Forward-Looking Statements
Except for the historical information presented in this document, the matters
discussed in this Form 10-Q for the quarter ended February 28, 2021, contain
forward-looking statements which involve assumptions and our future plans,
strategies, and expectations. These statements are generally identified by the
use of words such as "may," "will," "should," "expect," "anticipate,"
"estimate," "believe," "intend," or "project," or the negative of these words or
other variations on these words or comparable terminology. These statements are
expressed in good faith and based upon a reasonable basis when made, but there
can be no assurance that these expectations will be achieved or accomplished.
Such forward-looking statements include statements regarding, among other
things, (a) our potential profitability and cash flows, (b) our growth
strategies, (c) our future financing plans, and (d) our anticipated needs for
working capital. This information may involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance,
or achievements to be materially different from the future results, performance,
or achievements expressed or implied by any forward-looking statements. These
statements may be found under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" as well as in this Form 10-Q generally.
Actual events or results may differ materially from those discussed in
forward-looking statements as a result of various factors, including, without
limitation, the matters described in this Form 10-Q generally. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this filing will in fact occur. In addition to the
information expressly required to be included in this filing, we will provide
such further material information, if any, as may be necessary to make the
required statements, in light of the circumstances under which they are made,
not misleading.
Although forward-looking statements in this report reflect the good faith
judgment of our management, forward-looking statements are inherently subject to
known and unknown risks, business, economic and other risks and uncertainties
that may cause actual results to be materially different from those discussed in
these forward-looking statements. Readers are urged not to place undue reliance
on these forward-looking statements, which speak only as of the date of this
report. We assume no obligation to update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
report, other than as may be required by applicable law or regulation. Readers
are urged to carefully review and consider the various disclosures made by us in
our reports filed with the Securities and Exchange Commission which attempt to
advise interested parties of the risks and factors that may affect our business,
financial condition, results of operation and cash flows. If one or more of
these risks or uncertainties materialize, or if the underlying assumptions prove
incorrect, our actual results may vary materially from those expected or
projected.
Except where the context otherwise requires and for purposes of this Form 10-Q
only, "we," "us," "our," "Company," "our Company," and "MCTC" refer to Cannabis
Global, Inc, formerly known as MCTC Holdings, Inc.
Overview
The following discussion and analysis of our financial condition and results of
operations ("MD&A") should be read in conjunction with our financial statements
and the accompanying notes to the financial statements included in this Form
10-Q.
The MD&A is based on our financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities and expenses and related disclosure of contingent assets and
liabilities. Management bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
29
Description of Business
Cannabis Global is a research and development company that also operates
multiple cannabis businesses in California and hemp-related business in the
United States. We are in the process of organizing business operations which
will produce hemp products for international markets, and will supply transport
technologies for shippers of hemp and cannabis.
We recently announced our acquisition a 56.5%, controlling interest in Natural
Plant Extract (NPE), which operates a licensed cannabis manufacturing and
distribution business in Lynwood, California, holding a Type 7 California
Manufacturing and a distribution license, allowing for cannabis product
distribution anywhere in the state. We plan to use the Lynwood NPE operation,
combined with our internally developed technologies, as a testbed to launch
multi-state operations as soon as possible after the expected removal of
cannabis as a Scheduled substance from the federal CSA is completed, and
interstate commerce in cannabis is approved by the federal government.
The Company recently commenced operations at the Natural Plant Extract facility
effective immediately with emphasis on product manufacturing and distribution.
In addition to business opportunities available from product manufacturing and
distribution to all parts of the State of California.
Comply Bag™
Comply Bag™ features a multi-layer, low-density polyethylene outer shell that
protects valuable shipments and allows manufacturers, buyers, and processors
full view of contents to assess quality. Each Comply Bag™ contains financial
institution-grade tamper-evident seams, self-sealing closures, and sequential
numbering to ensure what is sent is what is received. In addition, because all
U.S. states have implemented specific regulations for the tracking and tracing
of cannabis shipments from seed to sale, Comply Bags™ features regulator
demanded tracking features, such as those required in the California Cannabis
Track-and-Trace (CCTT) system, including Unique Identifier Tags (UID) mandated
by California via its contracted service provider, METRC, Inc.
Cannabis-Related Research and Development
Cannabis Global also has an active research and development program primarily
focused on creating and commercialize engineered technologies delivering hemp
extracts and cannabinoids to the human body. Additionally, we invest, or provide
managerial services, in specialized areas of the regulated hemp and cannabis
industries. Thus far, the Company has filed six provisional patents, three
non-provisional patents and has recently announced its Comply Bag" secure
cannabis transport system with integrated track and trace capabilities via
smartphones which will be available soon.
Our R&D programs included the following;
1. Development of new routes and vehicles for hemp extract and cannabinoid
delivery to the human body.
2. Production of unique polymeric nanoparticles and fibers for use in oral
and dermal cannabinoid delivery.
3. Research and commercialization of new methodologies to isolate and/or
concentrate various cannabinoids and other substances that comprise
industrial hemp oil and other extracts.
4. Establishment of new methods to increase the bioavailability of
cannabinoids to the human body utilizing nanoparticles and other proven
bioenhancers, including naturally occurring and insect produced
glycosides.
5. Development of other novel inventions for the delivery of cannabinoids to
the human body, which at this time are considered trade secrets by the
Company.
