Disclaimer Regarding Forward Looking Statements
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 Registration Statement 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.
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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 is currently being sequenced by the
Sangre team using a binary sequencing approach based on the use of two distinct
sequencing technologies and a proprietary bioinformatics database. 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.
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 by Q3 of 2019, at an
estimated cost of $300,000. 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 is currently under re-design and renovation to convert the existing
structures into a world-class genetics research center.
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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.
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.
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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 Annual Report.
Results of Operations for the Years Ended December 31, 2020 and 2019
Year Ended December 31,
2020 2019
Revenue $ - $ -
Operating expenses:
General and administrative expenses 313,917 969,913
Professional fees 3,616,760 26,287,730
Depreciation and amortization 145,797 159,424
Total operating expenses 4,076,474 27,417,067
Loss from operations (4,076,474 ) (27,417,067 )
Other expense
Interest income - -
Interest expense (40,828 ) (11,672 )
Other income - 1,016
Loss on deposit - (100,000 )
Gain on extinguishment of debt 5,277 -
Gain on extinguishment of debt 46,948 -
Other expense - (1,956 )
Total other expense, net 11,397 (112,612 )
Net income (loss) $ (4,065,077 ) $ (27,529,679 )
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Operating Loss; Net Loss
Our comprehensive net loss decreased by $23,465,700, from ($27,530,288) to
($4,064,588), from the year ended 2019 compared to 2020. Our operating loss
decreased by $23,340,593, from ($27,417,067) to ($4,076,474) for the same
period. The decrease in operating loss is primarily a result of our decreases in
our professional fees and our general and administrative expenses. The decrease
in our net loss is also a result of our operating loss decrease, partially
offset by an increase in interest expense. These changes are detailed below.
Revenue
We have not had any revenues since our inception. Prior to October 1, 2014, we
were an exploration stage mineral exploration company that owned a number of
unpatented mining claims and Arizona State Land Department claims. In late 2014,
we changed our short-term and long-term business focus to 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 $655,996, from $969,913 for the
year ended December 31, 2019 to $313,917 for the year ended December 31, 2020,
primarily due to decreases in our travel and charitable contributions.
Professional Fees
Our professional fees decreased during the year ended December 31, 2020 compared
to the year ended December 31, 2019. Our professional fees were $3,616,760 for
the year ended December 31, 2020 and $26,287,730 for the year ended December 31,
2019. These fees are largely related to fees paid for legal and accounting
services, along with compensation to independent contractors, and increased
primarily as a result of increased stock-based compensation awards and the value
attributed to those shares of stock. We expect the amount of professional fees
we pay in cash to grow steadily as our business expands. However, the amount
attributed to the stock-based compensation could decrease in periods when our
stock price is lower, 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 year ended December 31, 2020, we had depreciation and amortization of
$145,797, compared to $159,424 in the year ended December 31, 2019. The
depreciation and amortization expense in 2020 was related to properties and
trademarks. The depreciation and amortization expense in 2019 was related to the
sale of the two Audi vehicles as a repayment to Nicole Breen.
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Interest Expense
Interest expense increased from ($11,672) to ($40,828) for the year ended
December 31, 2020 compared to the same period in 2019. Our interest expense
primarily relates to interest on short-term loans.
Other Income
In 2020, we had other income of $0 compared to $1,016 in 2019. The other income
in 2019 related to a refund from a merchant.
Loss on Deposit
In 2020, we had loss on deposit of $0, compared to $100,000 in 2019. The loss on
deposit for 2019 period was related to the termination of the exclusive license
and assignment agreement between us and Yissum Research Development Company.
Gain on Extinguishment of Debt
During the year ended December 31, 2020, we had a gain on extinguishment of debt
of $5,277, compared to $0 in the year ended December 31, 2019. The gain on
extinguishment of debt in 2020 was related to shares issued for relief of
payables.
Other Expense
During 2020, we had other expense of $0, compared to $1,956 in 2019. In 2019,
the other expense primarily related to credit card finance charges.
Liquidity and Capital Resources
Introduction
During the years ended December 31, 2020 and 2019, because of our operating
losses, we did not generate positive operating cash flows. Our cash on hand as
of December 31, 2020 was $12,629 and our monthly cash flow burn rate was
approximately $40,000. 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 operations for many years to come.
Our cash, current assets, total assets, current liabilities, and total
liabilities as of December 31, 2020 and 2019, respectively, are as follows:
December 31, December 31,
2020 2019 Change
Cash $ 12,629 $ 2,509 $ 10,120
Total Current Assets 255,134 126,310 128,824
Total Assets 1,818,997 1,952,612 (133,615 )
Total Current Liabilities 937,278 752,970 184,308
Total Liabilities $ 937,278 $ 752,970 184,308
Our current assets increased by $128,824 as of December 31, 2020 as compared to
December 31, 2019, primarily due to increases in cash and deposits. The decrease
in our total assets between the two periods was primarily attributed to a
decrease in our property and equipment, net and depreciation of certain of our
assets.
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Our current liabilities and total liabilities increased by $184,308, as of
December 31, 2020 as compared to December 31, 2019. This increase in liabilities
as of December 31, 2020 was primarily related to increases in our accounts
payable, accrued officer compensation, accrued expenses, accrued interest, and
notes payable, related parties, partially offset by a decrease in our notes
payable, compared to December 31, 2019.
In order to repay our obligations in full or in part when due, we will be
required to raise significant capital from other sources. There is no assurance,
however, that we will be successful in these efforts.
Cash Requirements
We had cash available as of December 31, 2020 of $12,629 and $2,509 on December
31, 2019. Based on our revenues, cash on hand and current monthly burn rate of
approximately $40,000, 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 $430,987 for the year ended
December 31, 2020, as compared to $1,110,597 for the year ended December 31,
2019. In 2020, the net cash used in operating activities consisted primarily of
our net loss of ($4,065,077), offset by estimated fair value of stock-based
compensation of $2,015,911, estimated fair of shares issued for services of
$1,407,200, depreciation and amortization of $145,797, gain on sale of fixed
asset of $46,948, and gain on relief of payable of $5,277, adjusted by an
increases in prepaid expenses and other assets of $118,704, and increases in
accounts payable of $45,073 and accrued expenses of $1782,484. In 2019, the net
cash used in operating activities consisted primarily of our net loss of
($27,529,679), offset by estimated fair value of stock-based compensation of
$22,770,662, estimated fair of shares issued for services of $2,578,250,
depreciation and amortization of $159,423, and impairment of construction in
progress of $499,695 adjusted by an increases in accounts receivable of $801,
accrued expenses of $141,800, and a decreases in prepaid expenses and other
assets of $298,331 and accounts payable of $28,278.
Investments
In 2020, we have net cash from investing activities of $163,590, consisting
entirely of proceeds from sales of fixed asset. In 2019, we had net cash used in
investing activities of $2,979, consisting entirely of purchases of property and
equipment.
Financing
Our net cash provided by financing activities for the year ended December 31,
2020 was $277,028, compared to $1,046,086 for the year ended December 31, 2019.
For the period in 2020, our financing activities related to proceeds from the
sale of common stock of $295,000, proceeds from notes payable - related party of
$64,100, and proceeds from notes payable of $10,201, offset by repayments on
notes payable - related party of $30,000 and repayments of notes payable of
$62,273. For the period in 2019, our financing activities related to proceeds
from the sale of common stock of $573,000, proceeds from notes payable, related
party of $305,823, and proceeds from notes payable of $250,850, offset by
repayments on notes payable of ($83,587).
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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