The following table provides a summary of

In management’s opinion, the fair value of our derivative liabilitiesconvertible notes payable and advances payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments. As June 30, 20172020 and December 31, 2016:2019, the balances reported for cash, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities, approximate the fair value because of their short maturities.

Income taxesTaxes

The Company accounts for incomerecords deferred taxes in accordance with FASB ASC No. 740, “Income Taxes”, which requires the asset and liability approach for financial accounting and reporting for income taxes.Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities of a change in tax rates is recognized in incomeoperations in the period that includes the enactment date.year of change. A valuation allowance related to deferred tax assets is recorded when it is more likely than not“more likely-than-not” that some portion or all thea deferred tax assetsasset will not be realized.

As of the date of this filing, the Company is current in filing their tax returns. The last return filed by the Company was December 31, 2018, and the Company has not accrued any potential penalties or interest from that period forward.

Basic and Diluted Loss Per Share

In accordance with ASC Topic 280 – “Earnings Per Share”, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

NewRecent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces existing revenue recognition guidance. The updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company has implemented all new accounting pronouncements that areadopted the standard on January 1, 2018, using a modified retrospective approach, with the cumulative effect of initially applying the standard recognized in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or resultsretained earnings at the date of operations.adoption.

In February 2016, the FASB issued ASU 2016-02 (ASC Topic 842), Leases. The ASU amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted the new lease guidance

effective January 1, 2019.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The guidance requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires the consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted the standard in the first quarter of fiscal 2020 and there was no material impact.

NOTE 2 – GOING CONCERN

The Company has experienced net losses to date, and it has not generated sufficient revenue from operations to meet our operational overhead. We will need additional working capital to service debt and for ongoing operations, which raises substantial doubt about our ability to continue as a going concern. Management of the Company is preparing a strategy to meet operational shortfalls which may include equity funding, short term or long-term financing or debt financing, to enable the Company to reach profitable operations. Historically, the Company’s sole officer and director has provided short term loans to meet working capital shortfalls. We have recently entered into financing agreements with various third parties to meet our capital needs in fiscal 2017.2020.

The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

NOTE 3 – MERGER TRANSACTION

On November 22, 2019, Vet Online Supply and Brewbilt Manufacturing (“BrewBilt”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) and completed a merger, whereby Brewbilt merged with and into Vet Online Supply, with BrewBilt remaining as the surviving entity (the “Merger”). Under U.S. generally accepted accounting principles, the merger is treated as a “reverse merger” under the purchase method of accounting, with BrewBilt as the accounting acquirer.

Pursuant with the Merger Asset Purchase Agreement, the Board of Directors has authorized that BrewBilt shall sell, assign and transfer all of its right, title and interest to its IP, fixed assets and “know how” to the Company (collectively, the “Seller’s Assets”). Vet Online Supply and BrewBilt mutually agree that BrewBilt will assign certain assets and provide the “Know-How” regarding the designing and building of the finest craft brewing equipment in the industry today. As consideration for the IP, fixed assets and the “Know -How”, the Company shall issue, or cause to be issued, $5,000,000 worth of Preferred Series A Stock (PAR $.001) within thirty (30) days from the date of the agreement. The number of Preferred Series A shares to be issued is 500,000 shares at a price of $10.00 per share and convertible pursuant the conversion rights as specified in the Articles of Incorporation and certificate of designation for VTNL. BrewBilt has designated that the said stock be issued in the name of its President, Jeffrey Lewis.

The Board of Directors dismissed Daniel Rushford as an officer and director, specifically as the Chief Executive Officer, Chairman of the Board, and Corporate (President) of the Company effective November 22, 2019. Effective November 22, 2019, Daniel Rushford will have a new revised Employment Agreement which appoints him as Manager of the CBD Pet Supply Division, a non-director/officer position which includes returning to Treasury 1,000 Preferred Series B Control Shares, and an annual salary of $36,000. Unpaid wages will accrue interest at 6% per annum and may be converted to restricted common stock at fair market value at the time of conversion.

NOTE 4 - PREPAID EXPENSES

Prepaid fees represent amounts paid in advance for future contractual benefits to be received. Contracting expenses paid in advance are recorded as a prepaid asset and then amortized to the statements of operations when services are rendered, or over the life of the contract using the straight-line method.

As of June 30, 2020, the Company accrued prepaid insurance expenses of $2,899 and as of December 31, 2019, the Company accrued prepaid insurance expenses and employee wages of $9,467.

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at June 30, 2020 and December 31, 2019:

NOTE 6 – LEASES

The Company adopted the new lease guidance effective January 1, 20142019 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information will not be updated, and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. The adoption of the new guidance resulted in the recognition of ROU assets of $423,360 and lease liabilities of $423,360.

The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In calculating the present value of the lease payments, the Company elected to utilize its incremental borrowing rate based on the remaining lease terms as of the January 1, 2019 adoption date.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred, if any. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Our lease has a remaining lease term of nine years.

The Company has elected the practical expedient to combine lease and non-lease components as a single component. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, current operating lease liabilities and non-current operating lease liabilities.

The new standard also provides practical expedients and certain exemptions for an entity’s ongoing accounting. We have elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases where the initial lease term is one year or less or for which the ROU asset at inception is deemed immaterial, we will not recognize ROU assets or lease liabilities. Those leases are expensed on a straight-line basis over the term of the lease.

