Our Management's Discussion and Analysis or Plan of Operations contains not only
statements that are historical facts, but also statements that are
forward-looking. Forward-looking statements are, by their very nature, uncertain
and risky. These risks and uncertainties include international, national and
local general economic and market conditions; demographic changes; our ability
to sustain, manage, or forecast growth; our ability to successfully make and
integrate acquisitions; raw material costs and availability; new product
development and introduction; existing government regulations and changes in, or
the failure to comply with, government regulations; adverse publicity;
competition; the loss of significant customers or suppliers; fluctuations and
difficulty in forecasting operating results; changes in business strategy or
development plans; business disruptions; the ability to attract and retain
qualified personnel; the ability to protect technology; and other risks that
might be detailed from time to time in our filings with the Securities and
Exchange Commission.
Although the forward-looking statements in this Quarterly Report reflect the
good faith judgment of our management, such statements can only be based on
facts and factors currently known by them. Consequently, and because
forward-looking statements are inherently subject to risks and uncertainties,
the actual results and outcomes may differ materially from the results and
outcomes discussed in the forward-looking statements. You are urged to carefully
review and consider the various disclosures made by us in this report and in our
other reports as we attempt to advise interested parties of the risks and
factors that may affect our business, financial condition, and results of
operations and prospects.
Overview
We are an early stage holding company currently focused on the development and
application of cannabis-derived compounds for the treatment of human disease.
Our wholly-owned subsidiary, Sangre AT, LLC ("Sangre"), has begun a planned
five-year Cannabis Genomic Study to complete a genetic blueprint of the Cannabis
plant genus, by creating a global genomic classification of the entire plant. By
targeting cannabis-derived molecules that stimulate the endocannabinoid system,
Sangre's research team plans to develop scientifically-valid and evidence-based
cannabis strains for the production of disease-specific medicines. The goal of
the research is to identify, collect, patent, and archive a collection of
highly-active medicinal strains. We plan to conduct this study only in states
where cannabis has been legalized for medicinal purposes.
Using annotated genomic data and newly generated phenotypic data, Sangre plans
to identify and isolate regions of the plant genome which are related to growth,
synthesis of desired molecules, and drought and pest resistance. This complex
data set would then be utilized in a breeding program to generate and establish
new hybrid cultivars which exemplify the traits that are desired by the medical
and patient community. This breeding program would produce new seed stocks and
clones, which we plan on patenting. If successful this intellectual property
should generate immense value for the Company. After developing a comprehensive
understanding of the annotated genome of a variety of cannabis strains, and
obtaining intellectual property protection over the most promising strains, we
plan move forward either independently or with strategic partners to develop
medicinal products for the treatment of a multitude of human diseases.
Our current, short-term goals relate to the Cannabis Genomic Study and the
resulting development of a variety of new cannabis strains, and, over the next 5
years, we plan to process those results in order to become an international
cannabis research and product development company, with a globally-recognized
brand focusing on building and purchasing labs, land and building commercial
grade "Cultivation Centers" to consult, assist, manage & lease to universities,
state governments, licensed dispensary owners and organic grow operators on a
contract basis with a concentration on the legal and medical cannabis sector..
Our long-term plan is to become a true "Seed-to-Sale" global holding company
providing infrastructure, financial solutions, product development, and real
estate options in this new emerging market. Our long term growth may also come
from the acquisition of synergistic businesses, such as distilleries, to make
anything from infused beverages to super oxygenated water with CBD and THC.
Currently, we have formed WEED Australia Ltd., registered as an unlisted public
company in Australia to address this Global demand. We have also formed WEED
Australia Ltd., registered as an unlisted public company in Australia, to
address future global demand, however the entity has been dormant since its
inception. We will look to conduct future research, marketing, import/exporting,
and manufacturing of our proprietary products on an international level.
In furtherance of our current, short terms goals, Sangre initiated the cannabis
genome project in April 2017, by extracting DNA from seven cannabis strains in
Tucson, Arizona. Sangre followed the initial extraction with a second round of
extractions in July 2017. The extracted DNA will be sequenced by the Sangre team
using a binary sequencing approach based on the use of two distinct sequencing
technologies and a proprietary bioinformatics database, as funds allow.
Following the generation of genomic data, the sequences will be annotated
(compared) against over 300,000 plant genes to elucidate specific de novo
pathways responsible for the synthesis of specific compounds and classes of
compounds.
