U.S. 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 ~~June 30, 2020~~March 31, 2021

oo 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 000-55787

BrewBilt Manufacturing Inc.

(Exact name of registrant as specified in its charter)

(BREWBILT LOGO)

Florida				47-0990750
(State or other jurisdiction of incorporation)				(I.R.S. Employer Identification No.)

110 Spring Hill Road #10
Grass Valley, CA 95945
(Address of principal executive offices)

(530) 802-5023
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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~~ xNo o

Yes

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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~~ xNo o

Yes

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	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 7(a)(2)(B) of the Securities Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

~~Yes~~ oNo x

Yes

As of ~~August 13, 2020,~~May 5, 2021, there were ~~1,422,592,951~~4,635,222,744 shares of the registrant’s $0.001 par value common stock issued and outstanding.

CONTENTS

FORWARD LOOKING STATEMENTS

Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements.”. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~2021. For further information, refer to the financial statements and footnotes thereto included in our company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 as filed with the Securities and Exchange Commission on ~~April 14, 2020.~~March 31, 2021.

REPORTED IN UNITED STATES DOLLARS

		Page
Balance Sheets (Unaudited)		4
Statements of Operations and Comprehensive Loss (Unaudited)		5
Statements of Shareholders’ Deficit (Unaudited)		6
Statements of Cash Flows (Unaudited)		7
Notes to Financial Statements		8-20

BREWBILT MANUFACTURING INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,			March 31,			December 31,
	2020			2019			2021			2020
	(unaudited)			(audited)			(Unaudited)			(Audited)
ASSETS
Current Assets
Cash	$	8,777		$	1,444		$	379,857		$	72,764
Accounts receivable		474,066			323,779			910,338			97,701
Earnings in excess of billings		164,201			53,038			238,247			489
Inventory		47,151			47,280			68,478			44,223
Prepaid expenses		2,899			9,467			9,811			8,552
Other current assets		221			156
Total current assets		697,315			435,164			1,606,731			223,729

Property, plant and equipment, net		94,368			116,202
Property, plant, and equipment, net								112,210			109,339
Right-of-use asset		376,524			392,664			236,494			246,968
Security deposit		16,980			4,980			16,980			16,980

TOTAL ASSETS	$	1,185,187		$	949,010		$	1,972,415		$	597,016

LIABILITIES
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable	$	854,035		$	947,655		$	780,169		$	843,882
Accrued interest		157,874			250,592			120,235			106,639
Accrued liabilities		165,840			62,539			227,932			286,997
Billings in excess of revenue		1,780,751			1,511,096			1,530,671			71,280
Current operating lease liabilities								43,707			42,977
Convertible notes payable, net of discount		446,006			829,384			152,333			149,988
Derivative liabilities		2,890,275			2,273,269			1,935,295			2,373,176
Liability for unissued shares		175,825			151,325			150,825			150,825
Promissory notes payable, net of discount		93,180			—			216,716			101,056
Related party liabilities		128,448			84,072			200,836			154,252
Total Current Liabilities		6,692,234			6,109,932			5,358,719			4,281,072

Long term debt		277,730			307,887			283,119			281,357
Operating lease liabilities		376,524			392,664
Non-current operating lease liabilities								192,787			203,991

Total liabilities		7,346,488			6,810,483
Total Liabilities								5,834,625			4,766,420

Commitments and contingencies		—			—			—			—

SHAREHOLDERS’ EQUITY
Stockholders’ Deficit:
Preferred stock, Series A: $0.001 par value; 30,000,000 shares authorized		1,115			400			958			1,120
1,114,823 shares issued and outstanding at June 30, 2020
400,000 shares issued and outstanding at December 31, 2019
957,500 shares issued and outstanding at March 31, 2021
1,120,000 shares issued and outstanding at December 31, 2020
Preferred stock, Series B: $0.001 par value; 1,000 shares authorized		1			1			1			1
1,000 shares issued and outstanding at June 30, 2020
1,000 shares issued and outstanding at December 31, 2019
Common stock, $0.001 par value; 10,000,000,000 authorized		526,591			10,343
526,590,517 shares issued and outstanding at June 30, 2020
10,343,330 shares issued and outstanding at December 31, 2019
1,000 shares issued and outstanding at March 31, 2021
1,000 shares issued and outstanding at December 31, 2020
Common stock, $0.001 par value; 20,000,000,000 authorized								4,351,431			3,534,022
4,351,431,054 shares issued and outstanding at March 31, 2021
3,534,022,455 shares issued and outstanding at December 31, 2020
Additional paid in capital		(7,433,803	)		(15,240,774	)		1,379,451			(748,254	)
Accumulated deficit		744,795			9,368,557
Total Shareholders’ Equity (Deficit)		(6,161,301	)		(5,861,473	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)	$	1,185,187		$	949,010
Retained earnings								(9,594,051	)		(6,956,293	)
Total stockholders’ deficit								(3,862,210	)		(4,169,404	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT							$	1,972,415		$	597,016

The accompanying notes are an integral part of these financial statements

BREWBILT MANUFACTURING INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

	Three months ended						Six months ended						Three months ended
	June 30,						June 30,						March 31,
	2020			2019			2020			2019			2021			2020
Sales	$	56,554		$	518,428		$	95,488		$	850,496		$	13,251		$	38,934
Cost of sales		35,647			343,871			57,270			650,840			7,614			21,623
Gross profit		20,907			174,557			38,218			199,656			5,637			17,311

Operating expenses:
Consulting fees		4,012,500			15,000			4,037,250			30,000			121,608			24,750
G&A expenses		92,056			99,075			174,685			213,315			150,525			82,712
Professional fees		69,350			150			116,801			150			80,702			47,370
Salaries and wages		68,628			137,004			216,289			277,987			51,166			147,660
Total operating expenses		4,242,534			251,229			4,545,025			521,452			404,001			302,492

Loss from operations		(4,221,627	)		(76,672	)		(4,506,807	)		(321,796	)		(398,364	)		(285,181	)

Other income (expense):
Loss on derivative liability valuation		(1,592,416	)		—			(3,303,148	)		—
Debt forgiveness														13,924			—
Gain (loss) on derivative liability valuation														(1,033,712	)		(1,710,732	)
Loss on conversion		(371,090	)		—			(371,090	)		—			(786,315	)		—
Interest expense		(302,240	)		(9,190	)		(442,717	)		(26,963	)		(433,291	)		(140,476	)
Total other expenses		(2,265,746	)		(9,190	)		(4,116,955	)		(26,963	)		(2,239,394	)		(1,851,208	)

Net loss before income taxes		(6,487,373	)		(85,862	)		(8,623,762	)		(348,759	)		(2,637,758	)		(2,136,389	)
Income tax expense		—			—			—			—			—			—
Net loss	$	(6,487,373	)	$	(85,862	)	$	(8,623,762	)	$	(348,759	)	$	(2,637,758	)	$	(2,136,389	)

Per share information
Weighted number of common shares outstanding, basic and diluted		198,040,748			—			110,093,354			—
Net loss per common share	$	(0.03276	)	$	—		$	(0.07833	)	$	—

Weighted number of common shares outstanding, basic, and diluted														3,996,863,319			34,595,672
Net income (loss) per common share													$	(0.0007	)	$	(0.0618	)

The accompanying notes are an integral part of these financial statements

BREWBILT MANUFACTURING INC.