Operating Leases

On January 1, 2018, the Company entered into a Reseller Agreementstandard office lease for approximately 8,000 square feet of space, located in the Wolf Creek Industrial Building at 110 Spring Hill Dr. #10 Grass Valley, CA 95945. The lease has a term of 10 years, from January 1, 2018 through January 1, 2028, with Concord Veterinary Supplies Inc., (“Concord”), where under Concord has authorized the non-exclusive righta monthly rent of $4,861.

ROU assets and lease liabilities related to Vet Online Supply, Inc. to market, promote, advertise, sell, distributeour operating lease is as follows:

NOTE 7 – ACCURED LIABILITIES

As of June 30, 2020 and deliver, veterinary products carried by Concord Veterinary Supply, which are listed on www.concord-surgical.com, for a one-time fee of $50,000. The fee payable has been secured by an interest free convertible promissory note (the “Note”) due within ninety (90) daysDecember 31, 2019, accrued liabilities were comprised of the following:

NOTE 8 – BILLINGS IN EXCESS OF REVENUE AND EARNINGS IN EXCESS OF BILLINGS

Billings in excess of revenue is related to contracted amounts that have been invoiced to customers for which remaining performance obligations must be completed before the Company getting noticecan recognize the revenue. Earnings in excess of effect from its S-1 Registration Statement as filedbillings is related to the cost of sales associated with the Securitiescustomer products that are incomplete.

Changes in unearned revenue for the periods ended June 30, 2020 and Exchange Commission, which occurred December 22, 2015. At any time prior31, 2019 were as follows:

As of June 30, 2020 and December 31, 2019, the Company has recorded $164,201 and $53,038, respectively in earnings in excess of billings for the cost of sales related to maturitycustomer orders in progress.

NOTE 9 – CONVERTIBLE NOTES PAYABLE

As of June 30, 2020 and December 31, 2019, notes payable were comprised of the Note, Concord Veterinary Supply may elect to convert the debt amount into shares of the common stock of the Company at a fixed price of $0.000667 per share.following:

There is no beneficial conversion feature resulting from the conversion price compared to market price.

On April 11, 2017 Concord Veterinary Supply agreed to cancel its outstanding promissory note in the amount of $50,000 for no further consideration. The Company recorded a gain on debt forgiveness of $50,000. 

On March 15, 2017, the Company entered into a convertible loan agreement with an investor. The Company received net proceeds of $35,000 from total loan proceeds of $38,000, which bears interest at 12% per annum and is due on December 30, 2017. Legal fees of $3,000 were paid in respect of the note and deducted from proceeds advanced.  Interest shall accrue from the advancement date and shall be payable on maturity. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of a 42% discount to the average lowest two (2) trading prices for the previous fifteen (15) trading days to the date of conversion.

During the ninesix months ending SeptemberJune 30, 2017,2020, the Company received proceeds from new convertible notes of $360,900, and reclassified accounts payable of $44,000 into convertible notes payable. The Company recorded no payments on their convertible notes, default penalties of $79,920, and conversions of $481,142 of convertible note holder converted $8,000 in principalprincipal. The Company recorded loan fees on new convertible notes of $30,600, which increased the debt discounts recorded on the convertible notes during the six months ending June 30, 2020. All of the Company’s convertible notes have a conversion rate that is variable, and therefore, the Company has accounted for their conversion features as derivative instruments (see Note 10). The Company also recorded amortization of $209,094 on their convertible note debt discounts and loan fees. As of June 30, 2020, the convertible notes payable are convertible into 987,654356,557,799 Convert to stock split shares of the Company’s common stock.

During the six months ended June 30, 2020, the Company recorded interest expense of $109,845 on its convertible notes payable. During the six months ended June 30, 2020, the Company recorded conversions of $209,408 of convertible note interest and $29,775 in conversion fees. As of June 30, 2020, the accrued interest balance was $141,066.

On April 25, 2017, the Company entered into a convertible loan agreement with an investor. The Company received net proceedsAs of $50,000 from total loan proceeds of $55,000, which bears interest at 8% per annumJune 30, 2020, we have not attained profitable operations and is due on April 25, 2018. Legal fees of $5,000 were paid in respect of the noteare dependent upon obtaining financing to pursue any extensive acquisitions and deducted from proceeds advanced.  Interest shall accrue from the advancement date and shall be payable on maturity. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of a 42% discount to the average lowest three (3) trading prices for the previous twenty (20) trading days to the date of conversion.

On May 1, 2017, the Company entered into a convertible loan agreement with an investor. The Company received net proceeds of $40,000 from total loan proceeds of $45,000, which bears interest at 8% per annum and is due on May 1, 2018. Original issue discount of $2,300 and legal fees of $2,700 were paid in respect of the note and deducted from proceeds advanced.  Interest shall accrue from the advancement date and shall be payable on maturity. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of a 42% discount to the average three (3) lowest closing price for the previous twenty (20) trading days preceding the date of conversion.activities.

On May 8, 2017, the Company entered into a convertible loan agreement with an investor. The Company received net proceeds of $30,000 from total loan proceeds of $36,000, which bears interest at 8% per annum and is due on May 1, 2018. Original issue discount of $4,500 and legal fees of $1,500 were paid in respect of the note and deducted from proceeds advanced.  Interest shall accrue from the advancement date and shall be payable on maturity. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of a 45% discount to the lowest trading price for the previous twenty (20) trading days to the date of conversion.NOTE 10 – DERIVATIVE LIABILITIES

In addition, the Company paid an additional $3,000 to a consultant in respect to the consulting agreement (ref: Note 5 – (4)).