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Under the genome project directives, additional strains are slated for
sequencing and annotation as part of the overall expansion of this research
project. An integral part of this expansion is the acquisition of additional DNA
extraction, amplification, and sequencing technologies. The expansion also
includes the installation of high-level IT networks for data acquisition,
analysis, and storage.
On July 26, 2017, we acquired a property located in La Veta, Colorado in order
for Sangre to complete its 5-Year, $15+ million Cannabis Genomic Study. The site
includes a 10,000+ sq. ft. building that will house Sangre's genomic research
facility, a 4,000+ square foot building for plant product analytics and plant
product extraction, a 3,500 sq. ft. corporate office center, and 25 RV slots
with full water and electric, which we plan to convert into a series of small
research pods. Under the terms of the purchase agreement, we paid $525,000 down,
along with 25,000 shares of our common stock, and Sangre took immediate
possession of the property. We were obligated to pay an additional $400,000 in
cash and issue an additional 75,000 shares of our common stock over the two next
years in order to pay the entire purchase price. To date we have spent $354,000
renovating the property and an additional $400,000 on extraction and analytical
lab equipment. We plan to complete the property renovations at an estimated cost
of $300,000, if we raise sufficient funding. We will need additional extraction
equipment and analytical lab equipment, totaling approximately $700,000. During
the year ended December 31, 2019, construction in progress in the amount of
$499,695 was fully impaired due to the Company may not receive funds to complete
the research facility center project. There was no work performed in 2019. We
will need to raise additional funds in order to complete the planned renovations
and pay the purchase price for the equipment.
WEED Inc. acquired the property in La Veta, Colorado in order to facilitate the
expansion of the genomic studies and the development of new hybrid strains. The
facility will undergo a re-design and renovation to convert the existing
structures into a world-class genetics research center, once we have sufficient
funds to proceed with the work.
A gene-based breeding program will allow us to root out inferior cultivars and
replace them with fully-validated and patentable cultivars which produce
consistent plant products for the medicinal markets. The gene-based breeding
program will improve cultivars and introduce integrity, stability, and quality
to the market in the following ways:
? accelerated and optimized growth rates; modern genomic resources will enhance
traditional breeding methods
? generate new cultivars, accelerating and perfecting the art of selective
breeding
? provide the ability to assay for specific genes within the crop, establish
strain tracking, and promote market quality assurance
? improved disease, pest, and drought resistance of the Cannabis plant
We believe the gene-based breeding program will facilitate and accelerate:
? improved therapeutic properties, i.e., increased THC/CBD concentration and the
production of specific classes of oils and terpenses
? enhanced opportunities for new drug discovery
? accelerated breeding of super-cultivars: drought, pest, and mold resistant,
increased %THC
? revenue generation through our unique ability to breed and genetically
fingerprint new, super-cultivars: establish strong patent protection; and
provide these cultivars to the market on a favorable cost and royalty basis.
Our goal with this program is to develop a translational breeding program to
establish a new collection of Cannabis cultivars for the Colorado, national, and
international markets. Through the use of genetic screening technology,
cultivars can be up-selected for specific traits and grown to address the needs
of consumers in the medicinal market.
Corporate Overview
We were originally incorporated under the name Plae, Inc., in the State of
Arizona on August 20, 1999. At the time we operated under the name Plae, Inc.,
no business was conducted. No books or records were maintained and no meetings
were held. In essence, nothing was done after incorporation until Glenn E.
Martin took possession of Plae, Inc. in January 2005. On February 18, 2005, the
corporate name was changed to King Mines, Inc. and then subsequently changed to
its current name, United Mines, Inc., on March 30, 2005. No shares were issued
until the Company became United Mines, Inc. From 2005 until 2015, we were an
exploration stage mineral exploration company that owned a number of unpatented
mining claims and Arizona State Land Department claims.
23
On November 26, 2014, our Board of Directors approved the redomestication of our
company from Arizona to Nevada (the "Articles of Domestication"), and approved
Articles of Incorporation in Nevada, which differed from then-Articles of
Incorporation in Arizona, primarily by (a) changing our name from United Mines,
Inc. to WEED, Inc., (b) authorizing Twenty Million (20,000,000) shares of
preferred stock, with blank check rights granted to our Board of Directors, and
(c) authorizing Two Hundred Million (200,000,000) shares of common stock (the
"Nevada Articles of Incorporation"). On December 19, 2014, the holders of a
majority of our outstanding common stock approved the Articles of Domestication
and the Nevada Articles of Incorporation at a Special Meeting of Shareholders.