The Company's strategy is to develop a growing portfolio of intellectual
property relating to the processing of hemp extracts and cannabinoids into forms
that are easily and efficiently delivered to the human body and to companion
animals.
30
The Company owns no issued patents. The Company has filed multiple provisional
patents and three non-provisional patents as follows:
Cannabinoid Delivery System and Method of Making
• September 1, 2020 Original File Date - Cannabinoid Delivery System and
Method of Making
• September 6, 2021 Second Filing Date - Cannabinoid Delivery System and
Method of Making
Water Soluble Compositions With Enhanced Bioavailability
• September 24, 2019 - Water Soluble Compositions With Enhanced Bioavailability
• This provisional patent filing was abandoned, although the Company may
refile at a later date.
Printed Shape Changing Article for the Delivery of Cannabinoids
• October 15, 2019 Original File Date - Printed Shape Changing Article
for the Delivery of Cannabinoids.
• September 23, 2021 Second File Date - Printed Shape Changing Article
for the Delivery of Cannabinoids.
Cannabinoid Enriched Composition and Method of Treating a Medical Condition
Therewith
• The invention relates to a method of treating a medical condition
addressed by one or more cannabinoids, and a cannabinoid enriched
treatment composition. In particular, 1) wherein the cannabinoid
enriched treatment is produced by honey bees yielding a dry
free-flowing solid or 2) wherein the cannabinoid enriched treatment is
produced by other insects.
November 4, 2019 - Original provisional patent filing - Cannabinoid
enriched composition and method for dry free-flowing powder.
• December 15, 2020 Non-provisional Patent Filing - Cannabinoid enriched
composition and method of treating a medical condition therewith. This
was a non-provisional patent filing.
December 15 2020, the Company filed an application under the Patent
Cooperation Treaty (PCT) seeking international protection of the
Cannabinoid enriched composition and method for dry free-flowing
powder.
The Company plans to utilize these unique compounds and powdered
technologies to produce new cannabinoid infusion technologies for
drugs, foods and beverages. The solid form of the bee honey compounds
are already being utilized in the Company's Hemp You Can Feel™ branded
products. Cannabis Global plans to conduct additional development on
its other insect-based technologies to determine the extent of the
unique properties of these new insect produced cannabinoid compounds.
There can be no assurance any patent protection will be provided, or
that we will be successful in protecting our patents if issued.
31
Electrosprayed and Electrospun Cannabinoid Compositions
The application addresses new methods for the creation of highly
bioavailable and ultra-fast acting polymeric nanoparticles and nano
fibers of cannabinoids for use in beverages, food, topical, and other
applications.
The non-provisional application expands on the developments and
technologies outlined in the provisional applications that were filed
on November 4, 2019.
November 4, 2020, the Company filed an application under the Patent
Cooperation Treaty (PCT) seeking international protection of the
Electrosprayed and Electrospun Cannabinoid Compositions and Process to
Produce inventions.
The Company believes this technology holds significant advantages over
legacy cannabis infusion technologies. For example:
1) While legacy infusion technologies generally rely on chemicals to
maintain stability, the Company invented a chemical free method
utilizing only two ingredients. Surfactants and stabilizers are not
needed.
2) The technology allows manufacturers to use only two ingredients (the
"Two Ingredient Method"). Surfactants and stabilizers are not needed.
This allows for the production of products with "Clean Labels".
3) Utilizing the "Two-Ingredient" method, food, beverage, and consumer
product formulators can add cannabinoids using very small amounts of
product, as each of the two ingredients make up about 50% of the
product. For example, the technology allows manufacturers of
cannabis-infused foods to add as little as 20 milligrams of material to
dose psychoactive cannabinoids at the 10 milligram legal limit within
most states. Cannabis Global expects to significantly improve this
already high 50% loading rate over the next few months, with loading
rates of up to 75% expected.
4) by reducing cannabinoid particle sizes to nanometer proportions,
ultra-high levels of active ingredients get absorbed into the body in
very short periods of time. This allows formulators to use cannabis to
gain a desired effect, which can result in significant cost saving,
especially relating to the rare cannabinoids, which sell at many times
more than common cannabinoids, such as CBD or THC.
There can be no assurance any patent protection will be provided, or
that we will be successful in protecting our patents if issued.
32
Animal Based Cannabosides
• On January 18, 2021, the Company filed a non-provisional patent on a
novel method to produce water-soluble cannabinoids. The invention
relates to a composition comprising one or more cannabosides and a
method of producing one or more cannabosides. In particular, by feeding
an insect a cannabinoid and harvesting the insect, excluding honey
bees, to improve aqueous solubility and stability of cannabinoids. The
patent claims coverage of both the process to create the compounds, and
the use of the compounds in foodstuffs and pharmaceutical preparations.
We believe this set of technologies represents a new class of
nature-based cannabinoid preparations. This technology is separate from
our chemical free Two Ingredient nanoparticle and nano fiber infusion
technologies for which we filed a patent application during November of
2002. We believe both sets of technologies are consistent with our
corporate objective to introduce novel chemical free cannabinoid
infusion technologies to the cannabis and hemp marketplaces.
On January 18, 2021, the Company filed an application under the Patent
Cooperation Treaty (PCT) seeking international protection of a
composition comprising one or more cannabosides and a method of
producing one or more cannabosides.
There can be no assurance any patent protection will be provided, or
that we will be successful in protecting our patents if issued.
