Company’s has no historical revenue. The
impact of the adoption of the new standard was not material to the
Company’s condensed consolidated financial statements for the
three months ended March 31, 2018. The Company expects the impact
to be immaterial on an ongoing basis.
The primary change
under the new guidance is the requirement to report the allowance
for uncollectible accounts as a reduction in net revenue as opposed
to bad debt expense, a component of operating expenses. The
adoption of this guidance did not have an impact on our condensed
consolidated financial statements, other than additional financial
statement disclosures. The guidance requires increased disclosures,
including qualitative and quantitative disclosures about the
nature, amount, timing and uncertainty of revenue and cash flows
arising from contracts with customers.
The Company
operates as one reportable segment.
Sales on fixed
price contracts are recorded when services are earned, the earnings
process is complete or substantially complete, and the revenue is
measurable and collectability is reasonably assured. Provisions for
discounts and rebates to customers, estimated returns and
allowances, and other adjustments are provided for in the same
period the related sales are recorded. The Company will defer any
revenue from sales in which payment has been received, but the
earnings process has not occurred. Sales have not yet
commenced.
Advertising and Promotion
All costs
associated with advertising and promoting products are expensed as
incurred. These expenses were $498 and $1,621 for the three months
ended March 31, 2018 and 2017, respectively.
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note
1 – Nature of Business and Significant Accounting Policies
(continued)
Recently Issued Accounting Pronouncements
In May 2014, the
FASB issued Accounting Standards Update ASU 2014-09, “Revenue
from Contracts with Customers (Topic 606),” which supersedes
nearly all existing revenue recognition guidance, including
industry-specific guidance. Subsequent to the issuance of ASU No.
2014-09, the FASB clarified the guidance through several Accounting
Standards Updates; hereinafter the collection of revenue guidance
is referred to as “Topic 606.” Topic 606 is based on
the principle that an entity should recognize revenue to depict the
transfer of goods or services to customers in an amount that
reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. Topic 606 also
requires additional disclosures about the nature, amount, timing
and uncertainty of revenue and cash flows arising from customer
contracts, including significant judgments and changes in judgments
and assets recognized from costs incurred to fulfill a contract.
The Company adopted Topic 606 on January 1, 2018 using the modified
retrospective transition method; accordingly, Topic 606 has been
applied to the fiscal 2018 financial statements and disclosures
going forward, but the comparative information has not been
restated and continues to be reported under the accounting
standards in effect for those periods. We expect the impact of the
adoption of Topic 606 to be immaterial to our operating results on
an ongoing basis.
In February 2016,
the FASB issued ASU 2016-02, Leases. The standard requires lessees
to recognize lease assets and lease liabilities on the consolidated
balance sheet and requires expanded disclosures about leasing
arrangements. We plan to adopt the standard on January 1, 2019. We
are currently assessing the impact that the new standard will have
on our consolidated financial statements, which will consist
primarily of a balance sheet gross up of our operating leases to
show equal and offsetting lease assets and lease
liabilities.
Note
2 – Going Concern
As shown in the
accompanying financial statements, the Company has no revenues,
incurred net losses from operations resulting in an accumulated
deficit of $24,516,978, and had negative working capital of
approximately $1,052,409 at March 31, 2018. These factors
raise substantial doubt about the Company’s ability to
continue as a going concern. Management is actively pursuing new
products and services to begin generating revenues. In addition,
the Company is currently seeking additional sources of capital to
fund short term operations. The Company, however, is dependent upon
its ability to secure equity and/or debt financing and there are no
assurances that the Company will be successful; therefore, without
sufficient financing it would be unlikely for the Company to
continue as a going concern.
The financial
statements do not include any adjustments that might result from
the outcome of any uncertainty as to the Company’s ability to
continue as a going concern. The financial statements also do not
include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and
classifications of liabilities that might be necessary should the
Company be unable to continue as a going
concern.
Note 3 – Business
Combination
Business Combination – Sangre AT, LLC, April 20,
2017
On April 20, 2017,
the Company closed on a Share Exchange Agreement
(“SEA”) with Sangre AT, LLC, a Wyoming company doing
business as Sangre AgroTech. Pursuant to the SEA, we purchased all
of the outstanding membership interests in consideration for a
total of 500,000 shares of common stock to seven individuals,
valued at $1,003,850 based on the closing price of the
Company’s common stock on the date of
grant.
