UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20202021

or

[  ]☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission File Number: 000-56025

Quanta, Inc.

(Exact name of registrant as specified in its charter)

Nevada81-2749032

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3606 W. Magnolia Blvd.632 S Glenwood Pl, Burbank, CA9150591506
(Address of principal executive offices)(Zip Code)

(Registrant’s telephone number, including area code): (424) (424) 261-2568

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] ☒ No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] ☒ No [  ]☐

 

Indicate by check mark whether the registrantRegistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ]☐Accelerated filer [  ]☐
Non-accelerated filer [  ] ☐Smaller reporting company [X]☒
 Emerging growth company [X]☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] Yes☐ No [X] ☒

 

As of December 17, 2020,August 19, 2021, the registrant had 63,768,402197,699,585 shares of Common Stock outstanding.

 

 

TABLE OF CONTENTS

Page
PART IFINANCIAL INFORMATION
ITEM 1.Financial Statements
Condensed Consolidated Balance Sheets – SeptemberJune 30, 20202021 (Unaudited) and December 31, 201920203
Condensed Consolidated Statements of Operations (Unaudited) – Three and Nine monthsSix Months ended SeptemberJune 30, 20202021 and 201920204
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited) -– Three and NineSix Months Ended SeptemberJune 30, 20202021 and 201920205
Condensed Consolidated Statements of Cash Flows (Unaudited) - NineSix Months Ended SeptemberJune 30, 20202021 and 201920207
Notes to Condensed Consolidated Financial Statements (Unaudited) – Three and NineSix Months Ended SeptemberJune 30, 20202021 and 201920208
ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations2016
ITEM 3.Quantitative And Qualitative Disclosures About Market Risk2622
ITEM 4.Controls And Procedures2622
PART IIOTHER INFORMATION2724
ITEM 1Legal Proceedings2724
ITEM 1A.Risk Factors2724
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds2724
ITEM 3.Defaults Upon Senior Securities2724
ITEM 4.Mine Safety Disclosures2724
ITEM 5.Other Information2724
ITEM 6.Exhibits2824
Signatures2925

2

PART I – FINANCIAL INFORMATION

Item 1.Financial Information.

QUANTA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share amounts)

  June 30, 2021  December 31, 2020 
  (Unaudited)    
ASSETS        
Current assets:   ��    
Cash $277,827  $6,270 
Accounts receivable  -   685 
Accounts receivable (net of reserve of $49,700) – related party  149,100   - 
Deferred charges – related party  -   134,704 
Inventories, net  78,081   19,220 
Prepaid production cost  300,000   - 
Total current assets  805,008   160,879 
         
Equipment, net  192,027   200,523 
Operating lease right-of-use asset, net  321,263   362,227 
Deposits  16,883   16,883 
         
Total assets $1,335,181  $740,512 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
Current liabilities:        
Accounts payable and accrued expenses $537,266  $673,494 
Advances  200,000   - 
Notes payable (net of deferred finance charges of $60,717 and $74,817 at June 30, 2021 and December 31, 2020, respectively)  289,445   482,724 
Convertible note payable (net of discount of $174,669 and $539,282 at June 30, 2021 and December 31, 2020, respectively)  1,354,151   1,074,814 
Deferred revenue, license agreement  19,186   34,818 
Operating lease liabilities, short-term  103,914   100,901 
Lease settlement obligation  235,759   235,759 
Total current liabilities  2,739,721   2,602,510 
         
Long term liabilities        
Notes payable, long term  457,288   451,368 
Operating lease liabilities, long-term  252,335   294,880 
Total liabilities  3,449,344   3,348,758 
         

Commitments and contingencies:

  -   - 
Mezzanine equity:        
Series B preferred stock, $0.00001 par value, 9,000 shares authorized, 9,000 and -0- issued and outstanding at June 30, 2021 and December 31, 2020, respectively  1,522,198   - 
Series C preferred stock, $0.00001 par value, 1,000 shares authorized, 1,000 and -0- issued and outstanding at June 30, 2021 and December 31, 2020, respectively  169,133   - 
Preferred stock value  1,691,331   - 
Total Mezzanine equity  1,691,331   - 
Stockholders’ deficit:        
Preferred stock, $0.001 par value; 25,000,000 shares authorized; 2,500,000 issued and outstanding  2,500   2,500 
Common stock, $0.001 par value; 500,000,000 shares authorized; 191,731,218 and 46,756,970 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively  191,805   46,757 
Shares to be issued (4,875,000 and 4,875,000 as of June 30, 2021 and December 31, 2020, respectively)  3,939,659   3,641,868 
Additional paid-in capital  13,867,853   10,102,805 
Accumulated deficit  (21,258,289)  (16,402,176)
Total Quanta, Inc. stockholders’ deficit  (3,256,472)  (2,608,246)
Noncontrolling interest in consolidated subsidiary  (549,022)  - 
Total stockholders’ deficit  (3,805,494)  (2,608,246)
         
Total liabilities and stockholders’ deficit $1,335,181  $740,512 

  September 30, 2020  December 31, 2019 
  (Unaudited)    
ASSETS        
Current assets:        
Cash $11  $433 
Accounts receivable  6   28 
Inventories  157   123 
Prepaid expenses  -   7 
Total current assets  174   591 
         
Equipment, net  232   313 
Operating lease right-of-use asset, net  383   333 
Deposits  17   3 4 
         
Total assets $806  $1,271 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        
Current liabilities:        
Accounts payable and accrued expenses $460  $74 
Notes payable (net of discount of $25 and deferred finance charges of $89 at September 30, 2020)  420   56 
Convertible note payable (net of premium of $125 and $0 and discount of $497 and $255, respectively)  600  57 
Deferred revenue, license agreement  43   33 
Operating lease liabilities, short-term  99   86 
Settlement Reserve  236   - 
Derivative liabilities  -   400 
Total current liabilities  1,858   706 
         
Long term liabilities        
Deferred revenue, licenses agreement, long-term  -   34 
Notes payable, long term  483     
Operating lease liabilities, long-term  315   252 
Total liabilities  2,656   992 
         
Stockholders’ equity (deficit):        
Preferred stock, $0.001 par value; 25,000,000 shares authorized; 2,500,000 issued and outstanding  2   - 
Common stock, $0.001 par value; 100,000,000 shares authorized; 60,779,130 and 49,087,255 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively  62   49 
Shares to be issued (4,250,000 and 7,318,519 as of September 30, 2020 and December 31, 2019, respectively)  3,320   2,848 
Additional paid-in capital  8,935   5,620 
Accumulated deficit  (14,169)  (8,238)
Total stockholders’ equity (deficit)  

(1,850

)  279 
         
Total liabilities and stockholders’ equity (deficit) $806  $1,271 

See notes to condensed consolidated financial statements

3

QUANTA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except share and per share amounts)(Unaudited)

(Unaudited)

  

Three months ended

June 30, 2021

  

Three months ended

June 30, 2020

  

Six months ended

June 30, 2021

  

Six months ended

June 30, 2020

 
Sales, net $109,053  $306,785  $229,060  $657,134 
Sales, related party  -   -   198,800   - 
License revenue  7,816   11,368   15,632   17,823 
Total revenue  116,869   318,153   443,492   674,957 
Cost of goods sold  44,645   70,093   79,629   98,458 
Gross profit  72,224   248,060   363,863   576,499 
                 
Operating expenses:                
Research and development  112,675   166,662   243,500   244,537 
Selling, general, and administrative (includes $210,000 royalty and $409,970 administrative to related party for the six months ended June 30, 2021, and $180,000 royalty to related party for the six months ended June 30, 2021)  2,540,180   2,146,569   5,685,879   3,440,880 
Total operating expenses  2,652,855   2,313,231   5,929,379   3,685,417 
Loss from operations  (2,580,631)  (2,065,171)  (5,565,516)  (3,108,918)
                 
Other income (expense):                
Interest expense  (23,709)  (217,486)  (91,526)  (406,123)
Debt discount amortization  (36,750)  -   (68,695)  - 
Private placement costs  -   (17,000)  -   (279,000)
Change in fair value derivative  -   148,000   -   283,139 
Gain on extinguishment of debt  -   286,000   -   286,000 
Other income and expense, net  (60,459)  199,514   (160,221)  (115,984)
                 
Net loss  (2,641,090)  (1,865,657)  (5,725,737)  (3,224,902)
                 
Net loss attributable to noncontrolling interest  412,841   -   549,022   - 
                 
Net loss attributable to Quanta, Inc. $(2,228,249) $(1,865,657) $(5,176,715) $(3,224,903)
                 
Net loss per share, basic and diluted $(0.01) $(0.0303) $(0.05) $(0.06)
Weighted average common shares outstanding–basic and diluted  149,170,837   5,842,875,252   106,363,740   57,512,526 

  Three months ended
September 30, 2020		  Three months ended
September 30, 2019		  Nine months ended
September 30, 2020		  Nine months ended
September 30, 2019		 
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited) 
Sales, net $315  $384  $973  $914 
Distributor license fees  9   9   26   17 
Total revenue  324   393   999   931 
Cost of goods sold  52   74   151   230 
Gross profit  272   319   848   701 
                 
Operating expenses:                
Compensation and benefits  371   338   1,157   832 
Selling, general, and administrative  

840

   784   3,494   2,670 
Research and development  62   115   307   196 
Impairment of operating lease right of use asset  

255

   

-

   255   

-

 
Total operating expenses  1,528   1,237   5,213   3,698 
Loss from operations  (1,256)  (918)  (4,365)  (2,997)
                 
Other income (expense):                
Change in fair value of derivative liability  (182)  -   101   - 
Discount Amortization  (117)  -   (396)  - 
Loss on debt extinguishment  (1,081)   

-

   (795)     
Interest expense  (70)  (10)  (476)  (20)
Other income (expense), net  

(1,450

)  (10)  

(1,566

)  (20)
                 
Net loss $

(2,706

) $(928) $

(5,931

) $(3,017)
                 
Net loss per share, basic and diluted $(0.05) $(0.02) $(0.11) $(0.08)
Weighted average common shares outstanding – basic and diluted  57,844,835   41,823,505   56,034,097   40,092,030 

See notes to condensed consolidated financial statements

4

QUANTA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(amounts in thousands, except share amounts)(Unaudited)

(Unaudited)

Three months ended June 30, 2021

  Shares  Amount  Shares  Amount  Capital  Issued  Deficit  Interest  Deficit 
  Series A                      
  Preferred Stock,  Common Stock  Additional  Shares     Non  Total 
  par value $0.001  par value $0.001  Paid-in  To be  Accumulated  Controlling  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Issued  Deficit  Interest  Deficit 
Balance, March 31, 2021  2,500,000  $2,500   99,897,748  $99,900  $11,226,409  $3,802,047  $(19,030,060) $(136,161) $(4,035,365)
                                     
Shares issued for cash  -   -   24,275,000   24,275   946,725   -   -   -   971,000 
Adjustment for adoption of ASU 2020-6                                    
Issuance of shares                                    
Issuance of shares, shares                                    
Fair value of shares issued to employees and officer                                    
Fair value of shares issued to employees and officer, shares                                    
Fair value of perferred shares issued to officer                                    
Fair value of perferred shares issued to officer, shares                                    
Beneficial conversion feature of issued convertible notes                                    
Fair Value of shares issued for loan fees                                    
Fair Value of shares issued for loan fees, shares                                    
Fair value of shares for services  -   -   8,925,976   8,926   786,882   -   -   -   795,808 
Fair value of vested restricted stock  -   -   -   -   -   137,612   -   -   137,612 
Fair value of vested options  -   -   -   -   55,911   -   -   -   55,911 
Shares issued for conversion of convertible notes  -   -   58,702,494   58,704   851,926   -   -   -   910,630 
    .    .                             
Net loss  -   -   -   -   -   -   (2,228,229)  (412,861)  (2,641,090)
Balance June 30, 2021  2,500,000  $2,500   191,801,218  $191,805  $13,867,853  $3,939,659  $(21,258,289) $(549,022) $(3,805,494)

  Three months ended September 30, 2020 (Unaudited) 
  Series A Preferred stock, par value $0.001  Common stock, par value $0.001  Additional
Paid-in		  Shares
to be		  Accumulated  Total
Stockholders’		 
  Shares  Amount  Shares  Amount  Capital  issued  deficit  Deficit 
Balance, June 30, 2020 (Unaudited)  2,500,000  $2   56,900,978  $57  $7,474  $3,116  $(11,463) $(814)
Fair value of vested options  -   -   -   -   68   -   -   68 
Fair value of shares for services  -   -   (500,117)  -  (162)   184   -   22 
Fair Value of shares issued to employees and officers  -   -   -   1   54   -   -   55 
Shares to be issued for cash  -   -   -   -   -   20   -   20 
Beneficial conversion feature of issued convertible notes  -   -   -   -   1,277   -   -   1,277 
Issuance of shares due to conversion  -   -   3,955,747   3   208   -   -   211 
Fair value of shares issued for loan fees  -   -   422,522   1   16       -   17 
Net loss  -   -   -   -   -   -   

(2,706

)  

(2,706

)
Balance, September 30, 2020 (Unaudited)  2,500,000  $2   60,779,130  $62  $8,935  $3,320  $