On May 22, 2017, the Company entered into a convertible loan agreement with an investor. The Company received net proceeds of $25,000 from total loan proceeds of $28,000, which bears interest at 12% per annum and is due on February 28, 2018. Legal fees of $3,000 were paid in respect of the note and deducted from proceeds advanced.  Interest shall accrue from the advancement date and shall be payable on maturity. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of a 42% discount to the average lowest two (2) trading prices for the previous fifteen (15) trading days to the date of conversion.

On May 25, 2017, the Company entered into a convertible loan agreement with an investor. The Company received net proceeds of $47,500 from total loan proceeds of $50,000, which bears interest at 8% per annum and is due on May 25, 2018. Legal fees of $2,500 were paid in respect of the note and deducted from proceeds advanced.  Interest shall accrue from the advancement date and shall be payable on maturity. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of a 42% discount to the lowest closing price in the previous twenty (20) trading days to the date of conversion.

In addition, the Company paid an additional $4,750 to a consultant in respect to the consulting agreement (ref: Note 5 – (4)).

On June 16, 2017, the Company entered into a convertible loan agreement with an investor. The Company received net proceeds of $47,250 from total loan proceeds of $64,000, which bears interest at 8% per annum and is due on March 16, 2018. Original issue discount of $9,000 and legal fees of $7,750 were paid in respect of the note and deducted from proceeds advanced.  Interest shall accrue from the advancement date and shall be payable on maturity. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of a 42% discount to the lowest trading price for the previous thirty (30) trading days to the date of conversion.

In addition, the Company paid an additional $4,725 to a consultant in respect to the consulting agreement (ref: Note 5 – (4)).

On June 16, 2017, the Company entered into a convertible loan agreement with an investor in the form of a back-end note. The Company received net proceeds of $20,000 from total loan proceeds of $25,500, which bears interest at 2% per annum and is due on June 16, 2018. Original issue discount of $4,000 and legal fees of $1,500 were paid in respect of the note and deducted from proceeds advanced.  Interest shall accrue from the advancement date and shall be payable on maturity. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of a 45% discount to the lowest trading price for the previous twenty (20) trading days to the date of conversion.

In addition, the Company paid an additional $2,000 to a consultant in respect to the consulting agreement (ref: Note 5 – (4)).

On August 10, 2017, the Company entered into a convertible loan agreement with an investor. The Company received net proceeds of $42,000 from total loan proceeds of $44,200, which bears interest at 8% per annum and is due on April 10, 2018. Legal fees of $2,200 were paid in respect of the note and deducted from proceeds advanced.  Interest shall accrue from the advancement date and shall be payable on maturity. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of a 42% discount to the lowest closing price in the previous twenty (20) trading days to the date of conversion.

The following table represents the Company’s derivative liability activity for the embedded conversion features for the nine months ended Septemberperiod ending June 30, 2017:2020 and December 31, 2019:

During the nine monthsperiod ended SeptemberJune 30, 20172020 and December 31, 2019, the Company recorded derivative liabilities for embedded conversion features related to convertible notes payable of $44,906, reduced derivative liabilities by $9,642 for$2,731,152 and $0, respectively.

During the period ended June 30, 2020 and December 31, 2019, in conjunction with convertible notes payable accrued interest being converted into common stock of the Company, derivative liabilities were reduced by $3,282,202 and $5,077, respectively.

For the period ended June 30, 2020 and December 31, 2019, the Company performed a final mark-to-market adjustment for the derivative liability related to the convertible notes and the carrying amount of the derivative liability related to the conversion feature and recognized a loss of $1,168,056 and a gain on the derivative liability valuation of $95,267.$13,068,808, respectively.

The Company uses the Black-Scholes option pricing model to estimate fair value for those instruments convertible into common shares at inception, at conversion or extinguishment date, and at each reporting date. During the ninesix months ended SeptemberJune 30, 2017,2020, the company used the following assumptions in their Black-Scholes model: (1) risk free interest rate 1.06%.08% - 1.20%.37%, (2) term of 0.250.12 years – 0.724.06 years, (3) expected stock volatility of 184%280.75% - 291%1,563.40%, (4) expected dividend rate of 0%, (5) common stock price of $0.0011$0.001 - $0.0014,$0.03, and (6) exercise price of $0.00605$0.0008 - $0.00754.$0.03.

These instruments were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The instruments do not qualify for hedge accounting, and as such, all future changes in the fair value will be recognized in earnings until such time as the instruments are exercised, converted or expire. 

On March 21, 2017, the Company entered a three-month engagement agreement with a consultant, where under the Company retains consultant to advise it regarding certain legal, corporate and business operations, and more specifically with regard to public filings and compliance with regard to the Company, and the consultant is to be compensated in the amount of $1,000 per month for the services rendered. The contract expired on June 21, 2017 and was not renewed.

On March 17, 2017 the Company entered into a consulting agreement with a third party where under the consultant shall provide administrative and business services for a period of three months from the date of the agreement, and the consultant shall be compensated in the amount of $1,500 per month for the services rendered with a bonus of $15,000 payable in shares as of the date of the agreement.NOTE 11 – RELATED PARTY TRANSACTIONS

The stock bonus was not issued asMr. Jef Lewis, Chief Executive Officer, Chairman of March 31, 2017,the Board, President, Secretary, and $15,000 was recorded as stock-based compensation and included as consulting fees.Treasurer

On May 16, 2017,November 22, 2019, the Company amendedappointed Jeffrey Lewis as the termsnew Chief Executive Officer, Chairman of the agreement so that the $15,000 in services payable in stock shall convert at $0.01 per share for a total of 1,500,000 common shares of stock to be issued. 1,500,000 common shares were issued asBoard, Corporate President, Secretary, and Treasurer of the dateCompany. The Company and Mr. Lewis entered into an Employee Agreement that included the issuance of is the amendment1,000 Preferred Series B Control Shares, and were valuedan annual salary of $200,000. Unpaid wages will accrue interest at $82,500, or $0.0556% per share based on theannum and may be converted to restricted common stock at fair market value on the date of the agreement. The Company recorded the additional $67,500 as stock-based compensation which is included in consulting fees.