Sangre is a plant
genomic research and breeding company comprised of top-echelon
scientists with extensive expertise in genomic sequencing,
genetics-based breeding, plant tissue culture, and plant
biochemistry, utilizing the most advanced sequencing and analytical
technologies and proprietary bioinformatics data systems available.
Sangre is working on a cannabis genomic study to complete a global
genomic classification of the cannabis plant
genus.
In connection with
the SEA, two members of Sangre and the Company entered into
Consulting Agreements, pursuant to which the members of Sangre
agreed to provide consulting services to the Company for a period
of one year following closing, with the option to extend for a
two-year period in annual increments, upon mutual written agreement
by both parties. Pursuant to the agreement, the members were each
awarded 50,000 shares of common stock with the issuances deferred
until January 1, 2018.
This acquisition
was accounted for as a business combination under the purchase
method of accounting, given that substantially all of the
Company’s assets and ongoing operations were acquired. The
purchase resulted in $1,015,910 of goodwill, which was subsequently
impaired and expensed in the current period. According to the
purchase method of accounting, the Company recognized the
identifiable assets acquired and liabilities assumed as
follows:
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note
3 – Business Combination (continued)
|
|
|
|
Consideration:
|
|
Fair value of
common stock paid at closing
(1)
|
$
1,003,850
|
Short term
liabilities assumed
(2)
|
25,929
|
Fair Value of total
consideration exchanged
|
1,029,779
|
Cash
|
54
|
Fixed
assets
|
13,815
|
Total fair value of
assets assumed
|
13,869
|
Consideration paid in excess of fair value
(Goodwill)
(3)
|
$
1,015,910
|
|
(1)
Consideration
consisted of 500,000 shares of the Company’s common stock
valued at $1,003,850 based on the closing price of the
Company’s common stock on the date of
grant.
|
|
|
(2)
Assumed liabilities
consisted of trade payables and outstanding credit card
debt.
|
|
|
(3)
The consideration
paid in excess of the net fair value of assets acquired and
liabilities assumed has been recognized as goodwill and was
expensed due to economic uncertainties and the absence of a revenue
stream.
|
Management believes
the intangible assets acquired, consisting of the personnel of
Sangre, will enable the Company to launch their business model and
take advantage of additional growth
opportunities.
The unaudited
supplemental pro forma results of operations of the combined
entities had the dates of the acquisitions been January 1, 2017 are
as follows:
|
For the
Three-Months Ended March 31, 2017
|
Revenue
|
$
-
|
Expenses
|
663,332
|
Net Operating
Loss
|
(663,332
)
|
Net
Loss
|
(664,716
)
|
Weighted Average
Number of Common Shares Outstanding – Basic and
Diluted
|
103,893,921
|
Net loss per share
– basic and diluted
|
$
(0.01
)
|
Note
4 – Related Party
Notes Payable
From time to time,
the Company has received short term loans from officers and
directors as disclosed in Note 8 below.
Capital Contributions
The Company imputed
interest on non-interest bearing, related party loans, resulting in
a total of $0 and $151 of contributed capital during the three
months ended March 31, 2018 and 2017,
respectively.
Common Stock Issued for Bartered Assets
On January 18,
2017, the Company exchanged 66,000 units, consisting of 66,000
shares of common stock and warrants to purchase 66,000 shares of
common stock at an exercise price of $3.00 per share, exercisable
until January 18, 2018, in exchange for a 2017 Audi Q7
and a 2017 Audi A4 driven by the Officers. The total fair
value received, based on the market price of the stock at $4.02 per
share, was allocated to the $105,132 purchase price of the vehicles
and the $160,188 excess value of the common stock and warrants was
expensed as stock-based compensation.
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note
4 – Related Party (continued)
Common Stock
On August 1, 2017,
the Company granted 150,000 shares of common stock to Mary
Williams, a principal of Sangre AT, LLC, for services performed.
The fair value of the common stock was $154,500 based on the
closing price of the Company’s common stock on the date of
grant.
On January 7, 2017,
the Company granted 50,000 shares of common stock to Pat Williams.
PhD, a principal of Sangre AT, LLC, for services performed. The
total fair value of the common stock was $210,250 based on the
closing price of the Company’s common stock on the date of
grant.