Trademark applications are as follows:
Trade Mark - Hemp You Can Feel™ - On August 27 2019, the Company filed a
trademark application with the U.S. Patent and Trademark Office (USPTO) for its
Hemp You Can Feel™ trade name. The U.S. Application Serial Number is 88595425.
On June 24, 2020, the Company received a Notice of Nonfinal Office Action from
the USPTO indicating the Company would have six months to respond to issues
presented the Company by USPTO or be abandoned. The Company plans to re-file the
application.
Trade Mark - Gummies You Can Feel™. The Company received a Notice of Allowance
from the USPTO on March 24, 2020. The U.S. Serial Number for the trademark is
88590925
Trade Mark - Comply Bag™. During January of 2021, the Company filed a trademark
application with the U.S. Patent and Trademark Office (USPTO) for its Comply
Bag™. trade name.
There can be no assurance any trademark protection will be provided, or that we
will be successful in protecting our trademarks if issued.
Hemp You Can Feel Products
The Hemp You Can Feel product line consists of hemp infused foods and beverages.
The infusion technologies utilized are a combination on water soluble
preparations invented by the Company's internal partner research teams.
The product line consists of the following:
• Hemp You Can Feel™ Alcohol Replacement Cocktail Mixers - This is a line
of alcohol-free cocktail mixers marketed on line via our own website
site and via our marketing partners. All products in this line test as
having non-detectable levels of THC.
• Hemp You Can Feel™ Coffee Products - This is a line of hemp infused
coffee products. All products in this line test as having
non-detectable levels of THC.
33
• Hemp You Can Feel™ Gummies - This is a line of all natural hemp infused
candy products. All products in this line test as having non-detectable
levels of THC.
• Hemp You Can Feel™ Kombucha Beverages. This is a line of hemp infused
fermented tea products. All products in this line test as having
non-detectable levels of THC.
• Hemp You Can Feel™ Sweeteners - This is a line of natural and
artificial sweeteners consisting of:
• Hemp You Can Feel Organic Sugar
• Hemp You Can Feel Sucralose Blend
• Hemp You Can Feel Stevia Blend
• Hemp You Can Feel Aspartame
• Hemp You Can Feel Saccharin
Upcoming additions to the product line will include:
• Hemp You Can Feel Monk Fruit Sweetener (monk fruit extract and erythritol)
• Hemp You Can Feel Non-Dairy Creamer
• Hemp You Can Feel French Vanilla Non-Dairy Creamer
• Hemp You Can Feel Non-Dairy Creamy Chocolate Creamer
Coffee Pod and Single Serving Beverage Pod Infusion System
Based on internally developed technology and those developed by the Company's
contract research organization, the Company is marketing product lines
consisting of infusion technologies designed to easily and to accurately dose
single serving coffee and other beverage pods.
34
Management Services for Whisper Weed
On July 22, 2020, we signed a management agreement with Whisper Weed, Inc., a
California corporation ("Whisper Weed"). Edward Manolos, our director, is a
shareholder in Whisper Weed (see "Related Party Transactions"). Whisper Weed
conducts licensed delivery of cannabis products in California. The material
definitive agreement requires the parties to create a separate entity, CGI
Whisper W, Inc. in California as a wholly owned subsidiary of the Company. The
business of CGI Whisper W, Inc. will be to provide management services for the
lawful delivery of cannabis in the State of California. The Company will manage
CGI Whisper W, Inc. operations. In exchange for the Company providing management
services to Whisper Weed through the auspices of CGI Whisper W, Inc., the
Company will receive as consideration a quarterly fee of 51% of the net profits
earned by Whisper Weed. As separate consideration for the transaction, the
Company agreed to issue to Whisper Weed $150,000 in the Company's restricted
common stock, valued for purposes of issuance based on the average closing price
of the Company's common stock for the twenty days preceding the entry into the
material definitive agreement. Additionally, the Company agreed to amend its
articles of incorporation to designate a new class of preferred shares. The
preferred class will be designated and issued to Whisper Weed in an amount equal
to two times the quarterly payment made to the Company. The preferred shares
will be convertible into the Company's common stock after 6 months, and shall be
senior to other debts of the Company. The conversion to common stock will be
based on a value of common stock equal to at least two times the actual sales
for the previous 90 day period The Company agreed to include in the designation
the obligation to make a single dividend payment to Whisper Weed equal to 90% of
the initial quarterly net profits payable by Whisper Weed. As of February 28,
2021, the Company has not issued the common or preferred shares, and the
business is in the development stage.
Sales and Marketing
The Company recently began sales and marketing activities for its products and
inventions. The Company primarily plans to market its non-psychoactive products
via a "white label" strategy where the company produces products marketed and
sold by other companies. The Company also plans to market its products directly
to consumers. The Company
Please reference the section labeled "Risk Factors to our Business" for
additional information.
Significant Customers
The company has no significant customers as of the end of the last fiscal
quarterly reporting period.
Competition
We are entering markets that are highly competitive.
Relative to our prospects for commercializing polymeric nanoparticles and
nanofibers, there are many competitors with various approaches to cannabinoid
infusion for foods, beverages and other consumer products. While these currently
available technologies are not directly competitive with us, such technologies
may be viewed as being directly competitive by the marketplace in the future.