(14,169

) $

(1,850

)
Six Months Ended June 30, 2021

Nine months ended September 30, 2020 (Unaudited)
  Series A Preferred stock, par value $0.001  Common stock, par value $0.001  Additional
Paid-in		  Shares
to be		  Accumulated  Total
Stockholders’		 
  Shares  Amount  Shares  Amount  Capital  issued  deficit  Deficit 
Balance, December 31, 2019  -  $-   49,087,255  $49  $5,620  $2,848  $(8,238) $279 
Issuance of shares          5,000,000   6   529   (535)      - 
Shares issued for cash  -   -   407,408   1   75   50   -   126 
Fair value of vested options  -   -   -   -   250   -   -   250 
Fair value of shares issued for services  -   -   750,000   1   24   946   -   971 
Fair value of shares issued to employees and officer  -   -   451,198   1   105   -   -   106 
Shares issued for conversion of Convertible Notes  -   -   3,955,747   3   208   -   -   211 
Fair value of preferred shares issued to officer  2,500,000   2   -   -   463   -   -   465 
Beneficial conversion feature of issued convertible notes  -   -   -   -   1,568   -   -   1,568 
Fair value of shares issued for loan fees  -   -   1,127,522   1   93   11   -   105 
Net loss  -   -   -   -   -   -   (5,931)  

(5,931

)
Balance, September 30, 2020 (Unaudited)  2,500,000  $2   60,779,130  $62  $8,935  $3,320  $

(14,169

) $

(1,850

)
  Series A                      
  Preferred Stock,  Common Stock  Additional  Shares     Non  Total 
  par value $0.001  par value $0.001  Paid-in  To be  Accumulated  Controlling  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Issued  Deficit  Interest  Deficit 
Balance December 31, 2020  2,500,000  $2,500   46,756,970  $46,757  $10,102,805  $3,641,868  $(16,402,176) $-  $(2,608,246)
                                     
Adjustment for adoption of ASU 2020-6  -   -   -   -   (823,655)  -   320,602   -   (503,053)
Shares issued for cash  -   -   56,750,000   56,750   1,928,250   -   -   -   1,985,000 
Fair value of shares for services  -   -   14,925,976   14,926   1,299,832   -   -   -   1,314,758 
Fair value of vested restricted stock  -   -   -   -   -   297,791   -   -   297,791 
Fair value of vested options  -   -   -   -   126,905   -   -   -   126,905 
Shares issued for conversion of convertible notes  -   -   73,368,272   73,372   1,233,716   -   -   -   1,307,088 
    .    .                             
Net loss  -   -   -   -   -   -   (5,176,715)  (549,022)  (5,725,737)
Balance June 30, 2021  2,500,000  $2,500   191,801,218  $191,805  $13,867,853  $3,939,659  $(21,258,289) $(549,022) $(3,805,494)

5

Three months ended September 30, 2019 (Unaudited)
  Common Stock, par
value $0.001		  Additional          
  Number of shares  Amount  paid-in capital  Shares to be issued  Accumulated deficit  Total 
Balance, June 30, 2019  41,823,505  $42  $2,374  $2,304  $(4,540) $180 
Shares issued for cash  2,642,750   3   937   (454)  -   486 
Fair value of shares for services  180,000   -   467   -   -   467 
Net loss  -   -   -   -   (928)  (928)
Balance, September 30, 2019 (Unaudited)  44,646,255  $45  $3,778  $1,850  $(5,468) $205 

QUANTA, INC. AND SUBSIDIARY

Nine months ended September 30, 2019 (Unaudited)
  Common Stock, par
value $0.001		  Additional          
  Number of shares  Amount  paid-in capital  Shares to be issued  Accumulated deficit  Total 
Balance, December 31, 2018  39,200,090  $39  $2,360  $306  $(2,450) $255 
Shares issued for cash  2,642,750   3   1,315   (206)  -   1,112 
Shares for services  212,505   -   106   1,750   -   1,856 
Shares issued for cashless exercise of warrants  2,590,910   3   (3)  -   -   - 
Net loss  -   -   -   -   (3,018)  (3,018)
Balance, September 30, 2019 (Unaudited)  44,646,255  $45  $3,778  $1,850  $(5,468) $205 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

Three months ended June 30, 2020

  Series A                      
  Preferred Stock,  Common Stock  Additional  Shares     Non  Total 
  par value $0.001  par value $0.001  Paid-in  To be  Accumulated  Controlling  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Issued  Deficit  Interest  Deficit 
Balance March 31, 2020  -  $-   54,198,366  $55,198  $6,223,617  $2,773,868  $(9,596,992) $-  $(544,309)
                                     
Issuance of shares  -   -   18,519   -   4,995   (4,995)  -   -   - 
Shares issued for cash  -   -   277,778   -   74,722   -   -   -   74,722 
Fair value of shares for services  -   -   1,250,117   998   185,581   336,000   -   -   522,579 
Fair value of vested options  -   -   -   -   100,921   -   -   -   100,921 
Fair value of shares issued to employees and officer  -   -   451,198   -   52,254   -   -   -   52,254 
Fair value of perferred shares issued to officer  2,500,000   2,500   -   -   462,500   -   -   -   465,000 
Beneficial conversion feature of issued convertible notes  -   -   -   -   291,000   -   -   -   291,000 
Fair Value of shares issued for loan fees  -   -   705,000   705   78,438   10,890   -   -   90,033 
    .    .                             
Net loss  -   -   -   -   -   -   (1,865,657)  -   (1,865,657)
Balance June 30, 2020  2,500,000  $2,500   56,900,978  $56,901  $7,474,028  $3,115,763  $(11,462,649) $-  $(1,711,744)

Six Months Ended June 30, 2020

  Series A                      
  Preferred Stock,  Common Stock  Additional  Shares     Non  Total 
  par value $0.001  par value $0.001  Paid-in  To be  Accumulated  Controlling  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Issued  Deficit  Interest  Deficit 
Balance December 31, 2019  -  $-   49,087,255  $49,087  $5,619,733  $2,847,868  $(8,237,747) $-  $278,941 
                                     
Issuance of shares  -   -   5,018,519   5,000   499,995   (504,995)  -   -   - 
Shares issued for cash  -   -   388,889   1,111   103,611   -   -   -   104,722 
Fair value of shares for services  -   -   1,250,117   998   185,581   762,000   -   -   948,579 
Fair value of vested options  -   -   -   -   180,916   -   -   -   180,916 
Fair value of shares issued to employees and officer  -   -   451,198   -   52,254   -   -   -   52,254 
Fair value of perferred shares issued to officer  2,500,000   2,500   -   -   462,500   -   -   -   465,000 
Beneficial conversion feature of issued convertible notes  -   -   -   -   291,000   -   -   -   291,000 
Fair Value of shares issued for loan fees  -   -   705,000   705   78,438   10,890   -   -   90,033 
    .    .                             
Net loss  -   -   -   -   -   -   (3,224,902)  -   (3,224,902)
Balance June 30, 2020  2,500,000  $2,500   56,900,978  $56,901  $7,474,028  $3,115,763  $(11,462,649) $-  $(1,711,744)

See notes to condensed consolidated financial statements

6

QUANTA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)(Unaudited)

(Unaudited)

 Nine Months Ended
September 30, 2020		 Nine Months Ended
September 30, 2019		  Six Months Ended
June 30, 2021		 Six Months Ended
June 30, 2020		 
 (Unaudited) (Unaudited)  (Unaudited) (Unaudited) 
          
CASH FLOW FROM OPERATING ACTIVITIES:                
Net loss $(5,931) $(3,017) $(5,725,737) $(3,224,902)
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation  162   122   35,168   106,718 
Fair value of shares issued for services  1,314,758   180,916 
Fair value of vested options  250   -   126,905   186,893 
Fair value of shares issued for services  1,068   1,856 
Fair value of shares issued to employees and officer  106   - 
Fair value of preferred shares issued to officer  465   - 
Fair value of vested restricted shares  297,791   761,686 
Fair value of mezzanine equity Series B and Series C preferred shares issued for services  1,691,331   - 
Fair value of shares issued to officer  -   514,754 
Amortization of convertible note discount  54,595   380,000 
Amortization of note payable discount  14,100   - 
Amortization of right-of-use asset  40,964   84,095 
Fees paid through conversion of convertible notes  54,400   - 
Change in fair value of derivative  (101)  -   -   (283,139)
Loss on debt extinguishment  

795

  - 
Impairment of operating lease right of use asset  255   - 
Fee Notes Issued  60   - 
Net Gain on Settlement of AP and Accrued Expenses  (16)  - 
Accretion of Premium  226   - 
Amortization of convertible note discount  396   - 
Amortization of right-of-use asset  106   58 
Interest accrual  -   - 
Private placement costs  -   279,000 
Gain on extinguishment of debt  -   (286,000)
Changes in operating assets and liabilities:                
Accounts receivable  22   (37)  685   10,640 
Accounts receivable, related party  (198,800)  - 
Allowance for doubtful accounts  49,700   - 
Deferred expenses, related party  134,704   - 
Inventories  (34)  -   (58,861)  (38,882)
Prepaid Expenses  7   - 
Prepaid production costs  (300,000)  7,500 
Accounts payable and accrued liabilities  386   29   (136,890)  72,387 
Advances  200,000   - 
Deferred revenue  (26)  76   (15,632)  (17,052)
Operating lease liabilities  (39,493)  (78,018)
Net cash used in operating activities  (1,804)  (968)  (2,460,312)  (1,343,404)
                
CASH FLOW FROM INVESTING ACTIVITIES:                
        
Purchase of equipment  (80)  (84)  (26,672)  (80,272)
Net cash used in investment activities  (80)  (84)  (26,672)  (80,272)
                
CASH FLOW FROM FINANCING ACTIVITIES:                
Proceeds from shares to be issued  50     
Proceeds from shares issued for cash  125   1,110   1,985,000   104,722 
Proceeds from convertibles notes payable  712   -   975,000   563,000 
Proceeds from revenue sharing loan  250   - 
Proceeds from PPP and EIDL loans  294   - 
Proceeds from notes payable  378   -   10,000   679,000 
Principal payments of convertible notes  (282)  - 
Principal payments of notes payable  (65)  (59)  (211,459)  (44,000)
Costs of recapitalization  -   - 
Principal payments of convertible notes payable  -   (282,000)
Net cash provided by financing activities  1,462   1,051   2,758,541   1,020,722 
                
Increase (decrease) in cash  (422)  (1)  271,557   (402,954)
Cash and cash equivalents, beginning of period  433   36   6,270   433,099 
Cash and cash equivalents, end of period $11  $29  $277,827  $30,145 
                
Supplemental Disclosures of Cash Flow Information:                
Cash paid for taxes  -   - 
Cash paid for Interest  17   - 
Cash paid for interest  59,749   391,405 
                
Non-cash investing and financing activities                
Recognition of right-of-use asset and liability $92  $410 
Reclass to long term Convertible Notes payable  (52)  - 
Premium on Convertible notes Payable  (70)  - 
Discount on Convertible Notes Payable  (725)  - 
Reclass to Settlement Payable  7   - 
Original issuance discount  (131)  - 
Discount revenue loan  (28)  - 
Conversions  186     
Recognition of beneficial conversion feature  353   - 
Shared to be issued  (535)    
Derivative allocated to discount  173   - 
Common Stock for services  (6)  - 
Fair Value of Options  529   - 
Adjustment for adoption of ASU 2020-06  503,053   - 
Common shares issued for conversion of convertible notes  1,307,088   - 
Derivative liabilities allocated to convertible note discount  -   153,000 
Recognition of operating lease right-of-use asset and operating lease liabilities $-  $431,402 

See notes to condensed consolidated financial statements

7

QUANTA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINESIX MONTHS ENDED SeptemberJUNE 30, 2021 AND 2020 AND 2019 (UNAUDITED)

(Amounts in thousands, except share and per share amounts)

NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Quanta, Inc. (the “Company”) is an applied science company focused on increasing energy levels in plant matter to increase performance within the human body. The Company’s operations are based in Burbank, California.

On April 28, 2016, the Company was incorporated as Freight Solution, Inc. in the State of Nevada. Effective June 6, 2018, the Company (then known as Bioanomaly Inc.) was acquired by Freight Solution in a transaction accounted for as a reverse merger transaction. On July 11, 2018, the Company changed its name to Quanta, Inc.

Subsequent to September 30,December 21, 2020, the Company experienced a change in control and appointment of a new Chief Executive Officer, among other corporate actions, and commenced a transitionentered into a holding company. During the transition phase,Securities Exchange Agreement with Medolife Rx, Inc., a Wyoming corporation, (“Medolife Rx”) pursuant to which, the Company furloughed mostagreed to acquire 51% of its employees,Medolife Rx in exchange for 9,000 shares of newly created Series B Convertible Preferred Stock. On January 14, 2021, the Company completed the acquisition of 51% of Medolife, which had nominal assets, liabilities, and has continued to sell its products onlineoperations. (see Note 12)10).

Basis of presentation-Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. The results of operations for the three months and six months ended June 30, 2021, are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2021. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2020 and notes thereto contained in the Annual Report on Form 10-K of the Company as filed with the SEC on April 15, 2021. The condensed consolidated balance sheet as of December 31, 2020 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

The consolidated financial statements include the accounts of Quanta Inc, and its 51% owned subsidiary, Medolife Rx, Inc. All intercompany balances and transactions have been eliminated in consolidation.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, for the ninesix months ended SeptemberJune 30, 2020,2021, the Company incurred a net loss of $5,931$5,725,737 and used cash in operating activities of $1,804,$2,460,312, and at SeptemberJune 30, 2020,2021, the Company had a stockholders’ deficit of $1,850.$3,805,494. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in theirits report on the Company’s December 31, 2019 audited2020 financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

At SeptemberJune 30, 2020,2021, the Company had cash on hand in the amount of $11. Subsequent to September 30, 2020, the Company received $1,643 from the issuance of notes payable.$277,827. Management estimates that the current funds on hand will be sufficient to continue operations through the next threesix months. The Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial support from its shareholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stockholders, in the case of equity financing

Basis of presentation and principles of Consolidation

The accompanying unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2020 and 2019, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2020. The Condensed Consolidated Balance Sheet information as of December 31, 2019 was derived from the Company’s audited Consolidated Financial Statements as of and for year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K/A filed with the SEC on April 10, 2020. These financial statements should be read in conjunction with that report.