A
total of $75,831 and $179,331 of officer compensation was unpaid
and outstanding at March 31, 2018 and 2017,
respectively.
Stock Options Issued for Services – related party
(2018)
On February 1,
2018, in connection with executive employment agreements, the
Company granted non-qualified options to purchase an aggregate of
6,000,000 shares of the Company’s common stock at the
exercise price of $10.55 per share. The options shall become
exercisable at the rate of 1/3 upon the six-month anniversary, 1/3
upon the one-year anniversary and 1/3 upon the second anniversary
of the grant. The options were valued at $45,987,970 using the
Black-Scholes option pricing model. The Company recognized expense
of approximately $3,653,839 relating to these options during the
three-months ended March 31, 2018.
Note
5 – Fair Value of Financial Instruments
Under FASB ASC
820-10-5, fair value is defined as the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (an
exit price). The standard outlines a valuation framework and
creates a fair value hierarchy in order to increase the consistency
and comparability of fair value measurements and the related
disclosures. Under GAAP, certain assets and liabilities must be
measured at fair value, and FASB ASC 820-10-50 details the
disclosures that are required for items measured at fair
value.
The Company has
certain financial instruments that must be measured under the new
fair value standard. The Company’s financial assets and
liabilities are measured using inputs from the three levels of the
fair value hierarchy. The three levels are as
follows:
Level 1 - Inputs
are unadjusted quoted prices in active markets for identical assets
or liabilities that the Company has the ability to access at the
measurement date.
Level 2 - Inputs
include quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than
quoted prices that are observable for the asset or liability (e.g.,
interest rates, yield curves, etc.), and inputs that are derived
principally from or corroborated by observable market data by
correlation or other means (market corroborated
inputs).
Level 3 -
Unobservable inputs that reflect our assumptions about the
assumptions that market participants would use in pricing the asset
or liability.
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note
5 – Fair Value of Financial Instruments
(continued)
The following
schedule summarizes the valuation of financial instruments at fair
value on a recurring basis in the balance sheets as of March 31,
2018 and 2017, respectively:
Fair Value
Measurements at December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
Cash
|
$
161,178
|
$
-
|
$
-
|
Total
assets
|
161,178
|
-
|
-
|
Liabilities
|
|
|
|
Notes payable,
related parties
|
-
|
49,000
|
-
|
Notes
payable
|
-
|
475,000
|
-
|
Total
liabilities
|
-
|
524,000
|
-
|
|
|
|
|
|
$
161,178
|
$
524,000
|
$
-
|
Fair Value
Measurements at December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
Cash
|
$
105,461
|
$
-
|
$
-
|
Total
assets
|
105,461
|
-
|
-
|
Liabilities
|
|
|
|
Notes payable,
related parties
|
-
|
56,000
|
-
|
Notes
payable
|
-
|
1,370,056
|
-
|
Total
liabilities
|
-
|
1,426,056
|
-
|
|
|
|
|
|
$
105,461
|
$
1,426,056
|
$
-
|
The fair values of
our related party debts are deemed to approximate book value and
are considered Level 2 inputs as defined by ASC Topic
820-10-35.
There were no
transfers of financial assets or liabilities between Level 1, Level
2 and Level 3 inputs for the three months ended
March 31, 2018 and the year ended December 31,
2017.
