Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 18, 2022 | |
Cover [Abstract] | ||
Entity Registrant Name | GrowLife, Inc. | |
Entity Central Index Key | 0001161582 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Sep. 30, 2022 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2022 | |
Entity Common Stock Shares Outstanding | 4,385,306 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 000-50385 | |
Entity Incorporation State Country Code | DE | |
Entity Tax Identification Number | 90-0821083 | |
Entity Address Address Line 1 | 11335 NE 122nd Way | |
Entity Address Address Line 2 | Suite 105 | |
Entity Address City Or Town | Kirkland | |
Entity Address State Or Province | WA | |
Entity Address Postal Zip Code | 98034 | |
City Area Code | 866 | |
Local Phone Number | 781-5559 | |
Entity Interactive Data Current | Yes | |
Icfr Auditor Attestation Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 40,385 | $ 363,863 |
Accounts receivable - trade, net of allowance for doubtful accounts of $4,000 and $10,000 at 9/30/22 and 12/31/21, respectively | 20,931 | 366,789 |
Inventory | 1,106,322 | 1,299,560 |
Advances | 95,901 | 0 |
Deposits | 18,995 | 18,995 |
Total current assets | 1,282,534 | 2,049,207 |
Property and equipment, net | 224,532 | 249,906 |
Intangible assets, net | 0 | 459,002 |
Goodwill | 781,749 | 781,749 |
Other receivables from related parties | 161,000 | 161,000 |
Operating lease right of use asset | 257,382 | 407,166 |
TOTAL ASSETS | 2,707,197 | 4,108,030 |
CURRENT LIABILITIES: | ||
Accounts payable - trade | 948,921 | 1,146,344 |
Accrued expenses | 245,377 | 219,398 |
Notes payable- PPP/EIDL loans | 876,352 | 1,034,994 |
Notes payable, net | 1,113,156 | 137,728 |
Derivative liability | 1,755,260 | 1,698,272 |
Convertible notes payable, net | 2,248,521 | 2,583,816 |
Acquisition of EZ-CLONE Enterprises, Inc. payable in cash | 1,026,000 | 1,026,000 |
Acquisition of EZ-CLONE Enterprises, Inc. payable in common stock | 1,105,000 | 1,105,000 |
Current portion of operating lease right of use liability | 218,296 | 197,915 |
Federal and state income taxes payable | 438,951 | 556,952 |
Total current liabilities | 9,975,833 | 9,706,419 |
LONG TERM LIABILITIES: | ||
Deferred tax liability | 0 | 106,000 |
Non-current portion of operating lease right of use liability | 59,057 | 229,222 |
Total long term liabilities | 59,057 | 335,222 |
STOCKHOLDERS' DEFICIT | ||
Common stock - $0.0001 par value, 740,000,000 shares authorized, 3,386,686 and 786,331 shares issued and outstanding at 9/30/2022 and 12/31/2021, respectively | 339 | 79 |
Additional paid in capital | 156,104,683 | 154,380,348 |
Accumulated deficit | (163,432,714) | (160,314,038) |
Total stockholders' deficit | (7,327,693) | (5,933,611) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 2,707,197 | $ 4,108,030 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance for doubtful accounts | $ 4,000 | $ 10,000 |
Preferred Stock, Par Value | $ 0.0001 | $ 0.0001 |
Preferred Stock, Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Issued | 0 | 0 |
Preferred Stock, Outstanding | 0 | 0 |
Common Stock, Par Value | $ 0.0001 | $ 0.0001 |
Common Stock, Authorized | 740,000,000 | 740,000,000 |
Common Stock, Issued | 3,386,687 | 786,331 |
Common Stock, Outstanding | 3,386,686 | 786,331 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
NET REVENUE | $ 225,918 | $ 1,232,208 | $ 1,401,167 | $ 5,074,790 |
Cost of goods sold | 149,930 | 815,790 | 756,476 | 2,683,406 |
Gross Profit | 75,988 | 416,418 | 644,691 | 2,391,384 |
Operating expenses | 692,201 | 924,911 | 2,767,188 | 3,074,197 |
Loss from operations | (616,213) | (508,493) | (2,122,497) | (682,813) |
OTHER INCOME (EXPENSE): | ||||
Change in fair value of derivative | (187,408) | 25,592 | (622,674) | (399,948) |
Interest expense, net | (270,465) | (435,919) | (756,581) | (1,666,288) |
Gain on debt conversions, net | 170,317 | (291,364) | 164,509 | (2,370,369) |
Warrant expense | 0 | 571,060 | (5,433) | 1,045,310 |
Total other expense, net | (287,556) | (130,631) | (1,220,179) | (3,391,295) |
LOSS BEFORE INCOME TAXES | (903,769) | (639,124) | (3,342,676) | (4,074,108) |
Income taxes | ||||
Current | 57,000 | 29,388 | 117,000 | (321,477) |
Deferred | 21,000 | 107,000 | ||
Income Tax, net | 78,000 | 29,388 | 224,000 | (321,477) |
NET LOSS | $ (825,769) | $ (609,736) | $ (3,118,676) | $ (4,395,585) |
Basic and diluted loss per share | $ (0.40) | $ (1.02) | $ (2.27) | $ (8.81) |
Weighted average shares of common stock outstanding- basic and diluted | 2,070,530 | 596,449 | 1,374,391 | 499,199 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT - USD ($) | Total | Common Stock | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) |
Balance, shares at Dec. 31, 2020 | 345,621 | |||
Balance, amount at Dec. 31, 2020 | $ (7,174,472) | $ 35 | $ 147,666,862 | $ (154,841,370) |
Stock based compensation for stock options | 5,643 | 5,643 | 0 | |
Shares issued for convertible note conversions, shares | 102,260 | |||
Shares issued for convertible note conversions, amount | 3,159,597 | $ 10 | 3,159,588 | 0 |
Net loss for the three months ended March 31, 2021 | (2,876,681) | $ 0 | 0 | (2,876,681) |
Balance, shares at Mar. 31, 2021 | 447,882 | |||
Balance, amount at Mar. 31, 2021 | (6,885,913) | $ 45 | 150,832,093 | (157,718,051) |
Balance, shares at Dec. 31, 2020 | 345,621 | |||
Balance, amount at Dec. 31, 2020 | (7,174,472) | $ 35 | 147,666,862 | (154,841,370) |
Net loss for the three months ended March 31, 2021 | (4,395,585) | |||
Balance, shares at Sep. 30, 2021 | 649,000 | |||
Balance, amount at Sep. 30, 2021 | (5,654,080) | $ 65 | 153,582,810 | (159,236,955) |
Balance, shares at Mar. 31, 2021 | 447,882 | |||
Balance, amount at Mar. 31, 2021 | (6,885,913) | $ 45 | 150,832,093 | (157,718,051) |
Stock based compensation for stock options | 4,916 | 0 | 4,916 | 0 |
Net loss for the three months ended March 31, 2021 | (909,168) | $ 0 | 0 | (909,168) |
Shares issued for convertible note and interest conversion, shares | 44,693 | |||
Shares issued for convertible note and interest conversion, amount | 837,515 | $ 4 | 837,511 | 0 |
Shares issued for liability settlement, shares | 65,000 | |||
Shares issued for liability settlement, amount | 1,183,250 | $ 7 | 1,183,244 | 0 |
Shares issued for warrant exercise - cashless, shares | 5,425 | |||
Shares issued for warrant exercise - cashless, amount | 0 | $ 1 | (1) | 0 |
Balance, shares at Jun. 30, 2021 | 563,000 | |||
Balance, amount at Jun. 30, 2021 | (5,769,400) | $ 56 | 152,857,763 | (158,627,219) |
Stock based compensation for stock options | 4,916 | $ 0 | 4,916 | 0 |
Net loss for the three months ended March 31, 2021 | (609,736) | (609,736) | ||
Shares issued for convertible note and interest conversion, shares | 56,000 | |||
Shares issued for convertible note and interest conversion, amount | 526,200 | $ 6 | 526,194 | 0 |
Shares issued for liability settlement, shares | 30,000 | |||
Shares issued for liability settlement, amount | 193,940 | $ 3 | 193,937 | 0 |
Balance, shares at Sep. 30, 2021 | 649,000 | |||
Balance, amount at Sep. 30, 2021 | (5,654,080) | $ 65 | 153,582,810 | (159,236,955) |
Balance, shares at Dec. 31, 2021 | 786,331 | |||
Balance, amount at Dec. 31, 2021 | (5,933,611) | $ 79 | 154,380,348 | (160,314,038) |
Shares issued for convertible note conversions, shares | 183,785 | |||
Shares issued for convertible note conversions, amount | 694,815 | $ 18 | 694,797 | |
Net loss for the three months ended March 31, 2021 | (609,077) | (609,077) | ||
Balance, shares at Mar. 31, 2022 | 970,116 | |||
Balance, amount at Mar. 31, 2022 | (5,847,873) | $ 97 | 155,075,145 | (160,923,114) |
Balance, shares at Dec. 31, 2021 | 786,331 | |||
Balance, amount at Dec. 31, 2021 | (5,933,611) | $ 79 | 154,380,348 | (160,314,038) |
Net loss for the three months ended March 31, 2021 | (3,118,676) | |||
Balance, shares at Sep. 30, 2022 | 3,386,687 | |||
Balance, amount at Sep. 30, 2022 | (7,327,693) | $ 339 | 156,104,683 | (163,432,714) |
Balance, shares at Mar. 31, 2022 | 970,116 | |||
Balance, amount at Mar. 31, 2022 | (5,847,873) | $ 97 | 155,075,145 | (160,923,114) |
Shares issued for convertible note conversions, shares | 160,000 | |||
Shares issued for convertible note conversions, amount | 198,897 | $ 16 | 198,881 | |
Net loss for the three months ended March 31, 2021 | (1,683,831) | (1,683,831) | ||
Shares issued for convertible note commitment, shares | 50,000 | |||
Shares issued for convertible note commitment, amount | 99,548 | $ 5 | 99,543 | |
Fair value of warrants issued | 27,417 | 27,417 | ||
Balance, shares at Jun. 30, 2022 | 1,180,116 | |||
Balance, amount at Jun. 30, 2022 | (7,205,842) | $ 118 | 155,400,985 | (162,606,945) |
Shares issued for convertible note conversions, shares | 2,206,571 | |||
Shares issued for convertible note conversions, amount | 703,918 | $ 221 | 703,697 | |
Net loss for the three months ended March 31, 2021 | (825,769) | (825,769) | ||
Balance, shares at Sep. 30, 2022 | 3,386,687 | |||
Balance, amount at Sep. 30, 2022 | $ (7,327,693) | $ 339 | $ 156,104,683 | $ (163,432,714) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net loss | $ (3,118,676) | $ (4,395,585) | |
Adjustments to reconcile net loss to net cash (used in) operating activities | |||
Depreciation expense | 41,963 | 21,382 | |
Amortization of intangible assets | 459,002 | 503,787 | $ 671,716 |
Share-based compensation expense | 0 | 15,475 | |
Non Cash Interest Expense | 690,785 | 1,368,855 | |
(Gain) Loss on debt Conversion | (164,511) | 399,948 | |
Change in fair value of derivative | 622,674 | 2,564,658 | |
Loss on debt settlement | 0 | (1,045,310) | |
Gain on forgiveness of debt | (183,448) | ||
Changes in operating assets and liabilities: | |||
Accounts receivable | 345,858 | 903,396 | |
Inventory | 193,238 | (727,874) | |
Other assets | (95,901) | (161,000) | |
Right of use, net | 0 | 5,013 | |
Accounts payable and accrued expenses | 122,346 | (13,364) | |
Change in deferred taxes | (106,000) | (88,164) | |
