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2022-03-08 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure utr:acre utr:sqft

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

~~[X]~~☒ ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, ~~2020~~2021

☐ 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 000-50099

GRAPEFRUIT USA, INC.

(Exact name of registrant as specified in its charter)

California		95-4451059
Delaware		95-4451059
(State of Incorporation)		(I.R.S. Employer Identification No.)

1000 Northwest Street, Mid-Town Brandy Wine, Suite 1200-3094, Wilmington, DE 19801

(Address of principal executive offices) (Zip Code)

310-575-1175

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol(s)		Name of exchange on which registered
No par value common stock		GPFT		OTCQB

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.0001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ~~[ ]~~ ☐ No ~~[X]~~☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ~~[ ]~~ ☐ No ~~[X]~~☒

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 ~~[X]~~☒ No ~~[ ]~~☐

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

Indicate by check mark whether the 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 [☐ ] Accelerated filer [☐ ] Non-accelerated filer ~~[X]~~☒ Smaller reporting company ~~[X]~~☒ Emerging growth company ~~[ ]~~☐

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

The aggregate market value of the shares of common stock held by non-affiliates of the registrant as of ~~March~~April 241, ~~2021~~2022 was $3215,~~711~~386,~~852 based~~597 based on the closing price of $0.150275 per share of common stock of Grapefruit USA, Inc. as quoted on the OTC Pink Marketplace on that date.

There were ~~510~~559,~~767~~512,~~041~~622 shares outstanding of the registrant’s Common Stock as of April 151, ~~2021~~2022.

TABLE OF CONTENTS

PART I
ITEM 1	Business	3
ITEM 1A	Risk Factors	1110
ITEM 2	Properties	1210
ITEM 3	Legal Proceedings	1210
ITEM 4	Mine Safety Disclosures	1210
PART II
ITEM 5	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	1210
ITEM 6	Selected Financial Data	1312
ITEM 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1412
ITEM 8	Financial Statements and Supplementary Data	2221
ITEM 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	40
ITEM 9A	Controls and Procedures	40
ITEM 9B	Other Information	4140
PART III
ITEM 10	Directors, Executive Officers, and Corporate Governance	4140
ITEM 11	Executive Compensation	44
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	46
ITEM 13	Certain Relationships and Related Transactions, and Director Independence	47
ITEM 14	Principal Accounting Fees and Services	47
PART IV
ITEM 15	Exhibits, Financial Statement Schedules	48
SIGNATURES		50

PART I

ITEM 1. BUSINESS

BUSINESS

Overview

Grapefruit ~~USA~~ Boulevard Investments, Inc. (“we”, “our”, “us”, “~~GBI~~Grapefruit”, “~~Grapefruit~~GBI”, or “the Company”) was formed as a California corporation on August 28, 2017 and began ~~operating~~operation in September 2017. On July 10, 2019, Grapefruit acquired Imaging3, Inc. (“IGNG”) in a reverse acquisition (the “Acquisition”). Under the terms of the Share Exchange Agreement, IGNG issued to Grapefruit’s existing shareholders approximately 81% of the post-Acquisition IGNG common shares and the IGNG shareholders retained 19% of the post-Acquisition IGNG common shares. As a result, our financial statements are prepared using the acquisition method of accounting with Grapefruit as the accounting acquirer and IGNG treated as the legal acquirer and accounting acquiree. On December 16, 2019, Grapefruit filed the necessary paperwork with the Financial Industry Regulatory Authority (“FINRA”) and OTC Markets to effect the Company Name and Ticker symbol changes from “IGNG” to “GPFT” formally changing our corporate name from Imgaing3, Inc. to Grapefruit USA, Inc., a Delaware corporation whose stock is trading under the Ticker Symbol “GPFT”.