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note
6 – Investment in Land and Property
On July 26, 2017,
the Company closed on the purchase of property, consisting of a
home, recreational facility and RV park located at 5535 State
Highway 12 in La Veta, Colorado to be developed into a bioscience
center. The home has 4 Bedrooms and 2 Baths, and the recreational
facility has showers, laundry, and reception area with an
additional equipment barn attached, in addition to another facility
with 9,500 square feet. The RV Park has 24 sites with full hook-ups
including water, sewer, and electric, which the Company plans to
convert into a series of small research pods. Under the terms of
the purchase agreement, the Company paid $525,000 down, including
25,000 shares of our common stock, and Sangre took immediate
possession of the property. Under the terms of the original
purchase agreement, the Company was obligated to pay an additional
$400,000 in cash and issue an additional 75,000 shares of our
common stock over the next two years in order to pay the entire
purchase price. On January 12, 2018, the Company entered into an
Amendment No. 1 to the $475,000 principal amount promissory note
issued by the Company to the seller of the property, under which
both parties agreed to amend the purchase and the promissory note
to allow the Company to payoff the note in full if it paid $100,000
in cash on or before January 15, 2018 and issued the seller 125,000
shares of common stock, restricted in accordance with Rule 144, on
before January 20, 2018. Through an escrow process, the Company
paid the seller $100,000 in cash and issued him 125,000 shares of
common stock in accordance with the Amendment No. 1, in exchange
for a full release of the deed of trust that was securing the
promissory note, on January 17, 2018. As a result, the $475,000
principal promissory note issued to the seller was deemed
paid-in-full and fully satisfied and the Company owned the property
without encumbrances as of that date. The Company recorded a loss
on extinguishment of debt of approximately $1,065,000 based on the
fair value of the consideration paid and the carrying value of the
note payable on the settlement date. The total purchase price was
as follows:
|
|
|
|
Consideration:
|
|
Common stock payment of 25,000 shares
(1)
|
$
30,000
|
Cash payment of
down payment
|
50,000
|
Cash paid at
closing
|
444,640
|
Short term liabilities assumed and paid at
closing
(2)
|
5,360
|
Note payable
(3)
|
475,000
|
Total
purchase price
|
$
1,005,000
|
|
(1)
Consideration consisted of an advance
payment of 25,000 shares of the Company’s common stock valued
at $30,000 based on the closing price of the Company’s common
stock on the July 18, 2017 date of grant.
|
|
|
(2)
Purchaser’s shares of closing
costs, including the seller’s prepaid property
taxes.
|
|
|
(3)
As noted above, the note was settled
with a payment of $100,000 and the issuance of 125,000 shares of
common stock.
|
In January 2018,
the Company closed on the purchase of property, consisting of a
condominium in La Veta, Colorado to house Company personnel and
consultants for total consideration approximating $140,000, which
was paid in cash at the time of closing. The home has 3 bedrooms
and 2.5 gaths.
Sangre
took immediate possession of the property. La Veta, Colorado is a
small town and rental or short term housing is very difficult to
obtain.
In February 2018,
the Company closed on the purchase of property, consisting of a
home in La Veta, Colorado to house Company personnel and
consultants for total consideration approximating $1,200,000. The
home has 5 Bedrooms and 3 Baths. Under the terms of the purchase
agreement, the Company paid $150,000 down, entered into a note
payable in the amount of approximately $1,041,000 (see Note
9). The Company secured a below-market interest rate of 1.81%
based on the short-term nature of the term (due on August 15,
2018). Sangre took immediate possession of the property. La Veta,
Colorado is a small town and rental or short term housing is very
difficult to obtain.
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note
7 – Property and Equipment
Property and
equipment consist of the following at March 31, 2018 and December
31, 2017, respectively:
|
|
|
|
|
|
Property
improvements
|
28,934
|
28,934
|
Automobiles
|
105,132
|
105,132
|
Office
equipment
|
4,934
|
4,934
|
Lab
equipment
|
15,202
|
15,202
|
Property
(1)
|
891,250
|
2,249,916
|
Property and
equipment, gross
|
1,045,452
|
2,404,118
|
Less accumulated
depreciation
|
(45,040
)
|
(86,198
)
|
Property and
equipment, net
|
$
1,000,412
|
$
2,317,920
|
(1) During
February 2018, the Company purchased property in La Veta, Colorado
for approximately $1,300,000 (see Note 9).
Non-depreciable
land with an appraised value of $113,750 was acquired with the La
Veta property on July 26, 2017.
Non-depreciable
land with an appraised value $11,692 and $10,958 was acquired with
the condo and house located in La Veta, Co. in January and February
2018, respectively (see Note
6).
Depreciation and
amortization expense totaled $41,158 and $4,238 for the three
months ended March 31, 2018 and 2017,
respectively.