Change in federal and state taxes payable | (118,001) | 409,641 | |
Cash Used in operating activities | (1,310,671) | (239,142) | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Purchase of PP&E | (16,590) | 0 | |
Cash Used in investing activities | (16,590) | 0 | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Payment of notes | (219,592) | (1,307,806) | |
Proceeds from notes payable, net | 1,223,375 | 2,385,455 | |
Net cash provided by financing activities | 1,003,783 | 1,077,649 | |
NET CHANGE IN CASH AND CASH EQUIVALENTS | (323,478) | 838,507 | |
CASH AND CASH EQUIVALENTS, beginning of period | 363,863 | 383,144 | 383,144 |
CASH AND CASH EQUIVALENTS, end of period | 40,385 | 1,221,651 | $ 363,863 |
Non-cash investing and financing activities: | |||
Value of shares issued for convertible note conversion | 1,597,630 | 1,958,655 | |
Value of shares issued for liability settlement | $ 1,377,190 | ||
Value of shares issued for loan commitment fee | $ 99,548 |
DESCRIPTION OF BUSINESS AND ORG
DESCRIPTION OF BUSINESS AND ORGANIZATION | 9 Months Ended |
Sep. 30, 2022 | |
DESCRIPTION OF BUSINESS AND ORGANIZATION | |
DESCRIPTION OF BUSINESS AND ORGANIZATION | NOTE 1 – DESCRIPTION OF BUSINESS AND ORGANIZATION GrowLife, Inc. (“GrowLife” or the “Company”) is incorporated under the laws of the State of Delaware and is headquartered in Kirkland, Washington. The Company was founded in 2012 with the Closing of the Agreement and Plan of Merger with SGT Merger Corporation. On October 15, 2018, the Company closed the Purchase and Sale Agreement with EZ-CLONE Enterprises, Inc., a California corporation (the “Agreement”). On November 5, 2019, the Company amended the Agreement with one 24.5% shareholder of EZ-CLONE Enterprises, Inc. (“EZ-CLONE”), to extend the date to purchase the remaining 49% of stock of EZ-CLONE in exchange for a 20% extension fee (a total of $171,000 for the 49% or $85,500 for each 24.5% shareholder) of the $855,000 cash payable at the earlier of the closing of $2,000,000 in funding or nine months (July 2020). The Company did not close the purchase of the remaining 49% of stock of EZ-CLONE by the extended deadline. On September 15, 2020, the Company received notice that William Blackburn and Brad Mickelsen (“Plaintiffs”), minority shareholders of EZ-CLONE Enterprises, Inc., a majority owned subsidiary of the Company, filed a complaint against the Company and its officers in the Superior Court of California, County of Sacramento (“Complaint”) for claims related to breach under the Purchase and Sale Agreement dated October 15, 2018 between the Company and Plaintiffs. The Complaint also alleges that the Company and its Officers made certain false representations and other claims to consummate the Transaction and as a result has failed to complete the second closing as required under Purchase and Sale Agreement. The Plaintiffs are seeking rescission of the Purchase and Sale Agreement, unspecified damages in excess of ten thousand dollars, and other equitable relief. As of December 4, 2020, the Company’s officers were dismissed from the case. The Plaintiffs are seeking rescission of the Purchase and Sale Agreement, unspecified damages in excess of ten thousand dollars, and other equitable relief. See Note 17 for description of Legal Proceedings. On September 15, 2020, the Company filed a notice of removal with the California Superior Court, County of Sacramento and the United States District Court for the Eastern District of California. The case was removed to Federal District Court for the Eastern District of California and Plaintiffs filed an Ex Parte Application for TRO and an Order for Preliminary Injunction with the Federal Court. The TRO was granted on September 16, 2020 and a preliminary injunction hearing was scheduled for September 29, 2020. After reviewing all pleadings and oral arguments at the hearing, the Court issued a ruling granting Plaintiffs’ request for a preliminary injunction. Presently the parties are providing legal briefs to the Federal court to determine if rescission should be granted. If we are unsuccessful and the court grants Plaintiffs’ request for rescission the resulting actions are speculative at this time but could include the return of the consideration exchanged as part of the acquisition subject to certain adjustments as the result of several variables which the court will consider. If the court denies Plaintiffs request for rescission the litigation will continue regarding the breach of contract claims and contractual remedies for breach and the Court may or may not dissolve the preliminary injunction as a result. A decision to grant rescission At September 30, 2022 and December 31, 2021, the Company had recorded a liability of $2,131,000 for acquisition payable of which a $1,105,000 is payable in stock and $1,026,000 is payable in cash. On November 5, 2021, the Company held its 2021 Annual Meeting of Stockholders, where stockholders approved an increase in the authorized shares of common stock (“Common Stock”) from 120,000,000 to 740,000,000 shares. As such, the Company filed a Certificate of Amendment of Certificate of Incorporation with the Secretary of State of the State of Delaware on November 8, 2021. As a result of the increase, the Company an aggregate 750,000,000 authorized shares consisting of: (i) 740,000,000 shares of common stock, par value $0.0001 per share, and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share. On October 7, 2022, FINRA (the Financial Industry Regulatory Authority) announced the Reverse Stock Split of 150-for-1 which was previously approved by the Company’s shareholders at the Company’s November 5, 2021 annual meeting of stockholders. All share and per share amounts have been adjusted in these condensed consolidated financial statements to reflect the effects of the reverse stock split. |
GOING CONCERN
GOING CONCERN | 9 Months Ended |
Sep. 30, 2022 | |
GOING CONCERN | |
GOING CONCERN | NOTE 2 – GOING CONCERN The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses of $3,118,676 and $4,395,585 for the nine months ended September 30, 2022 and 2021, respectively. Net cash used in operating activities was $1,310,671 and $239,142 for the nine months ended September 30, 2022 and September 30, 2021, respectively. The Company anticipates that it will record losses from operations for the foreseeable future. As of September 30, 2022, the Company’s accumulated deficit was $163 million. The Company has limited capital resources, and operations to date have been funded with the proceeds from private equity and debt financings. These conditions raise substantial doubt about our ability to continue as a going concern. The Company believes it will require additional funding to execute its business plans. The Company needs additional financing to implement our business plan and to service our going operations and pay our current debts. There can be no assurance that we will be able to secure any needed funding, or that if such funding is available, the terms or conditions would be acceptable to us. If we are unable to obtain additional financing when it is needed, we will need to restructure our operations, and divest all or a portion of our business. We may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, and could increase our expenses and require that our assets secure such debt. Equity financing, if obtained, could result in dilution to the Company’s then-existing stockholders and/or require such stockholders to waive certain rights and preferences. If such financing is not available on satisfactory terms, or is not available at all, the Company may be required to delay, scale back, eliminate the development of business opportunities and our operations and financial condition may be materially adversely affected. See Note 19 – Subsequent Events. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS | 9 Months Ended |
Sep. 30, 2022 | |
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS | |
SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS Basis of Presentation - The Company has evaluated subsequent events through the date of the filing of its Form 10-Q with the Securities and Exchange Commission. Other than those events disclosed in Note 19, the Company is not aware of any other significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Company’s financial statements. Principles of Consolidation Cash and Cash Equivalents Accounts Receivable and Revenue – Sales Returns - Concentration of Credit and Sales Risk - The Company had the following concentrations of credit and sales risk: Customers with over 10% of sales - the Company had three customers of EZ-CLONE that represented approximately 10%, 13% and 30% of consolidated revenue for the nine months ended September 30, 2022. Customers with over 10% of outstanding EZ-CLONE accounts receivable - as of September 30, 2022 three customers totaled 76%, and as of December 31, 2021 one customer totaled 85%. All amounts from these customers were current for both periods. Inventories - Property and Equipment Long Lived Assets Intangible Assets Goodwill - Fair Value Measurements and Financial Instruments Fair Value Measurement and Disclosures Level 1 – Quoted prices in active markets for identical assets and liabilities; Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of September 30, 2022, and December 31, 2021 are based upon the short-term nature of the assets and liabilities. The Company’s derivative financial instruments are considered Level 3 instruments. See Note 12. Derivative Financial Instruments – Stock Based Compensation Convertible Securities Determining Fair Value under ASC 718 Net Loss Per Share - As of September 30, 2022, there are no dilutive stock options or warrants outstanding. In addition, we have an unknown number of common shares to be issued under the convertible notes financing agreements because the number of shares ultimately issued depends on the price at which the holder converts its debt to shares and exercises its warrants. The lower the conversion or exercise prices, the more shares that will be issued to the holder upon the conversion of debt to shares. The Company will not know the exact number of shares of stock issued to the holder until the debt is actually converted to equity. Dividend Policy Use of Estimates - Advertising Comprehensive loss Research and Development Expenses September 30, 2022 and 2021 Recent Accounting Pronouncements —--- In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). Based on the Company’s review of accounting standard updates issued, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significant impact on the Company’s consolidated financial statements. |