Many of the current market participants are well established with considerable
financial backing. We expect the quality and composition of the competitive
market in the hemp processing environment to continue to evolve as the industry
matures. Additionally, increased competition is possible to the extent that new
states and geographies enter into the marketplace as a result of continued
enactment of regulatory and legislative changes that de-criminalize and regulate
cannabis and hemp products, including the 2018 Farm Bill. We believe the
contemporaneous growth of the industry as a whole will result in new customers
entering the marketplace, thereby further mitigating the impact of competition
on our expected operations and results relating to our hemp processing
businesses.
35
Relative to our non-psychoactive cannabis extract powdered drink business, there
are relatively few market participants in this sector, but management of the
Company believes the competitive situation will advance quickly over the coming
months as new companies target this potentially lucrative market opportunity.
Additionally, while large beverage industry participants have yet to launch
products in this area, we believe such market entrances are likely as the
regulatory environment is clarified by the FDA. This could significantly affect
our ability to achieve market success.
We believe the contemporaneous growth of the cannabis beverage sector and the
industry as a whole will result in new customers entering the marketplace,
thereby further mitigating the impact of competition on our expected operations
and results relating to hemp cultivation and processing business and joint
venture.
The psychoactive cannabis sector is also highly competitive with many
participants being better capitalized. The Company plans to distinguish its
products based on both quality and brand appearance.
Employees
As of the end of the last reporting period, the Cannabis Global has one
employee, CEO, Arman Tabatabaei. Additionally, the Company relies on the
services of numerous consultants who perform various tasks for the Company.
Natural Plant Extract of California employs two full time professional
managerial staff and between four and ten part time individuals, depending on
workload and order levels, engaged in production and administration activities.
Our U.S employees are not represented by a labor union.
Legal Proceedings
On November 22, 2019, the Company filed suit against Jeet Sidhru and Jatinder
Bhogal in the District Court of Clark County Nevada, Case number A-19-805943-C.
Mr. Sidhru and Mr. Bhogal were formerly directors and officers of the Company.
The Company's complaint alleges that Mr. Sidhru and Mr. Bhogal breached their
fiduciary duties to the Company, including their fiduciary duties of due care,
good faith and loyalty, by recklessly and intentionally failing to maintain the
Company's statutory corporate filings with the State of Nevada, OTC Markets and
the U.S. Securities and Exchange Commission, and abandoning the Company and its
shareholders. The Company's complaint also alleges that Mr. Sidhru and Mr.
Bhogal engaged in conflicted transactions involving the Company, in which each
were unjustly enriched. The Company served Mr. Bhogal, and received notice of
representation of both defendants. The case is currently in its early phase, as
neither defendant has responded to the complaint.
Market Information
Our common stock trades on the OTC Markets Pink under the stock symbol CBGL.
Transfer Agent
Pacific Stock Transfer Company, located at 6725 Via Austin Pkwy., #300, Las
Vegas NV 89119 and telephone number of (702) 361-3033 is the registrar and
transfer agent for our common stock. As of April 19, 2021, there were
approximately 61 holders of record of our common stock.
DESCRIPTION OF PROPERTY
Our headquarters are located at 520 S. Grand Avenue, Suite 320, Los Angeles,
California 90071 where are we lease office space under a contract effective
August 15, 2019, which expired on August 14, 2020. We now rent the office space
on a month-to-month basis for $800 per month.
Relative to it Natural Plant Extract of California operation, the Company leases
a building in Lynwood, CA where it operates a licensed cannabis operation. The
Company pays $8,750 per month to occupy the building.
Our Company has also entered into a lease for a commercial food production
facility, which is also located in Los Angeles, California. The one-year lease
at rate of $3,300 per month was entered into as of August 2019. The lease is
expired with the location now being rented on a month-to-month basis.
We believe that our existing office facilities are adequate for our needs.
Should we require additional space at that time, or prior thereto, we believe
that such space can be secured on commercially reasonable terms.
36
Results of Operations
For the Three months Ended February 28, 2021 and February 29, 2020
Product revenues for the quarterly financial period ending February 28, 2021,
were $25,816 compared to $0 reported during the quarterly financial period
ending February 29, 2020.
During the financial period ending February 28, 2021, cost of goods sold was
$6,653 compared to $0 for the quarterly financial period ending February 29,
2020. This resulted in a gross margin of $19,163 for the period ending February
28, 2021.
Accounts receivable were $218,374 for the period ending February 28, 2021.
Compared to $0 for the period ending August 31, 2020. The increase is
attributable to consolidate of Natural Plant Extract of California and inclusion
of its cannabis related accounts receivables relating to its orders for cannabis
products for its customers.
For the period ending February 28, 2021, the Company incurred operating expenses
of $431,571 compared to $410,915 for the period ending February 29, 2020. The
increase was due to the Company launching new products and marketing programs.
Interest expenses for the financial period ending February 28, 2021 were $1,933,
728 compared to $522,203 for the financial period ending February 29, 2020. The
increase was attributable to an increased number of notes sold during the period
aimed at financing our product and marketing programs.
During the three months ending February 28, 2021, net loss was $2,110,770
compared to $762,196 for the financial period ending February 29, 2020. The
increase in net loss was attributable mainly to increased spending associated
with the reorganization of the business, expenses relating to hiring consultants
and general costs associated with the design of new product in preparation of
customer orders, and increased interest expenses. The net loss for the period
ending February 28, 2021, resulted in a loss per share of $0.05, compared to a
net loss per share $0.06 during the year ago period.