On March 28, 2017, the Company entered into an investor relations agreement with a third party, whereby the third party will provide advertising, promotional and marketing services for the Company between April 1, 2017 and July 1, 2017. In consideration of the foregoing services performed by the third party, the Company will pay a fee of 1,920,000 restricted shares on or before April 1, 2017. In addition, the third party will remain the owner of at least 1% of the company’s outstanding shares for a 1-year period. On April 1, 2018, the Company shall issue additional shares as necessary to bring the total number of shares paid to the third party to equal 1% of the outstanding shares of common stock as of 4/1/2018. In the event the Company does not issue the shares as required under this provision, the Company will be subject to a penalty of $5,000 per month until the shares are issued.

1,920,000 shares were issued on March 28, 2017 and valued at the fair market value on the datetime of grant totaling $96,000, which amount has been expensed as stock based compensation as part of consulting expenses.

In respect to the investor relations agreement, 15,000 additional shares have been allocated for issuance effective May 16, 2017, and $825 has been expensed as stock based compensation as part of consulting expenses due to 1,500,000 shares of common stock issued to a consultant (ref Note 5 – (2)).

The 15,000 shares were not issued as of June 30, 2017, and $825 was recorded on the balance sheet as liabilities for unissued shares.

On April 6, 2017 the Company entered into a consulting agreement with an advisor, where under the advisor will provide access to financing for the Company’s business activities. In consideration of the foregoing services performed by the advisor, the Company will pay a fee of 10% of net proceeds on each financing introduced.

conversion. During the six months ended June 30, 2017,2020, the Company paidaccrued wages of $14,475$100,000, accrued interest of $1,500 and made payments of $21,260.

Pursuant to the advisorMerger Agreement, Mr. Lewis is to receive 500,000 shares of Preferred Series A shares, valued at $5,000,000. The shares are convertible pursuant the conversion rights as specified in respectthe Articles of this agreement.

On April 1, 2017,Incorporation and Certificate of Designation for the Company. As of December 31, 2019, the shares had not been issued, and the Company expanded its boardrecorded a liability for unissued shares in the amount of directors$500, goodwill of $2,289,884 and $2,289,334 to include Matthew C. Scott, to assist with development of our internet marketing efforts with a goal of growing our business. Concurrently we entered into a consulting agreement with Mr. Scott for a term of one year, where under Mr. Scott shall receive an annual fee of $100,000 payableadditional paid in quarterly installments. Further effective April 1, 2017capital. During the six months ended June 30, 2020, the Company agreed to issue Mr. Scott 2,000,000issued 500,000 shares of restricted common stock for his services as a director. The shares upon issue will be held by the Company for a term of six monthsPreferred Series A to Mr. Lewis and are cancelable should Mr. Scott not serve in his capacity as director for a minimum term of six months.

The Company recorded $140,000 in respect to the 2,000,000 shares based on the fair market value on April 1, 2017, which has been recorded on the balance sheet as$500 was reclassed from liabilities for unissued shares and expensed $140,000 as stock based compensation as part of consulting expenses in the period ended September 30, 2017.  At September 30, 2017, the shares remained unissued.to equity.

Mr. Samuel Berry, Director

On June 19, 2017,November 22, 2019, the Company entered into a Consulting Agreement with Mr. Samuel Berry with regard to marketing and distribution of online retail sales for all products.Berry.  Mr. Berry will receive an annual salary of $50,000, payable in quarterly payments ofinstallments at $12,500 per quarter. During the six months ended June 30, 2020, the Company accrued $25,000 in consulting fees in connection to his agreement.

Mr. Daniel Rushford, former President

During the six months ended June 30, 2020, the Company’s former President cancelled 8,008,334 shares of common stock issued to settle debt of $25,265 and $25,000 in stock based compensation pursuant to an employee agreement. The cancellation resulted in a liability of unissued shares of $25,000 and an increase in related party liabilities of $25,265.

NOTE 12 – LONG TERM DEBT

As of June 30, 2020 and December 31, 2019, long term debt was comprised of the following:

On June 19, 2017May 11, 2020, the BoardCompany was granted a loan (the “Loan”) from BSD Capital, LLC dba Lendistry, in the amount of Directors appointed Mr. Samuel L. Berry as Director.  For accepting$61,558, pursuant to the position of Director, Mr. Berry will receive 1,000,000 sharesPaycheck Protection Program (the “PPP”) under Division A, Title I of the Company’s common stock, valued at $0.05 per share.  Additionally, Mr. Berry will be paid $500 for each board meeting forCARES Act, which he is physically present.was enacted March 27, 2020.

The Company recorded $50,000 in respect to the value of 1,000,000 unissued shares as liabilities for unissued shares, and expensed $50,000 as stock based compensation as part of consulting expensesLoan, which was in the nine months ended September 30, 2017.form of a Note dated May 11, 2020, issued by the Borrower, matures on May 11, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on November 11, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations. The Company intends to use 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 as described in the CARES Act.