The consolidated financial statements include the accounts of Quanta Inc, and its wholly-owned subsidiary, Bioanomaly, Inc. Intercompany transactions have been eliminated in consolidation.

8

COVID-19

The global outbreak of COVID-19 has negatively affected the U.S. and global economies and has negatively impacted businesses, workforces, customers, and created significant volatility of financial markets. It has also disrupted the normal operations of many businesses, including ours. The extent of the impact of the pandemic on our business and financial results will depend largely on future developments, including the duration and severity of the outbreak, the length of restrictions and business closures, and the impact on capital and financial markets, all of which are highly uncertain and cannot be predicted. This outbreak could decrease spending, adversely affect demand for our products and harm our business and results of operations. In the quarter ended June 30, 2020 and September 30, 2020, we believe the COVID-19 pandemic did impact our operating results as shipments to customers in the second quarter and third quarter were down 13% and 10% from the first quarter of the year. However, we have not observed any material impairments of our assets or a significant change in the fair value of our assets due to the COVID-19 pandemic. While it is not possible at this time to estimate the full impact that COVID-19 will have on our business, restrictions resulting from COVID-19 on general economic conditions could, among other things, impair our ability to raise capital when needed. This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of Americaaccounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates include certain assumptions related to, among others, allowance for doubtful accounts receivable, impairment analysis of long-term assets, valuation allowance on deferred income taxes, assumptions used in valuing stock instruments issued for services, assumptions made in valuing derivative liabilities, and the accrual of potential liabilities. Actual results may differ from these estimates.

Revenue recognition

The Company follows the guidance of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.

Product Sales—Revenue from salesSubstantially all of the Company’s CBDrevenue is derived from product sales. Product revenue and costs of sales are recognized when control of the products is recognized at the point in time when the Company’s performance obligations with the applicable customers have been satisfied. Revenue is recorded at the transaction price,transfers to our customer, which is the amount of consideration the Company expects to receive in exchange for transferring products to a customer. Generally, thegenerally occurs upon shipment from our facilities. The Company’s performance obligations are transferred to the customersatisfied at a point in time, typically upon delivery of products.that time. The Company historically has offereddoes not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts rebates, rights of return,that could cause revenue to be allocated or other allowances to clients which would result in the establishment of reserves against revenue. The Company sells its products (i) directly to customers (“DTC”) through online orders from our websites, and DTC sales at conventions and events; and (ii) through wholesalers, including physicians, pharmacies, fitness studios, grocery stores, and other organizations.adjusted over time.

License revenue— Revenue from symbolic IP is recognized over the access period to the Company’s IP (see Note 2).

Cost of goods sold includes direct costs and fees related to the sale of our products.

Leases

Effective January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company determines if an arrangement contains a lease at the inception of the contract. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. All leases with terms greater than twelve months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the lease payments over the lease term. Leases with terms of twelve months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of an asset or liability (see Note 5).

98

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a probability weighted average Black-Scholes-Merton model to value the derivative instruments at inception and on subsequent valuation dates through the September 30, 2020, reporting date. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period

Convertible Notes with Fixed Rate Conversion Options

The Company may enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. The Company records the convertible note liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the Note date with a charge to interest expense in accordance with ASC 480 - “Distinguishing Liabilities from Equity”.

Stock-based compensation

Stock Compensation

The Company periodically issues stock options, warrants, shares of common stock, and restricted stock unit awards, as share-based compensation to employees and non-employees in non-capital raising transactions for services and for financing costs.non-employees. The Company accounts for such grants issued and vestingits share-based compensation in accordance with FASB ASC 718, Compensation – Stock Compensation (Topic 718). Stock-based compensation cost for employees is measured at the grant date, based on ASC 718, whereby the estimated fair value of the award, and is measured on the date of grant and recognized as expense over the requisite service period. Recognition of compensation expense onfor non-employees is in the straight-line basis oversame period and manner as if the vesting period. The Company recognizeshad paid cash for the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.services.

The fair value of the Company’s stock options is estimated using athe Black-Scholes-Merton option pricingOption Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton option pricingOption Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton option pricingOption Pricing model could materially affect compensation expense recorded in future periods.

Prepaid production costs

In February 2021, the Company’s subsidiary Medolife Rx entered into a collaboration and joint development agreement with a company (the “Agent) for Medolife to produce some of its products in the Agent’s facility. Medolife Rx agreed to pay the Agent $300,000 for the right to use the Agents production facility for a term of five years. Medolife Rx will also pay a production fee, as defined, to the Agent for any production. The Company determined that there is no distinct asset that it is purchasing from the Agent and will record amortization of the prepaid fee ratably over the life of the contract. As of June 30, 2021, the Company had paid the Agent the entire fee.

Advertising costs

Advertising costs are expensed as incurred. During the ninesix months ended SeptemberJune 30, 20202021 and 2019,June 30, 2020, advertising costs totaled $53$544,565 and $58,$44,658, respectively.

Research and Development Costs

Costs incurred for research and development are expensed as incurred. During the ninesix months ended SeptemberJune 30, 20202021 and 2019,June 30, 2020, research and development costs totaled $307$243,500 and $197,$244,537, respectively and include salaries, benefits, and overhead costs of personnel conducting research and development of the Company’s products.

Net Loss per Share

Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding forduring the period, excluding shares of unvested restricted common stock.period. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. At September 30, 2020, shares used in the calculation of basic net loss per common share include 4,125,000 of vested but unissued shares underlying awards of restricted common stock. Diluted earningsloss per share is computed by dividingreflects the net income applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued,dilution, using the treasury stock method. Shares of restrictedmethod that could occur if securities or other contracts to issue common stock are includedwere exercised or converted into common stock or resulted in the diluted weighted average numberissuance of common sharesstock that then shared in the loss of the Company. In computing diluted loss per share, the treasury stock method assumes that outstanding fromwarrants and convertible notes are exercised and the date theyproceeds are granted. Potentialused to purchase common shares are excluded fromstock at the computationaverage market price during the period. Warrants and convertible notes may have a dilutive effect under the treasury stock method only when their effect is anti-dilutive.the average market price of the common stock during the period exceeds the exercise price of the options and warrants.

For the ninesix months ended September 30,June 31, 2021 and 2020, the dilutive impact of common stock equivalents, e.g. stock options, exercisable into 2,732,261 shares of common stock,warrants and convertible notes convertible into 61,171,291 shares of common stock, and 4,500,000 shares of unvested restricted common stockpayable have been excluded from calculation of weighted average shares because their impact on the loss per share is anti-dilutive.

As of June 30, 2021, convertible notes of $1,528,820and accrued interest are convertible into 83,908,000 shares of common stock. It should be noted that undercontractually the contractual termslimitations on the third-party notes (and the related warrant) limit the number of the convertible notes; one note holder is limited no more thanshares converted to either 4.99% of outstanding shares; the other note holders are limited to no more thanor 9.99% of the then outstanding shares at any time within 61 daysshares.As of conversion. Therefore at SeptemberJune 30, 2021 and 2020, potentially dilutive securities consisted of the note holders could not convert their respective notes into more than 20,361,669 common shares.following:

SCHEDULE OF POTENTIALLY DILUTIVE SECURITIES

  June 30, 2021  June 30, 2020 
Stock options  775,000   3,290,000 
Unvested restricted shares  2,000,000   5,125,000 
Convertible notes payable  83,908,000   889,469 
Total  86,683,000   9,304,469 

10

Fair Value of Financial Instruments

The Company follows the authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) for fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

9

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company’s assumptions.

The Company is required to use of observable market data if such data is available without undue cost and effort.

The Company believes the carrying amount reported in the balance sheet for cash, accounts receivable, accounts payable and accrued liabilities, and notes payable, approximate their fair values because of the short-term nature of these financial instrumentsinstruments.

As of SeptemberJune 30, 2021 and December 31, 2020, the Company’s balance sheet includesCompany did not have any Level 2 liabilities comprised of the fair value of embedded derivative liabilities of $179 (see Note 8).liabilities.

Concentrations of risks

For the ninesix months ended SeptemberJune 30, 2020 and 2019,2021, one customer accounted for 15% or more52% of revenue. No otherFor the six months ended June 30, 2020, one customer accounted for 10%21% or more of revenue. As of SeptemberJune 30, 2020,2021 one customer accounted for 17%100% of accounts receivable and as of June 30, 2020, one customers accounted for 10%18% of accounts receivable. No other customer accounted for 10% or more of revenue or accounts receivable.

As of December 31, 2019,June 30, 2021, two customersvendors accounted for 19% and 12%61% of accounts receivable, respectively. Nopayable and no other customervendor accounted for 10%10% or more of accounts receivable.

payable. As of SeptemberJune 30, 2020, fourthree vendors accounted for 11%36%, 40% and 17% and 14% and 14%23%, respectively of accounts payable, respectively, and nopayable. No other vendor accounted for 10% or more of accounts payable. As of September 30, 2020 no vendor accounted for 10% or more of accounts payable.payable

The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits that are insured by the Federal Deposit Insurance Corporation, or FDIC. At times, deposits held may exceed the amount of insurance provided by the FDIC. The Company has not experienced any losses in its cash and believes it is not exposed to any significant credit risk.

Segments

The Company operates in one1 segment for the development and distribution of our CBD products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion accounting models. As a result, the Company’s convertible debt instruments will be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives. For contracts in an entity’s own equity, the type of contracts primarily affected by this update are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement conditions of the derivative scope exception. The Company early adopted ASU No. 2020-06 effective January 1, 2021 using the modified retrospective approach. Upon adoption, the following changes resulted: (i) the intrinsic value of the beneficial conversion feature recorded in 2020 was reversed as of the effective date of adoption, thereby resulting in an increase in the convertible debentures with an offsetting adjustment to additional paid in capital and (ii) interest expense recorded in 2020 that was related to the amortization of the discount related to the beneficial conversion feature was reversed against opening accumulated deficit. The adoption of ASU 2020-06 on January 1, 2021, resulted in a decrease in addition paid in capital of $823,655, a decrease to accumulated deficit of $320,602, and an increase in total stockholders’ deficit of $503,053.

In June 2016, the FASB issued ASU No. 2016-13,Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326) (“ASC 326”). ASU 2016-13 requiresThe standard significantly changes how entities to use a forward-lookingwill measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on current expected credit losses (“CECL”)rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to estimate credit losses on certain typesretained earnings as of financial instruments, including trade receivables. This may resultthe beginning of the first reporting period in which the earlier recognition of allowances for losses. ASU 2016-13guidance is effective. The standard is effective for the Companyinterim and annual reporting periods beginning January 1, 2023, and early adoption is permitted.after December 15, 2022. The Company does not believeis currently assessing the potential impact of adopting this standard on the new guidanceCompany’s financial statements and related codification improvements will be material to its financial position, results of operations and cash flows.disclosures.

11

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

NOTE 2 – LICENSE AGREEMENTINVENTORIES

Effective January 22, 2019, the Company entered into an agreement with a wholesaler for the exclusive rights to distribute the Company’s products in the state of Colorado for three years. In consideration, the Company received an up-front payment of $100. The Company determined that the exclusive distribution agreement was a distinct agreement for the license of symbolic IP and thus should be recognized on a straight-line basis over the three-year life of the agreement. For the three and nine months ended September 30, 2020 the Company recognized revenue related to this agreement in the amount of $9 and $25, respectively. For the three and nine months ended September 30, 2019 the Company recognized revenue related to this agreement in the amount of $9 and $17, respectively.

NOTE 3 – INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out) or net realizable value, and net of reserves, consisted of the following:

SCHEDULE OF INVENTORIES

 September 30, 2020 December 31, 2019  June 30, 2021 December 31, 2020 
      
Raw materials and packaging $120  $103  $53,559  $3,144 
Finished goods  37   20   24,522   16,076 
        
 $157  $123 
Inventories $78,081  $19,220 

10

The Company has recorded a reserve for slow moving and potentially obsolete inventory. The reserve at June 30, 2021 and December 31, 2020 was $9,125 and $9,125, respectively.

NOTE 43 - EQUIPMENT

Equipment, stated at cost, less accumulated depreciation consisted of the following:

SCHEDULE OF EQUIPMENT

 September 30, 2020 December 31, 2019  June 30, 2021 December 31, 2020 
          
Machinery-technology equipment $705  $607  $704,772  $704,772 
Machinery-technology equipment under construction  12   30   62,641   35,969 
  717   637 
Equipment, gross  767,413   740,741 
Less accumulated depreciation  (485)  (324)  (575,386)  (540,218)
        
 $232  $313 
Equipment, net $192,027  $200,523 

Depreciation expense for the three and ninesix months ended SeptemberJune 30, 2021 and 2020 was $55$35,168 and $162, respectively. Depreciation expense for the three and nine months ended September 30, 2019 was $50 and $122,$106,718, respectively. As of SeptemberJune 30, 2020,2021, the equipment under construction is approximately 80%60% complete, and is expected to be completed and placed into service during the year ended December 31, 2020.2021.

NOTE 54 - OPERATING LEASESLEASE

At December 31, 2019,June 30, 2021, the Company hadhas one operating lease for its headquarters office space in Burbank, California. In February 2020, the Company took possession of a second leased facility consisting of office, research, and production space also located in Burbank, California.Burbank. The lease commenced on January 1, 2020, and has a term for 5 years, with annual fixed rental payments ranging from $90$90,000 to $101. The aggregate total fixed rent is approximately $478 and resulted in$101,296. At June 30, 2021, the recognition of an operating lease right-of-use (“ROU”) asset and of corresponding lease liability of approximately $432 each. The Company also paid a security deposit of $17. At September 30, 2020, the Company did not have any other leases. 