For the Six months Ended February 28, 2021 and February 29, 2020
Product revenues for the six months ending February 28, 2021, were $30,226
compared to $10,003 reported during the quarterly financial period ending
February 29, 2020.
During the six months ending February 28, 2021, cost of goods sold was $7,953
compared to $2,900 for the quarterly financial period ending February 29, 2020.
This resulted in a gross margin of $22,273 for the period ending February 28,
2021.
For the six months ending February 28, 2021, the Company incurred operating
expenses of $878,962 compared to $784,708 for the six months ending February 29,
2020. The increase was due to the Company launching new products and marketing
programs.
Interest expenses for the six months ending February 28, 2021 were $2,706,483
compared to $553,453 for the six months ending February 29, 2020. The increase
was attributable to an increased number of notes sold during the period aimed at
financing our product and marketing programs.
During the six months ending February 28, 2021, net loss was $2,463,994 compared
to $1,147,633 for the six months ending February 29, 2020. The increase in net
loss was attributable mainly to increased spending associated with the
reorganization of the business, expenses relating to hiring consultants and
general costs associated with the design of new product in preparation of
customer orders, and increased interest expenses. The net loss for the period
ending February 28, 2021, resulted in a loss per share of $0.06, compared to a
net loss per share $0.09 during the year ago period.
37
Liquidity and Capital Resources
As of February 28, 2021 and August 31, 2020 our cash and cash equivalent
balances were $134,187 and $2,338, respectively.
Our primary internal sources of liquidity were provided by proceeds from the
sale of unregistered common shares and warrants of the Company as follows:
On July 3, 2019, we sold 2,000,000 restricted shares at $0.025 a share for the
amount of $50,000 to an accredited investor. The investor also received
2,000,000 warrants to purchase 2,000,000 shares at a price of $0.15 per share.
The warrants expire on July 3, 2020. The sale was made pursuant to SEC Rule 506
Section 4(2), which provides exemption from registration for transactions, which
are not public offerings.
On July 10, 2019, we sold 1,000,000 restricted shares at $0.025 a share for the
amount of $25,000 to an accredited investor. The investor also received
1,000,000 warrants to purchase 1,000,000 shares at a price of $0.15 per share.
The warrants expire on July 10, 2020. The sale was made pursuant to SEC Rule 506
Section 4(2), which provides exemption from registration for transactions, which
are not public offerings.
On July 16, 2019, we sold 1,400,000 restricted shares at $0.025 a share for the
amount of $35,000 to an accredited investor. The investor also received
1,400,000 warrants to purchase 1,400,000 shares at a price of $0.15 per share.
The warrants expire on July 16, 2020. The sale was made pursuant to SEC Rule 506
Section 4(2), which provides exemption from registration for transactions, which
are not public offerings.
On July 19, 2019, we sold 1,000,000 restricted shares at $0.025 a share for the
amount of $25,000 to an accredited investor. The investor also received
1,000,000 warrants to purchase 1,000,000 shares at a price of $0.15 per share.
The warrants expire on July 19, 2020. The sale was made pursuant to SEC Rule 506
Section 4(2), which provides exemption from registration for transactions, which
are not public offerings.
On August 15, 2019, we sold 2,000,000 restricted shares at $0.025 a share for
the amount of $50,000 to an accredited investor. The investor also received
2,000,000 warrants to purchase 2,000,000 shares at a price of $0.15 per share.
The warrants expire on August 15, 2020. The sale was made pursuant to SEC Rule
506 Section 4(2), which provides exemption from registration for transactions,
which are not public offerings.
On August 19, 2019, we sold 1,000,000 restricted shares at $0.025 a share for
the amount of $50,000 to an accredited investor. The investor also received
1,000,000 warrants to purchase 1,000,000 shares at a price of $0.15 per share.
The warrants expire on August 19, 2020. The sale was made pursuant to SEC Rule
506 Section 4(2), which provides exemption from registration for transactions,
which are not public offerings.
On August 27, 2019, we sold 1,000,000 restricted shares at $0.025 a share for
the amount of $25,000 to an accredited investor. The investor also received
1,000,000 warrants to purchase 1,000,000 shares at a price of $0.15 per share.
The warrants expire on August 27, 2020. The sale was made pursuant to SEC Rule
506 Section 4(2), which provides exemption from registration for transactions,
which are not public offerings. As of the date of this filing, these shares have
not yet been issued to the purchaser.
On November 6, 2019, we sold a convertible not to an accredited investor for
$20,000. The terms of the six month note allow 7% annual interest and for the
conversion into common shares at $0.75. Additionally, the investor received a
warrant providing the investor the right to purchase 26,666 common shares at a
price of $3.50.
On December 30, 2019, The Company sold a convertible note to an accredited
investor. The $63,000 note calls for annualized interest of 10% and is due on
December 20, 2020. The note converts in common shares at 40% discount. This note
is attached as an exhibit hereto.
On December 16, 2019, the Company's board of directors by unanimous written
consent caused the authorization of ten million (10,000,000) shares of preferred
stock, par value $0.0001 per share, of the Company ("Preferred Stock") in one or
more series, and expressly authorized the Board of Directors of the Company (the
"Board"), subject to limitations prescribed by law, to provide, out of the
unissued shares of Preferred Stock, for series of Preferred Stock, and, with
respect to each such series, to establish and fix the number of shares to be
included in any series of Preferred Stock and the designation, rights,
preferences, powers, restrictions, and limitations of the shares of such series.