On January 16, 2015, the Articles of Domestication and the Nevada Articles of
Incorporation went effective with the Secretary of State of the State of Nevada.
On February 2, 2015, our name change to WEED, Inc., and a corresponding ticker
symbol change to "BUDZ" went effective with FINRA and was reflected on the
quotation of our common stock on OTC Markets.
These changes were affected in order to make our corporate name and ticker
symbol better align with our short-term and long-term business focus. Our
current, short-term goals relate to the Cannabis Genomic Study and the resulting
development of a variety of new cannabis strains, and, over the next 5 years, we
plan to process those results in order to become an international cannabis
research and product development company, with a globally-recognized brand
focusing on building and purchasing labs, land and building commercial grade
"Cultivation Centers" to consult, assist, manage & lease to universities, state
governments, licensed dispensary owners and organic grow operators on a contract
basis with a concentration on the legal and medical cannabis sector.
Our long-term plan is to become a true "Seed-to-Sale" global holding company
providing infrastructure, financial solutions, product development, and real
estate options in this new emerging market. Our long term growth may also come
from the acquisition of synergistic businesses, such as distilleries, to make
anything from infused beverages to super oxygenated water with CBD and THC.
Currently, we have formed WEED Australia Ltd., registered as an unlisted public
company in Australia to address this Global demand. We have also formed WEED
Israel Cannabis Ltd., an Israeli corporation, to address future global demand.
We will look to conduct future research, marketing, import/exporting, and
manufacturing of our proprietary products on an international level.
On April 20, 2017, we entered into a Share Exchange Agreement with Sangre AT,
LLC, a Wyoming limited liability company, under which we acquired all of the
issued and outstanding limited liability company membership units of Sangre in
exchange for Five Hundred Thousand (500,000) shares of our common stock,
restricted in accordance with Rule 144. As a result of this agreement, Sangre is
a wholly-owned subsidiary of WEED, Inc.
This discussion and analysis should be read in conjunction with our financial
statements included as part of this Quarterly Report.
Three Months Ended June 30, 2020 compared to Three Months Ended June 30, 2019
Results of Operations
Three Months Ended
June 30,
2020 2019
Revenue $ - $ -
Operating expenses:
General and administrative 73,087 124,928
Professional fees 442,163 7,004,377
Depreciation and amortization 41,224 40,756
Total operating expenses 556,474 7,170,061
Net operating loss (556,474 ) (7,170,061 )
Other Expense
Interest expense (18,039 ) (2,140 )
Other income - 17
Other expense - (476 )
Net loss $ (574,513 ) $ (7,172,660 )
Other Comprehensive Loss 98 (521 )
Comprehensive Loss (574,415 ) (7,173,181 )
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Operating Loss; Net Loss
Our comprehensive loss decreased by $6,598,766, from ($7,173,181) to ($574,415),
from the three months ended June 30, 2019 compared to the three months ended
June 30, 2020. Our operating loss decreased by $6,613,587, from ($7,170,061) to
($556,474) for the same period. The decrease in operating loss and net loss
compared to the same period of the prior year is primarily a result of decreases
in professional fees and general and administrative expenses, offset slightly by
an increase in our interest expense. These changes are detailed below.
Revenue
We have not had any revenues since our inception. We are a company focused on
the medical cannabis sector. In the short-term we plan to conduct Sangre's
Cannabis Genomic Study over the next 5 years and process those result, and in
the long-term is to be a company focused on purchasing 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 (Cannabis) sector. Our
long-term plan is to become a True "Seed-to-Sale" company providing
infrastructure, financial solutions and real estate options in this new emerging
market, worldwide. We plan to make our brand global and therefore we will look
for opportunities to conduct future research, marketing, import and exporting,
and manufacturing of any proprietary products on an international level.
General and Administrative Expenses
General and administrative expenses decreased by $51,841, from $124,928 for the
three months ended June 30, 2019 to $73,087 for the three months ended June 30,
2020, primarily due to decreases in travel, facilities maintenance, and
charitable contribution expenses.