During the nine months ended September 30, 2020, the Company consolidated it operations into one space located in Burbank, California. In connection with one lease that is no longer utilized, the Company recorded an impairmentbalance of the related netlease’s right of use asset of $255, and wrote ofcorresponding lease liability were $321,263 and $341,844, respectively. At June 30, 2021, the Company is also obligated under a deposit of $17 with the lessor.lease that was abandoned in December 2020. The total due to the lessor for the abandoned lease space is $236$235,759 and is recorded as lease settlement reserveobligation at SeptemberJune 30, 2020.2021.

12

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Generally the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

The components of lease expense and supplemental cash flow information related to leases for the period are as follows:

SCHEDULE OF LEASE EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES

 

Nine months ended

September 30, 2020

  

Six months ended

June 30, 2021

 
 (in thousands)    
Lease Cost        
Operating lease cost (included in selling, general, and administrative expense in the Company’s statement of operations) $171,332  $62,905 
        
Other Information        
Cash paid for amounts included in the measurement of lease liabilities for 2020 $92 
Cash paid for amounts included in the measurement of lease liabilities for 2021 $61,200 
Weighted average remaining lease term – operating leases (in years)  3.25   2.50 
Average discount rate – operating leases  4%  4%

 

The supplemental balance sheet information related to leases for the period is as follows:SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES

  At June 30, 2021 
Operating leases    
Long-term right-of-use assets $321,263 
     
Short-term operating lease liabilities $103,914 
Long-term operating lease liabilities  252,335 
Total operating lease liabilities $356,249 

  At September 30, 2020 
Operating leases    
Long-term right-of-use assets $382 
     
Short-term operating lease liabilities $99 
Long-term operating lease liabilities  315 
Total operating lease liabilities $414 

Maturities of the Company’s lease liabilities are as follows:

Year Ending Operating Leases 
2020 $23 
2021  94 
2022  96 
2023  99 
2024  102 
Total lease payments  414 
Less: Imputed interest/present value discount  (-)
Present value of lease liabilities  414 
Less current portion  (99)
Operating lease liabilities, long-term $315 

SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES

Year Ending Operating Leases 
2021(remainder of year)  46,350 
2022  95,481 
2023  98,345 
2024  139,767 
Total lease payments  379,943 
Less: Imputed interest  (23,694)
Present value of lease liabilities  356,249 
Present value of lease liabilities  356,249 
Less current portion  (103,914)
Operating lease liabilities, long-term $252,335 

11

Lease expensesexpense were $72$62,905 and $171$98,926 during the three and ninesix months ended SeptemberJune 30, 2021 and 2020, respectively. Lease expenses were $20 and $81 during the three and nine months ended September 30, 2019, respectively.

NOTE 65 – NOTES PAYABLE

SCHEDULE OF NOTES PAYABLE

  September 30, 2020  December 31, 2019 
Secured        
(a) Notes payable secured by equipment $440  $- 
(a) Deferred finance charges on notes payable secured by equipment  (89)  - 
(b) Note payable secured by assets  33   56 
         
Unsecured        
(c) Note payable-Payroll Protection Loan  134   - 
(d) Note payable- Economic Injury Disaster Loan  160   - 
(e) Revenue sharing agreement  250   - 
(e) Deferred finance charges, revenue sharing  (25)  - 
Total notes payable outstanding  903   56 
Current portion  420   - 
Long-term portion $483  $56 
  June 30, 2021  December 31, 2020 
       
(a) Notes payable secured by equipment $257,175  $438,634 
(b) Note payable, secured by assets-in default  13,350   33,350 
(c) Note payable, Payroll Protection Program  134,125   134,125 
(d) Note payable, Economic Injury Disaster Loan  160,000   160,000 
(e) Revenue sharing agreement  242,800   242,800 
Total notes payable outstanding  807,450   1,008,909 
Debt discount  (60,717)  (74,817)
Notes payable, net of discount  746,733   934,092 
Current portion  289,445   482,724 
         
Long term portion $457,288  $451,368 

13

(a)In April 2020 and May 2020, the Company entered into two financing agreements aggregating $506.$505,646. The notes have a stated interest rate of 10.9%. The notes were issued at a discount including fees for underwriting, , legal and administrative costs along with deferred financing costs. The deferred financing costs are being amortized over the terms of the notes. The notes are secured by the Company’s equipment, and require monthly payments of principal and interest of $21,$21,000, and mature in April 2022 and May 2022. During the nine months ended September 30, 2020, the Company made payments of $67 and at September 30,2022. At December 31, 2020, the balance due on these notes was $439.$438,634. During the six months ended June 30, 2021, the Company made payments of $181,459 and at June 30, 2021, the balance due on these notes was $257,125. At June 30, 2021 and December 31, 2020, the unamortized discount related to deferred financing charges on these agreements was $60,717 and $74,817, respectively.
(b)Note payable, interest at 8.3%8.3% per annum, secured by all the assets of the Company. The note was due January 13, 2019 and on April 24, 2020, the. The note was due January 13, 2019. The note holder waived the default through December 31, 2020. At December 31, 2019,2020, and it is currently in default and the balance of this Note was $56,Company is in discussion with the note holder to extend the balance. During the ninesix months ended SeptemberJune 30, 2020,2021, the companyCompany made principal payments of $22,$20,000 and at SeptemberJune 30, 2020,2021, the balance due on this note was $33.$13,350.

(c)
(c)On May 7, 2020, the Company was granted a loan (the “PPP loan”) from Bank of America in the aggregate amount of $134,$134,125, pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act. The PPP loan agreement is dated May 4, 2020, matures on May 4, 2022, bears interest at a rate of 1%1% per annum, with the first six months of interest deferred, is payable monthly commencing on November 2020, and is unsecured and guaranteed by the U.S. Small Business Administration (“SBA”). The loan term may be extended to April 20, 2025, if mutually agreed to by the Company and lender. We applied ASC 470, Debt, to account for the PPP loan. The PPP loan may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the PPP loan may only be used for qualifying expenses as described in the CARES Act, including qualifying payroll costs, qualifying group health care benefits, qualifying rent and debt obligations, and qualifying utilities. The Company intends to usebelieves it used the entire loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses. The Company intends to apply for forgiveness of the PPP loan with respect to these qualifying expenses, however, we cannot assure that such forgiveness of any portion of the PPP loan will occur. As for the potential loan forgiveness, once the PPP loan is, in part or wholly, forgiven and a legal release is received, the liability would be reduced by the amount forgiven and a gain on extinguishment would be recorded. The terms of the PPP loan provide for customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency events. The Company was in compliance with the terms of the PPP loan as of SeptemberJune 30, 2020.2021.
(d)

On September 5, 2020, the Company received a $150$160,000 loan (the “EID Loan”) from the SBA under the SBA’s Economic Injury Disaster Loan program. The EID Loan has a thirty-year term and bears interest at a rate of 3.75%3.75% per annum. Monthly principal and interest payments of $0.7 per month are deferred for twelve months, and commence in June 2021. The EID Loan may be prepaid at any time prior to maturity with no prepayment penalties. The proceeds from the EID Loan must be used for working capital. The Loan contains customary events of default and other provisions customary for a loan of this type. The Company was in compliance with the terms of the EID loan as of SeptemberJune 30, 2020.

2021.
(e)

Between July 7, 2020, and July 29, 2020, the Company issued notes payable to a third-party investors totaling $250. $250,000, of which $7,200 was repaid in 2020. Under the terms of the note,notes, the Company is to pay 50% of the net revenues beginning on August 21, 2020, for a product to be designed and produced by the Company. The product has not been produced and therefore no payments have been made.made to date. The Company issued 280,000 shareshas received a notice of common stock as fees in conjunction with this financing.default and demand for payment from three note holders (owed approximately $146,000). The Company recorded $28, of discount whichhas retained counsel who is being amortized to interest expense overin discussion with the expected term of the arrangement.

note holders.

NOTE 76 – CONVERTIBLE NOTES PAYABLE

Convertible notes payable consisted of the following:

SCHEDULE OF CONVERTIBLE NOTES PAYABLE

 September 30, 2020  December 31, 2019  June 30, 2021  December 31, 2020 
Unsecured                
(a) Convertible notes with fixed discount percentage conversion prices  223   282  $-  $180,200 
Put premiums on stock settled debt  -   117,866 
        
(b) Convertible notes with fixed conversion prices  497   -   1,528,820   936,944 
Default penalty principal added, charged to loss on debt extinguishment  315   - 
Put premiums on stock settled debt  155   - 
Default penalty principal added  -   369,086 
Total convertible notes principal outstanding  1,035   282   1,528,820   1,614,096 
Debt discount  (590)  (225)  (174,669)  (539,282)
                
Convertible notes, net of discount and premium $

600

  $57  $1,354,151  $1,074,814 
Current portion  

600

   57   1,354,151   1,074,814 
Long-term portion $-  $-  $-  $- 

1412

 

(a)

(a)

At December 31, 2019, there were $282 of2020, the balance due on convertible notes with adjustablefixed discount percentage conversion prices outstanding. During the nine months ended September 30, 2020, the Company issued one unsecured convertible promissory note for $153, bearing interest at 22% per annum, and maturing in February 2021. Also during the nine months ended September 30, 2020, the Company also issued two unsecured convertible notes payable for $30, bearing interest at 10% per annum, and maturing on December 31, 2020, that were issued as loan commitment fees for notes payable.was $180,200. At the option of the holder,holders, the notes arewere convertible into shares of the Company’s common stock at a price per share discount of 39% to 50% of the average marketlowest bid price of the Company’s common stock as defined. As a result, the Company determined that the conversion options of the convertiblewithin twenty-five days prior to conversion. The notes were not considered derivatives and qualifytreated as stock settled debt under ASC 480 – “Distinguishing480-Distinguishing Liabilities from Equity”. Therefore the Company calculated fixed premiums totaling $226 which wereEquity, and a put premium of $117,866 was recognized and charged to interest expense atwhen the datesnotes were initially recorded in 2020. During the six months ended June 30, 2021, note holders converted $180,200 principal and accrued interest of $18,266 (total of $198,466) into 7,492,676 shares of the note issuance. During the nine months ended September 30, 2020, one convertible note payable for $282 was paid off and another was partially converted intoCompany’s common stock. At September 30,Upon conversion the put premiums of $117,866 associated with these notes were reclassified to additional paid in capital.

(b)

As of December 31, 2020, the balance of thesedue on convertible notes was $223.

(b)

At December 31, 2019, the Company had no convertible notes outstanding with fixed conversion prices.prices was $1,306,030 (including default penalties of $369,086). During the ninesix months ended SeptemberJune 30, 2020,2021, the Company issued seveneight convertible notes with fixed conversion prices aggregating $497.$1,167,500. In addition, convertible notes with fixed conversion prices totaling $949,486 of principal and $37,726 of accrued interest (total of $987,212) were converted into 65,814,218 shares of the Company’s common stock. At June 30, 2021, the balance of the due on convertible notes with fixed conversion prices was $1,528,820. The notes are unsecured, convertible into common stock at prices ranging from $0.015 per share to $0.04 per share, bear interest at 10%4% to 10% per annum, and mature through MarchJune 22, 2022.

At December 31, 2021. The notes were initially convertible into shares2020, the net unamortized balance of the Company’s common stock at a fixed conversion price of $0.05 per share. The Company recorded debt discounts was $539,282, consisting of $531debt discount related to account for loan fees, beneficial conversion features ($323)823,655 less accumulated amortization of $320,602, or net of $503,053) and other debt discounts for fees and original issue discounts. discounts (OID) ($52,360 less accumulated amortization of $16,096, or net of $36,229). The Company early adopted ASU No. 2020-06 (See Note 1) effective January 1, 2021 using the modified retrospective approach. The adoption of ASU 2020-06 on January 1, 2021, resulted in a decrease in addition paid in capital of $823,655, a decrease to accumulated deficit of $320,602, and an increase in total stockholders’ deficit of $503,053.

The debt discounts related to fees and OID are amortized over the life of the related notes or are amortized in full upon the conversion of the corresponding notesnote to common stock.

On September 2, During the six months ended June 30, 2020, the Company issued a convertible note (see paragraph a above) having a conversion price less than $0.05 which triggered a term common to all notes in paragraph b, which changed the conversion terms to be the lowerdebt discounts of $0.05 or 61% of the lowest traded price during the 15 days prior$194,850 were added related to the conversion. This event is also considered a default for which a penalty is charged equal to 150%eight convertible notes issued above, and amortization of $56,445 was recorded. At June 30, 2021, the accrued interest, default interest and principal, totaling $315. On December 9, 2020, the Company executed amendments to these notes effective September 30, 2020 (as further discussed at Note 12), which extended the maturity dates and fixed the conversion price at $0.015. Due to the change in conversion terms the notes now require the recognitionnet unamortized balance of the beneficial conversion feature of the increased principal and lowering of the conversion price resulting in recognition of additional charges of $1,215. Loss on debt extinguishment was charged $901 andother debt discounts were charged $315 with a credit to additional paid in capital for the debt discounts which will be amortized to interest expense over the extended term of the amended notes. At September 30, 2020 the new principal totaled $812.was $174,669.