BUSINESS COMBINATIONS ACQUISITI
BUSINESS COMBINATIONS ACQUISITION PAYABLE AND OTHER TRANSACTION | 9 Months Ended |
Sep. 30, 2022 | |
BUSINESS COMBINATIONS ACQUISITION PAYABLE AND OTHER TRANSACTION | |
BUSINESS COMBINATIONS, ACQUISITION PAYABLE AND OTHER TRANSACTION | NOTE 4 –BUSINESS COMBINATIONS, ACQUISITION PAYABLE AND OTHER TRANSACTION Acquisition of EZ-CLONE Enterprises, Inc. On October 15, 2018, the Company closed the Purchase and Sale Agreement with EZ-CLONE Enterprises, Inc. (“EZ-CLONE”), a California corporation (the “Agreement”). The total purchase price was $4 million payable in $1,500,000 cash and $2.5 million in stock. At closing, we paid 51% of the purchase price, totaling $2,040,00 of which (i) a cash payment of $645,000; and (ii) issuing 715,385 restricted shares of our common stock, valued at $1,395,000. Per the Agreement the remaining 49% of the purchase price was to be delivered within one year, totaling $1,960,000 and payable via: (i) a cash payment of $855,000; and (ii) the issuance of the Company’s common stock at a value of $1,105,000. On November 5, 2019, the Company amended the Agreement with one 24.5% shareholder of EZ-CLONE to extend the date to purchase the remaining 49% of stock of EZ-CLONE in exchange for a 20% extension fee (a total of $171,000 for the 49% or $85,500 for each 24.5% shareholder) of the $855,000 cash payable at the earlier of the closing of $2,000,000 in funding or nine months (July 2020). The Company did not close the purchase of the remaining 49% of stock of EZ-CLONE by the extended deadline. On September 15, 2020, the Company received notice that William Blackburn and Brad Mickelsen (“Plaintiffs”), minority shareholders of EZ-CLONE Enterprises, Inc., a majority owned subsidiary of the Company, filed a complaint against the Company and its officers in the Superior Court of California, County of Sacramento (“Complaint”) for claims related to breach under the Purchase and Sale Agreement dated October 15, 2018 between the Company and Plaintiffs. As of December 4, 2020, the Company’s officers were dismissed from the case. The Plaintiffs are seeking rescission of the Purchase and Sale Agreement, unspecified damages in excess of ten thousand dollars, and other equitable relief. See Note 17 for description of Legal Proceedings. The Company accounted for the acquisition in accordance with ASC 805, “Business Combinations”. ASC 805 defines the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date that the acquirer achieves control. ASC 805 requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. For accounting purposes, from October 15, 2018 the Company consolidated EZ-Clone given their control and treated its obligation to acquire the remaining interest in EZ-Clone. The Company considers EZ-Clone to be 100% owned. At September 30, 2022 and December 31, 2021 the Company has recorded $2,131,000 as a liability, $1,026,000 of which is due in cash and $1,105,000 is due in stock. The fair value of the intangible assets associated with the assets acquired was $2,351,000 estimated by using a discounted cash flow approach based on future economic benefits. In summary, the estimate was based on a projected income approach and related discounted cash flows over five years, with applicable risk factors assigned to assumptions in the forecasted results. |
INVENTORY
INVENTORY | 9 Months Ended |
Sep. 30, 2022 | |
INVENTORY | |
INVENTORY | NOTE 5 – INVENTORY Inventory as of September 30, 2022 and December 31, 2021 consisted of the following: September 30, 2022 December 31, 2021 Raw materials $ 686,542 $ 723,834 Work in proess 223,368 375,083 Finished goods 196,412 183,318 Inventory deposits - 17,325 $ 1,106,322 $ 1,299,560 Inventory consist of supplies for product lines at EZ-CLONE. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2022 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 6 – PROPERTY AND EQUIPMENT Property and equipment as of September 30, 2022 and December 31, 2021 consists of the following: September 30, 2022 December 31, 2021 Machinery, equipment and tooling $ 373,456 $ 356,867 Computer equipment 16,675 16,675 Leasehold equipment 14,703 14,702 Automobile 157,728 157,728 Total $ 562,562 $ 545,972 Less accumulated depreciation and amortization (338,030 ) (296,066 ) Net property and equipment $ 224,532 $ 249,906 Total depreciation expense was $41,963 and $37,152 for the nine months ended September 30, 2022 and December 31, 2021, respectively. All equipment is used for manufacturing, selling, general and administrative purposes and accordingly all depreciation is classified in operating expenses. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2022 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | NOTE 7 – INTANGIBLE ASSETS Intangible assets as of September 30, 2022 and December 31, 2021 consisted of the following: Estimated life September 30, 2022 December 31, 2021 Customer lists 3.5 Years $ 1,297,000 $ 1,297,000 Intellectual property 3.5 Years 1,054,000 1,054,000 Less accumulated amortization (2,351,000 ) (1,891,998 ) $ - $ 459,002 Goodwill Indefinite $ 781,749 $ 781,749 Total Intangibles and Goodwill $ 781,749 $ 1,240,751 Total amortization expense was $459,002 and $671,716 for the nine months ended September 30, 2022 and December 31, 2021, respectively. |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2022 | |
LEASES | |
LEASES | NOTE 8- LEASES The Company previously entered into operating leases for a warehouse and corporate facilities. The leases terms are five years, and often includes an options to renew. These operating leases rights are listed as separate line items on the Company's September 30, 2022 Consolidated Balance Sheet and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also listed as separate line items on the Company's September 30, 2022 Consolidated Balance Sheet. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recognized right-of-use assets and lease liabilities for operating leases of approximately $1,378,000 on January 1, 2019. Operating lease right-of-use assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. As of September 30, 2022, total right-of-use assets and operating lease liabilities for remaining long-term lease was $257,382 and $277,353, respectively. During the nine months ended September 30, 2022 and 2021, the Company recognized approximately $172,107and $166,553respectively, in total lease costs for the leases. |
ACCOUNTS PAYABLE
ACCOUNTS PAYABLE | 9 Months Ended |
Sep. 30, 2022 | |
ACCOUNTS PAYABLE | |
ACCOUNTS PAYABLE | NOTE 9- ACCOUNTS PAYABLE Accounts payable were $948,921 and $1,146,344 as of September 30, 2022, and December 31, 2021, respectively. Such liabilities consisted of amounts due to vendors for inventory purchases, audit, legal and other expenses incurred by the Company. |
ACCRUED EXPENSES
ACCRUED EXPENSES | 9 Months Ended |
Sep. 30, 2022 | |
ACCRUED EXPENSES | |
ACCRUED EXPENSES | NOTE 10- ACCRUED EXPENSES Accrued expenses were $245,377 and $219,398 as of September 30, 2022, and December 31, 2021, respectively. Such liabilities consisted of amounts due to sales tax, payroll and restructuring expense liabilities. |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2022 | |
NOTES PAYABLE | |
NOTES PAYABLE | NOTE 11 –NOTES PAYABLE Notes Payable as of September 30, 2022 consisted of the following: Inteerest Rate Principal Accrued Interest Discount Balance Government Assistance Notes Economic Injury Disaster Loan (EZC) 3.75 % $ 149,900 $ 12,028 $ 161,928 Paycheck Protection Program 1 % 362,500 9,171 371,671 Paycheck Protection Program 1 % 337,050 5,703 342,753 $ 849,450 $ 26,902 $ 876,352 Promisory Notes Comercial Bank secured by automobile 3.44 % $ 123,823 $ - $ 123,823 Promisory notes 5 % 137,500 6,070 143,570 AJB Capital 5-17-22 10 % 750,000 - (100,737 ) 649,263 AJB Capital 9-28-22 10 % 220,000 - (23,500 ) 196,500 $ 1,231,323 $ 6,070 $ (124,237 ) $ 1,113,156 Convertible Promisory Notes Silverback 2-12-21 22 % $ 48,579 $ 48,927 534,717 Dublin Holdings 2-6-21 8 % 695,562 410,282 1,105,844 Dublin Holdings 8-25-21 8 % 335,000 31,056 366,903 Dublin Holdings 11-5-21 8 % 225,000 16,903 241,903 $ 1,741,353 $ 507,168 $ - $ 2,248,521 Notes payable as of December 31, 2021 consisted of the following: Inteerest Rate Principal Accrued Interest Balance Government Assistance Notes Economic Injury Disaster Loan (EZC) 3.75 % $ 149,900 $ 10,524 $ 160,424 Economic Injury Disaster Loan (GLI) 3.75 % 149,900 15,652 165,552 Paycheck Protection Program 1 % 362,500 6,350 368,850 Paycheck Protection Program 1 % 337,050 3,118 340,168 $ 999,350 $ 35,644 $ 1,034,994 Secured Promisory Note Comercial Bank secured by automobile 3.44 % $ 137,728 $ - $ 137,728 Convertible Promisory Notes Silverback 2-12-21 10 % $ 995,130 $ 212,169 $ - $ 1,207,299 Dublin Holdings 2-6-21 8 % 780,791 10,303 - 791,094 Dublin Holdings 8-25-21 8 % 335,000 9,511 - 344,511 Dublin Holdings 11-5-21 8 % 225,000 2,666 - 227,666 $ 2,335,921 $ 234,649 $ - $ 2,570,570 Amortizing Promisory Note First Fire 12 % 12,141 978 - 13,119 $ 2,348,062 $ 235,627 $ - $ 2,583,689 Government Assistance Notes Payable On April 17, 2020, the Company received $362,500 under the Paycheck Protection Program of the U.S. Small Business Administration’s (SBA) 7(a) Loan Program pursuant to