Professional Fees
Our professional fees decreased by $6,562,214 during the three months ended June
30, 2020 compared to the three months ended June 30, 2019. Our professional fees
were $442,163 for the three months ended June 30, 2020 and $7,004,377 for the
three months ended June 30, 2019. These fees are largely related to fees paid
for legal and accounting services, along with compensation to independent
contractors, and decreased significantly primarily as a result of a decrease in
the value of stock-based compensation awards due to our lower stock price. We
expect these fees to vary quarter-to-quarter as our business and stock price
fluctuate if we continue to use stock-based compensation. In the event we
undertake an unusual transaction, such as an acquisition, securities offering,
or file a registration statement, we would expect these fees to substantially
increase during that period.
Depreciation and Amortization
During the three months ended June 30, 2020 we had depreciation and amortization
expense of $41,224, compared to $40,756 in the three months ended June 30, 2019.
Our depreciation and amortization expense primarily relates to our property and
trademark acquisitions.
Interest Expense
Interest expense increased from $2,140 to $18,039 for the three months ended
June 30, 2019 compared to the same period in 2020. Our interest expense
primarily relates to notes payable from attorney and related parties.
Other Income
Other income during the three months ended June 30, 2020 was $0, compared to $17
for the three months ended June 30, 2019. Our other income for the three months
ended June 30, 2019, related to a refund from a merchant.
Other Expense
Other expense decreased from $476 to $0 for the three months ended June 30, 2019
compared to the same period in 2020. Our other expense for the three months
ended June 30, 2019, relates to bank service charges.
25
Six Months Ended June 30, 2020 compared to Six Months Ended June 30, 2019
Results of Operations
Six Months Ended
June 30,
2020 2019
Revenue $ - $ -
Operating expenses:
General and administrative 148,683 310,688
Professional fees 3,420,812 17,913,703
Depreciation and amortization 76,723 81,416
Total operating expenses 3,656,218 18,305,807
Net operating loss (3,656,218 ) (18,305,807 )
Other Expense
Interest expense (22,630 ) (2,389 )
Other income - 1,017
Other expense - (1,956 )
Net loss $ (3,678,848 ) $ (18,309,135 )
Other Comprehensive Loss (625 ) (521 )
Comprehensive Loss (3,679,473 ) (18,309,656 )
Operating Loss; Net Loss
Our comprehensive loss decreased by $14,630,183, from ($18,309,656) to
($3,679,473), from the six months ended June 30, 2019 compared to the six months
ended June 30, 2020. Our operating loss decreased by $14,649,589, from
($18,305,807) to ($3,656,218) for the same period. The decrease in operating
loss and net loss compared to the same period of the prior year is primarily a
result of decreases in professional fees and general and administrative
expenses, offset slightly by an increase in our interest expense. These changes
are detailed below.
Revenue
We have not had any revenues since our inception. We are company focused on the
medical cannabis sector. In the short-term we plan to conduct Sangre's Cannabis
Genomic Study over the next 5 years and process those result, and in the
long-term is to be a company focused on purchasing 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 (Cannabis) sector. Our
long-term plan is to become a True "Seed-to-Sale" company providing
infrastructure, financial solutions and real estate options in this new emerging
market, worldwide. We plan to make our brand global and therefore we will look
for opportunities to conduct future research, marketing, import and exporting,
and manufacturing of any proprietary products on an international level.
General and Administrative Expenses
General and administrative expenses decreased by $162,005, from $310,688 for the
six months ended June 30, 2019 to $148,683 for the six months ended June 30,
2020, primarily due to decreases in travel, facilities maintenance, and
charitable contribution expenses.
26
Professional Fees
Our professional fees decreased by $14,482,891 during the six months ended June
30, 2020 compared to the six months ended June 30, 2019. Our professional fees
were $3,430,812 for the six months ended June 30, 2020 and $17,913,703 for the
six months ended June 30, 2019. These fees are largely related to fees paid for
legal and accounting services, along with compensation to independent
contractors, and decreased significantly primarily as a result of a decrease in
the value of stock-based compensation awards due to our lower stock price. We
expect these fees to vary quarter-to-quarter as our business and stock price
fluctuate if we continue to use stock-based compensation. In the event we
undertake an unusual transaction, such as an acquisition, securities offering,
or file a registration statement, we would expect these fees to substantially
increase during that period.
Depreciation and Amortization
During the six months ended June 30, 2020 we had depreciation and amortization
expense of $76,723, compared to $81,416 in the six months ended June 30, 2019.
Our depreciation and amortization expense primarily relates to our property and
trademark acquisitions.