38
During the quarterly period ended February 29, 2020, the Company issued four
convertible promissory notes having an aggregate principal amount of $256,500,
aggregate original issue discount (OID) of $10,500, and aggregate legal fees of
$11,000, resulting in aggregate net proceeds to the Company of $235,000. The
notes mature in one year from the respective issuance date and bear interest at
the rate of 10% per annum, payable at maturity. Commencing one hundred eighty
(180) days following the issuance date of $198,750 of the notes and commencing
immediately following the issuance of $57,750 of the notes, the noteholders
shall have the right to convert all or any part of the outstanding and unpaid
principal balance of the note, at any time, into shares of common stock of the
Company at variable conversion prices ranging from 50% - 60% of the lowest
previous fifteen (15) to twenty (20) trading day closing trade prices of the
Company's common stock, subject to adjustment. As a result of the variable
conversion prices, upon issuance, the Company recognized total debt discount of
$256,500, which is being amortized to interest expense over the term of the
notes. The Company is prohibited from effecting a conversion of the note to the
extent that, as a result of such conversion, the noteholder, together with its
affiliates, would beneficially own more than 4.99% of the number of shares of
the Company's common stock outstanding immediately after giving effect to the
issuance of shares of common stock upon conversion of the note.
On March 19, 2020, the Company entered into a Securities Purchases Agreement and
Convertible Promissory Note in the principal amount of $150,000. The note, which
is payable one year after issuance, carries interest at 10% per annum. On March
19, 2020, the Company received its first disbursement under this agreement in
the amount of $50,000. Less an original discount and other certain fees, the
Company netted $43,000. The note converts to common shares at a 40% discount to
the lowest traded price during the 25 days prior to conversion. Additionally,
the issuer was granted three-year warrant coverage at $0.48. The note shall not
be able to be converted in an amount that would result in the beneficial
ownership of more than 4.99% of the Company outstanding common stock.
On May 4, 2020 the Company received its Second disbursement under this agreement
win the amount of $25,000. Less an original discount and other certain fees, the
Company netted $21,000. This note converts to common shares at a 40% discount to
the lowest traded price during the 25 days prior to conversion.
On May 28, 2020, Mr. Robert L. Hymers III, a former director and former chief
financial officer, returned 2,000,000 Series A Preferred shares to the corporate
treasury. As of the date of this filing, there were 6,000,000 Series A Preferred
shares issued and outstanding.
On June 19, 2020, we sold 352,941 registered common shares to an investor in
exchange for $60,000 by subscription from our Form S-1 registration, file number
333-238974.
On June 23, 2020, we sold 116,667 registered common shares to an investor in
exchange for a settlement by subscription form our Form S-1 registration, file
number 333-238974.
On June 30, 2020, we sold 289,301 registered common shares to an investor in
exchange for $50,000 by subscription form our Form S-1 registration, file number
333-238974.
On July 7, 2020, we sold 305,810 registered common shares to an investor in
exchange for $35,000 by subscription form our Form S-1 registration, file number
333-238974.
On July 10, 2020, the Company receives a $25,000 disbursement from a previously
signed convertible note. On March 19, 2020, the Company entered into a
Securities Purchases Agreement and Convertible Promissory Note in the principal
amount of $150,000. The note, which is payable one year after issuance, carries
interest at 10% per annum. On March 19, 2020, the Company received its first
disbursement under this agreement in the amount of $50,000. Less an original
discount and other certain fees, the Company netted $43,000. The note converts
to common shares at a 40% discount to the lowest traded price during the 25 days
prior to conversion. Additionally, the issuer was granted three-year warrant
coverage at $0.48. The note shall not be able to be converted in an amount that
would result in the beneficial ownership of more than 4.99% of the Company
outstanding common stock.
On July 21, 2020, the Company entered into a Securities Purchases Agreement and
Convertible Promissory Note in the principal amount of $78,750. The note, which
is payable one year after issuance, carries interest at 6% per annum. The note
converts to common shares at a 60% discount to the lowest traded price during
the 30 days prior to conversion.
On August 6, 2020, we sold 2,899,017 registered common shares to an investor in
exchange for $278,338, by subscription form our Form S-1 registration, file
number 333-238974. Additionally, the investor was provided with 150,000
commitment shares, and was issued a convertible for $50,000. The note calls for
annualized interest of 10% and is due on August 7, 2021. The note converts into
common shares at a fixed price of $0.1631.
39
On August 12, 2020, The Company sold a convertible note to an accredited
investor. The $55,000 note calls for annualized interest of 10% and is due on
May 21, 2021. The note converts into common shares at a fixed price of $0.1005.
On August 14, 2020, The Company sold a convertible note to an accredited
investor. The $50,000 note calls for annualized interest of 10% and is due on
May 14, 2021. The note converts into common shares at a fixed price of $0.1005.
On August 17, 2020, we sold 510,204 registered common shares to an investor in
exchange for $51,275.50 by subscription form our Form S-1 registration, file
number 333-238974.
On August 28, 2020, the Company sold a convertible note to an accredited
investor. The $113,000 note calls for annualized interest of 8% and is due on
August 28, 2021. The note converts to common shares at a 37% discount to the
lowest traded price during the 15 days prior to conversion.