the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), Pub. Law 116-136, 134 Stat. 281 (2020). The interest rate is one percent (1%). The Company is utilizing the funds in accordance with the legal requirements. The loan is due April 17, 2025 On September 19, 2020, the Company, including its EZ-CLONE subsidiary, received two loans totaling $299,800 under the Economic Injury Disaster Loan Program of the U.S. Small Business Administration’s 7(a) Loan Program pursuant to the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), Pub. Law 116-136, 134 Stat. 281 (2020). Repayment terms on the loans are monthly principal and interest totaling approximately $1,392 over a 30-year term at 3.75%. In addition, the loan contains a 12-month payment deferral beginning on the loan date. There is no prepayment penalty on the EIDL loans. One of the EIDL loans was forgiven in February 2022. On February 3, 2021, the Company received $337,050 under the Paycheck Protection Program of the U.S. Small Business Administration’s (SBA) 7(a) Loan Program pursuant to the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), Pub. Law 116-136, 134 Stat. 281 (2020). The interest rate is one percent (1%). The Company is utilizing the funds in accordance with the legal requirements. The loan is due February 3, 2026 Convertible Promissory Notes FirstFire Global Opportunities Fund, LLC On October 2, 2020, the Company executed the following agreements with FirstFire Global Opportunities Fund, LLC: (i) Securities Purchase Agreement; and (ii) Self-Amortization Promissory Note for $156,600 (“Note”). The Note has an interest rate of twelve percent (12%). The Company makes monthly payments in the amount of $13,851. The final payment was made on January 12, 2022. Silverback Capital Corporation On February 12, 2021 Silverback purchased a Note from Odyssey Research & Trading LLC (“Odyssey”) that was originally issued to Odyssey on July 22, 2019. Silverback assumed the terms and conditions of the original note. The Company typically issues original issuance discount notes that have a stated interest rate of typically 10%. Accrued interest represents the interest to be accreted over the remaining term of the notes. These notes contain terms and conditions that are deemed beneficial conversion features and the Company recognized a derivative liability related to these terms until the notes are converted. Upon the conversion of these notes, the Company records a loss on debt conversion and reduces their derivative liability. The derivative liability was written off at the end of 2021 due to Silverback asserting the loan in default as the Company was not maintaining the share reserves provided for the Note Agreement. See Legal Proceedings in PART II OTHER INFOMRATION. The 10% Notes are convertible at the holder’s option into the Company’s common stock at 50% of the current fair market value of the stock. During the nine months ended September 30, 2022, Silverback converted principal of $469,350 into1,302,000 shares of our common stock at an average per share conversion price of $0.36. Dublin Holdings LLC On February 26, 2021, the Company executed the following agreements with Bucktown Capital LLC: (i) Securities Purchase Agreement; (ii) Secured Convertible Promissory Note; and (iii) Security Agreement. During September 2022 Bucktown assigned all of its debt interests with the Company to Dublin Holdings LLC (“Dublin Agreements”). The total amount of funding under the Dublin Agreements is $3,088,000 as represented in the Secured Convertible Promissory Note (“Note”). The total purchase price for this Note is $2,850,000; the Note carries an aggregate original issue discount of $228,000 and a transaction expense amount of $10,000. The Note is comprised of two (2) tranches (each, a “Tranche”), consisting of (i) an initial Tranche in an amount equal to $928,000 and any interest, costs, fees or charges accrued thereon or added thereto under the terms of the Note and the Dublin Agreements (the “Initial Tranche”), and (ii) an additional Tranche, which is exclusively dedicated for the purchase of the remaining equity interest in EZ-CLONE, in the amount of $2,160,000.00, plus any interest, costs, fees or charges accrued thereon or added thereto under the terms of the Note and the Dublin Agreements (the “Subsequent Tranche”). The Initial Tranche shall correspond to $68,000 of the OID and the Transaction Expense Amount and may be converted into shares of Common Stock at any time after the Purchase Price Date. The Subsequent Tranche corresponds to the Investor Note and $160,000 of the aggregate OID. If not converted sooner, the Note is due on or before February 26, 2022. The Note has an interest rate of eight percent (8%). The Note is convertible, at Dublin’s option, into the Company’s common stock at $45.00 per share (“Lender Conversion Price”), subject to adjustment as provided for in the Note. However, in the event the Market Capitalization (as defined in the Note) falls below the Minimum Market Capitalization the Lender Conversion Price shall equal the lower of the Lender Conversion Price and the Market Price as of any applicable date of Conversion. On August 25, 2021 and on November 5, 2021, the Company entered into the following agreements with Bucktown Capital LLC which were subsequently assigned to Dublin: (i) Securities Purchase Agreements; (ii) Secured Convertible Promissory Notes; and (iii) Security Agreements. The total amount for these Notes is $560,000; the Notes carry an aggregate original issue discount of $50,000 and a transaction expense amount of $10,000. The Notes have an interest rate of eight percent (8%). The Note is convertible, at Dublin’s option, into the Company’s common stock at $15.00 per share (“Lender Conversion Price”), subject to adjustment as provided for in the Note. However, in the event the Market Capitalization (as defined in the Note) falls below the Minimum Market Capitalization the Lender Conversion Price shall equal the lower of the Lender Conversion Price and the Market Price as of any applicable date of Conversion. During the nine months ended September 30, 2022, Dublin converted principal of $295,000 into 442,954 shares of our common stock at a per share conversion price of $0.67. The Company’s obligation to pay the Notes, or any portion thereof, are secured by all the Company’s assets. 1800 Diagonal Lending LLC On January 4, 2022, and on March 11, 2022, the Company entered into the following agreements with 1800 Diagonal Lending LLC, formerly known as Sixth Street Lending LLC: (i) Securities Purchase Agreements; and (ii) Secured Convertible Promissory Notes. The total amount for these Notes is $310,200; the Note carries an aggregate original issue discount of $32,500 and a transaction expense amount of $7,700. The Notes have an interest rate of eight percent (8%). The Note is convertible, at the holder’s option, into the Company’s common stock at a 25% discount from the market price. Based on the variable conversion price, the Company recorded initial derivative liabilities and an increase in the debt discount of approximately $182,000. During the nine months ended September 30, 2022, 1800 Diagonal converted principal of $200,050 into 648,728 shares of our common stock at a per share conversion price of $0.31. On September 28, 2022 these notes were paid off from the proceeds of a note entered into with AJB Capital. The derivative liability was written off as a result of the pay off. AJB Capital Investments LLC On May 17, 2022, the Company entered into the following agreements with AJB Capital Investments LLC: (i) Securities Purchase Agreement; and (ii) Promissory Note; (iii) Common Stock Purchase Warrant; and (iv) Security Agreement. The total amount of the Note is $750,000; the Note carries an aggregate original issue discount of $75,000 and transaction expenses of $56,000. The Note carries an interest rate of ten percent (10%) per annum and matures on November 17, 2022. Should the Note be extended at that time the interest rate increases to fifteen percent (15%). Upon default by the Company, the Note is convertible by AJB Capital into the Company’s common stock at the lesser of the lowest trading price during the previous twenty trading days either (i) ending on the date of conversion of the Note or (ii) the date of the Note. In connection with executing the Note the Company will issue 50,000 shares of its common stock as an initial commitment fee. Should the Note be extended, the Company will issue an additional 33,333 shares as an extension commitment fee. The Warrant agreement allows for AJB to purchase 40,000 shares at $07.50 per share and has a five-year term. The Company recorded an original issue discount of approximately $252,000 related to the original issue discount, shares issued and warrants. Amortization of the debt discount of approximately $128,000 for the nine months ended September 30, 2022. On September 28, 2022, the Company entered into the following agreements with AJB Capital Investments LLC: (i) Securities Purchase Agreement; and (ii) Promissory Note; (iii) Common Stock Purchase Warrant; and (iv) Security Agreement. The total amount of the Note is $220,000; the Note carries an aggregate original issue discount of $20,000 and transaction expenses of $5,000. The Note carries an interest rate of ten percent (10%) per annum and matures on May 28, 2023. Should the Note be extended at that time the interest rate increases to fifteen percent (15%). Upon default by the Company, the Note is convertible by AJB Capital into the Company’s common stock at the lesser of the lowest trading price during the previous twenty trading days either (i) ending on the date of conversion of the Note or (ii) the date of the Note. In connection with executing the Note the Company will issue 53,334 shares of its common stock as an initial commitment fee. $151,048 of the proceeds from this Note were used to payoff the outstanding balance due 1800 Diagonal. |
DERIVATIVE LIABILITY
DERIVATIVE LIABILITY | 9 Months Ended |