 

AtNOTE 7 – DERIVATIVE LIABILITIES AND FINANCIAL INSTRUMENTS

The Company had no derivative liabilities at June 30, 2021 or December 31, 2019,2020. For the balance of unamortized discount on convertible notes was $225. During the ninesix months ended SeptemberJune 30, 2020, debt discount of $761 was recorded, and debt discount amortization of $396 was recorded. At September 30, 2020, the balancea roll-forward of the unamortized discount was $590.level 2 valuation financial instrument is as follows:

SCHEDULE OF LEVEL 2 VALUATION FINANCIAL INSTRUMENTS

  Derivative Liabilities 
Balance at December 31, 2019 $400,139 
Recognition of derivative liabilities upon initial valuation  176,000 
Change in fair value of derivative liabilities during the three months ended June 30, 2020  (283,139)
     
Balance at June 30, 2020 $293,000 

NoteNOTE 8 – DERIVATIVE FINANCIAL INSTRUMENTSMEZZANINE EQUITY

At December 31, 2019, the balanceThe shares of the derivative liabilities was $400, which was fully extinguished Series B and Series C convertible preferred stock discussed below have been determined by the Company to be conditionally redeemable upon pay-offthe occurrence of certain events that are not solely within the control of the related convertible notewithissuer, and upon such event, the shares would become redeemable at the option of the holders, they are classified as ‘mezzanine equity’ (temporary equity). The purpose of this classification is to convey that such a decreasesecurity may not be permanently part of fair valueequity and could result in a demand for cash, securities or other assets of $114the entity in the future. The shares as valued have been classified as mezzanine equity and gainpresented as such on debt extinguishment of $286 during the nine months ended Septemberconsolidated balance sheet at June 30, 2020. The Company also recorded additions of $101 related2021 as single line items due to the conversion features of a note issued during the period (see Note 7), and recorded a gain on extinguishment of $101 upon conversion of the related convertible note. At September 30,immaterial par value. The mezzanine equity value is not included in shareholders’ deficit.

Series B Convertible Preferred Stock

On December 21, 2020, the Company hadentered into a Securities Exchange Agreement with Medolife Rx, Inc., a Wyoming corporation, (“Medolife Rx”) pursuant to which, the Company agreed to acquire 51% of Medolife Rx in exchange for 9,000 shares of newly created Series B Convertible Preferred Stock, which, were issued to Dr. Arthur Mikaelian upon closing on January 14, 2021. The shares issued to Dr. Mikaelian on January 14, 2021 were valued based on the conversion number of common shares at the market price on the date of issuance. Due fact that there Medolife Rx, Inc. was a start-up venture with no net asset value the value associated with the shares of $1,522,198 was charged to compensation expense during the six months ended June 30, 2021.

Series C Convertible Preferred Stock

The terms of the Certificate of Designation of the Series C Convertible Preferred Stock, which was filed with the State of Nevada on January 12, 2021, state that such Series C Convertible shares have a par value of $0.00001 per share and a stated value of $100 per share (the “Stated Value”) and each Series C Preferred Share shall be convertible notes outstandinginto 6,750 shares of Common Stock (“Conversion Ratio”), at the option of a Holder, at any time and from time to time, from and after the issuance of the Series C Preferred Stock. Anti-dilution terms of the preferred may change the conversion ratio. Each holder of the Series C Preferred Stock shall have the right to vote on any matter that may from time to time be submitted to the Company’s shareholders for a vote, on an as converted basis, either by written consent or by proxy. Additionally, the shareholders are consideredentitled to have embedded derivative liabilities that require bifurcation perliquidation benefits including a cash payout, the note agreements.liquidation terms include sales and mergers affection a change in control.

13

On January 14, 2021, the Board of Directors of the Company approved the issuance of all 1,000 authorized shares of Series C Convertible Preferred Stock. 500 shares of Series C Preferred Stock were issued to Trillium Partners LP, and 500 shares of Series C Preferred Stock were issued to Sagittarii Holdings, Inc. The derivative liabilitiesshares issued to Trillium and Sagittarii were valued at the following dates using a binomial model with the following assumptions:

  September 30, 2020  December 31, 2019 
Conversion feature:        
Risk-free interest rate  0.17%  1.8%
Expected volatility  182%  222%
Expected life (in years) 3 – 12 months  1 year 
Expected dividend yield  -   - 
         
Fair Value:  -   - 
Conversion feature $-  $400 

15

The risk-free interest rate was based on rates established by the Federal Reserve Bank. The expected volatility is$169,133 based on the historical volatilityconversion number of common shares at the Company’s stock. The expected life of the conversion feature of the notes was basedmarket price on the remaining termsdate of issuance, and were charged to expense for services during the related notes. The expected dividend yield was based on the fact that the Company has not customarily paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.six months ended June 30, 2021.

NOTE 9 – STOCKHOLDERS’ EQUITYDEFICIT

Series A PreferredCommon Stock

On April 14,November 20, 2020, the Company filed a CertificateBoard of Designation forDirectors approved an increase in the Company’s Series A Preferredauthorized shares of Common Stock with thefrom 100,000,000 to 500,000,000 shares by Unanimous Written Consent. The Secretary of State of Nevada designating 2,500,000 approved the share increase.

The Company has 500,000,000shares of its authorized preferred stock as Series A Preferred Stock, par value of $0.001 per share. The Series A Preferred Stock is not entitled to receive any dividends or liquidation preference and are not convertible into shares of the Company’s common stock. The holders of the Series A Preferred Stock, in the aggregate, have voting power equal to 51% of the total votes of all of the outstanding common and preferred stock of the Company entitled to vote. Accordingly, each share of Series A Preferred Stock shall have voting rights equal to one and one-tenth (1.1) times a fraction, the numerator of which is the shares of outstanding $0.001common stock authorized and undesignated preferred191,731,218and 46,756,970shares were outstanding as of June 30, 2021 and December 31, 2020, respectively.

Common stock of the Company and the denominator of which is number of shares of outstanding Series A Preferred Stock. With respect to all matters upon which stockholders are entitled to vote or give consent, the holders of the outstanding shares of Series A Preferred Stock shall vote with the holders of the common stock and any outstanding preferred stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Company’s Articles of Incorporation.issued for cash

On April 14, 2020, The Company issued 2,500,000 shares of a newly created class of preferred stock, Series A Preferred Stock to the Company’s Chief Executive Officer in a private placement transaction. The fair value of the was determined to be $465 and was recorded as stock compensation.

Common Stock

During the ninesix months ended SeptemberJune 30, 2020,2021, the Company issued 407,40844,750,000 shares of common stock under a Form S-1 then in effect at a price of $0.04 per share. Also during the six months ended June 30, 2021, the Company issued 12,000,000 shares of common stock in a private placement of shares at a price of $0.26$0.015 to $0.02 per share. Total proceeds of $1,985,000 in cash was received.

During the six months ended June 30, 2020, the Company issued 388,889 shares of common stock in a private placement of shares at a price of $0.27 per share for total proceeds of $125.$104,722.

TheCommon stock issued for services

During the six months ended June 30, 2021, the Company issued 3,955,747 common13,925,976 shares of common stock to two holdersservice vendors with a fair value of convertible notes at contracted prices.$1,244,808, and 1,000,000 shares of common stock to employees and officers of the Company with a fair value of $69,950. The fair value of the shares was $211determined based on the closing price of the Company’s common stock on the date shares were granted, and the conversions reduced the convertible note principal due by $140.recorded as stock compensation in selling, general and administrative expense.

The Company issued 1,127,522 common shares of stock to secure financing for total fair value of $105.

During the ninesix months ended SeptemberJune 30, 2020, the Company recognized beneficial conversion features totaling $1,569, as additional paid in capital forissued 451,198 shares of common stock to service vendors with a fair value of $52,254. The fair value of the difference betweenshares was determined based on the conversionclosing price of the Company’s common stock on the date shares were granted, and recorded as stock compensation in selling, general and administrative expense.

During the six months ended June 30, 2020, the Company issued 1,250,117 shares of common stock to consultants and convertible notes payable and thenote holders for services with a fair value asof $186,579. The fair value of the dateshares was determined based on the closing price of the amendmentsCompany’s common stock on the date shares were granted, and recorded as stock compensation in selling, general and administrative expense.

During the six months ended June 30, 2020, the Company issued 705,000 shares of common stock to convertible note holders for fees with a fair value of $90,033. The fair value of the shares was determined based on the closing price of the Company’s common stock on the date shares were granted, and was recorded as debt discount to be amortized over the term of the related convertible notes.notes payable.

Preferred Stock

NOTE 10 – STOCK BASED COMPENSATION

The total charged to stock-based compensation for the nine months ended September 30, 2020, was $1,542. The total included the following:

Preferred stock

On April 14, 2020, Thethe Company issued 2,500,0002,500,00 shares of a newly created class of preferred stock, Series A Preferred Stock to the Company’s Chief Executive Officer in a private placement transaction. The fair value of the Series A Preferred shares was determined to be $465$462,500 and was recorded as a stock compensation expense in selling, general and administrative expense during the ninesix months ended SeptemberJune 30, 2020. The Company determined the fair value of the Series A Preferred shares by obtaining an independent valuation of the fair value of the Company’s Series A Preferred shares.

Common stock

During the nine months ended September 30, 2020, the Company issued 451,198 shares of common stock to employees and officers of the Company. The fair value of the shares was determined to be $106 based on the closing price of the Company’s common stock on the dates shares were granted, and recorded as stock compensation in selling, general and administrative expense during the nine months ended September 30, 2020.

During the nine months ended September 30, 2020, the Company recorded $929 to stock-based compensation as accretion of the expense related to grants of restricted stock (see below).

During the nine months ended September 30, 2020, the Company issued 750,000 common shares of stock to service vendors for a total fair value of $42.

16

Restricted common stock

On May 20,In 2019, the Company agreed to issue 8,000,000 shares of the Company’s common stock with vesting terms to a consultant for services. Arthur Mikaelian. 1,000,000 shares vested immediately, and the balance of 7,000,000 shares will vest 625,000 shares per quarter over 2.8 years. In the event the consultants service with the Company terminates, any or all of the shares of common stock held by such recipient that have not vested as of the date of termination are forfeited to the Company in accordance with such restricted grant agreement.

The total fair value of the 8,000,000 shares was determined to be $4,000 based on the price per shares of a contemporaneous private placement of the Company’s common stock on the date granted. years. The Company accounts for the share awards using a graded vesting attribution method over the requisite service period, as if each tranche were a separate award. During the ninesix months ended SeptemberJune 30, 2021 and 2020, total share-based expense recognized related to vested restricted shares totaled $929.$297,791 and $761,686, respectively. At SeptemberJune 30, 2020,2021, there was $753$139,620 of unvested compensation related to these awards that will be amortized over a remaining vesting period of 1.4 years.approximately nine months thru March 2022.

The following table summarizes restricted common stock activity for the ninesix months ended SeptemberJune 30, 2020:2021:

SUMMARY OF RESTRICTED COMMON STOCK ACTIVITY

 Number of shares Fair value of shares
(in thousands)		  Number of shares Fair value of shares 
Non-vested shares, December 31, 2019  5,750,000  $1,682 
Non-vested shares, December 31, 2020  3,250,000   431,411 
Granted  -   -   -   - 
Vested  (1,875,000)  (929)  (1,250,000)  (297,791)
Forfeited  -   -   -   - 
Non-vested shares, September 30, 2020  3,875,000  $753 
Non-vested shares, June 30, 2021  2,000,000  $139,620 

As of SeptemberJune 30, 2020,2021, no shares have been issued and 4,125,0004,875,000 vested shares are included in shares to be issued on the accompanying financial statements

Stock Options

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Common stock issued in conversion of convertible notes payable

During the yearsix months ended December 31, 2019,June 30, 2021, the Company issued 73,368,272 shares of common stock to holders of convertible notes upon the conversion of convertible notes payable and accrued interest valued at $1,307,088.

Stock Options

During the six months ended June 30, 2021 and 2020, the Company recognized $126,905 and $180,916, respectively, of compensation expense relating to vested stock options.

During the six months ended June 30, 2021, the Company did not issue any options. In April 2020, the Company issued options exercisable into 3,290,000300,000 shares of common stock. The options initially had an exercise price of $0.23 per share, and this was amended in May 2020 to $0.10 per share. The Company used the Black-Scholes-Merton option pricing model to estimate the fair value of the modified option grants immediately before and immediately after the modification and determined the change in fair value related to the modification was de minimis.

During the nine months ended September 30, 2020, the Company issued options exercisable into 900,000 shares of common stock. 600,000 of the optionsstock which vested immediately, and 300,000 of the options vest over 24 months.immediately. The options have an exercise price of $0.10 to $0.14$0.14 per share, and expire in ten10 years. TotalThe total fair value of these options at grant date was approximately $85,$30,000, which was determined using thehe Black-Scholes-Merton option pricing model with the following average assumption: stock price $0.14$0.14 per share, expected term ranging from five years, volatility 236%236%, dividend rate of 0%0% and risk-freerisk-fee interest rate of 0.17%0.17%.

During the nine months ended September 30, 2020, the Company recognized $250 of compensation expense relating to vested stock options. As of September 30, 2020, the amount of unvested compensation related to stock options was approximately $346 which will be recorded as an expense in future periods as the options vest.

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future.

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As of June 30, 2021, the amount of unvested compensation related to stock options was approximately $230,000 which will be recorded as an expense in future periods as the options vest.

A summary of stock option activity during the threesix months ended SeptemberJune 30, 2020:2021:

  Number of options  Weighted Average
Exercise Price		  Contractual
Life in Years		 
Options Outstanding as of December 31, 2019  3,230,000  $0.10   6.0 
Granted  900,000   0.11   10.0 
Exercised  -   -   - 
Expired  -   -   - 
Options Outstanding as of September 30, 2020  4,130,000   0.11   6.5 
Options Exercisable as of September 30, 2020  2,732,261  $0.10   5.5 

SCHEDULE OF STOCK OPTION ACTIVITY

  Number of options  Weighted Average
Exercise Price		  Contractual
Life in Years		 
Options Outstanding as of December 31, 2020  4,130,000   0.10   6.0 
Granted  -   -   - 
Exercised  (350,000)  -   - 
Forfeited  (3,005,000)  -   - 
Options Outstanding as of June 30, 2021  775,000   0.10   5.5 
Options Exercisable as of June 30, 2021  775,000  $0.10   5.5 

At SeptemberJune 30, 2020,2021, the options outstanding had no0 intrinsic value.