CONDENSED CONSOLIDATED STATEMENT OF ~~SHAREHOLDERS’ EQUITY (DEFICIT)~~STOCKHOLDERS’ DEFICIT

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~

(Unaudited)

	Preferred Stock						Preferred Stock										Additional						Total			Preferred Stock						Preferred Stock										Additional						Total
	Series A						Series B				Common Stock						Paid-In			Accumulated			Shareholders’			Series A						Series B				Common Stock						Paid-In			Retained			Stockholders’
	Shares			Amount			Shares		Amount		Shares			Amount			Capital			Deficit			Equity			Shares			Amount			Shares		Amount		Shares			Amount			Capital			Earnings			Equity (Deficit)
Balance as of December 31, 2019		400,000		$	400			1,000	$	1		10,343,330		$	10,343		$	(15,240,774	)	$	9,368,557		$	(5,861,473	)
Balance at December 31, 2020																											1,120,000		$	1,120			1,000	$	1		3,534,022,455		$	3,534,022		$	(748,254	)	$	(6,956,293	)	$	(4,169,404	)
Conversion of promissory notes to stock																											—			—			—		—		175,060,588			175,061			1,448,275			—			1,623,336
Derivative settlements																											—			—			—		—		—			—			435,301			—			435,301
Preferred stock converted to common stock																											(172,500	)		(172	)		—		—		570,299,494			570,299			216,188			—			786,315
Preferred stock issued for services																											10,000			10			—		—		—			—			99,990			—			100,000
Warrant exercise																											—			—			—		—		72,048,517			72,049			(72,049	)		—			—
Net loss																											—			—			—		—		—			—			—			(2,637,758	)		(2,637,758	)
Balance at March 31, 2021																											957,500		$	958			1,000	$	1		4,351,431,054		$	4,351,431		$	1,379,451		$	(9,594,051	)	$	(3,862,210	)

																										Preferred Stock						Preferred Stock										Additional						Total
																										Series A						Series B				Common Stock						Paid-In			Retained			Stockholders’
																										Shares			Amount			Shares		Amount		Shares			Amount			Capital			Earnings			Equity (Deficit)
Balance at December 31, 2019																											400,000		$	400			1,000	$	—		10,343,330		$	10,343		$	(15,240,774	)	$	9,368,557		$	(5,861,474	)
Conversion of promissory notes to stock		—			—			—		—		32,260,676			32,261			366,617			—			398,878			—			—			—		—		32,260,676			32,261			366,617			—			398,878
Derivative settlements		—			—			—		—		—			—			(50,586	)		—			(50,586	)		—			—			—		—		—			—			(50,586	)		—			(50,586	)
Cancellation of stock issued for services		—			—			—		—		(8,008,334	)		(8,008	)		(42,257	)		—			(50,265	)		—			—			—		—		(8,008,334	)		(8,008	)		(42,257	)		—			(50,265	)
Preferred stock issued per agreement		500,000			500			—		—		—			—			—			—			500			500,000			500			—		—		—			—			—			—			500
Net loss		—			—			—		—		—			—			—			(2,136,389	)		(2,136,389	)		—			—			—		—		—			—			—			(2,136,389	)		(2,136,389	)
Balance as of March 31, 2020		900,000		$	900			1,000	$	1		34,595,672		$	34,596		$	(14,967,000	)	$	7,232,168		$	(7,699,335	)

Conversion of promissory notes to stock		—			—			—		—		259,074,233			259,074			4,421,942			—			4,681,016
Derivative settlements		—			—			—		—		—			—			(1,026,700	)		—			(1,026,700	)
Preferred stock issued for services		400,000			400			—		—		—			—			3,999,600			—			4,000,000
Preferred stock converted to common stock		(185,177	)		(185	)		—		—		232,920,612			232,921			138,355			—			371,091
Net loss		—			—			—		—		—			—			—			(6,487,373	)		(6,487,373	)
Balance as of June 30, 2020		1,114,823		$	1,115			1,000	$	1		526,590,517		$	526,591		$	(7,433,803	)	$	744,795		$	(6,161,301	)

Balance as of December 31, 2018		—		$	—			—	$	—		—		$	—		$	(303,375	)	$	(722,748	)	$	(1,026,123	)
Capital distributions		—			—			—		—		—			—			(22,296	)		—			(22,296	)
Net loss		—			—			—		—		—			—			—			(262,897	)		(262,897	)
Balance as of March 31, 2019		—		$	—			—	$	—		—		$	—		$	(325,671	)	$	(985,645	)	$	(1,311,316	)

Capital distributions		—			—			—		—		—			—			(26,879	)		—			(26,879	)
Net loss		—			—			—		—		—			—			—			(85,862	)		(85,862	)
Balance as of June 30, 2019		—		$	—			—	$	—		—		$	—		$	(352,550	)	$	(1,071,507	)	$	(1,424,057	)
Balance at March 31, 2020																											900,000		$	900			1,000	$	—		34,595,672		$	34,596		$	(14,967,000	)	$	7,232,168		$	(7,699,336	)

The accompanying notes are an integral part of these financial statements

BREWBILT MANUFACTURING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended						Three months ended
	June 30,						March 31,
	2020			2019			2021			2020
Cash flows from operating activities:
Net loss	$	(8,623,762	)	$	(348,759	)	$	(2,637,758	)	$	(2,136,389	)
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of convertible debt discount		209,094			—			392,362			58,224
Change in derivative liability		3,303,148			—			1,033,712			1,710,732
Common stock issued for services								—			(25,000	)
Debt forgiveness								(13,924	)		—
Depreciation and amortization of fixed assets								8,950			—
Loss on conversion		371,090			—			786,315			—
Common stock issued for services		(25,000	)		—
Preferred stock issued for services		4,000,000			—			100,000			—
Liability for unissued shares due to agreements		25,000			—			—			25,000
Decrease (increase) in operating assets
Accounts receivable		(150,287	)		(79,059	)		(812,637	)		(149,674	)
Deposits		(12,000	)		—			—			(12,000	)
Earnings in excess of billings		(111,163	)		94,699			(237,758	)		(90,250	)
Inventory		129			—			(24,255	)		—
Prepaid expenses		6,568			(5,705	)		(1,259	)		9,098
Other assets		(65	)		1,567			—			(65	)
Increase (decrease) in operating liabilities
Accounts payable		(74,883	)		6,665			(63,713	)		(38,775	)
Accrued interest		226,465			4,522			45,085			78,849
Accrued liabilities		103,301			4,815			90,909			51,721
Earnings in excess of revenues		269,655			416,727
Billings in excess of revenues								1,459,391			316,347
Long term debt		(30,157	)		(85,978	)		1,762			(33,710	)
Net cash (used in) provided by operating activities		(512,867	)		9,494			127,182			(235,892	)

Cash flows from investing activities
Property, plant and equipment, additions								(11,821	)		—
Property, plant and equipment, reductions		21,834			24,858			—			12,403
Net cash (used in) provided by investing activities		21,834			24,858			(11,821	)		12,403

Cash flows from financing activities:
Contributed capital		—			(49,175	)
Proceeds from convertible debt		360,900			—			185,000			185,000
Proceeds from promissory notes		93,090			—			109,000			—
Related party liabilities		44,376			—			(102,268	)		37,665
Net cash (used in) provided for financing activities		498,366			(49,175	)		191,732			222,665

Net increase (decrease) in cash		7,333			(14,823	)		307,093			(824	)

Cash, beginning of period		1,444			43,285			72,764			1,444
Cash, end of period	$	8,777		$	28,462		$	379,857		$	620

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	—		$	—		$	—		$	—
Cash paid for interest	$	—		$	—		$	11,072		$	—

Schedule of non-cash investing & financing activities
Stock issued for debt conversion							$	1,623,336		$	398,878
Derivative settlements							$	435,301		$	(50,586	)
Discount from derivative							$	311,577		$	185,000
Preferred stock converted to common stock							$	786,315		$	—
Preferred stock issued for services							$	100,000		$	500
Cashless warrant exercise							$	72,049		$	—
Cancellation of common stock issued for services							$	—		$	(50,265	)

The accompanying notes are an integral part of these financial statements

BREWBILT MANUFACTURING INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

~~June 30, 2020~~March 31, 2021

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of Business

Located in Grass Valley, CA, BrewBilt is one of the only California companies that custom designs, hand crafts, and integrates processing, fermentation and distillation processing systems for the craft beer, cannabis and hemp industries using “Best in Class” American made components integrated with stainless steel processing vessels using only American made steel. Founded in 2014, the company began in a backyard shop by Jeff Lewis with a vision of creating a profitable company in “Rural America” by hiring excellent personnel, designing and fabricating products to exceed customer’s expectations and compensating craftsmen with living wages and profit sharing to financially sustain their families within the community. Mr. Lewis has 15+ years of experience as a craft beer brewer, a custom tank/vessel designer, fabrication and integration expert and business owner who initially founded Portland Kettle Works, a nationally recognized manufacturer of craft beer brewing equipment located in the Northwest. The Company has grown from 3 employees in 2015 to 7 in 2021.

BrewBilt has been built by having strong relationships with local suppliers of raw materials, equipment and services in California, an aggressive referral network of satisfied customers nationwide, and an Advisory Board consisting of successful business leaders that provide valuable product feedback and business expertise to management. The craft brewing & spirits industries continue to grow worldwide. California is where craft brewing began and now has over 900 operating breweries – being centrally located in this booming market was a large draw for BrewBilt to locate its manufacturing facility in the Sierra foothills.