Note
8 – Notes Payable, Related Parties
Notes payable,
related parties consist of the following at March 31, 2018
and December 31, 2017, respectively:
|
|
|
On various dates,
the Company received advances from the Company’s CEO, Glenn
Martin. Mr. Martin owns approximately 56.2% of the Company’s
common stock at March 31, 2018. The unsecured non-interest-bearing
loans were due on demand. A detailed list of advances and
repayments follows:
|
$
7,000
|
$
-
|
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note
8 – Notes Payable, Related Parties
(continued)
On December 29,
2017, the Company received an unsecured loan, bearing interest at
2% in the amount of $37,000, due on demand from Dr. Pat Williams,
PhD. The largest aggregate amount outstanding was $37,000 during
the periods ended December 31, 2017 and December 31, 2016. Mr.
Williams is a founding member and principal of our wholly-owned
subsidiary, Sangre AT, LLC
|
37,000
|
37,000
|
On April 12, 2010,
the Company received an unsecured, non-interest-bearing loan in the
amount of $2,000, due on demand from Robert Leitzman. Interest is
being imputed at the Company’s estimated borrowing rate, or
10% per annum. The largest aggregate amount outstanding was $2,000
during the periods ended September 30, 2017 and December 31, 2016.
Mr. Leitzman owns less than 1% of the Company’s common stock,
however, the Mr. Leitzman is deemed to be a related party given the
non-interest-bearing nature of the loan and the materiality of the
debt at the time of origination.
|
2,000
|
2,000
|
Over various dates
in 2011 and 2012, the Company received unsecured loans in the
aggregate amount of $10,000, due on demand, bearing interest at
10%, from Sandra Orman. The largest aggregate amount outstanding
was $10,000 during the periods ended September 30, 2017 and
December 31, 2016. Mrs. Orman owns less than 1% of the
Company’s common stock, however, Mrs. Orman is deemed to be a
related party given the nature of the loan and the materiality of
the debt at the time of origination.
|
10,000
|
10,000
|
Notes payable,
related parties
|
$
56,000
|
$
49,000
|
|
|
|
The Company
recorded interest expense in the amount of $193 and $509 for the
three months ended March 31, 2018 and 2017, respectively,
including imputed interest expense in the amount of $0 and $151
during such periods related to notes payable, related
parties.
Note
9 – Notes Payable
Note payable
consist of the following at March 31, 2018 and December 31, 2017,
respectively:
|
|
|
On July 26, 2017,
the Company issued a $475,000 note payable, bearing interest at 5%
per annum, to A.R. Miller (“Miller Note”) pursuant to
the purchase of land and property in La Veta, Colorado. The note is
to be paid in four consecutive semi-annual installments in the
amount of $118,750 plus accrued interest commencing on January 26,
2018 and continuing on the 26th day of July and the 26th day of
January each year until the debt is repaid on July 26, 2019. The
note carries a late fee of $5,937.50 in the event any installment
payment is more than 30 days late, and upon default the interest
rate shall increase to 12% per annum. During the three months ended
March 31, 2018, the Company issued 125,000 shares of common stock,
valued at $1,450,000 based on the closing price on the measurement
date. Accordingly, the Company recorded a loss on extinguishment of
$1,064,719.
|
-
|
475,000
|
During the three
months ended March 31, 2018, the Company issued 125,000 shares of
common stock, valued at $1,450,000 based on the closing market
price on the measurement date. Accordingly, the Company recorded a
loss on debt extinguishment of $1,064,719.
|
|
|
On February 16, 2018, the Company issued
a $1,040,662 note payable, bearing interest at 1.81% per annum (the
low interest rate was due to the short term nature of the note
– six months. See Note 6), to Craig and Carol Clark
(“Clark Note”) pursuant to the purchase of land and
property in La Veta, Colorado. The note is to be paid in
consecutive monthly installments in the amount of $5,000, including
accrued interest commencing on March 15, 2018 and continuing
through August 15, 2018. The note carries a late fee of 3% in the
event any installment payment is more than 10 days late, and upon
default the interest rate shall increase to 10% per
annum.
|
1,037,056
|
-
|
|
$
1,037,056
|
$
475,000
|
The Company
recognized interest expense of $2,200 and $-0- related to the note
payable for the three months ended March 31, 2018 and 2017,
respectively.