NOTE 10 – RELATED PARTY TRANSACTIONS

On January 14, 2021, the Company completed the acquisition of 51% of Medolife Rx, a company controlled by Arthur Mikaelian (see Note 8). Prior to the acquisition, Mr. Mikaelian was a consultant and shareholder in the Company. In connection with the acquisition of 51% of Medolife Rx, Mr. Mikaelian was appointed as a member of the Board of Directors of the Company, and also appointed to serve as the Company’s Chief Executive Officer, a role which Mr. Mikaelian assumed on January 14, 2021. As Medolife Rx had nominal assets, liabilities, and operations, proforma information is not presented.

The Company has an agreement with Mr. Mikaelian in consideration of the Company’s exclusive use of patented technology developed by Mr. Mikaelian. Pursuant to the agreement, as amended, the Company shall pay a royalty of 25% of all the net income from the sale of licensed products, as defined with a minimum royalty of $35,000 per month payable in cash or common stock of the Company. During the six months ended June 30, 2021 and 2020, the Company recognized royalty expenses of $210,000 and $180,000, respectively.

During the six months ended June 30, 2021, the Company recorded revenue of $198,800, or 44% of total revenue for the period, from a company controlled by a family member of the Company’s CEO. At June 30, 2021, the net amount due from the related party was $149,100 and represents 100% of the Company’s accounts receivable at that date.

During the six months ended June 30, 2021, the Company recorded administrative expenses of $409,970 to a company controlled by Mr. Mikaelian.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

TheCOVID-19

During the six months ended June 30, 2021, the COVID-19 pandemic has impacted our operating results and the Company has an agreement with an individual in considerationanticipates a continued impact for the balance of the Company’s exclusive use of patented technology developed by the individual. Pursuant to the agreement, as amended, the Company shall pay a royalty of 25% of all the net income from the sale of licensed products, as defined with a minimum royalty of $35 per month payable in cash or common stock of the Company.year. In addition, the pandemic may cause reduced demand for our products if, for example, the pandemic results in a recessionary economic environment which negatively effects the consumers who purchase our products. The Company agreedmonitors guidance from federal, state, and local public health authorities, and has implemented health and safety precautions and protocols in response to issue 8,000,000 sharesthese guidelines. The extent of the impact of the COVID-19 pandemic has had and will continue to have on the Company’s common stockbusiness is highly uncertain and difficult to predict and quantify at this time.

Contingencies include obligations for lease agreements, including an abandoned lease space, along with vesting terms to the individualCompany current lease for its headquarters office (see Note 10)4). During the three and nine months ended September 30, 2020, the Company paid $62 and $296 to the individual.

The Company entered into agreements to share revenue for a product to be designed and produced with several investors. The agreements specify payments of 50% of the net revenues from the specified new product sales. The investors advanced $250 for the right to receive the payments specified. The Company has not produced the specified product. The Company has recorded the advances as liabilities under notes payable. In addition, the Company issued 280,000 shares of common stock to the related investors and the recognized the fair value of $28 as a discount. The discountIt is being amortized to interest expense over the expected life of the agreement. The Company has determinedmanagement’s opinion that there isare no material contingent liabilities that are not disclosed in the potential for litigation under these agreements however no estimate of liability can be calculatedfinancial statements and footnote disclosures as of SeptemberJune 30, 2020.2021.

NOTE 12 – SUBSEQUENT EVENTS

Change in Control, Appointment of New Board Member and Chief Executive Officer and Other Corporate Actions

On November 13, 2020, Mr. Phil Sands was appointed as a member of the Board of Directors of the Company, and to serve as our new Chief Executive Officer, a role which he assumed following the ten-day period after the mailing of a Schedule 14F to our shareholders of record, Eric Rice has resigned from all officer and director positions with the Company.

On November 15, 2020, the Company entered into an interim compensation agreement with Mr. Phil Sands providing for monthly compensation of $8 commencing December 1, 2020 until March 1, 2021.

On November 16, 2020, the Company entered into a Control Block Transfer Agreement with Eric Rice and Phil Sands, pursuant to which, Mr. Rice agreed to transfer 2,500,000 shares of the Company’s Series A Super Voting Preferred Stock to Mr. Sands, representing a transfer of majority voting control over the Company because the holder of such 2,500,000 shares of our Series A Super Voting Preferred Stock automatically carries a vote equal to 51% on all matters submitted to a vote of the holders of our Common Stock and Preferred Stock. Mr. Rice agreed to transfer the Control Block to Phil Sands in order to consummate the Company’s transition into a holding company (transition phase), without requiring the Company to further dilute its stock through the issuance of new shares.Issued

During the transition phase, the Company has furloughed most of its employees, and formulation of product has been intermittent while fulfilling orders has continued. Finished goods inventory is been replenished by packaging and labeling inventory classified as raw materials. Management believes that order fulfilment can continue into the first quarter of 2021, while any organizational and staffing changes are being evaluated.

On November 16, 2020, the Company entered into a Share Cancellation Agreement with Eric Rice, holder of 18,030,032 shares of QNTA Common Stock, pursuant to which Mr. Rice agreed to cancel 17,030,032 shares, and to retain ownership of 1,000,000 shares of Common Stock. Mr. Rice agreed to cancel and return to treasury 17,030,032 shares in order to assist the Company with its plans to attract experienced management, reorganize into a holding company, while transitioning the Company’s existing CBD business operations into a newly formed operating subsidiary, without requiring QNTA to further dilute its stock through the issuance of new shares.

On November 20, 2020, the Board of Directors approved an increase in the Company’s authorized shares of Common Stock from 100,000,000 to 500,000,000 shares by Unanimous Written Consent in order to provide the Company with sufficient shares to adequately pay down its debt, to allow for compensation to vendors and executives for ongoing services being rendered to the Company, and to accommodate for future financings and acquisitions. On November 20, 2020, the Board Received the Majority Shareholder’s Consent from Phil Sands, holder of 2,500,000 shares of our Series A Preferred Stock, approving the increase in our authorized shares of Common Stock to 500,000,000. No changes to our Preferred Stock are being made. The Secretary of the state of Nevada approved the amendment to the articles of incorporation and approved the share increase.

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Issuances of Common Stock

In October 2020, the Company issued 2,509,217 shares of common stock for conversion of $43 of principal and $9 of accrued interest at contracted prices. Following the conversion, the principal and accrued interest of the related note were fully liquidated.

Convertible Notes Issued

In November 2020, the Company issued four notes payable for aggregate proceeds of $85,000 and received $77 in cash. The notes are convertible into common shares of stock at the fixed price of $0.015 per share. The notes mature in April 2021 and bear interest at 10%. The note holders were issued 155,000 of restricted shares of common stock at $0.0365 for total of $6 of fair value. The Company defaulted on these notes due to a failure to file the September 30, 2020 Form 10Q on a timely basis and therefore is subject default penalties of 150% of accrued interest and principal.

On December 9, 2020, the Company issued a convertible promissory note to Trillium Partners LP for $25. The note: carries $3 of original issue discount (OID), may be converted into the Company’s common stock at $0.015 per share, bears interest at 10% and matures on June 30, 2021. The OID will be amortized to interest expense over the term of the note and the beneficial conversion feature will be recognized as a debt discount and additional paid in capital.

On December 16, 2020, the Company issued a convertible promissory note to Trillium Partners LP for $23. The note: carries $3 of original issue discount (OID), may be converted into the Company’s common stock at $0.015 per share, bears interest at 10% and matures on June 30, 2021. The OID will be amortized to interest expense over the term of the note and the beneficial conversion feature will be credited to additional paid in capital and $20,000 will be recognized as a debt discount and amortized to interest expense over the term of the note.

Amendments to Convertible Notes effective September 30, 2020 to Cure Defaults

On December 9, 2020, the Company executed an amendment to its convertible note payable issued to Livingston Asset Management LLC on April 27, 2020, curing the defaults under the terms of the original note. The maturity was extendedSubsequent to June 30, 2021, the conversion terms were changed from fixed percentage discountCompany issued a total of 4,063,749 shares of common stock to a fixed price of $0.015. Additionally, the investor is now entitled to deduct $1,000 for each conversion to cover related costs.

On December 9, 2020, the Company executed an amendment to its convertible note payable issued to Alpha Capital Anstalt on April 27, 2020, curing the defaults under the terms of the original note. The principal was restated under the default terms to be $160, the maturity was extended to June 30, 2021,holders in exchange for the conversion termsof convertible notes payable and accrued interest. In addition, 38,449 shares of common stock were changed from fixed percentage discount to a fixed priceissued upon the exercise of $0.015. Additionally, the investor is now entitled to deduct $1,000 for each conversion to cover related costs.options.

On December 9, 2020, the Company executed an amendment to its convertible note payable issued to Trillium Partners LP on April 27, 2020, curing the defaults under the terms of the original note. The principal was restated under the default terms to be $160, the maturity was extended to June 30, 2021, the conversion terms were changed from fixed percentage discount to a fixed price of $0.015. Additionally, the investor is now entitled to deduct $1,000 for each conversion to cover related costs.

On December 9, 2020, the Company executed an amendment to its convertible note payable issued to an individual on April 27, 2020, curing the defaults under the terms of the original note. The principal was restated under the default terms to be $36, the maturity was extended to June 30, 2021, the conversion terms were changed from fixed percentage discount to a fixed price of $0.015. Additionally, the investor is now entitled to deduct $1,000 for each conversion to cover related costs.

On December 9, 2020, the Company executed an amendment to its convertible note payable issued to Trillium Partners LP on May 27, 2020, curing the defaults under the terms of the original note. The principal was restated under the default terms to be $18, the maturity was extended to June 30, 2021, the conversion terms were changed from fixed percentage discount to a fixed price of $0.015. Additionally, the investor is now entitled to deduct $1,000 for each conversion to cover related costs.

On December 9, 2020, the Company executed an amendment to its convertible note payable issued to Alpha Capital Anstalt on May 27, 2020, curing the defaults under the terms of the original note. The principal was restated under the default terms to be $9, the maturity was extended to June 30, 2021, the conversion terms were changed from fixed percentage discount to a fixed price of $0.015. Additionally, the investor is now entitled to deduct $1,000 for each conversion to cover related costs.

On December 9, 2020, the Company executed an amendment to its convertible note payable issued to Trillium Partners LP on June 26, 2020, curing the defaults under the terms of the original note. The principal was restated under the default terms to be $154, the maturity was extended to June 30, 2021, the conversion terms were changed from fixed percentage discount to a fixed price of $0.015. Additionally, the investor is now entitled to deduct $1,000 for each conversion to cover related costs.

 On December 9, 2020, the Company executed an amendment to its convertible note payable issued to Trillium Partners LP on August 27, 2020, curing the defaults under the terms of the original note. The principal was restated under the default terms to be $71, the maturity was extended to June 30, 2021, the conversion terms were changed from fixed percentage discount to a fixed price of $0.015. Additionally, the investor is now entitled to deduct $1,000 for each conversion to cover related costs.

The amendments to the notes above have been recognized in the financial statements as of September 30, 2020, as loss on debt extinguishment (for changes in principal amount of $315) the beneficial conversion features recorded as additional paid in capital and were charged to loss on debt extinguishment ($901) and debt discount of $315 which will be amortized with periodic charges to interest expense over the amended terms of the notes.

Amendments to Convertible Notes Issued Subsequent to September 30, 2020 to Cure Defaults

On December 9, 2020, the Company executed an amendment to its convertible note payable issued to Alpha Capital Anstalt on November 3, 2020, curing the defaults under the terms of the original note. The principal was restated under the default terms to be $35, the maturity was extended to June 30, 2021, the conversion terms were changed from fixed percentage discount to a fixed price of $0.015. Additionally, the investor is now entitled to deduct $1,000 for each conversion to cover related costs.

On December 9, 2020, the Company executed an amendment to its convertible note payable issued to an individual on November 3, 2020, curing the defaults under the terms of the original note. The principal was restated under the default terms to be $26, the maturity was extended to June 30, 2021, the conversion terms were changed from fixed percentage discount to a fixed price of $0.015. Additionally, investor is now entitled to deduct $1,000 for each conversion to cover related costs.

On December 9, 2020, the Company executed an amendment to its convertible note payable issued to another individual on November 3, 2020, curing the defaults under the terms of the original note. The principal was restated under the default terms to be $26, the maturity was extended to June 30, 2021, the conversion terms were changed from fixed percentage discount to a fixed price of $0.015. Additionally, the investor is now entitled to deduct $1,000 for each conversion to cover related costs.

On December 9, 2020, the Company executed an amendment to its convertible note payable issued to Trillium Partners LP on November 3, 2020, curing the defaults under the terms of the original note. The principal was restated under the default terms to be $43, the maturity was extended to June 30, 2021, the conversion terms were changed from fixed percentage discount to a fixed price of $0.015. Additionally, the investor is now entitled to deduct $1,000 for each conversion to cover related costs.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”, “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include by are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.

This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

Quanta isWe are an applied science company focusedfounded in 2016, focusing on increasing energy levels in plant matter to increase performance within the human body. Our proprietary technology uses quantum mechanics to increase bio-activity of targeted molecules to enhance the desired effects. We specialize in potentiating rare naturally occurring elements to create impactful and sustainable healing solutions that we believe will one day be as powerful and predictable as pharmaceutical drugs.

We offer our technology as a platform, making it accessible to existing high-quality product makers with existing distribution channels, as well as consumer products. Our mission is to power as many impactful, high-performing and wholly organic solutions as possible through product lines and a series of licensing and distribution partnerships.

BioanomalyQuanta, Inc. (“Quanta”) is a cutting-edge technology platform whose patented, proprietary technology harnesses advances in quantum biology to increase the potency of active ingredients. Currently, Quanta supports product formulations in pain management, anti-inflammation, skincare, agriculture, nutritional supplements, and plant-based consumables. Ultimately, Quanta’s mission is to deliver better, more effective ingredients to elevate product efficacy.

Our Company History

The company was founded in 2016Nevada as Freight Solution, Inc. in 2016.