NOTE 13 – PREFERRED STOCK

On August 28, 2017, Vet Online Supply Inc. (“the Company”) entered into an Employment Agreement with Mr. Daniel Rushford with regard to being appointed as the new Chief Executive Officer, President, Secretary, Treasurer and Member of the Board of Directors. Mr. Rushford will receive a monthly salary of $2,000.00 to be paid at the end of each month. Unpaid amounts will accrue annual interest of 6%. In addition, Mr. Rushford will receive 25,000,000 shares of restricted common stock and 1,000 Preferred Series B Shares upon signing of this agreement. Further, at the end of the first 12 months the employee will receive $75,000 of restricted common shares of the company at fair market value.  The term of the Consulting Agreement is for two years; renewable upon mutual consent. 

On March 28, 2017, the Company filed an amendment to its articles of incorporation reducing the number of authorized common shares from 8,000,000,000 to 1,000,000,000, par value $0.001, and designating 20,000 shares of its authorized preferred stock, par value $0.001 as Series B Voting Preferred Stock.  The Series B Voting Preferred Stock shall have the right to vote the shares on any matter requiring shareholder approval on the basis of 4 times the votes of all the issued and outstanding shares of common stock, as well as any issued and outstanding preferred stock.

Series B Voting Preferred Shares issued during the nine months ended September 30, 2017:

On April 7, 2017,July 1, 2019, the Company issued 20,000 sharesfiled a Certificate of Amendment to increase the number of authorized Series B VotingA Preferred Stock to Edward Aruda.  The Company obtained30,000,000, with a third-party valuationpar value of $0.001.  Each share of Preferred Series A Stock shall have a value of $10 per share and will convert into common stock at the closing price of the preferredcommon stock to determine the fair value as aton the date of issue.conversion.  The report results providedSeries A stock shall have no voting rights on corporate matters, unless and until the Series A shares are converted into Common Shares, at which time they will have the same voting rights as all Common Shareholders have; their consent shall not be required for a value of $ $21,000 as stock based compensation as part of consulting expenses.

On August 28, 2017 the 20,000 shares of Series B Voting Preferred Stock to Edward Aruda was canceled and 1,000 shares of Series B Voting Preferred Stock to Dan Rushford.taking any corporate action.

Pursuant to the Merger Agreement dated November 22, 2019, the Company will issue $5,000,000 worth of Preferred Series A Stock to Mr. Lewis. The number of Preferred Series A shares to be issued is 500,000 shares at a price of $10.00 per share and convertible pursuant the conversion rights as specified in the Articles of Incorporation and Certificate of Designation for the Company. As of September 30, 2017, and December 31, 2016,2019, the shares had not been issued, and the Company recorded a liability for unissued shares in the amount of $500, goodwill of $2,289,884 and $2,289,334 to additional paid in capital.

On April 6, 2020, the Company executed an addendum to the Distribution & Licensing Agreement dated November 19, 2019, with Bgreen Partners, Inc. The Company issued 400,000 Preferred Series A shares at a price of $10.00 per share convertible pursuant the conversion rights as specified in the Articles of Incorporation and certificate of designation for the Company.

During the six months ended June 30, 2020, 185,177 shares of Series A Preferred stock were converted to 232,920,612 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $371,090, which was recorded to the statement of operations.

During the six months ended June 30, 2020, 500,000 shares of Preferred Series A Shares were issued pursuant to the Merger Agreement, and a $500 liability for unissued shares was reclassed to equity.

As of June 30, 2020, 30,000,000 Series A Preferred shares and 1,000 and $0 preferredSeries B Preferred shares were authorized, of which 1,114,823 Series A shares were issued and outstanding, respectively.

and 1,000 Series B shares were issued and outstanding.

Common Shares issued during the nine months ended September 30, 2017:

NOTE 14 – COMMON STOCK

On March 28, 2017,April 22, 2019, the Company approved the issuanceauthorization of 1,920,000 sharesa 1 for 3,000 reverse stock split of the Company’s common stock for services provided by a consultant, in the form of stock awards which shall vest as of the date of grant.  The shares were valued at the fair market value on the date of grant totaling $96,000, which amount has been expensed as stock based compensation as part of consulting expenses.

On May 16, 2017, the Company amended the terms of a consulting agreement (Note 5 (2)) so that $15,000 in services payable byoutstanding shares of common stock. The Company’s financial statements have been retroactively adjusted for this stock shall convert at $0.01 per sharesplit for a total of 1,500,000 common shares.  The shares were issued as of the date of the amendment and were valued at $82,500, or $0.055 per share based on the fair market value on the date of the agreement. The Company recorded the additional $67,500 as stock-based compensation which is included in consulting fees.

On September 18, 2017, the holder of a note converted $8,000 in principal into 987,354 shares of the Company’s common stock.

Common Shares issued during the year ended December 31, 2016:all periods presented.

During the year ended December 31, 2016,2019, the Company has received proceeds totaling $35,500 from various parties subscribing forholder of a totalconvertible note converted $1,148 of 53,250,000accrued interest and $500 in conversion fees into 400,000 shares of common stock. The common stock was valued at $0.000667 per share under our Form S-1 registration statement.  53,250,000 shares$5,077 based on the market price of the Company’s common stock were issued in respecton the date of these subscriptions.conversion.

On JulyMarch 25, 2016, 1,500,000,0002020, the Company filed a Certificate of Amendment to increase the number of authorized common shares from 5,000,000,000 to 10,000,000,000 with a par value of treasury stock were returned.

On December 2, 2016, our sole officer and director, Mr. Edward Aruda, returned 7,361,250,000 shares of the Company’s common stock for no consideration. Mr. Aruda was originally issued 7,500,000,000 shares as a signing bonus in fiscal 2015.

As at September 30, 2017 and December 31, 2016, there were 196,407,654 and 192,000,000 shares issued and outstanding, respectively.