Interest Expense
Interest expense increased from $2,389 to $22,630 for the six months ended June
30, 2019 compared to the same period in 2020. Our interest expense primarily
relates to notes payable from attorney and related parties.
Other Income
Other income during the six months ended June 30, 2020 was $0, compared to
$1,017 for the six months ended June 30, 2019. Our other income for the six
months ended June 30, 2019, related to a refund from a merchant.
Other Expense
Other expense decreased from $1,956 to $0 for the six months ended June 30, 2019
compared to the same period in 2020. Our other expense for the six months ended
June 30, 2019, relates to bank service charges.
Liquidity and Capital Resources
Introduction
During the six months ended June 30, 2020, because of our operating losses, we
did not generate positive operating cash flows. Our cash on hand as of June 30,
2020 was $8,018 and our monthly cash flow burn rate was approximately $45,000.
Our cash on hand was primarily proceeds from the sales of our securities. We
currently do not believe we will be able to satisfy our cash needs from our
revenues for many years to come.
Our cash, current assets, total assets, current liabilities, and total
liabilities as of June 30, 2020 and December 31, 2019, respectively, are as
follows:
June 30, 2020 December 31, 2019 Change
Cash $ 8,018 $ 2,509 $ (5,509 )
Total Current Assets 174,156 126,310 47,846
Total Assets 1,923,735 1,952,612 (28,877 )
Total Current Liabilities 932,148 752,970 179,178
Total Liabilities $ 932,148 $ 752,970 $ 179,178
Our total assets decreased by $28,877 as of June 30, 2020 as compared to
December 31, 2019. The slight decrease in our total assets between the two
periods was primarily attributed to decreases in our property and equipment, net
(due to depreciation) and our prepaid expenses, partially offset by increases in
our cash and deposits at June 30, 2020 compared to December 31, 2019.
Our current liabilities and total liabilities increased by $179,178, as of June
30, 2020 as compared to December 31, 2019. This increase was due to increases in
accounts payable, accrued officer compensation, notes payable, related party,
accrued expenses, and accrued interest, partially offset by a decrease in notes
payable.
In order to pay our obligations in full or in part when due, we will be required
to raise capital from other sources. There is no assurance, however, that we
will be successful in these efforts.
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Cash Requirements
We had cash available of $8,018 and $2,509 as of June 30, 2020 and December 31,
2019, respectively. Based on our revenues, cash on hand and current monthly burn
rate of approximately $45,000, we will need to continue borrowing from our
shareholders and other related parties, and/or raise money from the sales of our
securities, to fund operations.
Sources and Uses of Cash
Operations
We had net cash used in operating activities of $169,243 for the six months
ended June 30, 2020, as compared to $755,044 for the six months ended June 30,
2019. For the period in 2020, the net cash used in operating activities
consisted primarily of our net loss of ($3,678,848), adjusted by estimated fair
value of stock-based compensation of $2,015,911, estimated value of shares
issued for services of $1,307,700, depreciation and amortization of $76,723, and
imputed interest on RP loans of $12,198, and adjusted by an increase in assets
of prepaid expenses and other assets of $42,337, and increases in liabilities of
accounts payable of $51,105 and accrued expenses of $88,305. For the period in
2019, the net cash used in operating activities consisted primarily of our net
loss of ($18,309,135), offset by estimated fair value of stock-based
compensation of $15,413,319, estimated value of shares issued for services of
$1,709,530, and depreciation and amortization of $81,416, and adjusted by an
increase in prepaid expenses and other assets of $225,057, an increase in
accrued expenses of $46,612, and an increase in accounts payable of $78,958.
Investments
For the six months ended June 30, 2020, we did not have any cash flows in
investing activities. For the period in 2019, the net cash used in investing
activities of $2,979, with the entire amount related to purchases of property
and equipment.
Financing
Our net cash provided by financing activities for the six months ended June 30,
2020 was $174,768, compared to $691,600 for the six months ended June 30, 2019.
For the period in 2020, our financing activities related to proceeds from the
sale of common stock of $95,000, proceeds from notes payable of $2,328, proceeds
from notes payable-related party of $59,500, and stock payable of $40,000,
partially offset by repayments on notes payable of $22,060. For the period in
2019, our financing activities related to proceeds from the sale of common stock
of $350,000, proceeds from notes payable of $234,000, and stock payable of
$107,600.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements.
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