On June 5, 2018, we underwent a change of control. In connection with the change of control, our board of directors and officers was reconstituted through the resignation of Shane Ludington as Chairman, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of the Registrant and the appointment of Mr. Eric Rice as Chairman, Chief Executive Officer and Chief Financial Officer and Mr. Jeffrey Doiron as President and Chief Operations Officer.

On June 6, 2018 we formed a wholly owned subsidiary, Quanta Acquisition Corp. in the state of California, and executed an Agreement of Merger and Plan of Reorganization, with Bioanomaly, Inc., a California corporation, d/b/a Quanta and Quanta Acquisition Corp., a California corporation and our wholly-owned subsidiary. Pursuant to the terms of the Merger Agreement, Quanta Acquisition Corp. merged with and into Quanta in a statutory reverse triangular merger with Quanta surviving as a wholly owned subsidiary. Following the merger, we adopted our business plan.

On June 6, 2018, we cancelled 15,000,000 shares of common stock acquired through the change in control transaction. As consideration for the merger, we agreed to issue the shareholders of Quanta an aggregate of 21,908,810 shares of our common stock, par value $0.001 per share. Freight Solution shareholders retained 6,500,000 shares of common stock, which represented 23% of our issued and outstanding stock following the merger.

Simultaneously with the merger, we accepted subscriptions for 6,500,000 shares of common stock in a private placement offering at a purchase price of $0.20 per share for an aggregate offering amount of $1,300,000. We also issued two non-affiliated investors warrants to purchase 3,000,000 shares of our common stock at an exercise price of $0.30 per share expiring in four years.

Following the consummation of the merger, Quanta shareholders beneficially owned approximately 63% of our issued and outstanding common stock.

On July 11, 2018 the State of Nevada approved our name change from Freight Solution, Inc. to Quanta, Inc.

On April 14, 2020, we issued to Eric Rice, our former Chairman, Chief Executive Officer and Chief Financial Officer, 2,500,000 shares of a newly created class of preferred stock, Series A Preferred Stock.

On November 16, 2020, the Company entered into a Control Block Transfer Agreement with Eric Rice and Phil Sands, pursuant to which, Mr. Rice agreed to transfer 2,500,000 shares of the Company’s Series A Super Voting Preferred Stock to Mr. Sands, representing a transfer of majority voting control over the Company because the holder of such 2,500,000 shares of our Series A Super Voting Preferred Stock automatically carries a vote equal to 51% on all matters submitted to a vote of the holders of our Common Stock and Preferred Stock. On November 16, 2020, the Company entered into a Share Cancellation Agreement with Eric Rice, holder of 18,030,032 shares of QNTA Common Stock, pursuant to which Mr. Rice agreed to cancel 17,030,032 shares (16,951,432 shares were cancelled December 29, 2020), and to retain ownership of 1,000,000 shares of Common Stock.

On December 21, 2020, the Company entered into a Securities Exchange Agreement with Medolife Rx, Inc., a Wyoming corporation, (“Medolife”) pursuant to which, the Company agreed to acquire 51% of Medolife in exchange for 9,000 shares of newly created Series B Convertible Preferred Stock. On January 14, 2021, we completed our acquisition of 51% of Medolife and Medolife’s founder, Arthur Mikaelian, PhD, a member of our Board of Directors, officially replaced Phil Sands as our Chief Executive Officer. Phil Sands resigned as an officer and director of the Company on May 10, 2021. Simultaneously therewith, the Company executed a Control Block Transfer Agreement with Phil Sands and Arthur Mikaelian, pursuant to which, effective Mr. Sands agreed to transfer 2,500,000 shares of the Company’s Series A Super Voting Preferred Stock to Dr. Mikaelian, representing a transfer of majority voting control over the Company because the holder of such 2,500,000 shares of our Series A Super Voting Preferred Stock automatically carries a vote equal to 51% on all matters submitted to a vote of the holders of our Common Stock and Preferred Stock. Mr. Sands agreed to transfer the Control Block to Arthur Mikaelian in exchange for 3,000,000 shares of the Company’s Common Stock, and for the payment of $22,500 in accrued salary, as well as the payment of health insurance benefits through January of 2022.

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Medolife provides contract research services. The Company focuses on research, development, and production of pharmaceutical-grade products, as well as clinical evidence-based nutraceuticals utilizing patented polarization technology. Medolife Rx serves clients in the United States.

In 2007, Medolife began its venom-to-drug research and development concept. In 2008, Medolife identified the Rhopalurus princeps scorpion species, which are endemic to the Dominican Republic, as a possible candidate. The company entered into an agreement with the local Ministry of Environment and Natural Resources to investigate the anticancer properties of scorpion venom peptides. The Company’s research confirmed the anticancer properties of the peptide. That same year, Medolife registered its product, Escozine, in the Dominican Republic due to the prime material and preliminary studies originating from Dominican Republic. Escozine was registered under Sanitary Registry Number PN2010-0244 as an anti-tumoral alternative medicine in the Dominican Republic, which allowed the company to perform clinical studies and observations in the country.

Quanta entered the CBD pain-relief rub market (“Muscle Rub”), is only the first in a series of paradigm shift products to emerge from our labs. At the heart of its well-documented effectiveness is our proprietary “polarization” process, which uses electromagnetic force to markedly enhance bioactivity at the molecular level—a polarized active ingredient is more soluble and creates stronger bonds with the body’s receptors. This allows us to enhance ingredients so they work faster and more powerfully without the use of chemical by-products or cellular penetration. Quanta believes this natural solution has nearly limitless applications in the world of plant-based consumer products.

In early 2020, the company was about to apply to the FDA to initiate the approval process for Escozine as an orphan drug for pancreatic cancer. The Weinberg Group was hired as our regulatory compliance consultants for the FDA application and guidelines.

As the COVID-19 pandemic spread during the Spring of 2020, Medolife studied the scorpion venom peptide as a potential COVID-19 drug treatment and began confirming its antiviral properties. The company applied to the FDA as a Pre-Investigational New Drug (PIND), which accepted the application under PIND #150335. For PIND Submission and Clinical Trial Strategy in the United States and the Dominican Republic, Medolife has contracted Affinity Bio Partners as a consulting firm on FDA regulatory matters.

In August of 2020, Medolife initiated clinical studies at the Cruz Jiminian Clinic (Clinica Cruz Jiminian) in Santo Domingo, Dominican Republic, which is one of the leading clinics with a license allowing them to treat COVID-19 patients. The study included 450 COVID-19 patients. The observation contained more female than male patients, with 252 female and 198 male participants. Out of 450 participants, there was an even spread among the age groups, with a higher number in the 41-to-50-year-old group.

EFFICACY STUDY.

Escozine was used as a 3-pillar treatment: a Therapeutic, a Palliative, and a Preventative.

Therapeutic

●Escozine was used as a monotherapy
●All therapeutic participants were tested COVID-19 positive prior to observation.
●100% of patients were discharged with a negative COVID-19 test result within 7 to 10 days of treatment with Escozine.

Conclusion: Within 4-5 days, all COVID-19 patients using Escozine tested negative for the virus, indicating Escozine eliminated the COVID-19 virus or accelerated recovery.

Palliative

●COVID-19 positive patients report a dramatic decrease of symptoms within 2-4 days of Escozine treatments. The World Health Organization Quality of Life (“WHOQOL”) Bref quality of life questionnaire by the World Health Organization (WHO) was used since July 2020 to evaluate patients’ symptoms, including:

○Shortness of breath
○Pain
○Fatigue
○Headache
○Loss of taste
○Fever
○Loss of smell (anosmia)

Conclusion: All participants reported significant improvement on all their COVID-19-related symptoms within 5 days, indicating that Escozine can be used to treat the symptoms of COVID-19.

Preventative

●Transmission of virus to treating physicians and nurses of COVID-19 patients is inhibited upon administering Escozine.
●Substantial reduction in infectability and spread of the SARS-CoV-2 virus.

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Conclusion: All hospital workers remained healthy during the clinical observation while taking Escozine, indicating that Escozine can be used as a preventative measure for COVID-19. The preventative capabilities require additional study.

SAFETY STUDY.

To verify the safety of using Escozine, patients were tested before and after treatment for:

●Hematology
●Clinical chemistry (Kidney and Liver function tests, Enzymes, Glucose, Calcium and Phosphorus)
●Urine
●CD4/CD8

Conclusion: No toxic response was observed in 100% of patients and no side-effects were reported, indicating that Escozine is safe to use for COVID-19 patients.

ADDITIONAL FINDINGS.

During the clinical study, Medolife observed that Escozine prevents Acute Kidney Injury (AKI) caused by a group of technology and industry entrepreneurs and provides licensed technology solutionsCOVID-19:

●During the clinical study, no deaths occurred.
●40% of the monitored COVID-19 patients who were administered Escozine, had serum creatinine that was higher than normal, indicating AKI before Escozine administration.
●After Escozine administration, most of the patient’s creatinine concentrations dropped or did not change.
●Overall, the frequency of patients that developed normal creatinine levels after Escozine administration was statistically significant (p<0.05).

Medolife has received a new reply from the FDA on their latest submission of requested data. In the reply, the FDA:

●Validated of the Company’s clinical trial as an informal proof-of-concept study
●Laid out very specific guidelines for the next steps required by the regulatory body in order to garner approval for Escozine as a treatment for COVID-19, in which the FDA requested:

○Pharmacokinetic (PK) study, which Medolife has initiated in the United Kingdom.
○DNA toxicology study, for which Medolife is negotiating with a GLP certified laboratory in the United States.
○Additional Chemistry, Manufacturing and Controls (CMC) data from Medolife’s contract manufacturer, CURE Pharmaceutical Corporation.

R&D Expenses related to natural product companies in multiple verticals. Our headquarters is located in Burbank, California.Escozine.

 

Over the last 24 months, the company has spent more than $533,000 on research and development related to Escozine as both a treatment of cancer and for COVID-19.

Quanta Basics

Quanta, Inc. (“Quanta”) is a cutting-edge technology platform whose patented, proprietary technology harnesses advances in quantum biology to increase the potency of active ingredients. Currently, Quanta supports product formulations in pain management, anti-inflammation, skincare, agriculture, nutritional supplements, and plant-based consumables. Ultimately, Quanta’s mission is to deliver better, more effective ingredients to elevate product efficacy, reduce waste and facilitate healthier, more sustainable consumption.

The established resonance theory behind Quanta’s polarization process has many potential applications. From potentiating bio-ingredients to produce more-effective carbon-trapping plants to transformative anti-aging solutions Quanta’s technology has the opportunity to upend how commercial products are made and the benefits from them. Already we see multi-trillion-dollar global industries benefiting from Quanta’s technology.

Our proof of concept, Quanta’s market-leading CBD pain-relief rub (“Muscle Rub”), is only the first in a series of paradigm shift products to emerge from our labs. At the heart of its well-documented effectiveness is our proprietary “polarization” process, which uses electromagnetic force to markedly enhance bioactivity at the molecular level—a polarized active ingredient is more soluble and creates stronger bonds with the body’s receptors. This allows us to enhance ingredients so they work faster and more powerfully without the use of chemical by-products or cellular penetration. Quanta believes this natural solution has nearly limitless applications in the world of plant-based consumer products.

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Quanta is involved in ambitious projects that we believe will reshape the next wave of climate science, sustainability, nutrition, and more. Having harnessed the technology of the future, Quanta is dedicated to bringing tomorrow’s health and wellness solutions to the billions in need today.

Proof of Concept

Creating, producing and selling consumer products was never our primary focus; Quanta’s Muscle Rub was simply a means to an end - proof of concept and a revenue driver in a small emerging market as our business model took shape. Fundamentally, Quanta will be a licensing concern designed to collaborate with large brands to improve product quality and the profit margins of existing and new products. But the market needed proof and we chose to start in the under-developed category of CBD because of its speed to market.

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Understandably, we met the same initial hurdles every start-up encounters. In addition to simply explaining quantum mechanics, we had no track record of success from a business standpoint. The immediate goal was to prove our model was defensible. Hence, we chose CBD as a launch category. This market provided protection from industry titans that may have felt threatened by such a powerful technology while allowing us to drive profits during R&D.

Over the last two years, we have developed and sold products largely to the medical industry, along with some consumer retail. This effort was designed to drive revenue and to prove the concept of our model: that polarizing a single ingredient can produce a demonstrably superior product that consumers find safe and effective (establish consumer appetite).

Discovery Synopsys

Using our product development process and business-to-business and direct-to-consumer sales approaches as a benchmark for future business, we developed the Quanta business model. Our technology’s unique ability to strengthen ingredients renders them more potent without added chemicals or penetrating cells means Quanta is in a first-of-its-kind position in the market. As the world’s first company focused on Quantum Biology we sit in a strong, but unique position in the market.

Our ability to increase ingredient efficacy by up to 500% means we are in a rare position to truly disrupt many areas of material science.

Quanta’s technology renders products superior to any on the market today. A 30% re-purchase rate (on one SKU alone) illustrates consumer appetite for the product.

Upcoming products and ventures will be designed to achieve or surpass this level of consumer benefit and uptake.

Quanta Business Model in 3 P’s: Potentiation, Partners, and Profits

After two years we believe the best possible model for the long-term success of the company is collaborating with best-in-class partners through joint ventures for new verticals, products, and research. These joint ventures may involve a jointly owned special purpose entity or they may be entirely based on contractual obligations.

Our mission has never been to create the best novel products on the planet. Our mission has always been to revolutionize the way formulations are developed and how products perform. We seek to work with the best product makers in the world to positively impact as many industries as possible.

The unique ability to increase the ingredient and product performance opens the doors for major opportunities. Higher performing ingredients mean less is needed to make a strong impact (increased margins, increase overall efficacy). We proved this with our Muscle Rub, which uses approximately 1/3 the CBD of competing products with demonstrably improved results.