Mr. Edward Aruda, President, CEO and Director$0.001.

During the ninesix months ended SeptemberJune 30, 2017, Mr. Aruda advanced $5,7002020, the Company’s former President cancelled 8,008,334 shares of common stock issued to settle debt of $25,265 and $25,000 in stock based compensation pursuant to an employee agreement. The cancellation resulted in a liability of unissued shares of $25,000 and an increase in related party liabilities of $25,265.

During the six months ended June 30, 2020, 185,177 shares of Series A Preferred stock were converted to 232,920,612 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $371,090, which was recorded to the Company.statement of operations.

During the six months ended June 30, 2020, the holders of a convertible notes converted $481,142 of principal, $209,488 of accrued interest and $29,775 in conversion fees into 291,334,909 shares of common stock. The common stock was valued at $3,282,202 based on the market price of the Company’s stock on the date of conversion.

As of SeptemberJune 30, 2017,2020, 10,000,000,000 were authorized, of which 526,590,517 shares are issued and December 31, 2016, $10,940 and $9,440 is reflected on the Company’s balance sheets as promissory notes payable – related party in respect of amounts which remain payable to Mr. Aruda.

During the nine months ended September 30, 2017, Mr. Aruda invoiced $30,000 ($5,000 per month) as consulting fees. The Company paid $18,000 in cash, leaving $12,000 on the Company’s balance sheets as accounts payable – related parties.outstanding.

On April 7, 2017, the Company issued 20,000 shares of Series B Voting Preferred Stock to Edward Aruda.  The Company obtained a third-party valuation of the preferred stock to determine the fair value as at the date of issue.  The report results provided for a value of $ $21,000 as stock based compensation as part of consulting expenses.Warrants

On August 28, 2017 Edward Aruda resigned fromWe account for common stock purchase warrants as derivative liabilities and debt issuance costs on the positionsbalance sheet at fair value, and changes in fair value during the periods presented in the statement of Chief Executive Officer, President, Secretary, and Treasurer. Mr Aruda will remain as Chairmanoperations, which is revalued at each balance sheet date subsequent to the initial issuance of the Board of Directors and will supervise sales and marketing for the Company in the near future.warrant. 

Mr. Matthew C. Scott, DirectorNOTE 15– INCOME TAX

On April 1, 2017, the Company expanded its board of directors to include Matthew C. Scott.  Concurrently, the Company entered into a consulting agreement with Mr. Scott for a term of one year, whereby Mr. Scott shall receive an annual fee of $100,000 payable in quarterly installments. Furthermore, effective April 1, 2017 the Company agreed to issue Mr. Scott 2,000,000 shares of restricted common stock for his services as a director. The shares upon issue will be held by the Company for a term of six months and are cancelable should Mr. Scott not serve in his capacity as director for a minimum term of six months.

The Company recorded $140,000 in share based compensation in respect of the 2,000,000 shares issuable based on the fair market value on April 1, 2017, which has been recorded on the balance sheet as liabilities for unissued shares.  Furthermore, a total of $140,000 has been expensed in the nine months ended September 30, 2017 as stock based compensation as part of consulting expenses.

During the nine months ended September 30, 2017, the Company accrued consulting fees of $40,000, and paid $10,000 in cash, leaving $30,000on the Company’s balance sheets as account payable – related parties with respect to amounts due to Mr. Scott.

Mr. Samuel Berry, Director

On June 19, 2017, the Company entered into a Consulting Agreement with Mr. Samuel Berry.  Mr. Berry will receive an annual salary of $50,000, payable in quarterly installments at $12,500 per quarter.  

On June 19, 2017 the Board of Directors appointed Mr. Samuel L. Berry as Director.  For accepting the position of Director, Mr. Berry will receive 1,000,000 Shares of the Company’s Common Stock, valued at $0.05 per share.  Additionally, Mr. Berry will be paid $500 for each board meeting for which he is physically present.

The Company recorded $50,000 in respect to the value of 1,000,000 unissued shares as liabilities for unissued shares, and expensed $50,000 as stock based compensation as part of consulting expenses in the period ended June 30, 2017.

During the nine months ended September 30, 2017, the Company accrued consulting fees of $16,667on the Company’s balance sheets as account payable – related parties in respect of amounts payable to Mr. Berry.

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

Operating loss carry-forwards generated during the period from May 25, 2014 (date of inception) through September 30, 2017 of approximately $1,092,723 will begin to expire in 2034.   The Company applies a statutory income tax rate of 34%. Accordingly, deferred tax assets related to net operating loss carry-forwards total approximately $371,524asset and the valuation allowance consist of the following at SeptemberJune 30, 2017.2020:

As of the date of this filing, the Company is current in filing their tax returns. The last return filed by the Company was December 31, 2018, and the Company has not accrued any potential penalties or interest from that period forward.

All tax years since inception are open to examination by the Internal Revenue Service.NOTE 16 – COMMITMENTS AND CONTINGENCIES

Distribution & Licensing Agreement

On October 15, 2017,November 19, 2019, the BoardCompany entered into a Distribution & Licensing Agreement with Bgreen Partners, Inc., a California Corporation. The Agreement provides exclusive rights to various cannabis and agricultural products inclusive of Directors ofgrow-containers and CBD Extraction Systems to be used for mobile processing. The IP and rights are valued at $4,000,000, based upon a five-year term. As consideration for the Corporation approvedIP and rights, the issuance of 20,000,000 restricted commonCompany issued 400,000 Preferred Series A shares in value of $200,000 at a price of $.01 to Robert Sullavan$10.00 per share and convertible pursuant the conversion rights as specified in the Articles of Incorporation and certificate of designation for the Company.