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note 10 – Commitments and
Contingencies
On November 8,
2016, the Company entered into an agreement with Gregory
DiPaolo’s Pro Am Golf, LLC to acquire improved property
located in Westfield, New York. The total purchase price of
$1,600,000 is to be paid with a deposit of 50,000 shares of common
stock, followed by cash of $1,250,000 and 300,000 shares of the
Company’s common stock to be delivered at closing. The
deposit of 50,000 shares issued as a deposit was $42,500 based on
the closing price of the Company’s common stock on the date
of grant. Subsequently, we entered into an amended Purchase and
Sale Agreement on October 24, 2017, under which we amended the
total purchase price to Eight Hundred Thousand Dollars ($800,000)
and forfeited our previous deposit of stock. Under the terms of the
amended agreement, we paid an additional Ten Thousand Dollar
($10,000) deposit on October 26, 2017, with the remaining purchase
price to be paid on or before the date closing date, which was
scheduled on May 1, 2018. The property is approximately 43 acres
and has unlimited water extraction rights from the State of New
York. We plan to use this property as our inroads to the New York
hemp and infused beverage markets in the future. There are no
current plans or budget to proceed with operations in New York, and
there will not be until proper funding is secured after acquiring
this property.
On January 19,
2018, the Company was sued in the United States District Court for
the District of Arizona (
William
Martin v. WEED, Inc..
, Case No. 4:18-cv-00027-RM) by the
listed Plaintiff. The Company was served with the Verified
Complaint on January 26, 2018. The Complaint alleges claims for
breach of contract-specific performance, breach of
contract-damages, breach of the covenant of good faith and fair
dealing, conversion, and injunctive relief. In addition to the
Verified Complaint, the Company was served with an application to
show cause for a temporary restraining order. The Verified
Complaint alleges the Company entered into a contract with the
Plaintiff on October 1, 2014 for the Plaintiff to perform certain
consulting services for the Company in exchange for 500,000 shares
of its common stock up front and an additional 700,000 shares of
common stock to be issued on May 31, 2015. The Plaintiff alleges he
completed the requested services under the agreement and received
the initial 500,000 shares of common stock, but not the additional
700,000 shares. The request for injunctive relief asks the Court to
Order the Company to issue the Plaintiff 700,000 shares of its
common stock, and possibly include them in its Registration
Statement on Form S-1, or, in the alternative, issue the shares and
have them held by the Court pending resolution of the litigation,
or, alternatively, sell the shares and deposit the sale proceeds in
an account that the Court will control. The hearing on the
Temporary Restraining Order occurred on January 29, 2018. On
January 30, 2018, the Court issued its ruling denying the
application for a Temporary Restraining Order. Currently, there is
no further hearing scheduled in this matter
.
On February 13, 2018,
the Company filed an Answer to the Verified Complaint and
Counterclaim. On February 15, 2018, the Company filed a Motion to
Dismiss the Verified Complaint. On February 23, 2018, the Company
filed a Motion to Amend Counterclaim to add W. Martin’s wife,
Joanna Martin as a counterdefendant. On March 9, 2018, William
Martin filed a Motion to Dismiss the Counterclaim. On March 12,
2018, William Martin filed a Motion to Amend the Verified Complaint
to, among other things, add claims against Glenn Martin and Nicole
and Ryan Breen. On March 27, 2018, the Court granted both William
Martin and WEED, Inc.’s Motions to Amend. On March 27, 2018,
the Company filed an Amended Counterclaim adding Joanna Martin. On
April 2, 2018, the Company filed a Motion to Amend our Counterclaim
to add a breach of contract claim. On April 10, 2018, the Company
filed an Answer to First Amended Verified Complaint. On April 23,
2018, Glenn Martin and Nicole and Ryan Breen filed their Answer to
the First Amended Complaint. On May 31, 2018, the Court issued an
Order: (a) granting the Company’s Motion to Dismiss thereby
dismissing the Plaintiff’s claims for breach of the covenant
of good faith and fair dealing and the claim for conversion, (b)
denying William Martin’s Motion to Dismiss the counterclaim
as to the claims for fraudulent concealment and fraudulent
misrepresentation, but granting the Motion to Dismiss only as to
the claim for fraudulent nondisclosure, and (c) granting the
Company’s Motion to Amend its Counterclaim to add a breach of
contract claim. On June 1, 2018, William Martin and his wife filed
their Answer to the First Amended Counterclaim. On June 1, 2018,
William Martin and his wife filed their Answer to the Second
Amended Counterclaim. In addition to the above pleadings and
motions, the parties have exchanged disclosure statements and
served and responded to written discovery. The Company
denies the Plaintiff’s allegations in the Verified Complaint
in their entirety and plan to vigorously defend against this
lawsuit.