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The level of potentiation delivered by Quanta allows our partners the unique ability to provide higher-performing products, lower material costs, more competitive pricing and increased profit margins. In short, our partners will be able to make better performing, more affordable products with a higher repeat purchase. This is true disruption and consumer utopia.

We aim to work with groups that specialize in manufacturing, marketing, selling and distributing existing product lines that utilize ingredients we can potentiate. Partners like this facilitate efficient market delivery of joint innovations.

We believe this strategy provides greater shareholder value, enhances revenue potential, defrays upfront expenses and affords us the ability to raise capital for new projects without massive dilution.capital.

Ultimately, these ventures would result in licensing out our technology to other reputable brands and companies to create co-branded products whereas the term “Powered by Quanta” becomes as recognized as “Intel Inside.”

We believe this type of partnership will afford a company Quanta partners with:

●Development of emerging products with cutting edge ingredients.
●A product line with a true point of differentiation.
●New SKUs with an increased margin.
●Decreased cost of goods sold.

Simultaneously these partnerships will allow Quanta:

●Greater brand recognition.
●Increased revenue and in turn profitability.
●Quicker timeline to more licensing opportunities because of a track record of success.
●Brand to become synonymous with improving the performance of ingredients within products.

Manufacturing Partnerships -

Quanta is currently focused on partnering with large-scale manufacturers and distributors able to produce products that meet the requirements of applicable regulations IE: Good Manufacturing Practices to fulfill orders of our own product line. This type of partnership is crucial because it will afford:

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●●New product development that meets certification requirements
●Much larger production scale
●Speed to market
●Increased distribution and profitability

With our licensing capabilities, Quanta technology can render better, more efficacious products that cost less to create but command a higher purchase value because of polarized ingredients. This, in turn, allows companies to diversify their catalog of products while simultaneously providing them with a distinguished advantage. More efficacious ingredients.

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Government Regulation

We believe we are in compliance with applicable federal, state and other regulations and that we have compliance programs in place to ensure compliance going forward. There are no regulatory notifications or actions pending.

Results of Operations

Summary of Key Results

Results of Operations for three months ended SeptemberJune 30, 20202021 compared to the three months ended SeptemberJune 30, 20192020

Revenue

Net sales are comprised of wholesale sales to our retail partners and sales through our direct to consumerdirect-to-consumer channel. Net sales in both channels reflect the impact of product returns as well as discounts for certain sales programs or promotions.

For the three months ended SeptemberJune 30, 2020,2021, the Company recognized $315$109,053 in net sales. For the three months ended SeptemberJune 30, 2019,2020, the Company recognized $393$306,785 in net sales.

Expenses

Operating expenses for the three months ended SeptemberJune 30, 20202021 was $1,528. The Company incurred $62$2,652,855, including $112,675 in research and development costs, $840and $2,540,180 in selling, administrative, and other costs associated with operations.

Operating expenses for the three months ended June 30, 2020 was $2,313,231 including $166,662 in research and development costs, and $2,146,569 in selling, administrative and other costs associated with operations.

Other Income (Expense)

For the three months ended June 30, 2021, the Company recognized $(60,459) of net other expenses.

For the three months ended June 30, 2020, the Company recognized $199,514 of net other income.

Net Loss

Net loss for the three months ended June 30, 2021 was $2,641,090. Net loss for the three months ended June 30, 2020 was $1,865,657. No provision for income taxes for either period was recorded.

Results of Operations for six months ended June 30, 2021 compared to the six months ended June 30, 2020

Revenue

Net sales are comprised of wholesale sales to our retail partners and sales through our direct-to-consumer channel. Net sales in both channels reflect the impact of product returns as well as discounts for certain sales programs or promotions.

For the six months ended June 30, 2021, the Company recognized $427,860 in net sales. For the six months ended June 30, 2020, the Company recognized $657,134 in net sales.

Expenses

Operating expenses for the six months ended June 30, 2021 was $5,929,379. The Company incurred $301,554 in compensation and benefit costs, $243,500 in research and development costs, and $5,384,325 in selling, administrative and other costs associated with operations, including legal and professional fees of $415,974.

Operating expenses for the six months ended June 30, 2020 was $3,685,417. The Company incurred $787,353 in compensation and benefit costs, $244,537 in research and development costs, and $2,653,527 in administrative and other costs associated with operations, including legal and professional fees of $400, and $370 of labor and related costs and charged $255 to operating expenses for the impairment lease right of use asset,$404,560.

Operating expenses for the three months ended September 30, 2019 was $1,237. The Company incurred $115 in research and development costs, and $1,237 in administrative and other costs associated with operations, including legal and professional fees of $126, and $307 of labor and related costs.

Other Income (Expense)

For the threesix months ended SeptemberJune 30, 2021, the Company recognized $(160,221) of net other expenses.

For the six months ended June 30, 2020, the Company recognized $1,450$(115,984) of net other expense.expenses.

For the three months ended September 30, 2019, the Company recognized $10 of net other expenses.

Net Loss

Net loss for the threesix months ended SeptemberJune 30, 20202021 was $2,706.$5,725,737. Net loss for the threesix months ended SeptemberJune 30, 20192020 was $928. We recorded no$3,224,902. No provision for federal income taxes for either period.period was recorded.

Results of Operations for nine months ended September 30, 2020 compared to the nine months ended September 30, 2019

Revenue

For the nine months ended September 30, 2020, the Company recognized $973 in net sales. For the nine months ended September 30, 2019, the Company recognized $914 in net sales.

Expenses

Operating expenses for the nine months ended September 30, 2020 was $5,213. The Company incurred $306 in research and development costs, and $3,494 in administrative and other costs associated with operations, including legal and professional fees of $805, and $1,157 of labor and related costs and charged $255 to operating expenses for the impairment lease right of use asset.

Operating expenses for the nine months ended September 30, 2019 was $3,685. The Company incurred $197 in research and development costs, and $2,670 in administrative and other costs associated with operations, including legal and professional fees of $232, and $832 of labor and related costs.

Other Income (Expense)

For the nine months ended September 30, 2020, the Company recognized $1,566 of net other expenses.

For the nine months ended September 30, 2019, the Company recognized $20 of net other expenses.

Net Loss

Net loss for the nine months ended September 30, 2020 was $5,931. Net loss for the nine months ended September 30, 2019 was $2,099. We recorded no provision for federal income taxes for either period.

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Liquidity

We have yet to establish any history of profitable operations. For the ninesix months ended SeptemberJune 30, 2020,2021, the Company incurred a net loss of $5,031$5,725,737 and used cash in operating activities of $1,804,$2,460,312, and at SeptemberJune 30, 2020,2021, the Company had a stockholders’ deficitworking capital deficiency of $1,850.$3,805,494. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in theirits report on the Company’s December 31, 2019 audited2020 financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. ThisThe going concern opinion could materially limit our ability to raise additional funds through the issuance of new debt or equity securities, and future reports on our financial statements may also include an explanatory paragraph with respect to our ability to continue as a going concern.

At SeptemberJune 30, 2020,2021, the Company had cash on hand in the amount of $11. Subsequent to September 30, 2020 the Company received $119 from the issuance of six notes payable. Management estimates that the current funds on hand will be sufficient to continue operations through the next six months.$277,827. The Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial support from its shareholders. Management believes the existing shareholders or external financing will provide additional cash to meet the Company’s obligations as they become due. No assurance can be given that any future financing if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company can obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stockholders, in the case of equity financing

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. GAAP requires us to make estimates and assumptions that affect the reported amounts in our financial statements including various allowances and reserves for accounts receivable and inventories, the estimated lives of long-lived assets and trademarks and trademark licenses, as well as claims and contingencies arising out of litigation or other transactions that occur in the normal course of business. The following summarizes our most significant accounting and reporting policies and practices:

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates include certain assumptions related to, among others, impairment analysis of long-term assets, valuation allowance on deferred income taxes, assumptions used in valuing stock instruments issued for services, assumptions made in valuing derivative liabilities, and the accrual of potential liabilities. Actual results may differ from these estimates.

Revenue Recognition

The Company recognizes revenue when risk of loss transfers to our customers and collection of the receivable is reasonably assured, typically upon delivery of products. The Company historically has offered no discounts, rebates, rights of return, or other allowances to clients which would result in the establishment of reserves against revenue.

The Company follows the guidance of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.

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Stock Compensation

The Company periodically issues stock options, warrants, shares of common stock, and restricted stock unit awards, as share-based compensation to employees and non-employees in non-capital raising transactions for services and financing costs.non-employees. The Company accounts for such grants issued and vestingits share-based compensation in accordance with FASB ASC 718, Compensation – Stock Compensation (Topic 718). Stock-based compensation cost for employees is measured at the grant date, based on ASC 718, whereby the estimated fair value of the award, and is measured on the date of grant and recognized as expense over the requisite service period. Recognition of compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.

The fair value of the Company’s stock optionsfor non-employees is estimated using a Black-Scholes-Merton option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton option pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton option pricing model could materially affect compensation expense recorded in future periods.

Derivative Financial Instruments

The Company evaluates its financial instruments to determinesame period and manner as if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a probability weighted average Black-Scholes-Merton model to valuehad paid cash for the derivative instruments at inception and on subsequent valuation dates through the September 30, 2020, reporting date. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.services.

Recently Issued Accounting Pronouncements

See Note 1 to the Condensed Consolidated Financial Statements

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of SeptemberJune 30, 20202021 that our disclosure controls and procedures were not effective.

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We identified material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (i) We dowe had an insufficient number of personnel appropriately qualified to perform control design, execution and monitoring activities; (ii) we did not have written documentation of our internal control policies and procedures, including written policies and procedures to ensure the correct application of accounting and financial reporting with respect to the current requirements of U.S. GAAP and SEC disclosure requirements; (iii) we had ineffective controls over our financial statement close and (ii) the Companyreporting process and did not provide reasonable assurance that accounts were complete and accurate and agreed to detailed support and that reconciliations of accounts were properly performed, reviewed and approved, (iv) we did not maintain effective policies to ensure adequatecontrols over the recording and approval of recurring and non-recurring journal entries and (v) we had inadequate segregation of duties within its accounting processes. Specifically, due to the size of the Company and the smaller nature of department teams, opportunities are limited to segregate duties, resulting in inabilities to soundly manage segregation of job responsibilities.consistent with control objectives.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting (as defined by Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended SeptemberJune 30, 2020,2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are a party to, or otherwise involved in, legal proceedings arising in the normal and ordinary course of business. As of the date of this report, we are not aware of any other proceeding, threatened or pending, against us which, if determined adversely, would have a material effect on our business, results of operations, cash flows or financial position.

Item 1A. Risk Factors.

The recent global coronavirus outbreak could harm our business and results of operations.

The global outbreak of COVID-19 has negatively affected the U.S. and global economies, and has negatively impacted businesses, workforces, customers, and created significant volatility of financial markets. It has also disrupted the normal operations of many businesses, including ours. The extent of the impact of the pandemic on our business and financial results will depend largely on future developments, including the duration and severity of the outbreak, the length of restrictions and business closures, and the impact on capital and financial markets, all of which are highly uncertain and cannot be predicted. This outbreak could decrease spending, adversely affect demand for our products and harm our business and results of operations. In the quarter ended September 30, 2020, we believe the COVID-19 pandemic did impact our operating results as shipments to customers in the second quarter were down 13% from the first quarter of the year. However, we have not observed any material impairments of our assets or a significant change in the fair value of our assets due to the COVID-19 pandemic. While it is not possible at this time to estimate the full impact that COVID-19 will have on our business, restrictions resulting from COVID-19 on general economic conditions could, among other things, impair our ability to raise capital when needed. This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

No unregistered sales of equity securities subsequent to SeptemberJune 30, 2020.2021.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

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Item 6. Exhibits.

The following exhibits are incorporated into this Form 10-Q Quarterly Report:

Exhibit

Number

Description
3.4Certificate of Designation of Series A Preferred Stock (incorporated by reference to Exhibit 3.4 to the Registrant’s Current Report on Form 8-K filed with the Commission on April 14, 2020)
10.13Equity Purchase Agreement, dated as of April 9, 2020, by and between Quanta, Inc. and Oscaleta Partners LLC (incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 filed with the Commission on April 10, 2020)
10.14Registration Rights Agreement, dated as of April 9, 2020, by and between Quanta, Inc. and Oscaleta Partners LLC (incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S-1 filed with the Commission on April 10, 2020)
10.15Promissory Note, dated as of April 9, 2020, issued by Quanta, Inc. in favor of Oscaleta Partners LLC (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1 filed with the Commission on April 10, 2020)
10.16Brokerage Agreement, dated as of March 26, 2020, by and between Quanta, Inc. and Hanson Faso Sales & Marketing, Inc. (incorporated by reference to Exhibit 10.16 to the Registrant’s Current Report on Form 8-K filed with the Commission on April 10, 2020)
10.17Form of Securities Purchase Agreement, dated as of April 27, 2020, by and between Quanta, Inc. and the Purchasers Signatory Thereto (incorporated by reference to Exhibit 10.17 to the Registrant’s Current Report on Form 8-K filed with the Commission on May 1, 2020)
10.18Form of Note dated as of April 27, 2020, issued by Quanta, Inc. in favor of the Holders Thereof (incorporated by reference to Exhibit 10.18 to the Registrant’s Current Report on Form 8-K filed with the Commission on May 1, 2020)
31.1*Rule 13a-14(a) Certification of the Chief Executive and Financial Officer
32.1*Section 1350 Certification of Chief Executive and Financial Officer

101.INSInline XBRL Instance Document
101.SCH
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed along with this document

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

QUANTA, INC
Dated: December 18, 2020August 23, 2021By:/s/ Phil SandsArthur Mikaelian
Phil SandsArthur Mikaelian
Chairman, Chief Executive Officer (Principal Executive Officer and Principal Accounting Officer)

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