Sep. 30, 2022 | |
DERIVATIVE LIABILITY | |
DERIVATIVE LIABILITY | NOTE 12 – DERIVATIVE LIABILITY The Convertible Notes payable include a conversion feature that pursuant ASC 815 “Derivatives and Hedging”, has been identified as an embedded derivative financial instrument and which the Company accounts for under the fair value method of accounting. If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (BCF). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20. Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method. The debt is convertible at a range of between 25% to 50% discount to the fair value of the Company’s common stock --requiring the conversion feature to be bifurcated from the host debt contract and accounting for separately as a derivative, resulting in periodic revaluations. The notes underlying the derivatives are short term in nature and generally converted to stock in less than one year. The derivative is valued at period end with the key inputs being current stock price and the conversion feature. There was a derivative liability of $1,755,260 and $1,698,272 as of September 30, 2022 and December 31, 2021, respectively. For the nine months ended September 30, 2022, the Company recorded non-cash expense of $390,069 related to the “change in fair value of derivative” expense related to the convertible note financing. These were the only changes in level 3 fair value instruments during such periods. Derivative liability as of September 30, 2022 was as follows: Balance, December 31, 2021 $ 1,698,272 Additions 270,586 Conversions (836,272 ) Change in fair value 622,674 Balance, September 30, 2022 $ 1,755,260 |
RELATED PARTY TRANSACTIONS AND
RELATED PARTY TRANSACTIONS AND CERTAIN RELATIONSHIPS | 9 Months Ended |
Sep. 30, 2022 | |
RELATED PARTY TRANSACTIONS AND CERTAIN RELATIONSHIPS | |
RELATED PARTY TRANSACTIONS AND CERTAIN RELATIONSHIPS | NOTE 13 – RELATED PARTY TRANSACTIONS AND CERTAIN RELATIONSHIPS Notes Receivable from Related Parties EZ-CLONE had $161,000 due from its two founders at September 30, 2022 and December 31, 2021. The notes bear interest at 3% and are due in July 2041. |
EQUITY
EQUITY | 9 Months Ended |
Sep. 30, 2022 | |
EQUITY | |
EQUITY | NOTE 14 – EQUITY Authorized Capital Stock On November 5, 2021, the Company held its 2021 Annual Meeting of Stockholders, where stockholders approved an increase in the authorized shares of common stock (“Common Stock”) from 120,000,000 to 740,000,000 shares. As such, the Company filed a Certificate of Amendment of Certificate of Incorporation with the Secretary of State of the State of Delaware on November 8, 2021. As a result of the increase, the Company an aggregate 750,000,000 authorized shares consisting of: (i) 740,000,000 shares of common stock, par value $0.0001 per share, and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share. On September 17, 2022, the Company’s Board approved the implementation of a one-for-one hundred and fifty (1:150) reverse stock split of all of the Company’s issued and outstanding common stock (the “Reverse Stock Split”). The number of authorized shares will not change as a result of the Reverse Stock Split. The Reverse Stock Split was effective on October 7,2022 upon announcement by FINRA (the Financial Industry Regulatory Authority). Preferred Stock Under the terms of our articles of incorporation, our board of directors is authorized to issue shares of non-voting preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of non-voting preferred stock. The purpose of authorizing our board of directors to issue non-voting preferred stock and determine our rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of non-voting preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. Other than the Series B and C Preferred Stock discussed below, there are no shares of preferred stock presently outstanding, and we have no present plans to issue any shares of preferred stock. Voting Common Stock Holders of the Company’s common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. On all other matters, the affirmative vote of the holders of a majority of the stock present in person or represented by proxy and entitled to vote is required for approval, unless otherwise provided in our articles of incorporation, bylaws or applicable law. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock. In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future. Unless otherwise indicated, all of the following sales or issuances of Company securities were conducted under the exemption from registration as provided under Section 4(2) of the Securities Act of 1933 (and also qualified for exemption under 4(5), formerly 4(6) of the Securities Act of 1933, except as noted below). All of the shares issued were issued in transactions not involving a public offering, are considered to be restricted stock as defined in Rule 144 promulgated under the Securities Act of 1933 and stock certificates issued with respect thereto bear legends to that effect. The Company has compensated consultants and service providers with restricted common stock during the development of our business and when our capital resources were not adequate to provide payment in cash. Warrants At December 31, 2021 the Company had 4,578 warrants outstanding at a weighted average exercise price of $246.00, all of which were exercisable. These warrants were forfeited effective June 30, 2022. At September 30, 2022 the Company had 40,000 warrants outstanding at an exercise price of $7.50 which were issued for short term borrowings. See Note 11. The Black-Scholes model was used to calculate the fair value of the warrants, which amounted to $27,417. |
STOCK OPTIONS
STOCK OPTIONS | 9 Months Ended |
Sep. 30, 2022 | |
STOCK OPTIONS | |
STOCK OPTIONS | NOTE 15– STOCK OPTIONS Description of Stock Option Plan On November 5, 2021, at our annual shareholder meeting the Second Amended and Restated 2017 Stock Incentive Plan was adopted to increase the shares issuable under the plan from 1,333,333 to 75,000,000 shares. All terms of the Plan shall remain the same with the exception of the amount of shares reserved for issuance under the Plan. We have 75,000,000 shares available for issuance under the Second Amended and Restated 2017 Stock Incentive Plan. Stock Option Activity At September 30, 2022 and December 31, 2021 there were no stock options issued or outstanding. |
COMMITMENTS CONTINGENCIES AND L
COMMITMENTS CONTINGENCIES AND LEGAL PROCEEDINGS | 9 Months Ended |
Sep. 30, 2022 | |
COMMITMENTS CONTINGENCIES AND LEGAL PROCEEDINGS | |
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | NOTE 17 – COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS Legal Proceedings From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of the Company’s business. Although we cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and may be adjusted from time to time according to developments. As of September 30, 2019, the Company closed retail stores in Portland, Maine, Encino, California and Calgary, Canada. The Company has recorded restructuring reserves related to the store closures. The Company cannot determine the outcome of these proceedings. On October 15, 2018, the Company closed the Purchase and Sale Agreement with EZ-CLONE Enterprises, Inc., a California corporation (the “Agreement”). On November 5, 2019, the Company amended the Agreement with one 24.5% shareholder of EZ-CLONE Enterprises, Inc. (“EZ-CLONE”), to extend the date to purchase the remaining 49% of stock of EZ-CLONE in exchange for a 20% extension fee (a total of $171,000 for the 49% or $85,500 for each 24.5% shareholder) of the $855,000 cash payable at the earlier of the closing of $2,000,000 in funding or nine months (July 2020). The Company did not close the purchase of the remaining 49% of stock of EZ-CLONE by the extended deadline. On September 15, 2020, the Company received notice that William Blackburn and Brad Mickelsen, minority shareholders of EZ-CLONE Enterprises, Inc. (“Plaintiffs”), a majority owned subsidiary of the Company, filed a complaint against the Company and its officers in the Superior Court of California, County of Sacramento (“Complaint”) for claims related to breach under the Purchase and Sale Agreement dated October 15, 2018 between the Company and Plaintiffs. On September 15, 2020, the Company filed a notice of removal with the California Superior Court, County of Sacramento and the United States District Court for the Eastern District of California. The case was removed to Federal District Court for the Eastern District of California and Plaintiffs filed an Ex Parte Application for TRO and an Order for Preliminary Injunction with the Federal Court. The TRO was granted on September 16, 2020 and a preliminary injunction hearing was scheduled for September 29, 2020. After reviewing all pleadings and oral arguments at the hearing, the Court issued a ruling granting Plaintiffs’ request for a preliminary injunction. This injunction provides Plaintiffs with operating control of EZ-CLONE and this control assures that GrowLife will have little if any involvement in operations and that GrowLife will be denied cash distributions for the foreseeable future. After reviewing all pleadings and oral arguments at the hearing, the Court issued a ruling granting Plaintiffs’ request for a preliminary injunction. The parties provided legal briefs to the Federal court to determine if rescission should be granted. The Court did not reach a decision on this issue, and denied without prejudice, the Company’s effort to reverse the preliminary injunction. The Company is currently reviewing all options in this matter including settlement discussions. As of December 4, 2020, our officers, both current and former, were dismissed from the case. The Plaintiffs are seeking rescission of the Purchase and Sale Agreement, unspecified damages in excess of ten thousand dollars, and other equitable relief. The Company cannot predict the outcome of these proceedings at this time. At September 30, 2022, the Company recorded a liability of $2,131,000 for acquisition payable of which a $1,105,000 is payable in stock and $1,026,000 is payable in cash. Operating Leases The Company is obligated under the following leases for its various facilities. On December 14, 2018, GrowLife, Inc. entered into a lease agreement with Pensco Trust Company for a 28,000 square feet industrial space at 10170 Croydon Way, Sacramento, California 95827 used for the assembly and sales of plastic parts by EZ-CLONE. The monthly lease payment is $17,500 and increases approximately 3% per year. The lease expires on December 31, 2023. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2022 | |