On April 6, 2020, the Company executed an addendum to the Distribution & Licensing Agreement dated October 2, 2017; 75,000,000 restricted commonNovember 19, 2019, with Bgreen Partners, Inc. The Company issued 400,000 Preferred Series A shares at a value of $50,000 to Samuel Berry at $12,500 per month for 4 months pursuant his agreement date June 19, 2017 at a price of ..00067; 75,000,000 restricted common shares at a value$10.00 per share convertible pursuant the conversion rights as specified in the Articles of $50,000Incorporation and certificate of designation for the Company.

Employee Agreement

On November 22, 2019, the Company entered into an Employment Agreement with Mr. Daniel Rushford. Mr. Rushford will receive an annual salary of $36,000 to Mathew Scott pursuant his agreement date April 1, 2017;be paid in equal monthly installments. Unpaid amounts will accrue annual interest of 6%. The term of the Agreement is for one year and 25,000,000 restricted common shares at a value of $25,000 to Daniel Rushford at a price of $.01 pursuant his agreement dated August 28, 2017.is renewable upon mutual consent.

Lease

On January 1, 2018, the Company entered into a standard office lease for approximately 8,000 square feet of space, located in the Wolf Creek Industrial Building at 110 Spring Hill Dr. #10 Grass Valley, CA 95945. The lease has a term of 10 years, from January 1, 2018 through January 1, 2028, with a monthly rent of $4,861.

Service Agreement

On June 12, 2018, the Company entered into a preventative maintenance service agreement with Atlas Copco Compressions LLC. The agreement is for a period of 5 years, at a cost of $145.13 per month.

NOTE 17 – SUBSEQUENT EVENTS

Convertible Notes

On July 2, 2020, the Company entered in a Convertible Promissory Note in the amount of $25,000. The note is unsecured, bears interest at 10% per annum, and matures on July 2, 2021.

On July 7, 2020, the Company entered in a Convertible Promissory Note in the amount of $25,000. The note is unsecured, bears interest at 10% per annum, and matures on July 7, 2021.

Subsequent Issuances

During the period of July 1 to August 13, 2020, the holders of a convertible notes converted $534,590 of principal, accrued interest and conversion fees into 307,612,420 shares of common stock.

During the period of July 1 to August 13, 2020, 238,443 shares of Series A preferred stock were converted to 549,883,688 common shares in accordance with the conversion terms.

On August 5, 2020, a warrant holder exercised the warrant and the Company issued 38,506,326 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis summarizes the significant factors affecting our consolidated results of operations, financial condition and liquidity position for the six months ended June 30, 2020. This discussion and analysis should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for our year-ended December 31, 2019 and the consolidated unaudited financial statements and related notes included elsewhere in this filing. The following discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “intends”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results, later events or circumstances or to reflect the occurrence of unanticipated events.

In this report unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares of our capital stock.

The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

As used in this quarterly report, the terms “we”, “us”, “our”, and “our company” means Vet Online Supply,BrewBilt Manufacturing, Inc., unless otherwise indicated.

Corporate InformationRESULTS OF OPERATIONS

Vet Online Supply, Inc. was incorporated in the State of Florida on May 31, 2014. We are an emerging growth company that engages in the sale of veterinary supplies for vet clinics of all sizes. We sell our products on the eCommerce web-based platform called OsCommerce, at our website www.vetonlinesupplies.com. Our website gives our customers the ability to purchase veterinary supplies at affordable prices, making an order any time of the day, any day of the week. Our short term objective is to phase-out the Concord Supply line and expand our product line to include CBD Pet Products and have plans for further expansion in fiscal 2017 with new products to enhance pet health. As part of this initiative we recently began selling and shipping our own cannabis product line for pets, in addition to our legacy veterinarian supplies line. The newest of the products are the Pet Drops, and the Pet Treats. CBD pet drops can help with arthritis, compromised immune systems, stress responses, aggression and digestive issues. Veterinarians are also finding CBD hemp can be useful in treating acute ailments like sprains and strains, torn ligaments, bone breaks and even during post-operative care to reduce swelling, pain and stiffness.

The margins are greater with our own brand-name label products as compared to the products sold through Concord. Further, our ability to respond to our customer needs are also greater as compared to reliance on Concord’s ability to fulfill product orders.

The Company’s fiscal year end is December 31.

Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.

Liquidity and Capital Resources

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements for the nine months ended September 30, 2017 and audited financial statements for the year ended December 31, 2016, along with the accompanying notes, as filed with the Securities and Exchange Commission on Form 10-K on April 17, 2017.

At September 30, 2017 we had cash on hand totaling $2,762 (December 31, 2016 - $319), property and equipment of $16,876, and other receivables of $177 for total assets of $19,815 (December 31, 2016 - $496). We had liabilities of $975,252 (December 31, 2016 - $80,352).  The substantive increase to our current liabilities is a direct result of certain financings by way of convertible note payable entered into during the nine months ended September 30, 2017.  In addition, we expanded our board of directors, management and consulting team during the current nine months which resulted in an increase to both our accounts payable and our related party accounts payable.  We have recently commenced an aggressive plan to increase our online sales including a series of newly developed supplements for pets. We expect to be required to secure additional financing to fund future operations. To date, loans when required, have been able to be secured from management of the Company and third-party financing sources, however we cannot provide any assurance that we will be able to raise additional proceeds or secure additional loans in the future to cover our expenses related to maintaining our reporting company status (estimated at $50,000 for fiscal year 2017) and our other operational overhead which shall require a minimum of $300,000. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. If we are unable to accomplish raising adequate capital, then it would be likely that any investment made into the Company would be lost in its entirety.  