All BrewBilt products are designed and fabricated as “food grade” quality which enables the company to build vessels for food & beverage processing , the company is now building systems that are pharmaceutical grade for clients involved in distillation for the cannabis and hemp industries, thus making the revenue potential much greater. BrewBilt buys materials and components mostly from California suppliers which enables them to closely monitor quality, while the company’s revenues are generated from sales to customers throughout the country. The company is aggressively pursuing international orders and has held meetings with the Center for International Trade Development and U.S. Commercial Service to develop international opportunities. Presently, a great deal of sales interest in coming from Mexico, Japan, Europe, and Australia.

BrewBilt competes against a number of companies, most of which are selling mass produced equipment from China made from less costly inferior quality Chinese steel which often is neither food nor pharmaceutical grade quality. While this broader market is ~~very~~extremely competitive, there continues to be little competition and strong market demand for higher quality, custom designed, hand crafted and integrated systems that BrewBilt produces.

In July of 2016, BrewBilt moved from the small facility in Nevada City, CA to lease an eight thousand (8,000) square foot manufacturing facility in Grass Valley, CA. This facility was purchased by BrewBilt in January 2018 and upgraded with substantial tenant improvements. BrewBilt is prepared to expand again by leasing an additional seventy-six hundred (7,600) square feet in the same facility. BrewBilt obtains the majority of its leads through customer referrals and from online marketplaces. The company’s website is being expanded for online sales to include online educational/marketing videos that feature the company and its expanded integrated product line for the cannabis and hemp industries. BrewBilt has also created distribution sales agreements with individuals and companies to represent BrewBilt in both the domestic and international markets.

The former company, Vet Online Supply Inc, a Florida corporation, was incorporated on May 31, 2014. Vet Online Supply Inc. manufactured and distributed wholistic CBD based pet products. 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.

~~On January 21, 2020, the Company filed Articles of Amendment to change its name to “BrewBilt Manufacturing Inc.~~

The Company’s common stock will continue to trade on the OTCQB Market under the new Symbol “BBRW,” and the CUSIP number for the Company’s common stock is now 10756L108. Outstanding stock certificates for shares of the Company are not affected by the name change, and they continue to be valid and need not be exchanged.

Financial Statement Presentation

The audited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Fiscal year end

The Company has selected December 31 as its fiscal year end.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.

Cash Equivalents

The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.

COVID-19

The Company began seeing the impact of the COVID-19 pandemic on its business in early March 2020. The direct financial impact of the pandemic has primarily shown in significantly reduced production from the on-premises channel and higher labor and safety-related costs at the Company’s manufacturing facility. In addition to these direct financial impacts, COVID-19 related safety measures resulted in a reduction of manufacturing productivity. The Company will continue to assess and manage this situation and will provide a further update in each quarterly earnings release, to the extent that the effects of the COVID-19 pandemic are then known more clearly.

Revenue Recognition and Related Allowances

The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of control of its products. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. If the conditions for revenue recognition are not met, the Company defers the revenue and related cost of sales until all conditions are met. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company has deferred ~~$1,780,751~~$1,530,671 and ~~$1,511,096,~~$71,280, respectively, in revenue, and ~~$164,201~~$238,247 and ~~$53,038~~$489 in cost of sales, respectively, related to customer orders in progress. These amounts are recorded as billings in excess of revenues and earnings in excess of billings in the accompanying balance sheets.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at the amount that management expects to collect from outstanding balances. Bad debts and allowances are provided based on historical experience and management’s evaluation of outstanding accounts receivable. Management evaluates past due or delinquency of accounts receivable based on the open invoices aged on due date basis. The allowance for doubtful accounts at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 is $0.

Inventories

Inventories consist of raw materials, work in process and finished goods. Raw materials, which principally consist of raw stainless steel, raw stainless tubing, motors, pumps, and fittings, are stated at the lower of cost, determined on the first-in, first-out basis, or net realizable value. During the year ended December 31, 2021, the Company wrote off $17,246 in obsolete inventory to the statement of operations. As of March 31, 2021 and December 31, 2020, the Company has inventory of $68,478 and $44,223, respectively.

In addition, the Company is a manufacturer of premium CBD infused holistic pet products and as such will maintain inventory on site. The company directly drop ships to customers when ordered. The Company has wholesale distributors that purchase products in bulk inventory.

Goodwill

The excess of the cost over the fair value of net assets of acquired in the Merger is recorded as goodwill. Goodwill is not subject to amortization, but is reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. An impairment charge would be recorded to the extent the carrying value of goodwill exceeds its estimated fair value. The testing of goodwill under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations. ~~At December 31, 2019, the Company reviewed the goodwill recorded in the Merger and determined that an impairment expense of $2,289,884 was required.~~

Warranty

The Company is a manufacturer of products which are shipped to our customers directly from the Company. For products that are made from raw materials, the Company offers a 6-year limited warranty. The parts provided by outside vendors as finished goods that are added to a system produced by the Company as components, have a manufacturers’ warranty that is passed on to the end user of the complete system. To date, BrewBilt has spent less than $5,000 over the past 5 years for repairs (under warranty) on products they have built, with most of the costs going to cover travel and lodging expenses. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company has recorded a liability of $5,000 and $5,000, respectively, for warranties, which is included in accrued liabilities in the accompanying balance sheet.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the fiscal year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

These levels are:

Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

Financial assets and liabilities measured at fair value on a recurring basis:

	Input	June 30, 2020		December 31, 2019		Input	March 31, 2021		December 31, 2020
	Level	Fair Value		Fair Value		Level	Fair Value		Fair Value
Derivative Liability	3	$	2,890,275	$	2,273,269	3	$	1,935,295	$	2,373,176
Total Financial Liabilities		$	2,890,275	$	2,273,269		$	1,935,295	$	2,373,176

In management’s opinion, the fair value of convertible 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, 2020~~of March 31, 2021 and December 31, ~~2019,~~2020, the balances reported for cash, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities, approximate the fair value because of their short maturities.

Income Taxes

The Company records deferred taxes in accordance with FASB ASC No. 740, 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 is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

As of the date of this filing, the Company is not current in filing their tax returns. The last return filed by the Company was December 31, ~~2018,~~2019, and the Company has not accrued any potential penalties or interest from that period forward. The Company will need to file returns for the year ending December 31, 2020, which is still open for examination.

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.

Recent Accounting Pronouncements

~~In May 2014,~~Although there were new accounting pronouncements issued or proposed by 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~~during 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, timingthree months ended March 31, 2021 and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the standard on January 1, 2018, using a modified retrospective approach, with the cumulative effect of initially applying the standard recognized in retained earnings atthrough the date of ~~adoption.~~filing of this report, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its financial position or results of operations.

~~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 ~~2020.~~2021.

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 43 - 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.~~

1211

As of March 31, 2021 and December 31, 2020, prepaid expenses consisted of the following:

March 31, December 31,
2021 2020
Prepaid insurance expenses $ 4,950 $ 3,691
Prepaid rent expense 4,861 4,861
$ 9,811 $ 8,552
NOTE 54 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

June 30, December 31, March 31, December 31,
2020 2019 2021 2020
Computer Equipment $ 18,313 $ 18,313 $ 23,876 $ 23,876
Leasehold Improvements 48,549 48,549 59,121 59,121
Machinery 250,762 250,762 257,088 250,762
Software 23,183 17,688
Vehicles 6,717 6,717 6,717 6,717
Total 324,341 324,341
369,985 358,164
Less accumulated amortization (3,395 ) (702 )
Less accumulated depreciation (229,973 ) (208,139 ) (254,380 ) (248,123 )
$ 112,210 $ 109,339
Net $ 94,368 $ 116,202

NOTE 65 – LEASES

The Company adopted the new lease guidance effective January 1, 2019 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 Leases
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~~less than 4 years.
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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 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.
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On January 1, 2020, the Company terminated the lease agreement dated January 1, 2018, and entered into a new office lease for the same space located in the Wolf Creek Industrial Building at 110 Spring Hill Dr. #10 Grass Valley, CA 95945. The lease has a term of 5 years, from January 1, 2020 through December 31, 2025, with a monthly rent of $4,861.
ROU assets and lease liabilities related to our operating lease is as follows:

June 30, December 31,
2020 2019
Right-of-use assets $ 376,524 $ 392,664
Current lease liabilities — —
Non-current lease liabilities $ 376,524 $ 392,664
March 31, December 31,
2021 2020
Right-of-use assets $ 236,494 $ 246,968
Current operating lease liabilities 43,707 42,977
Non-current operating lease liabilities 192,787 203,991
The following is a schedule, by years, of future minimum lease payments required under the operating lease:
Years Ending
December 31, Operating Lease
2021 $ 43,751
2022 58,334
2023 58,334
2024 58,334
2025 58,335
Total 277,088
Less imputed interest 40,594
Total liability $ 236,494

NOTE 76 – ACCURED LIABILITIES

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, accrued liabilities were comprised of the following:

June 30, December 31, March 31, December 31,
2020 2019 2021 2020
Accrued liabilities
Accrued wages $ 100,818 $ 5,784 $ 31,294 $ 123,663
Credit card 18,936 16,659 1,879 19,893
Payroll liabilities (103 ) (644 )
Reimbursable expenses 5,212 —
Customer deposits 103,550 103,550
Sales tax payable 35,977 35,740 86,209 34,891
Warranty 5,000 5,000 5,000 5,000
Total accrued expenses $ 165,840 $ 62,539 $ 227,932 $ 286,997
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NOTE 87 – 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 can recognize the revenue. Earnings in excess of billings is related to the cost of sales associated with the customer products that are incomplete.
Changes in unearned revenue for the periods ended ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:

June 30, December 31, March 31, December 31,
2020 2019 2021 2020
Unearned revenue, beginning of the period $ 1,511,096 $ 1,905,346 $ 71,280 $ 1,511,096
Billings in excess of revenue during the period 351,310 536,420 1,459,391 71,280
Recognition of unearned revenue in prior periods (81,655 ) (930,670 ) — (1,511,096 )
Unearned revenue, end of the period $ 1,780,751 $ 1,511,096 $ 1,530,671 $ 71,280

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company has recorded ~~$164,201~~$238,247 and ~~$53,038,~~$489, respectively in earnings in excess of billings for the cost of sales related to customer orders in progress.
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NOTE 98 – CONVERTIBLE NOTES PAYABLE

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, notes payable were comprised of the following:

Original Original Due Interest Conversion June 30, December 31,
Note Amount Note Date Date Rate Rate 2020 2019
APG Capital #2 31,500 6/25/2018 6/25/2019 12% Variable — 31,500
Auctus Fund #2 84,000 1/10/2018 10/10/2018 24% Variable — 31,285
Auctus Fund #3 175,000 2/6/2018 11/6/2018 24% Variable — 175,000
Auctus Fund #4 90,000 3/6/2018 12/6/2018 24% Variable 73,418 90,000
Auctus Fund #5 100,000 6/14/2018 3/14/2019 24% Variable 100,000 100,000
Auctus Fund #6 75,000 8/13/2018 5/13/2019 12% Variable 75,000 75,000
Auctus Fund #7 25,000 10/11/2018 7/11/2019 12% Variable 25,000 25,000
Auctus Fund #8 25,750 12/20/2018 9/20/2019 12% Variable 25,750 25,750
Auctus Fund #9 57,000 4/12/2019 1/12/2020 12% Variable 57,000 57,000
Auctus Fund #10 31,000 7/22/2020 7/22/2020 12% Variable 31,000 31,000
CBP #3 30,000 5/1/2020 5/1/2021 10% Variable 30,000 —
EMA Financial #2 50,000 12/15/2017 12/15/2018 12% Variable — 8,474
EMA Financial #3 100,000 3/5/2018 3/5/2019 24% Variable — 73,305
EMA Financial #4 25,000 10/10/2018 7/10/2019 24% Variable — 25,000
EMA Financial #5 80,500 1/30/2020 10/31/2020 10% Variable 80,500 —
Emerging Corp Cap #1 83,333 2/12/2018 2/11/2019 22% Variable 34,857 74,933
Emerging Corp Cap #2 110,000 10/31/2018 10/31/2019 12% Variable 110,000 110,000
Power Up Lending #9 68,000 1/2/2020 1/2/2021 10% Variable 68,000 —
Power Up Lending #10 53,000 2/13/2020 2/13/2021 10% Variable 53,000 —
Power Up Lending #11 73,000 4/6/2020 4/6/321 10% Variable 73,000 —
Power Up Lending #12 53,000 5/4/2020 5/4/2021 10% Variable 53,000 —
Power Up Lending #13 63,000 6/3/2020 6/3/2021 10% Variable 63,000 —
Tri-Bridge 15,000 5/26/2020 5/26/2021 10% Variable 15,000 —
967,525 933,247
Debt discount (504,661 ) (100,137 )
Financing costs/Original issue discount (16,858 ) (3,726 )
Notes payable, net of discount $ 446,006 $ 829,384
Original Original Due Interest Conversion March 31, December 31,
Note Amount Note Date Date Rate Rate 2021 2020
Auctus Fund #11 113,000 8/19/2020 8/19/2021 12% Variable 113,000 113,000
CBP #3 30,000 5/1/2020 5/1/2021 10% Variable 9,576 30,000
CBP #4 30,000 7/23/2020 7/23/2021 10% Variable 30,000 30,000
EMA Financial #6 80,500 8/17/2020 5/17/2021 12% Variable — 80,500
EMA Financial #7 50,000 10/21/2020 7/21/2021 12% Variable 50,000 50,000
Emerging Corp Cap #1 83,333 2/12/2018 2/11/2019 22% Variable — 34,857
Emerging Corp Cap #2 110,000 10/31/2018 10/31/2019 12% Variable 110,000 110,000
GPL Ventures #1 25,000 10/14/2020 10/14/2021 10% Variable 25,000 25,000
GPL Ventures #2 25,000 3/10/2021 3/10/2022 10% Variable 25,000 —
Mammoth Corp 33,000 11/19/2020 8/19/2021 0% Variable 33,000 33,000
Optempus #1 25,000 7/2/2020 7/2/2021 10% Variable 25,000 25,000
Optempus #2 25,000 7/7/2020 7/2/2021 10% Variable 25,000 25,000
Optempus #3 15,000 11/24/2020 11/24/2021 10% Variable 15,000 15,000
Optempus #4 40,000 12/29/2020 12/29/2021 10% Variable 40,000 40,000
Power Up Lending #14 43,000 7/30/2020 7/30/2021 10% Variable — 43,000
Power Up Lending #15 53,000 9/21/2020 9/21/2021 10% Variable — 53,000
Power Up Lending #16 43,000 10/14/2020 10/14/2021 10% Variable 43,000 43,000
Power Up Lending #17 43,500 12/7/2020 12/7/2021 10% Variable 43,500 43,500
Power Up Lending #18 43,500 1/14/2021 1/14/2022 10% Variable 43,500 —
Power Up Lending #19 73,500 2/10/2021 2/10/2022 10% Variable 73,500 —
Tri-Bridge #1 15,000 5/26/2020 5/26/2021 10% Variable 15,000 15,000
Tri-Bridge #2 25,000 7/24/2020 7/24/2021 10% Variable 10,000 10,000
Tri-Bridge #4 25,000 2/24/2021 8/24/2021 10% Variable 25,000 —
$ 754,076 $ 818,857
Debt discount (556,156 ) (597,670 )
Financing costs/Original issue discount (45,587 ) (71,199 )
Notes payable, net of discount $ 152,333 $ 149,988
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During the ~~six~~three months ending ~~June 30, 2020,~~March 31, 2021, the Company received proceeds from new convertible notes of ~~$360,900, and reclassified accounts payable of $44,000 into convertible notes payable.~~$185,000. The Company recorded no payments on their convertible notes ~~default penalties of $79,920,~~ and conversions of ~~$481,142~~$256,781 of convertible note principal. The Company recorded loan fees on new convertible notes of ~~$30,600,~~$7,000, which increased the debt discounts recorded on the convertible notes during the ~~six~~three months ending ~~June 30, 2020.~~March 31, 2021. 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~~$385,702 on their convertible note debt discounts and loan fees. As of ~~June 30, 2020,~~March 31, 2021, the convertible notes payable are convertible into ~~356,557,799 Convert to stock split~~372,720,010 shares of the Company’s common stock.