INCOME TAXES | |
INCOME TAXES | NOTE 18 – INCOME TAXES The Company has incurred losses since inception, which have generated net operating loss carryforwards. The net operating loss carryforwards arise solely from United States sources. EZ-CLONE currently files its own separate tax return as it does not meet the qualifications for being included in the Company’s consolidated tax returns. During 2021 and 2020 EZ-CLONE generated taxable income and our tax expense relates to estimated taxes owed by EZ-CLONE. For the nine months ended September 30, 2022 EZ-CLONE incurred a loss, and a tax benefit was recorded in the amount of $146,000. At December 31, 2021 the Company has net operating loss carryforwards of approximately $24.9 million which expire in 2022-2038. Because it is more likely than not that sufficient tax earnings will be generated to utilize the net operating loss carryforwards, the deferred tax asset related to the net operating loss carryforwards has a corresponding 100% valuation allowance. Additionally, under the Tax Reform Act of 1986, the amounts of, and benefits from, net operating losses may be limited in certain circumstances, including a change in control. Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in its stock ownership. There can be no assurance that the Company will be able to utilize any net operating loss carryforwards in the future. The Company is subject to possible tax examination for the years 2014 through 2021. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2022 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 19 SUBSEQUENT EVENTS Reverse Stock Split On October 7, 2022, FINRA (the Financial Industry Regulatory Authority) announced the Reverse Stock Split which was previously approved by the Company’s shareholders at the Company’s November 5, 2021 annual meeting of stockholders. All share and per share amounts have been adjusted in these condensed consolidated financial statements to reflect the effects of the reverse stock split. As a result of the Reverse Stock Split, every one hundred and fifty (150) shares of the issued and outstanding common stock of the Company will be converted into one (1) share of common stock. Any and all fractional shares resulting from the Reverse Split which are less than 1 (one) whole share, shall not be rounded up to the next whole share and rather such Holder shall receive a fractional pro-rata cash payment equal to 120% of the closing market price on the Record Date. Any and all fractional shares created by the Reverse Stock Split which are greater than one (1) whole share will be rounded up to the nearest whole share. The number of authorized shares will not change as a result of the Reverse Stock Split. Financing On October 17, 2022, the Company entered into a Convertible Note Agreement with 1800 Diagonal in the principal amount of $88,000, with an aggregate funded amount of $76,500. The Note matures on October 17, 2023, and bears interest at 8% annually. The Note may be converted at any time after 180 days from execution at Seventy-Five Percent (75%) of the average of the three lowest trading prices for the proceeding 15 trading days prior to conversion. On November 2, 2022, the Company entered into a Note Purchase Agreement (the “NPA”) with Quick Capital, LLC, a Wyoming Limited Liability Company (“QCL”) and issued a Convertible Promissory Note in the principal amount of $95,555.55, with an aggregate funded amount of $86,000.00 (the “QCL Note”) to QCL pursuant to the NPA, and 100,000 restricted origination shares (the “Origination Shares”). The Note matures 8 months after the issue date (“Maturity Date”), bears interest at 12% annually, and is convertible, in whole or in part, at any time and from time to time before the Maturity at the option of the holder at the Conversion Price that shall equal the lesser of: a) $0.06 or b) Seventy-Five Percent (75%) of the average of the lowest two lowest trading prices for the proceeding 15 trading days prior to conversion. Additionally, the Company issued to QCL a 5-year Common Stock Purchase Warrant granting QCL the right to purchase up to 1,911,111 shares of the Company common stock at an exercise price of $0.05 per share, subject to adjustments as fully set forth therein (the “QCL Warrant”). |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS | |
Basis of Presentation | Basis of Presentation - The Company has evaluated subsequent events through the date of the filing of its Form 10-Q with the Securities and Exchange Commission. Other than those events disclosed in Note 19, the Company is not aware of any other significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Company’s financial statements. |
Principles of Consolidation | Principles of Consolidation |
Cash and Cash Equivalents | Cash and Cash Equivalents |
Accounts Receivable and Revenue | Accounts Receivable and Revenue – |
Sales Returns | Sales Returns - |
Concentration of Credit and Sales Risk | The Company had the following concentrations of credit and sales risk: Customers with over 10% of sales - the Company had three customers of EZ-CLONE that represented approximately 10%, 13% and 30% of consolidated revenue for the nine months ended September 30, 2022. Customers with over 10% of outstanding EZ-CLONE accounts receivable - as of September 30, 2022 three customers totaled 76%, and as of December 31, 2021 one customer totaled 85%. All amounts from these customers were current for both periods. |
Inventories | Inventories - |
Property and Equipment | Property and Equipment |
Long Lived Assets | Long Lived Assets |
Intangible Assets | Intangible Assets |
Goodwill | Goodwill - |
Fair Value Measurements and Financial Instruments | Fair Value Measurements and Financial Instruments Fair Value Measurement and Disclosures Level 1 – Quoted prices in active markets for identical assets and liabilities; Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of September 30, 2022, and December 31, 2021 are based upon the short-term nature of the assets and liabilities. The Company’s derivative financial instruments are considered Level 3 instruments. See Note 12. |
Derivative Financial Instruments | Derivative Financial Instruments – |
Stock Based Compensation | Stock Based Compensation |
Convertible Securities | Convertible Securities |
Determining Fair Value under ASC 718 | Determining Fair Value under ASC 718 |
Net Loss Per Share | Net Loss Per Share - As of September 30, 2022, there are no dilutive stock options or warrants outstanding. In addition, we have an unknown number of common shares to be issued under the convertible notes financing agreements because the number of shares ultimately issued depends on the price at which the holder converts its debt to shares and exercises its warrants. The lower the conversion or exercise prices, the more shares that will be issued to the holder upon the conversion of debt to shares. The Company will not know the exact number of shares of stock issued to the holder until the debt is actually converted to equity. |
Dividend Policy | Dividend Policy |
Use of Estimates | Use of Estimates - |
Advertising | Advertising |
Comprehensive loss | Comprehensive loss |
Research and Development Expenses | Research and Development Expenses September 30, 2022 and 2021 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements —--- In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). Based on the Company’s review of accounting standard updates issued, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significant impact on the Company’s consolidated financial statements. |
INVENTORY (Tables)
INVENTORY (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
INVENTORY | |
Schedule of inventory | September 30, 2022 December 31, 2021 Raw materials $ 686,542 $ 723,834 Work in proess 223,368 375,083 Finished goods 196,412 183,318 Inventory deposits - 17,325 $ 1,106,322 $ 1,299,560 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
PROPERTY AND EQUIPMENT | |
Summary of property and equipment | September 30, 2022 December 31, 2021 Machinery, equipment and tooling $ 373,456 $ 356,867 Computer equipment 16,675 16,675 Leasehold equipment 14,703 14,702 Automobile 157,728 157,728 Total $ 562,562 $ 545,972 Less accumulated depreciation and amortization (338,030 ) (296,066 ) Net property and equipment $ 224,532 $ 249,906 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
INTANGIBLE ASSETS (Tables) | |
Intangible Assets | Estimated life September 30, 2022 December 31, 2021 Customer lists 3.5 Years $ 1,297,000 $ 1,297,000 Intellectual property 3.5 Years 1,054,000 1,054,000 Less accumulated amortization (2,351,000 ) (1,891,998 ) $ - $ 459,002 Goodwill Indefinite $ 781,749 $ 781,749 Total Intangibles and Goodwill $ 781,749 $ 1,240,751 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
NOTES PAYABLE | |