On September 2, 2020, the Company issued two convertible promissory notes with
an aggregate principal amount of $107,000, with the Company receiving proceeds
of $100,000 after original issue discount of $5,000 and deferred finance costs
of $2,000. The notes mature in September 2021 and bear interest at 12% per
annum. Commencing one hundred eighty (180) days following the issuance date of
the notes, the noteholders shall have the right to convert all or any part of
the outstanding and unpaid principal balance of the note, at any time, into
shares of common stock of the Company at variable conversion price of 60% of the
lowest previous twenty (20) trading day closing trade prices of the Company's
common stock, subject to adjustment. The Company is prohibited from effecting a
conversion of the note to the extent that, as a result of such conversion, the
noteholder, together with its affiliates, would beneficially own more than 4.99%
of the number of shares of the Company's common stock outstanding immediately
after giving effect to the issuance of shares of common stock upon conversion of
the note.
On September 22, 2020, the Company issued a convertible note in the amount of
$78,000. The note matures on September 22, 2021 and bears 8% interest rate per
annum. The note is convertible into common shares at 37% discount for the
average of the two lowest trading price of the common stock during the 15
trading day period ending on the latest complete trading day prior to the
conversion date.
On September 24, 2020, the Company issued a convertible note in the amount of
$78,000. The note matures on June 24, 2021 and bears 10% interest rate per
annum. The note is convertible into common shares at a fixed conversion price of
$0.06 or a conversion discount at rate of 30% to the lowest trading price during
the previous twenty (20) trading days to the date of a conversion notice;
whichever is lower.
On September 30, 2020, the Company entered into a securities exchange agreement
with Marijuana Company of America, Inc., a Utah corporation ("MCOA"). By virtue
of the agreement, the Company issued 7,222,222 shares of its restricted common
stock to MCOA in exchange for 650,000,000 shares of MCOA restricted common
stock. The Company and MCOA also entered into a lock up leak out agreement which
prevents either party from sales of the exchanged shares for a period of 12
months. Thereafter the parties may sell not more than the quantity of shares
equaling an aggregate maximum sale value of $20,000 per week, or $80,000 per
month until all Shares and Exchange Shares are sold.
40
On November 16, 2020, the Company sold an aggregate 3,000,000 shares of Company
common stock, par value $0.001, equal in value to $177,000 based on the closing
price on November 16, 2020. Of the total sold, 1,500,000 shares of common stock
were sold to Edward Manolos and 1,500,000 shares of common stock were sold
to Thang Nguyen. The sales were made in regards to the Company's acquisition of
Ethos, and its disclosures under Item 1.01 are incorporated herein by
reference. The Company issued the above shares of its common stock pursuant to
the exemption from the registration requirements of the Securities Act of 1933,
as amended, available to the Company by Section 4(a)(2) promulgated thereunder
due to the fact that it was an isolated issuance and did not involve a public
offering of securities. Messrs. Manolos and Nguyen were "accredited investors"
and/or "sophisticated investors" pursuant to Section 501(a)(b) of the Securities
Act, who provided the Company with representations, warranties and information
concerning their qualifications as "sophisticated investors" and/or "accredited
investors." The Company provided and made available to Messrs. Manolos and
Nguyen full information regarding its business and operations. There was no
general solicitation in connection with the offer or sale of the restricted
securities. Messrs. Manolos and Nguyen acquired the restricted common stock for
their own accounts, for investment purposes and not with a view to public resale
or distribution thereof within the meaning of the Securities Act. The restricted
shares cannot be sold unless subject to an effective registration statement by
the Company, or by an exemption from registration requirements of Section 5 of
the Securities Act-the existence of any such exemption subject to legal review
and approval by the Company.
On December 1, 2020, the Company entered into a Securities Purchase Agreement in
connection with the issuance of an 8% convertible note with the principal amount
of $33,500, with an accredited investor. The note is convertible anytime after
180 days of issuance at a variable conversion price of 63% of the Market Price
at time of conversion. Market Price is defined as the average of the two lowest
trading prices during the fifteen (15) days prior to conversion. The Note and
Purchase Agreement are attached to this filing. The Company received net cash
proceeds of $30,000.
On December 1, 2020, the Company entered into an additional Securities Purchase
Agreement in connection with the issuance of an 8% convertible note with the
principal amount of $33,500, with an accredited investor. The note is
convertible anytime after 180 days of issuance at a variable conversion price of
63% of the Market Price at time of conversion. Market Price is defined as the
average of the two lowest trading prices during the fifteen (15) days prior to
conversion. The Company received net cash proceeds of $30,000.
On January 3, 2021, we entered into a settlement agreement with Robert L.
Hymers, III ("Hymers") concerning five delinquent payments totaling $100,000 due
under the stock purchase agreement whereby the Company purchased 266,667 shares
of common stock of Natural Plant Extract of California Inc., a California
corporation ("NPE"), The Company was required to make $20,000 monthly for a
period of twenty-seven (27) months to Hymers, with the first payment commencing
September 1, 2020 and the remaining payments due and payable on the first day of
each subsequent month until Hymers received $540,000. On January 3, 2021, we
entered into a settlement concerning the outstanding payments by agreeing to
issue to Hymers a total of 1,585,791 shares of registered common stock from our
S-1 registration statement made effective during February 2021.