During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, the Company recorded interest expense of ~~$109,845~~$26,016 on its convertible notes payable. During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, the Company recorded conversions of ~~$209,408~~$16,185 of ~~convertible~~ note interest and ~~$29,775~~$2,500 in conversion fees. As of ~~June 30, 2020,~~March 31, 2021, the accrued interest balance was ~~$141,066.~~$79,762.

As of ~~June 30, 2020,~~March 31, 2021, we have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities.
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NOTE 9 – PROMISSORY NOTES PAYABLE
On June 19, 2020, the Company received funding pursuant to a promissory note. for $108,000 of which $93,090 was received in cash and $14,910 was recorded as transaction fees. The note bears interest of 12% (increases to 24% per annum upon an event of default) and matures on June 19, 2021. As of March 31, 2021, the company has amortized $11,642 of the financing costs to the statement of operations. As of March 31, 2021, the note has a principal balance of $108,000 and accrued interest of $10,119.
On January 5, 2021, the Company received funding pursuant to a promissory note. for $50,000 of which $39,000 was received in cash and $11,000 was recorded as transaction fees. The note bears interest of 12% (increases to 16% per annum upon an event of default) and matures on January 5, 2022. As of March 31, 2021, the company has amortized $2,562 of the financing costs to the statement of operations. As of March 31, 2021, the note has a principal balance of $50,000 and accrued interest of $1,397.
On March 17, 2021, the Company received funding pursuant to a promissory note. for $80,500 of which $70,000 was received in cash and $10,500 was recorded as transaction fees. The note bears interest of 12% (increases to 16% per annum upon an event of default) and matures on March 17, 2022. As of March 31, 2021, the company has amortized $422 of the financing costs to the statement of operations. As of March 31, 2021, the note has a principal balance of $80,500 and accrued interest of $371.
NOTE 10 – DERIVATIVE ~~LIABILITIES~~LIABIITIES
~~The following table represents the Company’s derivative liability activity for the embedded conversion features for the period ending June 30, 2020 and December 31, 2019:~~
June 30, December 31,
2020 2019
Balance, beginning of period $ 2,273,269 $ 15,347,154
Initial recognition of derivative liability 2,731,152 —
Conversion of derivative instruments to Common Stock (3,282,202 ) (5,077 )
Mark-to-Market adjustment to fair value 1,168,056 (13,068,808 )
Balance, end of period $ 2,890,275 $ 2,273,269
During the period ended June 30, 2020 and December 31, 2019, the Company recorded derivative liabilities for embedded conversion features related to convertible notes payable of $2,731,152 and $0, respectively.

During the ~~period~~three months ended ~~June 30, 2020 and December~~March 31, ~~2019, in conjunction with convertible notes payable accrued interest being converted into common stock of~~2021, the Company ~~derivative liabilities were reduced by $3,282,202 and $5,077, respectively.~~
~~For~~valued 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~~embedded conversion feature of 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 $13,068,808, respectively.~~
warrants. 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~~
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The following table represents the ~~six~~Company’s derivative liability activity for the embedded conversion features for the three months ended June 30, 2020, the company used the following assumptions in their Black-Scholes model: (1) risk free interest rate .08% - .37%, (2) term of 0.12 years – 4.06 years, (3) expected stock volatility of 280.75% - 1,563.40%, (4) expected dividend rate of 0%, (5) common stock price of $0.001 - $0.03, and (6) exercise price of $0.0008 - $0.03.March 31, 2021:
Notes Warrants Total
Balance, beginning of period $ 2,311,296 $ 61,880 $ 2,373,176
Initial recognition of derivative liability 1,233,308 126,577 1,359,885
Derivative settlements (1,437,337 ) (345,833 ) (1,783,170 )
Loss (gain) on derivative liability valuation (551,954 ) 537,358 (14,596 )
Balance, end of period $ 1,555,313 $ 379,982 $ 1,935,295
Convertible Notes

~~These instruments~~The fair value at the commitment date for the convertible notes and warrants and the revaluation dates for the Company’s derivative liabilities were ~~not~~based upon the following management assumptions as of March 31, 2021:
Valuation date
Expected dividends 0%
Expected volatility 187.64% - 341.60%
Expected term .12 - 1 year
Risk free interest .01% - .18%
Warrants
We account for common stock purchase warrants as derivative liabilities and debt issuance costs on the balance sheet at fair value, and changes in fair value during the periods presented in the statement of operations, which is revalued at each balance sheet date subsequent to the initial issuance of the warrant.
On June 19, 2020, the Company executed a Common Stock Purchase Warrant for 5,400,000 shares. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.02 per share and expire on June 19, 2025.
On June 19, 2020, the Company executed a Common Stock Purchase Warrant for 5,400,000 shares. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.02 per share and expire on June 19, 2025.
On July 23, 2020, the Company executed a Common Stock Purchase Warrant for 1,153,846 shares. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.026 per share and expire on July 23, 2025.
On August 19, 2020, the Company executed a Common Stock Purchase Warrant for 5,650,000 shares. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.02 per share and expire on August 19, 2025.
On August 19, 2020, the Company executed a Common Stock Purchase Warrant for 5,650,000 shares. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.02 per share and expire on August 19, 2025.
On January 5, 2021, the Company executed a Common Stock Purchase Warrant for 25,000,000 shares. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.002 per share and expire on January 5, 2026.
On January 5, 2021, the Company executed a Common Stock Purchase Warrant for 25,000,000 shares. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.002 per share and expire on January 5, 2026.
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During the three months ended March 31, 2021, warrant holders exercised the warrants and the Company issued 72,048,517 shares of common stock through a cashless exercise of the warrants in accordance with the ~~intent of effectively hedging any future cash flow,~~conversion terms.
The Company evaluated all outstanding warrants to determine whether these instruments may be tainted. All warrants outstanding were considered tainted.
The 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~~at the ~~fair value will be recognized in earnings until such time as~~valuation dates were based upon the ~~instruments are exercised, converted or expire.~~ following management assumptions:
Valuation date
Expected dividends 0%
Expected volatility 718.72% - 920.43%
Expected term 4.22 - 5 years
Risk free interest .27% - .64%

NOTE 11 – RELATED PARTY TRANSACTIONS

Mr. Jef Lewis, Chief Executive Officer, Chairman of the Board, President, Secretary, and Treasurer

On November 22, 2019, the Company appointed Jeffrey Lewis as the new Chief Executive Officer, Chairman of the Board, Corporate President, Secretary, and Treasurer of the Company. The Company and Mr. Lewis entered into an Employee Agreement that included the issuance of 1,000 Preferred Series B Control Shares, and an annual salary of $200,000. 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. During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, the Company accrued wages of ~~$100,000, accrued~~$50,000, interest of ~~$1,500~~$1,445 and made payments of ~~$21,260.~~$74,344. As of March 31, 2021, the Company owed Mr. Lewis $68,025 in accrued wages and $6,401 in accrued interest.

~~Pursuant to the Merger Agreement, Mr. Lewis~~The Company is ~~to receive 500,000 shares of Preferred Series A shares, valued at $5,000,000.~~periodically advanced noninterest bearing operating funds from related parties. The ~~shares~~advances are ~~convertible pursuant the conversion rights as specified in the Articles of Incorporation~~due on demand and ~~Certificate of Designation for the Company.~~unsecured. As of March 31, 2021 and December 31, 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. During the six months ended June 30, 2020, the Company ~~issued 500,000 shares of Preferred Series A to~~owed Mr. Lewis $743 and ~~$500 was reclassed from liabilities~~$743, respectively for ~~unissued shares~~advances to ~~equity.~~the Company.
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Mr. Samuel Berry, Director

On November 22, 2019, 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. During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, the Company accrued ~~$25,000~~$50,000 in consulting fees and made $5,000 in payments in connection to his agreement. As of March 31, 2021, the Company owed Mr. Berry $125,667 in fees.

~~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~~March 31, 2021 and December 31, ~~2019,~~2020, long term debt was comprised of the following:

June 30, December 31, March 31, December 31,
2020 2019 2021 2020
Long term debt
Equipment lease $ — $ 1,952
Equipment loan 115,614 115,614 115,614 115,614
Line of credit 100,528 96,664 105,917 104,155
Other loans 61,588 93,657 61,588 61,588
Total long term debt $ 277,730 $ 307,887 $ 283,119 $ 281,357
Paycheck Protection Program Loan

On May 11, 2020, the Company was granted a loan (the “Loan”) from BSD Capital, LLC dba Lendistry, in the amount of $61,558, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The Loan, which was in the 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.
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NOTE 13 – PREFERRED STOCK

On March 28, 2017, the Company filed an amendment to its articles of incorporation 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.