Schedule of notes maturity | Inteerest Rate Principal Accrued Interest Discount Balance Government Assistance Notes Economic Injury Disaster Loan (EZC) 3.75 % $ 149,900 $ 12,028 $ 161,928 Paycheck Protection Program 1 % 362,500 9,171 371,671 Paycheck Protection Program 1 % 337,050 5,703 342,753 $ 849,450 $ 26,902 $ 876,352 Promisory Notes Comercial Bank secured by automobile 3.44 % $ 123,823 $ - $ 123,823 Promisory notes 5 % 137,500 6,070 143,570 AJB Capital 5-17-22 10 % 750,000 - (100,737 ) 649,263 AJB Capital 9-28-22 10 % 220,000 - (23,500 ) 196,500 $ 1,231,323 $ 6,070 $ (124,237 ) $ 1,113,156 Convertible Promisory Notes Silverback 2-12-21 22 % $ 48,579 $ 48,927 534,717 Dublin Holdings 2-6-21 8 % 695,562 410,282 1,105,844 Dublin Holdings 8-25-21 8 % 335,000 31,056 366,903 Dublin Holdings 11-5-21 8 % 225,000 16,903 241,903 $ 1,741,353 $ 507,168 $ - $ 2,248,521 Inteerest Rate Principal Accrued Interest Balance Government Assistance Notes Economic Injury Disaster Loan (EZC) 3.75 % $ 149,900 $ 10,524 $ 160,424 Economic Injury Disaster Loan (GLI) 3.75 % 149,900 15,652 165,552 Paycheck Protection Program 1 % 362,500 6,350 368,850 Paycheck Protection Program 1 % 337,050 3,118 340,168 $ 999,350 $ 35,644 $ 1,034,994 Secured Promisory Note Comercial Bank secured by automobile 3.44 % $ 137,728 $ - $ 137,728 Convertible Promisory Notes Silverback 2-12-21 10 % $ 995,130 $ 212,169 $ - $ 1,207,299 Dublin Holdings 2-6-21 8 % 780,791 10,303 - 791,094 Dublin Holdings 8-25-21 8 % 335,000 9,511 - 344,511 Dublin Holdings 11-5-21 8 % 225,000 2,666 - 227,666 $ 2,335,921 $ 234,649 $ - $ 2,570,570 Amortizing Promisory Note First Fire 12 % 12,141 978 - 13,119 $ 2,348,062 $ 235,627 $ - $ 2,583,689 |
DERIVATIVE LIABILITY (Tables)
DERIVATIVE LIABILITY (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
DERIVATIVE LIABILITY | |
Schedule of fair value of financial instruments | Balance, December 31, 2021 $ 1,698,272 Additions 270,586 Conversions (836,272 ) Change in fair value 622,674 Balance, September 30, 2022 $ 1,755,260 |
DESCRIPTION OF BUSINESS AND O_2
DESCRIPTION OF BUSINESS AND ORGANIZATION (Details Narrative) - USD ($) | Oct. 15, 2018 | Sep. 30, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | Nov. 08, 2021 | Nov. 05, 2021 |
Common Stock Par Value | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Preferred Stock | 10,000,000 | 10,000,000 | 10,000,000 | |||
Authorized Common Stock | 740,000,000 | 740,000,000 | 740,000,000 | 740,000,000 | ||
Company An Aggregate Stock | 750,000,000 | |||||
Preferred Stock Par Value | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Biding Price | $ 1,105,000 | |||||
Cash Payable | $ 1,026,000 | $ 1,026,000 | ||||
Total Liability Of Acquisition Payable | $ 2,131,000 | |||||
EZ-CLONE Cloning Manufacturing | ||||||
Total Liability Of Acquisition Payable | $ 2,131,000 | $ 2,131,000 | ||||
EZ-CLONE Cloning Manufacturing | Purchase And Sale Agreement [Member] | ||||||
Agreement Descriptions | On November 5, 2019, the Company amended the Agreement with one 24.5% shareholder of EZ-CLONE Enterprises, Inc. (“EZ-CLONE”), to extend the date to purchase the remaining 49% of stock of EZ-CLONE in exchange for a 20% extension fee (a total of $171,000 for the 49% or $85,500 for each 24.5% shareholder) of the $855,000 cash payable at the earlier of the closing of $2,000,000 in funding or nine months (July 2020). The Company did not close the purchase of the remaining 49% of stock of EZ-CLONE by the extended deadline |
GOING CONCERN (Details Narrativ
GOING CONCERN (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
DESCRIPTION OF BUSINESS AND ORGANIZATION | ||
Net Loss | $ (3,118,676) | $ (4,395,585) |
Cash (used In) Operating Activities | 1,310,671 | $ 239,142 |
Accumulated Deficit | $ (163,000,000) |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | |
Federal Deposit Insurance Amount | $ 250,000 | $ 250,000 | |
Risk free interest rate | 1% | ||
Expected dividend rate | 0% | ||
Allowance For Doubtful Accounts | 4,000 | $ 4,000 | $ 10,000 |
Advertising And Marketing Costs | $ 5,950 | $ 45,451 | |
Leasehold Improvment Descriptions | Depreciation is computed by the straight-line method over the estimated useful lives or lease period of the relevant asset, generally 3-10 years, except for leasehold improvements which are depreciated over the lesser of the life of the lease or 10 years. | ||
One Customer [Member] | Accounts Receivable [Member] | |||
Concentration Of Risk | 85% | ||
One Customer [Member] | Revenue Net [Member] | |||
Concentration Of Risk | 10% | ||
Two Customer [Member] | Revenue Net [Member] | |||
Concentration Of Risk | 13% | ||
Three Customer [Member] | Accounts Receivable [Member] | |||
Concentration Of Risk | 76% | ||
Three Customer [Member] | Revenue Net [Member] | |||
Concentration Of Risk | 30% |
BUSINESS COMBINATIONS ACQUISI_2
BUSINESS COMBINATIONS ACQUISITION PAYABLE AND OTHER TRANSACTION (Details Narrative1) - USD ($) | Nov. 05, 2019 | Oct. 15, 2018 | Sep. 30, 2022 | Jun. 30, 2022 | Dec. 31, 2021 |
Intangible Assets | $ 2,351,000 | ||||
Total Liability Of Acquisition Payable | $ 2,131,000 | ||||
Acquisition Of Ez-clone Enterprises, Inc. Payable In Cash | 1,026,000 | $ 1,026,000 | |||
Purchase And Sale Agreement [Member] | |||||
Agreement descriptions | On November 5, 2019, the Company amended the Agreement with one 24.5% shareholder of EZ-CLONE to extend the date to purchase the remaining 49% of stock of EZ-CLONE in exchange for a 20% extension fee (a total of $171,000 for the 49% or $85,500 for each 24.5% shareholder) of the $855,000 cash payable at the earlier of the closing of $2,000,000 in funding or nine months (July 2020). The Company did not close the purchase of the remaining 49% of stock of EZ-CLONE by the extended deadline | ||||
EZ-CLONE Enterprises, Inc. [Member] | |||||
Agreement descriptions | At closing, we paid 51% of the purchase price, totaling $2,040,00 of which (i) a cash payment of $645,000; and (ii) issuing 715,385 restricted shares of our common stock, valued at $1,395,000. Per the Agreement the remaining 49% of the purchase price was to be delivered within one year, totaling $1,960,000 and payable via: (i) a cash payment of $855,000; and (ii) the issuance of the Company’s common stock at a value of $1,105,000 | ||||
Total purchase price | $ 4,000,000 | ||||
Cash purchase price | 1,500,000 | ||||
Stock issued for purchase price | $ 250,000 | ||||
EZ-CLONE Cloning Manufacturing | |||||
Liability Payable In Stock | 1,105,000 | 1,105,000 | |||
Total Liability Of Acquisition Payable | 2,131,000 | $ 2,131,000 | |||
Acquisition Of Ez-clone Enterprises, Inc. Payable In Cash | $ 1,026,000 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
INVENTORY | ||
Raw Materials | $ 686,542 | $ 723,834 |
Work In Process | 223,368 | 375,083 |
Finished Goods | 196,412 | 183,318 |
Inventory Deposits | 0 | 17,325 |
Total Inventory | $ 1,106,322 | $ 1,299,560 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Machinery, equipment and tooling | $ 373,456 | $ 356,867 |
Computer equipment | 16,675 | 16,675 |
Leasehold equipment | 14,703 | 14,702 |
Automobile | 157,728 | 157,728 |
Total Property And Equipment | 562,562 | 545,972 |
Less Accumulated Depreciation And Amortization | (338,030) | (296,066) |
Net Property And Equipment | 224,532 | 249,906 |
Property Plant And Equipment [Member] | ||
Net Property And Equipment | $ 224,532 | $ 249,906 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
PROPERTY AND EQUIPMENT | ||
Depreciation Expense | $ 41,963 | $ 37,152 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Less: Accumulated Amortization | $ (2,351,000) | $ (1,891,998) |
Net Intangible Assets - Definitive Life | 0 | 459,002 |
Goodwill - Indefinite Life | 781,749 | 781,749 |
Total Intangible Assets And Goodwill | 781,749 | 1,240,751 |
Customer Lists | ||
Intangible Assets - Definitive Life, Gross | $ 1,297,000 | 1,297,000 |
Estimated Useful Lives | 3 years 6 months | |
Intellectual Property [Member] | ||
Intangible Assets - Definitive Life, Gross | $ 1,054,000 | $ 1,054,000 |
Estimated Useful Lives | 3 years 6 months |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
INTANGIBLE ASSETS (Tables) | |||
Amortization Expense | $ 459,002 | $ 503,787 | $ 671,716 |
LEASES (Details Narrative)
LEASES (Details Narrative) - USD ($) | 9 Months Ended | |||
Jan. 02, 2019 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
LEASES | ||||
Right-of-use Assets | $ 257,382 | $ 277,353 | $ 407,166 | |
Operating lease right of use asset liabilities | $ 1,378,000 | |||
Lease Cost | $ 172,107 | $ 166,553 |
ACCOUNTS PAYABLE (Details Narra
ACCOUNTS PAYABLE (Details Narrative) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
ACCOUNTS PAYABLE (Details Narrative) | ||
Accounts Payable | $ 948,921 | $ 1,146,344 |
ACCRUED EXPENSES (Details Narra
ACCRUED EXPENSES (Details Narrative) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
ACCOUNTS PAYABLE (Details Narrative) | ||
Accrued Expenses | $ 245,377 | $ 219,398 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 | Apr. 17, 2020 |
Convertible Notes Payable, Net | $ 2,248,521 | $ 2,583,816 | |
Promissory Notes Payable, Net | |||
Principal | 1,231,323 | ||
Accrued Interest | 6,070 | ||
Convertible Notes Payable, Net | 1,113,156 | ||
Debt Discounts | (124,237) | ||
AJB Capital Member 5-17-22 | |||
Principal | 750,000 | ||
Accrued Interest | $ 0 | ||
Interest Rate | 10% | ||
Convertible Notes Payable, Net | $ 649,263 | ||
Debt Discounts | (100,737) | ||
AJB Capital Member 9-28-22 [Member] | |||
Principal | 220,000 | ||
Accrued Interest | $ 0 | ||
Interest Rate | 10% | ||
Convertible Notes Payable, Net | $ 196,500 | ||
Debt Discounts | (23,500) | ||
Amortizing Promisory Note [Member] | |||
Principal | 2,348,062 | ||
Accrued Interest | 235,627 | ||
Convertible Notes Payable, Net | 2,583,689 | ||
Debt Discounts | 0 | ||
Promisory Note [Member] | |||
Principal | 137,500 | ||
Accrued Interest | $ 6,070 | ||
Interest Rate | 5% | ||
Convertible Notes Payable, Net | $ 143,570 | ||
Economic Injury Disaster Loan (GLI) | |||
Principal | 149,900 | ||
Accrued Interest | $ 15,652 | ||
Interest Rate | 3.75% | ||
Convertible Notes Payable, Net | $ 165,552 | ||
First Fire [Member] | |||
Principal | 12,141 | ||
Accrued Interest | $ 978 | ||
Interest Rate | 12% | ||
Convertible Notes Payable, Net | $ 13,119 | ||
Debt Discounts | 0 | ||
Economic Injury Disaster Loan (EZC) | |||
Principal | 149,900 | 149,900 | |
Accrued Interest | $ 12,028 | $ 10,524 | |