Results of Operationsfor the Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019

Results for the three months ended September 30, 2017 compared to the three months ended September 30, 2016

Revenues:

The Company’s revenues were $0$56,554 for the three months ended SeptemberJune 30, 20172020 compared to $0$518,528 for the three months ended SeptemberJune 30, 2016.2019. The decrease is due to the office closing due to COVID-19.

Cost of Sales:

The Company’s cost of salesmaterials was $670$35,647 for the three months ended SeptemberJune 30, 2017,2020, compared to $0$343,871 for the three months ended SeptemberJune 30, 2016.2019. The increasedecrease was due to the purchase of additional materials requiredan increase in unfinished projects due to fulfill customer orders as sales increased.COVID-19.

Operating Expenses:

Operating expenses consisted primarily of consulting fees, professional fees, consulting fees,salaries and wages, office expenses and fees associated with preparing reports and SEC filings relating to operatingbeing a public company. Operating expenses for the three months ended SeptemberJune 30, 2017,2020, and SeptemberJune 30, 2016,2019, were $160,197$4,242,534 and $7,431$251,229, respectively. The increase was primarily attributable to our operating costs is a direct resultan increase in share-based compensation of the increase to consulting fees period over period as the Company has retained additional consultants to help implement expansion of our business plan.  We have also increased our management team with the addition of two new directors.  $4,000,000.

Other Income (Expense):

Other income (expense) for the three months ended SeptemberJune 30, 2017,2020 and September 30, 2016,2019 was $(92,119)$(2,265,746) and $(131)$(9,190), respectively. Other income (expense) consisted of gain or loss on debt forgiveness, gain or losslosses on derivative valuation, and interest expense. The gain or loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable to interest and penalties on outstanding notes payable, the initial interest expense associated with the valuation of derivative instruments at issuance and the accretion of the convertible debentures over their respective terms. The increased expensevariance primarily resulted from the fluctuation of the Company’s stock price which impacted the valuation of the derivative liabilities on the convertible debt and the change in the gain/a loss on debt settlement between periods based on the amountconversion of debt converted and the difference between the value of thePreferred Series A stock issued and the debt extinguished.to common stock.

Net Loss:

Net loss for the three months ended SeptemberJune 30, 20172020 was $252,986$6,487,373 compared with a net loss of $7,562$85,862 for the three months ended SeptemberJune 30, 2016.2019. The increased net loss can be explained by the increaseloss in operating expenses and by the changes in the gain in the fair value of the derivative liabilities andinstruments in the gain on settlement of debt.three months ended June 30, 2020.

Results for the nine months ended SeptemberSix Months Ended June 30, 2017 compared2020 Compared to the nine months ended SeptemberSix Months Ended June 30, 20162019

Revenues:

The Company’s revenues were $2,782$95,488 for the ninesix months ended SeptemberJune 30, 20172020 compared to $972$850,496 for the ninesix months ended SeptemberJune 30, 2016.2019. The decrease is due to the office closing due to COVID-19.

Cost of Sales:

The Company’s cost of salesmaterials was $2,145$57,270 for the ninesix months ended SeptemberJune 30, 2017,2020, compared to $620$650,840 for the ninesix months ended SeptemberJune 30, 2016.2019. The increasedecrease was due to the purchase of additional materials requiredan increase in unfinished projects due to fulfill customer orders as sales increased.COVID-19.

Operating Expenses:

Operating expenses consisted primarily of consulting fees, professional fees, consulting fees,salaries and wages, office expenses and fees associated with preparing reports and SEC filings relating to operatingbeing a public company. Operating expenses for the ninesix months ended SeptemberJune 30, 2017,2020, and SeptemberJune 30, 2016,2019, were $782,479$4,545,025 and $29,968$521,452, respectively. The substantial increase was primarily attributable to our operating costs is a direct resultan increase in share-based compensation of the increase to consulting fees, as the Company has retained additional consultants to help implement expansion of our business plan.  We have also increased our management team with the addition of two new directors in the recent six months.  The Company has also retained both an IR firm and several administrative consultants in the most recently completed nine months.$4,000,000.

Other Income (Expense):

Other income (expense) for the ninesix months ended SeptemberJune 30, 2017,2020 and September 30, 2016,2019 was $(310,886)$(4,116,995) and $(324)$(26,963), respectively. Other income (expense) consisted of gain or loss on debt forgiveness, gain or losslosses on derivative valuation, and interest expense. The gain or loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable to interest and penalties on outstanding notes payable, the initial interest expense associated with the valuation of derivative instruments at issuance and the accretion of the convertible debentures over their respective terms. The increased expensevariance primarily resulted from the fluctuation of the Company’s stock price which impacted the valuation of the derivative liabilities on the convertible debt and the change in the gain/a loss on debt settlement between periods based on the amountconversion of debt converted and the difference between the value of thePreferred Series A stock issued and the debt extinguished.to common stock.

Net Loss:

Net loss for the ninesix months ended SeptemberJune 30, 20172020 was $1,092,723$8,623,762 compared with a net loss of $29,940$348,759 for the ninesix months ended SeptemberJune 30, 2016.2019. The increased net loss can be explained by the increaseloss in operating expenses and by the changes in the gain in the fair value of the derivative instruments in the six months ended June 30, 2020.

Impact of Inflation

We believe that the rate of inflation has had a negligible effect on our operations.

Liquidity and Capital Resources