On July 1, 2019, the Company filed a Certificate of Amendment to increase the number of authorized Series A Preferred Stock to 30,000,000, with a par 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 common stock on the date of conversion.  The Series 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 taking any corporate action.
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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 December 31, 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 March 1, 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.
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 which are convertible pursuant the conversion rights as specified in the Articles of Incorporation and certificate of designation for the Company.

On October 15, 2020, the Company entered into an IP Purchase and License Agreement with Maguire & Associates, LLC in the amount of $5,000,000. The Company issued 500,000 Preferred Series A shares at a price of $10.00 per share which are convertible pursuant the conversion rights as specified in the Articles of Incorporation and certificate of designation for the Company.
On November 20, 2020, Mr. Lewis converted 70,000,000 common shares at a price of $.0018 per share into 54,000 Preferred Series A Shares at a price of $10 per share. The conversion resulted in a loss of $414,000 which was recorded to the statement of operations.
During the ~~six months~~year ended ~~June 30,~~December 31, 2020, ~~185,177~~734,000 shares of Series A Preferred stock were converted to ~~232,920,612~~2,416,667,054 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of ~~$371,090,~~$1,572,272 which was recorded to the statement of operations.

On January 1, 2021, the Company issued 10,000 shares of Series A Preferred stock to Bennett Buchanan pursuant to his Consulting Agreement.
During the ~~six~~three months ended ~~June 30, 2020, 500,000~~March 31, 2021, 172,500 shares of ~~Preferred~~ Series A ~~Shares~~Preferred stock were ~~issued pursuant~~converted to 570,299,494 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $786,315 which was recorded to the ~~Merger Agreement, and a $500 liability for unissued shares was reclassed to equity.~~statement of operations.

As of ~~June 30, 2020,~~March 31, 2021, 30,000,000 Series A Preferred shares and 1,000 Series B Preferred shares were authorized, of which ~~1,114,823~~957,500 Series A shares were issued and outstanding, and 1,000 Series B shares were issued and outstanding.
NOTE 14 – COMMON STOCK

On April 22, 2019, the Company approved the authorization of a 1 for 3,000 reverse stock split of the Company’s outstanding shares of common stock. The Company’s financial statements have been retroactively adjusted for this stock split for all periods presented.

During the year ended December 31, 2019, the holder of a convertible note converted $1,148 of accrued interest and $500 in conversion fees into 400,000 shares of common stock. The common stock was valued at $5,077 based on the market price of the Company’s stock on the date of conversion.

On March ~~25, 2020, 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 $0.001.~~
~~During the six months ended June 30,~~17, 2020, the Company’s former President cancelled 8,008,334 shares of common stock issued to settle debt of ~~$25,265~~$25,342 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.~~$25,342. On December 31, 2020, Mr. Rushford agreed to forgive the debt and $50,342 was recorded to additional paid in capital.
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On March 25, 2020, 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 $0.001.
On November 20, 2020, Mr. Lewis converted 70,000,000 common shares at a price of $.0018 per share into 54,000 Preferred Series A Shares at a price of $10 per share. The conversion resulted in a loss of $414,000 which was recorded to the statement of operations.
On December 4, 2020, the Company filed a Certificate of Amendment to increase the number of authorized common shares from 10,000,000,000 to 20,000,000,000 with a par value of $0.001.

During the ~~six months~~year ended ~~June 30,~~December 31, 2020, ~~185,177~~734,000 shares of Series A Preferred stock were converted to ~~232,920,612~~2,416,667,054 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of ~~$371,090,~~$1,572,272 which was recorded to the statement of operations.

During the ~~six months~~year ended ~~June 30,~~December 31, 2020, the holders of a convertible notes converted ~~$481,142~~$1,388,809 of principal, ~~$209,488~~$351,376 of accrued interest and ~~$29,775~~$39,275 in conversion fees into ~~291,334,909~~1,023,817,685 shares of common stock. The common stock was valued at ~~$3,282,202~~$8,141,166 based on the market price of the Company’s stock on the date of conversion.
During the three months ended March 31, 2021, warrant holders exercised the warrants and the Company issued 72,048,517 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.
During the three months ended March 31, 2021, 172,500 shares of Series A Preferred stock were converted to 570,299,494 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $786,315 which was recorded to the statement of operations.
During the three months ended March 31, 2021, the holders of a convertible notes converted $256,781 of principal, $16,185 of accrued interest and $2,500 in conversion fees into 175,060,588 shares of common stock. The common stock was valued at $1,623,336 based on the market price of the Company’s stock on the date of conversion.

As of ~~June 30, 2020, 10,000,000,000~~March 31, 2021, 20,000,000,000 were authorized, of which ~~526,590,517~~4,351,431,054 shares are issued and outstanding.

~~Warrants~~
We account for common stock purchase warrants as derivative liabilities and debt issuance costs on the balance sheet at fair value, and changes in fair value during the periods presented in the statement of operations, which is revalued at each balance sheet date subsequent to the initial issuance of the warrant.
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NOTE ~~15–~~15 – INCOME TAX

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.

The deferred tax asset and the valuation allowance consist of the following at ~~June 30, 2020:~~March 31, 2021:

June 30, March 31,
2020 2021
Net operating loss $ 3,256,908 $ 811,261
Statutory rate 21 % 21 %
Expected tax recovery 683,951 170,365
Change in valuation allowance (683,951 ) (170,365 )
Income tax provision $ — $ —

Components of deferred tax asset:
Non-capital tax loss carry-forwards 683,951 170,365
Less: valuation allowance (683,951 ) (170,365 )
Net deferred tax asset $ — $ —

As of the date of this filing, the Company is not current in filing their tax returns. The last return filed by the Company was December 31, ~~2018,~~2019, and the Company has not accrued any potential penalties or interest from that period forward. The Company will need to file returns for the year ending December 31, 2020, which is still open for examination.
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NOTE 16 – COMMITMENTS AND CONTINGENCIES

~~Distribution & Licensing~~Consulting Agreement

On ~~November 19, 2019,~~January 1, 2021, the Company entered into a ~~Distribution & Licensing~~Consulting Agreement with ~~Bgreen Partners, Inc., a California Corporation. The Agreement provides exclusive rights~~Bennett Buchanan to ~~various cannabis~~assist with marketing, advertising, customer relations, and ~~agricultural products inclusive of grow-containers~~licensing 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 IP and rights, the Company issued 400,000 Preferred Series A 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.
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.
~~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 be paid in equal monthly installments. Unpaid amounts will accrue annual interest of 6%.compliance regulatory requirements. The term of the Agreement is for ~~one year~~two years and ~~is renewable~~may be terminated or extended upon mutual ~~consent.~~agreement of both parties pursuant with a thirty-day written notice. The Company will pay the Consultant a monthly fee of $3,000 and $100,000 in Series A Stock during the term of the agreement. In addition, the Consultant will receive a 2% commission on gross sales for each customer sale closed by the Consultant.
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Operating Lease

On January 1, ~~2018,~~2020, the Company entered into a ~~standard~~new 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 105 years, from January 1, ~~2018~~2020 through ~~January 1, 2028,~~December 31, 2025, 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~~Subsequent Issuances
~~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~~April 6, 2021, 7,500 shares 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~~Preferred Series A stock was converted ~~$534,590 of principal, accrued interest and conversion fees~~ into ~~307,612,420~~50,000,000 shares of common stock.

~~During the period of July 1 to August~~On April 13, ~~2020, 238,443~~2021, 10,000 shares of Preferred Series A ~~preferred~~ stock ~~were converted~~was issued to ~~549,883,688 common shares in accordance with the conversion terms.~~employee Jesse Prim at $10 per share.