On January 5, 2021, the Company entered into a Securities Purchase Agreement in
connection with the issuance of an 10% convertible note with the principal
amount of $110,000, with an accredited investor. The note is convertible at a
fixed conversion price of $0.005. In the event of default by the Company, or
after the public announcement of a change of control transaction as defined in
the agreement, the conversion price is $0.001. The Company received net proceeds
of $97,500.
On January 5, 2021, the Company entered into a Securities Purchase Agreement in
connection with the issuance of an 10% convertible note with the principal
amount of $110,000, with an accredited investor. The note is convertible at a
fixed conversion price of $0.05. In the event of default by the Company, or
after the public announcement of a change of control transaction as defined in
the agreement, the conversion price is $0.01. The Company received net proceeds
of $97,500.
On January 12, 2021, the Company entered into a Securities Purchase Agreement in
connection with the issuance of an 10% convertible note with the principal
amount of $115,500, with an accredited investor. The note is convertible
beginning 61 days from issuance at a fixed conversion price of $0.10 per share
or 60% or the lowest trading price for ten days prior to conversion in the event
that the Company's stock trades at less than $0.10 per share. The Company
received net proceeds of $100,000.
On January 26, 2021, the Company entered into two Securities Purchase Agreements
in connection with the issuance of two 10% convertible note with the principal
amount of $487,750, with an accredited investor. The note is convertible at 70%
of the average of the three lowest trading prices for 20 days prior to
conversion. The Company received net proceeds of $431,000.
41
On February 3, 2021, the Registrant completed the sale of an aggregate of
4,700,000 registered shares of common stock registered on Form S-1 (File No.
333-250038) in two transactions in exchange for a total purchase price of
$282,000. The parties to the transactions were the Registrant and BHP Capital
NY, Inc., and Platinum Point Capital, LLC. There was no material relationship,
other than in respect of the transactions, between BHP Capital NY, Inc.,
Platinum Point Capital, LLC and the Registrant or any of its affiliates, or any
director or officer of the Registrant, or any associate of any such director or
officer. BHP Capital NY, Inc. purchased 2,350,000 registered common shares in
exchange for $141,000. Platinum Point Capital, LLC purchased 2,350,000
registered common shares in exchange for $141,000.
On January 27, 2021 Cannabis Global, Inc. (the "Registrant") closed a material
definitive agreement (MDA) with Edward Manolos, a director and related party.
Pursuant to the MDA, the Registrant purchased from Mr. Manolos 266,667 shares of
common stock in Natural Plant Extract of California Inc., a California
corporation ("NPE"), representing 18.8% of the outstanding capital stock of NPE
on a fully diluted basis. NPE operates a licensed psychoactive cannabis
manufacturing and distribution business operation in Lynwood, California. NPE is
a privately held corporation. Under the terms of the MDA, the Registrant
acquired all beneficial ownership over the NPE shares in exchange for a purchase
price of two million forty thousand dollars ($2,040,000). In lieu of a cash
payment, the Registrant agreed to issue Mr. Manolos 11,383,929 restricted common
shares, valued for purposes of the MDA at $0.1792 per share. In connection with
the MDA, the Registrant became a party to a Shareholders Agreement by and among
Alan Tsai, Hymers, Betterworld Ventures, LLC, Marijuana Company of America, Inc.
and NPE. The Shareholders Agreement contains customary rights and obligations,
including restrictions on the transfer of the Shares. Additionally, the
Registrant intends, upon completion of the terms and conditions of the Material
Definitive Agreement, to control the production, manufacturing and distribution
of both NPE and the Registrant's products.
On February 16, 2021, we purchased 266,667 shares of common stock of Natural
Plant Extract of California Inc., a California corporation ("NPE"), from Alan
Tsai, in exchange for the issuance of 1,436,368 common shares. Other than with
respect to the transaction, there was no material relationship between Mr. Tsai
and the Registrant. By virtue of the transaction, the Registrant acquired 18.8%
of the outstanding capital stock of NPE, bringing its total beneficial ownership
in NPE to 56.5%. NPE operates a licensed psychoactive cannabis manufacturing and
distribution business operation in Lynwood, California. By virtue of its 56.5%
ownership over NPE, the Company will control production, manufacturing and
distribution of both NPE and Company products. In connection with the MDA, the
Registrant became a party to a Shareholders Agreement by and among Edward
Manolos, a director of the Company, Robert L. Hymers III, Betterworld Ventures,
LLC, Marijuana Company of America, Inc. and NPE. The Shareholders Agreement
contains customary rights and obligations concerning operations, management,,
including restrictions on the transfer of the Shares.
On February 16, 2021, the Company sold 1,133,334 registered common shares to
accredited investors, realizing $68,000.
On February 18, 2021, the Company sold 683,333 registered common shares to an
accredited investor, realizing proceeds of $41,000.
On February 28, 2021, the Company sold 153,000 Preferred Series B shares to an
accredited investor, realizing proceeds of $153,000. The proceeds were not
received until March 2021, and therefore no preferred stock shares were issued
and outstanding as of February 28, 2021.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Recently Issued Accounting Pronouncements
We review new accounting standards as issued. Although some of these accounting
standards issued or effective after the end of our previous fiscal year may be
applicable to the Company, we have not identified any standards that we believe
merit further discussion. We do not expect the adoption of any recently issued
accounting pronouncements to have a significant impact on our financial
position, results of operations, or cash flows.
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