Note
11 – Stockholders’ Equity
Preferred Stock
On December 5,
2014, the Company amended the Articles of Incorporation, pursuant
to which 20,000,000 shares of “blank check” preferred
stock with a par value of $0.001 were authorized. No series of
preferred stock has been designated to date.
Common Stock
On December 5,
2014, the Company amended the Articles of Incorporation, and
increased the authorized shares to 200,000,000 shares of $0.001 par
value common stock.
2018 Common Stock Activity
Common Stock Sales (2018)
During the quarter
ended March 31, 2018, the Company issued 699,450 shares of common
stock for proceeds of $1,373,550. In connection with certain of the
share issuances, the Company issued warrants to purchase an
aggregate of 477,500 shares of the Company’s common stock.
Warrants to purchase 262,500 shares have an exercise price of $5.00
per share, exercisable on various dates through March 2019 and
warrants to purchase 215,000 shares have an exercise price of
$12.50 per share and are exercisable on various dates through
January 2020. The proceeds received were allocated between the
common stock and the warrants on a relative fair value
basis.
Common Stock Issued for Services (2018)
During the quarter
ended March 31, 2018, the Company issued an aggregate of 100,000
shares of common stock that were valued at $200,770 and included in
stock subscriptions receivable at December 31,
2017.
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note
11 – Stockholders’ Equity
(continued)
2017 Common Stock Activity
Common Stock Sales
On
March 15, 2017 and March 31, 2017, the Company received an
aggregate $235,000 of advances on the subsequent sale on
April 20, 2017 of 375,000 units at $1.00 per unit, consisting
of 375,000 shares of common stock and warrants to purchase 375,000
shares of common stock at an exercise price of $3.00 per share,
exercisable until April 20, 2018, in exchange for total proceeds of
$375,000. The proceeds received were allocated between the common
stock and warrants on a relative fair value basis. The $235,000 was
presented as a subscriptions payable at March 31,
2017.
On
January 23, 2017, the Company sold 2,000 units at $2.00 per unit,
consisting of 2,000 shares of common stock and warrants to purchase
2,000 shares of common stock at an exercise price of $3.00 per
share, exercisable until January 23, 2018, in exchange for total
proceeds of $4,000. The proceeds received were allocated between
the common stock and warrants on a relative fair value
basis.
On
January 9, 2017, the Company sold 50,000 units at $1.00 per unit,
consisting of 50,000 shares of common stock and warrants to
purchase 50,000 shares of common stock at an exercise price of
$3.00 per share, exercisable until January 9, 2018, in exchange for
total proceeds of $50,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
Warrants Exercised
On
January 7, 2017, a warrant holder exercised warrants to purchase
2,666 shares of common stock at a strike price of $1.50 in exchange
for proceeds of $3,999.
Common Stock Issued for Bartered Assets
On
January 18, 2017, the Company exchanged 66,000 units, consisting of
66,000 shares of common stock and warrants to purchase 66,000
shares of common stock at an exercise price of $3.00 per share,
exercisable until January 18, 2018, in exchange for a
2017 Audi Q7 and a 2017 Audi A4. The total fair
value received, based on the market price of the stock at $4.02 per
share, was allocated to the $105,132 purchase price of the vehicles
and the $160,188 excess value of the common stock and warrants was
expensed as stock-based compensation.
Common Stock Issued for Services
On
March 2, 2017, the Company granted 50,000 shares of common stock to
a consultant for services performed. The total fair value of the
common stock was $142,500 based on the closing price of the
Company’s common stock on the date of grant. The shares were
subsequently issued on April 28, 2017, therefore the issuance was
presented as a subscription payable at March 31,
2017.
On
March 2, 2017, the Company granted 12,000 shares of common stock to
a consultant for services performed. The total fair value of the
common stock was $34,200 based on the closing price of the
Company’s common stock on the date of
grant.
On
January 7, 2017, the Company granted 50,000 shares of common stock
to a consultant for services performed. The total fair value of the
common stock was $210,250 based on the closing price of the
Company’s common stock on the date of
grant.