On ~~August 5, 2020, a warrant holder exercised the warrant and the Company~~April 13, 2021, 10,000 shares of Preferred Series A stock was issued ~~38,506,326~~to employee Corbin Boyle at $10 per share.
On April 15, 2021, 18,900 shares of Preferred Series A stock was converted into 60,000,000 shares of common stock.
On April 15, 2021, the holder of a convertible note converted a total of $45,150 of principal and interest into 19,630,435 shares of our common stock.
On April 19, 2021, 15,000 shares of Preferred Series A stock ~~through~~was converted into 125,000,000 shares of common stock.
On April 28, 2021, the holder of a ~~cashless exercise~~convertible note converted a total of ~~the warrants in accordance with the conversion terms.~~$54,123 of principal, interest, and fees into 29,161,255 shares of our common stock.
The Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that there are no additional subsequent events to disclose.
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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~~three months ended ~~June 30, 2020.~~March 31, 2021. 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~~2020 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.

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.
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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 BrewBilt Manufacturing, Inc., unless otherwise indicated.
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RESULTS OF OPERATIONS

Results for the Three Months Ended ~~June 30, 2020~~March 31, 2021 Compared to the Three Months Ended ~~June 30, 2019~~March 31, 2020

Revenues:

The Company’s revenues were ~~$56,554~~$13,251 for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$518,528~~$38,934 for the three months ended ~~June 30, 2019.~~March 31, 2020. The decrease is due to fewer projects being completed and delivered to customers in Q1 2021. In addition, the ~~office closing due~~average revenue per job for the customer orders that were completed were lower in Q1 2021 compared to ~~COVID-19.~~Q1 2020.

Cost of Sales:

The Company’s cost of materials was ~~$35,647~~$7,614 for the three months ended ~~June 30, 2020,~~March 31, 2021, compared to ~~$343,871~~$21,623 for the three months ended ~~June 30, 2019.~~March 31, 2020. The decrease ~~was~~is due to ~~an increase~~fewer completed jobs in ~~unfinished projects due to COVID-19.~~Q1 2021.

Operating Expenses:

Operating expenses consisted primarily of consulting fees, professional fees, salaries and wages, office expenses and fees associated with preparing reports and SEC filings relating to being a public company. Operating expenses for the three months ended ~~June 30,~~March 31, 2021, and March 31, 2020, were $404,001 and ~~June 30, 2019, were $4,242,534 and $251,229,~~$302,492, respectively. The increase ~~was~~is primarily attributable to an increase in ~~share-based compensation of $4,000,000.~~consulting fees and professional fees.

Other Income (Expense):

Other income (expense) for the three months ended ~~June 30,~~March 31, 2021 and March 31, 2020 was $(2,239,394) and ~~2019 was $(2,265,746) and $(9,190)~~$(1,851,208), respectively. Other income (expense) consisted of losses on derivative valuation, losses on conversion on preferred stock to common stock and interest expense. The loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable 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 variance primarily resulted from ~~the fluctuation of the Company’s stock price which impacted the valuation of the derivative liabilities on the convertible debt~~an increase in interest expense and a loss on conversion of Preferred Series A stock to common stock.

Net Loss:

Net loss for the three months ended ~~June 30, 2020~~March 31, 2021 was ~~$6,487,373~~$2,637,758 compared with ~~$85,862~~$2,136,389 for the three months ended ~~June 30, 2019.~~March 31, 2020. The increased loss can be explained by ~~the loss in fair value of the derivative instruments in the three months ended June 30, 2020.~~
~~Results for the Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019~~
~~Revenues:~~
~~The Company’s revenues were $95,488 for the six months ended June 30, 2020 compared to $850,496 for the six months ended June 30, 2019. The decrease is due to the office closing due to COVID-19.~~
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~~Cost of Sales:~~
~~The Company’s cost of materials was $57,270 for the six months ended June 30, 2020, compared to $650,840 for the six months ended June 30, 2019. The decrease was due to an~~and increase in ~~unfinished projects due to COVID-19.~~
~~Operating Expenses~~:
~~Operating~~operating expenses, ~~consisted primarily of consulting fees, professional fees, salaries and wages, office~~interest expenses and fees associated with preparing reports and SEC filings relating to being a public company. Operating expenses for the six months ended June 30, 2020, and June 30, 2019, were $4,545,025 and $521,452, respectively. The increase was primarily attributable to an increase in share-based compensation of $4,000,000.
~~Other Income (Expense)~~:
Other income (expense) for the six months ended June 30, 2020 and 2019 was $(4,116,995) and $(26,963), respectively. Other income (expense) consisted of losses on derivative valuation, and interest expense. The loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable 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 variance primarily resulted from the fluctuation of the Company’s stock price which impacted the valuation of the derivative liabilities on the convertible debt and a loss on conversion of Preferred Series A stock to common stock.

~~Net Loss:~~
Net loss for the six months ended June 30, 2020 was $8,623,762 compared with $348,759 for the six months ended June 30, 2019. The increased loss can be explained by the loss in 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.
22

Liquidity and Capital Resources

June 30, 2020 December 31, 2019 March 31, 2021 December 31, 2020
$ $ $ $
Current Assets 697,315 435,164 1,606,731 223,729
Current Liabilities 6,692,234 6,109,932 5,358,719 4,281,072
Working Capital (Deficit) (5,994,919 ) (5,674,768 ) (3,751,988 ) (4,057,343 )

As of ~~June 30, 2020,~~March 31, 2021, the Company had ~~$8,777~~$379,857 and ~~$1,185,187~~$1,972,415 in cash and total assets, as well as ~~$7,346,488~~$5,834,625 in total liabilities as compared to ~~$1,444~~$72,764 and ~~$949,010~~$597,016 in cash and total assets, and ~~$6,810,483~~$4,766,420 in total liabilities as of December 31, ~~2019. The decrease in cash was due to a decrease in revenue.~~2020. The increase in ~~total liabilities was primarily attributed~~working capital is due to ~~the~~an increase in ~~accrued liabilities billings~~cash on hand due to funds from notes payable, and an increase in ~~excess of revenue and derivative liabilities.~~accounts receivable for new sales closed in Q1 2021.

The Company requires additional capital to fully execute its marketing program and increase revenues. ~~Presently we are relying on short term loans from our sole officer and director to meet operational shortfalls.~~ There can be no assurance that continued funding will be available on satisfactory terms. We intend to raise additional capital through the sale of equity, loans, or other short-term financing options.

June 30, 2020 June 30, 2019
$ $
Cash Flows from (used in) Operating Activities (512,867 ) 9,494
Cash Flows from (used in) Investing Activities 21,834 24,858
Cash Flows from (used in) Financing Activities 498,366 (49,175 )
Net Increase (decrease) in Cash During Period 7,333 (14,823 )
23
March 31, 2021 March 31, 2020
$ $
Cash Flows from (used in) Operating Activities 127,182 (235,892 )
Cash Flows from (used in) Investing Activities (11,821 ) 12,403
Cash Flows from (used in) Financing Activities 191,752 222,665
Net Increase (decrease) in Cash During Period 307,093 (824 )

During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, cash from (used in) operating activities was ~~$(512,867)~~$127,182 compared to ~~$9,494~~$(235,892) for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. The variance is primarily resulted from ~~the derivative liability fair value fluctuation and~~increases in amortization of debt discounts, losses on conversions, share based ~~compensation.~~compensation and billings in excess of revenues during the three months ended March 31, 2021.

During the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 cash from investing activities was ~~$21,834~~$(11,821) compared to ~~$24,858~~$12,403 for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. The ~~decrease~~variance in cash from investing activity is due tofixed assets purchased in the ~~depreciation of fixed assets.~~first quarter 2021.

During the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 cash from (used in) financing activities was ~~$498,366~~$191,732 compared to ~~$(49,175)~~$222,665 for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. The ~~increase~~variance in cash from financing activity ~~primarily resulted from an increase~~is due to the change in ~~the proceeds from convertible debt during the six months ended June 30, 2020.~~related party liabilities.

Contractual Obligations

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies and Estimates

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. Our significant accounting policies are more fully discussed in the Notes to our Financial Statements, included herein.
23

~~Recent Accounting Pronouncements~~
~~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.
ITEM  3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company is not required to provide the information required by this Item.
24
ITEM 4. CONTROLS AND PROCEDURES

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.