Interest Rate | 3.75% | 3.75% | |
Convertible Notes Payable, Net | $ 161,928 | $ 160,424 | |
Paycheck Protection Program One | |||
Principal | 362,500 | 362,500 | |
Accrued Interest | $ 9,171 | $ 6,350 | |
Interest Rate | 1% | 1% | |
Convertible Notes Payable, Net | $ 371,671 | $ 368,850 | |
Paycheck Protection Program Two | |||
Principal | 337,050 | 337,050 | |
Accrued Interest | $ 5,703 | $ 3,118 | |
Interest Rate | 1% | 1% | |
Convertible Notes Payable, Net | $ 342,753 | $ 340,168 | |
Government Assistance Notes | |||
Principal | 849,450 | 999,350 | |
Accrued Interest | 26,902 | 35,644 | |
Convertible Notes Payable, Net | 876,352 | 1,034,994 | $ 362,500 |
Comercial Bank | |||
Principal | 123,823 | 137,728 | |
Accrued Interest | $ 0 | $ 0 | |
Interest Rate | 3.44% | 3.44% | |
Convertible Notes Payable, Net | $ 123,823 | $ 137,728 | |
Convertible Notes Payable [Member] | |||
Principal | 1,741,353 | 2,335,921 | |
Accrued Interest | 507,168 | 234,649 | |
Convertible Notes Payable, Net | 2,248,521 | 2,570,570 | |
Debt Discounts | 0 | 0 | |
Silverback 2-12-21 | Convertible Notes Payable [Member] | |||
Principal | 48,579 | 995,130 | |
Accrued Interest | $ 48,927 | $ 212,169 | |
Interest Rate | 22% | 10% | |
Convertible Notes Payable, Net | $ 534,717 | $ 1,207,299 | |
Debt Discounts | 0 | ||
Dublin Holdings 8-25-21 [Member] | Convertible Notes Payable [Member] | |||
Principal | 335,000 | 335,000 | |
Accrued Interest | $ 31,056 | $ 9,511 | |
Interest Rate | 8% | 8% | |
Convertible Notes Payable, Net | $ 366,903 | $ 344,511 | |
Debt Discounts | 0 | ||
Dublin Holdings11-5-21 [Member] | Convertible Notes Payable [Member] | |||
Principal | 225,000 | 225,000 | |
Accrued Interest | $ 16,903 | $ 2,666 | |
Interest Rate | 8% | 8% | |
Convertible Notes Payable, Net | $ 241,903 | $ 227,666 | |
Debt Discounts | 0 | ||
Dublin Holdings 2-6-21 [Member] | Convertible Notes Payable [Member] | |||
Principal | 695,562 | 780,791 | |
Accrued Interest | $ 410,282 | $ 10,303 | |
Interest Rate | 8% | 8% | |
Convertible Notes Payable, Net | $ 1,105,844 | $ 791,094 | |
Debt Discounts | $ 0 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||||||||
Jan. 04, 2022 | Feb. 03, 2021 | Oct. 02, 2020 | Sep. 28, 2022 | May 17, 2022 | Aug. 25, 2021 | Feb. 26, 2021 | Jun. 19, 2020 | Apr. 17, 2020 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Sep. 19, 2020 | |
Original Issue Discount | $ (287,556) | $ (130,631) | $ (1,220,179) | $ (3,391,295) | |||||||||||
Convertible Notes Payable, Net | $ 2,248,521 | 2,248,521 | $ 2,583,816 | ||||||||||||
Proceed from note | $ 1,223,375 | $ 2,385,455 | |||||||||||||
Silverback Capital Corporation [Member] | |||||||||||||||
Common stock shares | 1,302,000 | ||||||||||||||
Conversion Price | $ 0.36 | $ 0.36 | |||||||||||||
Principal amount | $ 469,350 | $ 469,350 | |||||||||||||
Convertible Notes Payable [Member] | |||||||||||||||
Convertible Notes Payable, Net | 2,248,521 | 2,248,521 | 2,570,570 | ||||||||||||
AJB Capital Investments LLC | |||||||||||||||
Common stock shares | 53,334 | 50,000 | |||||||||||||
Interest Rate | 10% | 10% | |||||||||||||
Original Issue Discount | $ 75,000 | 252,000 | |||||||||||||
Transaction Expenses | $ 5,000 | 56,000 | |||||||||||||
Extension commitment fee | $ 33,333 | ||||||||||||||
Maturity date | May 28, 2023 | Nov. 17, 2022 | |||||||||||||
Purchase of warrants | 40,000 | ||||||||||||||
Share price | $ 7.50 | ||||||||||||||
Convertible Notes Payable, Net | $ 220,000 | $ 750,000 | |||||||||||||
Proceed from note | $ 151,048 | ||||||||||||||
Amortization of the debt discount | 128,000 | ||||||||||||||
EZ-CLONE | Convertible Notes Payable [Member] | |||||||||||||||
Interest Rate | 3.75% | ||||||||||||||
Convertible Notes Payable, Net | $ 299,800 | ||||||||||||||
Repayment Of Debt | $ 1,392 | ||||||||||||||
Payment Term | 30 years | ||||||||||||||
Dublin Holdings LLC [Member] | |||||||||||||||
Principal | $ 295,000 | $ 295,000 | |||||||||||||
Common stock shares | 442,954 | ||||||||||||||
Interest Rate | 8% | 8% | |||||||||||||
Conversion Price | $ 15 | $ 45 | $ 0.67 | $ 0.67 | |||||||||||
Funding Amount | $ 560,000 | $ 3,088,000 | |||||||||||||
Original Issue Discount | 50,000 | ||||||||||||||
Total Purchase Price | 2,850,000 | ||||||||||||||
Transaction Expenses | $ 10,000 | 10,000 | |||||||||||||
Tranche Expense | 928,000 | $ 68,000 | |||||||||||||
Additional Tranche Expense | 2,160,000 | ||||||||||||||
Aggregate Oid | $ 160,000 | ||||||||||||||
First Fire [Member] | |||||||||||||||
Interest Rate | 12% | ||||||||||||||
Convertible Notes Payable, Net | 13,119 | ||||||||||||||
Self Amortization Promissory Note | $ 156,600 | ||||||||||||||
Total Monthly Payments | $ 13,851 | ||||||||||||||
Government Assistance Notes | |||||||||||||||
Interest Rate | 1% | ||||||||||||||
Convertible Notes Payable, Net | $ 362,500 | $ 876,352 | $ 876,352 | $ 1,034,994 | |||||||||||
Loan due date | Apr. 17, 2025 | ||||||||||||||
Securities Purchase Agreements | Sixth Street Lending LLC | Convertible Notes Payable [Member] | |||||||||||||||
Interest Rate | 8% | 8% | |||||||||||||
Original Issue Discount | $ 32,500 | ||||||||||||||
Transaction Expenses | 7,700 | ||||||||||||||
Convertible Notes Payable, Net | $ 310,200 | 310,200 | |||||||||||||
Amortization of the debt discount | $ 182,000 | ||||||||||||||
Principal amount | $ 200,050 | $ 200,050 | |||||||||||||
Convertile shares | 648,728 | 648,728 | |||||||||||||
Conversion price | $ 0.31 | ||||||||||||||
Paycheck Protection Program | |||||||||||||||
Interest Rate | 1% | ||||||||||||||
Convertible Notes Payable, Net | $ 337,050 | ||||||||||||||
Loan due date | Feb. 03, 2026 |
DERIVATIVE LIABILITY (Details)
DERIVATIVE LIABILITY (Details) | 9 Months Ended |
Sep. 30, 2022 USD ($) | |
DERIVATIVE LIABILITY | |
Beginning, Balance | $ 1,698,272 |
Additions | 270,586 |
Conversion | (836,272) |
Change in fair value | 622,674 |
Ending, balance | $ 1,755,260 |
DERIVATIVE LIABILITY (Details N
DERIVATIVE LIABILITY (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
DERIVATIVE LIABILITY | ||
Derivative Instruments | $ 1,755,260 | $ 1,698,272 |
Change In Fair Value Of Derivative Liability | $ 390,069 | |
Percentage of debt convertible, range | 25% to 50% |
RELATED PARTY TRANSACTIONS AN_2
RELATED PARTY TRANSACTIONS AND CERTAIN RELATIONSHIPS (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Note bear interest description | interest at 3% and are due in July 2041 | |
Two Founders [Member] | ||
Due To Related Party | $ 161,000 | $ 161,000 |
EQUITY (Details Narrative)
EQUITY (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2022 | Dec. 31, 2021 | Nov. 08, 2021 | Nov. 05, 2021 | |
Authorized Common Stock Decreased | 120,000,000 | |||
Common Stock, Par Value Per Share | $ 0.0001 | $ 0.0001 | $ 0.0001 | |
Authorized Preferred Stock | 10,000,000 | 10,000,000 | 10,000,000 | |
Preferred Stock, Par Value Per Share | $ 0.0001 | $ 0.0001 | $ 0.0001 | |
Authorized Common Stock | 740,000,000 | 750,000,000 | ||
Authorized Common Stock | 740,000,000 | 740,000,000 | 740,000,000 | 740,000,000 |
Warrant [Member] | ||||
Warrant Excise Price | $ 7.50 | $ 246 | ||
Warratns exercise price description | exercise price of $7.50 which were issued for short term borrowings. See Note 11 | |||
Fair value of warrants | $ 27,417 | |||
Warrants outstanding | 40,000 | 4,578 | ||
Maximum [Member] | ||||
Authorized Common Stock | 740,000,000 |
STOCK OPTIONS (Details Narrativ
STOCK OPTIONS (Details Narrative) - First Amended and Restated 2017 Stock Incentive Plan - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Options To Purchase Common Stock | 75,000,000 | |
Description Of Stock Option Grants Common Stock | shares issuable under the plan from 1,333,333 to 75,000,000 shares | |
Stock options or warrants outstanding | $ 0 | $ 0 |
COMMITMENTS CONTINGENCIES AND_2
COMMITMENTS CONTINGENCIES AND LEGAL PROCEEDINGS (Details Narrative) - USD ($) | 9 Months Ended | |||
Dec. 14, 2018 | Sep. 30, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | |
COMMITMENTS CONTINGENCIES AND LEGAL PROCEEDINGS | ||||
Monthly Lease Payment Percent | 3% | |||
Monthly Lease Payment | $ 17,500 | |||
Lease expire | December 31, 2023 | |||
Liability Payable In Stock | $ 1,105,000 | |||
Cash Payable | 1,026,000 | $ 1,026,000 | ||
Total Liability Of Acquisition Payable | $ 2,131,000 | |||
Agreement Descriptions | On November 5, 2019, the Company amended the Agreement with one 24.5% shareholder of EZ-CLONE Enterprises, Inc. (“EZ-CLONE”), to extend the date to purchase the remaining 49% of stock of EZ-CLONE in exchange for a 20% extension fee (a total of $171,000 for the 49% or $85,500 for each 24.5% shareholder) of the $855,000 cash payable at the earlier of the closing of $2,000,000 in funding or nine months (July 2020). The Company did not close the purchase of the remaining 49% of stock of EZ-CLONE by the extended deadline |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Net Operating Loss Carryforwards | $ 2,490,000 | |
Net Operating Loss Carryforwards, Valuation Allowance, Percentage | 100% | |
Net Operating Loss Carryforwards Expiration | 2022-2038 | |
EZCLONE Cloning Manufacturings [Member] | ||
Deferred tax benefit | $ 146,000 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) | Nov. 02, 2022 USD ($) | Oct. 07, 2022 USD ($) integer |
Diagonal [Member] | ||
Interest Rate | 8% | |
Note Conversion Period | 180 years | |
Execution Percentage | 75% | |
Trading Days | integer | 15 | |
Principal Amount | $ 88,000 | |
Covertiblenoteagreement | $ 76,500 | |
Maturity Date | October 17, 2023 | |
Quick Capital Llc [Member] | ||
Covertiblenoteagreement | $ 86,000 | |
Principal Amount | $ 9,555,555,000 | |
Period Of Maturity | 8 years | |
Annuual Percentage Rate | 12% | |
Subsequent Event [Member] | ||
Description Of Conversion | As a result of the Reverse Stock Split, every one hundred and fifty (150) shares of the issued and outstanding common stock of the Company will be converted into one (1) share of common stock | |
Cash Payment Percentage | 120% |