Common Stock Cancellations
On
January 26, 2017, the Company cancelled a total of 1,000,000 shares
of common stock previously granted to two individuals for
non-performance of services.
Capital Contributions
The Company imputed
interest on non-interest bearing, related party loans, resulting in
a total of $0 and $151 of contributed capital during the three
months ended March 31, 2018 and 2017,
respectively.
Note
12 – Common Stock Warrants and Options
Common Stock Warrants Granted (2018)
See Note 11 for
details on warrants issued during the three-months ended March 31,
2018.
Common Stock Warrants Expired (2018)
A
total of 2,000 warrants expired during the three-months ended March
31, 2018.
Common Stock Warrants Granted (2017)
On January 23,
2017, the Company sold warrants to purchase 2,000 shares of common
stock at $3.00 per share over a one (1) year period from the date
of sale, in exchange for total proceeds of $4,000 in conjunction
with the sale of 2,000 shares of common stock. The relative fair
value of the 2,000 common stock warrants using the Black-Scholes
option-pricing model was $5,106, or $2.55281 per share, based on a
volatility rate of 211%, a risk-free interest rate of 0.79% and an
expected term of 1.0 year. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018
Note
12 – Common Stock Warrants and Options
(continued)
On January 9, 2017,
the Company sold warrants to purchase 50,000 shares of common stock
at $3.00 per share over a one (1) year period from the date of
sale, in exchange for total proceeds of $50,000 in conjunction with
the sale of 50,000 shares of common stock. The relative fair value
of the 50,000 common stock warrants using the Black-Scholes
option-pricing model was $108,228, or $2.16456 per share, based on
a volatility rate of 210%, a risk-free interest rate of 0.82% and
an expected term of 1.0 year. The proceeds received were allocated
between the common stock and warrants on a relative fair value
basis.
Common Stock Warrants Expired
No
warrants were expired or cancelled during the three months ended
March 31, 2017.
Common Stock Warrants Exercised
On January 7, 2017,
a warrant holder exercised warrants to purchase 2,666 shares of
common stock at a strike price of $1.50 in exchange for proceeds of
$3,999.
Common Stock Options (2018)
On February 1,
2018, in connection with executive employment agreements, the
Company granted non-qualified options to purchase an aggregate of
6,000,000 shares of the Company’s common stock at the
exercise price of $10.55 per share. The options shall become
exercisable at the rate of 1/3 upon the six-month anniversary, 1/3
upon the one-year anniversary and 1/3 upon the second anniversary
of the grant. The options were valued at approximately $46,000,000
using the Black-Scholes option pricing model. The Company
recognized expense of approximately $3,653,839 relating to these
options during the three-months ended March 31,
2018.
The assumptions
used in the Black-Scholes model are as follows:
|
For the period
ended
March 31,
2018
|
Risk-free interest
rate
|
1.75
%
|
Expected dividend
yield
|
0
%
|
Expected
lives
|
|
Expected
volatility
|
200
%
|
A
summary of the Company’s stock options activity and related
information is as follows:
|
For the three months ended March 31, 2018
|
|
|
|
|
|
|
Outstanding at the
beginning of year
|
-
|
$
-
|
Granted
|
6,000,000
|
10.55
|
Exercised/Expired/Cancelled
|
-
|
-
|
Outstanding at the
end of year
|
6,000,000
|
$
10.55
|
|
|
|
Exercisable at the
end of year
|
660,000
|
$
10.55
|
Note
13 – Subsequent Events
Common Stock Purchase Agreements
On April 6, 2018,
the Company sold an aggregate of 203,750 shares of its common stock
to four unrelated investors for an aggregate of $407,500, or $2.00
per share.
On May 4, 2018, the
Company sold an aggregate of 200,000 shares of its common stock to
two unrelated investors for an aggregate of $400,000, or $2.00 per
share.
On June 18, 2018,
the Company sold an aggregate of 600,000 shares of its common stock
to two unrelated investors for an aggregate of $600,000, or $1.00
per share.
On June 28, 2018,
the Company sold an aggregate of 650,000 shares of its common stock
to two unrelated investors for an aggregate of $650,000, or $1.00
per share.
WEED,
INC. AND SUBSIDIARY
(Formerly United
Mines, Inc.)
Notes to Financial
Statements
March 31,
2018