As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and chief financial officer (our principal executive officer, principal financial officer, and principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report. Our company is in the process of adopting specific internal control mechanisms to ensure effectiveness as we grow, and we will work to retain additional qualified individuals to ensure a proper segregation of duties. We have engaged an outside consultant to assist in adopting new measures to improve upon our internal controls. Future controls, among other things, will include more checks and balances and communication strategies between the management and the board, once we are able to secure additional board members, to ensure efficient and effective oversight over company activities as well as more stringent accounting policies to track and update our financial reporting.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

ITEM 1A.    RISK FACTORS

A smaller reporting company is not required to provide the information required by this Item.
24
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Quarterly Issuances

On ~~April 6, 2020,~~January 1, 2021, the Company ~~executed an addendum to the Distribution & Licensing Agreement dated November 19, 2019, with Bgreen Partners, Inc. The Company~~ issued ~~400,000 Preferred~~10,000 shares of Series A ~~shares at a price of $10.00 per share convertible~~Preferred stock to Bennett Buchanan pursuant ~~the conversion rights as specified in the Articles of Incorporation and certificate of designation for the Company.~~to his Consulting Agreement.

During the ~~six~~three 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.~~
~~During the six months ended June 30, 2020, 185,177~~March 31, 2021, 172,500 shares of Series A Preferred stock were converted to ~~232,920,612~~570,299,494 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of ~~$371,090,~~$786,315 which was recorded to the statement of operations.
25

During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, warrant holders exercised the warrants and the Company issued 72,048,517 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.
During the three months ended March 31, 2021, the holders of a convertible notes converted ~~$481,142~~$256,781 of principal, ~~$209,488~~$16,185 of accrued interest and ~~$29,775~~$2,500 in conversion fees into ~~291,334,909~~175,060,588 shares of common stock. The common stock was valued at ~~$3,282,202~~$1,623,336 based on the market price of the Company’s stock on the date of conversion.

In respect of the aforementioned convertible loan agreement(s) and the underlying shares, as well as shares issued to a director and consultant, the Company will claim an exemption from the registration requirements of the Securities Act of 1933, as amended, for the issuance of the shares pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transaction does not involve a public offering, the purchasers are “accredited investors” and/or qualified institutional buyers, the purchasers have access to information about the Company and its purchase, the purchasers will take the securities for investment and not resale.

Other than as disclosed above, there were no unregistered securities to report which were sold or issued by the Company without the registration of these securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements, within the period covered by this report, which have not been previously included in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.   MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5.   OTHER INFORMATION

None.
2625

ITEM 6.    EXHIBITS

Exhibit
Number Description
31.1 Certification of the Chief Executive Officer required under Rule 13a-14(a)/15d-14(a) of the Exchange Act*
31.2 Certification of the Chief Financial Officer required under Rule 13a-14(a)/15d-14(a) of the Exchange Act*
32.1 Certification of the Chief Executive Officer and Chief Financial Officer required under Section 1350 of the Exchange Act*
101.INS XBRL Instance Document*
101.SCH XBRL Taxonomy Extension Schema*
101.CAL XBRL Taxonomy Extension Calculation Linkbase*
101.DEF XBRL Taxonomy Extension Definition Linkbase*
101.LAB XBRL Taxonomy Extension Label Linkbase*
101.PRE XBRL Taxonomy Extension Presentation Linkbase*

* Filed herewith
2726

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.

BrewBilt Manufacturing Inc.

Date: ~~August~~May 14, ~~2020~~2021 By: /s/ Jef Lewis

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
2827

		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	24

Item 4.	Controls and Procedures	2524

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	2524

Item 1A.	Risk Factors	2524

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3.	Defaults Upon Senior Securities	2625

Item 4.	Mine Safety Disclosures	2625

Item 5.	Other Information	2625

Item 6.	Exhibits	2726

	SIGNATURES	2827

Years Ending
December 31,	Operating Lease
2021	$	43,751
2022		58,334
2023		58,334
2024		58,334
2025		58,335
Total		277,088
Less imputed interest		40,594
Total liability	$	236,494

	Original		Original	Due	Interest	Conversion	June 30,			December 31,
	Note Amount		Note Date	Date	Rate	Rate	2020			2019
APG Capital #2		31,500	6/25/2018	6/25/2019	12%	Variable		—			31,500
Auctus Fund #2		84,000	1/10/2018	10/10/2018	24%	Variable		—			31,285
Auctus Fund #3		175,000	2/6/2018	11/6/2018	24%	Variable		—			175,000
Auctus Fund #4		90,000	3/6/2018	12/6/2018	24%	Variable		73,418			90,000
Auctus Fund #5		100,000	6/14/2018	3/14/2019	24%	Variable		100,000			100,000
Auctus Fund #6		75,000	8/13/2018	5/13/2019	12%	Variable		75,000			75,000
Auctus Fund #7		25,000	10/11/2018	7/11/2019	12%	Variable		25,000			25,000
Auctus Fund #8		25,750	12/20/2018	9/20/2019	12%	Variable		25,750			25,750
Auctus Fund #9		57,000	4/12/2019	1/12/2020	12%	Variable		57,000			57,000
Auctus Fund #10		31,000	7/22/2020	7/22/2020	12%	Variable		31,000			31,000
CBP #3		30,000	5/1/2020	5/1/2021	10%	Variable		30,000			—
EMA Financial #2		50,000	12/15/2017	12/15/2018	12%	Variable		—			8,474
EMA Financial #3		100,000	3/5/2018	3/5/2019	24%	Variable		—			73,305
EMA Financial #4		25,000	10/10/2018	7/10/2019	24%	Variable		—			25,000
EMA Financial #5		80,500	1/30/2020	10/31/2020	10%	Variable		80,500			—
Emerging Corp Cap #1		83,333	2/12/2018	2/11/2019	22%	Variable		34,857			74,933
Emerging Corp Cap #2		110,000	10/31/2018	10/31/2019	12%	Variable		110,000			110,000
Power Up Lending #9		68,000	1/2/2020	1/2/2021	10%	Variable		68,000			—
Power Up Lending #10		53,000	2/13/2020	2/13/2021	10%	Variable		53,000			—
Power Up Lending #11		73,000	4/6/2020	4/6/321	10%	Variable		73,000			—
Power Up Lending #12		53,000	5/4/2020	5/4/2021	10%	Variable		53,000			—
Power Up Lending #13		63,000	6/3/2020	6/3/2021	10%	Variable		63,000			—
Tri-Bridge		15,000	5/26/2020	5/26/2021	10%	Variable		15,000			—
								967,525			933,247
Debt discount								(504,661	)		(100,137	)
Financing costs/Original issue discount								(16,858	)		(3,726	)
Notes payable, net of discount							$	446,006		$	829,384

	Notes			Warrants			Total
Balance, beginning of period	$	2,311,296		$	61,880		$	2,373,176
Initial recognition of derivative liability		1,233,308			126,577			1,359,885
Derivative settlements		(1,437,337	)		(345,833	)		(1,783,170	)
Loss (gain) on derivative liability valuation		(551,954	)		537,358			(14,596	)
Balance, end of period	$	1,555,313		$	379,982		$	1,935,295

		Valuation date
Expected dividends		0%
Expected volatility		187.64% - 341.60%
Expected term		.12 - 1 year
Risk free interest		.01% - .18%

	June 30, 2020			June 30, 2019
	$			$
Cash Flows from (used in) Operating Activities		(512,867	)		9,494
Cash Flows from (used in) Investing Activities		21,834			24,858
Cash Flows from (used in) Financing Activities		498,366			(49,175	)
Net Increase (decrease) in Cash During Period		7,333			(14,823	)

	March 31, 2021			March 31, 2020
	$			$
Cash Flows from (used in) Operating Activities		127,182			(235,892	)
Cash Flows from (used in) Investing Activities		(11,821	)		12,403
Cash Flows from (used in) Financing Activities		191,752			222,665
Net Increase (decrease) in Cash During Period		307,093			(824	)

Exhibit Number		Description
31.1		Certification of the Chief Executive Officer required under Rule 13a-14(a)/15d-14(a) of the Exchange Act*
31.2		Certification of the Chief Financial Officer required under Rule 13a-14(a)/15d-14(a) of the Exchange Act*
32.1		Certification of the Chief Executive Officer and Chief Financial Officer required under Section 1350 of the Exchange Act*
101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase*
101.DEF		XBRL Taxonomy Extension Definition Linkbase*
101.LAB		XBRL Taxonomy Extension Label Linkbase*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase*

	BrewBilt Manufacturing Inc.

Date: ~~August~~May 14, ~~2020~~2021	By: /s/ Jef Lewis

	Chief Executive Officer