OnThe ~~July~~Company ~~10,~~holds ~~2019,~~its ~~Grapefruit~~annual ~~closed~~distribution ~~the~~licensure ~~Share~~which ~~Exchange~~allows ~~after~~us ~~the~~to ~~completion~~operate ofthrough ~~all~~June ~~conditions subsequent contemplated by the Share Exchange Agreement among the parties thereto ( “SEA”)~~14, ~~by which Imaging3, Inc~~2022. ~~(“IGNG”)~~Our ~~was~~annual ~~acquired~~manufacturing inlicense has abeen ~~reverse~~renewed ~~acquisition (the “Acquisition”)~~ by the ~~former~~California ~~shareholders~~Department of ~~Grapefruit, the accounting acquirer~~Health. ~~Under the~~Grapefruit ~~terms~~has ofnot ~~the~~yet ~~SEA~~applied ~~executed~~for ona ~~May~~license ~~31, 2019, IGNG became obligated~~ to ~~issue~~cultivate toand ~~Grapefruit’s~~will ~~existing~~not ~~shareholders~~until ~~that~~construction ~~number~~ of ~~newly~~our ~~issued~~cultivation ~~restricted~~facility ~~IGNG~~has ~~common~~been ~~shares~~substantially ~~such~~completed. ~~that~~We ~~the former Grapefruit shareholders (now new IGNG shareholders) will~~ own ~~approximately~~two ~~81%~~acres of ~~the~~fully ~~post-Acquisition~~entitled ~~IGNG~~cannabis ~~common~~real ~~shares~~property ~~and~~located ~~the~~in ~~current IGNG shareholders will retain 19% of~~ the ~~post-Acquisition IGNG common shares. At the time of the execution of the SEA, IGNG had approximately 85,218,249 outstanding shares of common stock. Therefore, IGNG issued to Grapefruit~~Coachillin’s ~~shareholders~~Industrial ~~362,979,114~~Cultivation ~~IGNG~~and ~~common~~Ancillary ~~shares to Grapefruit’s current shareholder on a pro rata basis with their then~~Canna-~~current~~Business ~~ownership~~Park ofwhere ~~Grapefruit~~we ofintend ~~which~~to ~~Bradley~~build ~~Yourist and Daniel J. Yourist own~~ a ~~combined 72.26%~~30,000 orsquare ~~approximately~~foot ~~259,967,136~~fully ~~shares. Accordingly, the financial statements are prepared using the~~licensed ~~acquisition~~cannabis ~~method~~facility. ofThe ~~accounting~~location ~~with~~within ~~GBI~~Coachillin’ asallows the ~~accounting~~Company ~~acquirer~~to ~~and~~apply ~~IGNG~~for ~~treated as the legal acquirer~~ and ~~accounting~~hold ~~acquiree. Because~~every ~~Imaging3,~~cannabis ~~Inc.~~license ~~did~~available ~~not meet~~ under the ~~accounting~~California ~~definition~~Cannabis ~~of an operating business, having only nominal assets, the reverse merger transaction was treated as a recapitalization and no goodwill was recognized~~laws.

~~The~~In ~~Company~~July ~~has~~2021, ~~applied~~Grapefruit ~~for~~obtained ~~and~~a ~~received~~development ~~our~~permit ~~provisional~~to ~~distribution~~build ~~renewal~~a ~~licensure~~30,000 ~~which~~square ~~allows~~foot us“Mothership” facility intended to ~~operate~~house a ~~through~~state-of-the-art ~~May~~indoor ~~13, 2021.~~grow ~~Our~~as ~~annual~~well ~~manufacturing~~as ~~license~~a ~~has~~separately ~~been~~licensed ~~renewed~~distribution byhub and laboratory that will produce the ~~California~~patented ~~Department~~Hourglass line of ~~Health~~topical creams as well as high quality extracts from trim generated by processing the indoor grow. ~~Grapefruit~~We ~~has~~intend ~~not~~to ~~yet~~obtain ~~applied~~CGMP certification for athe ~~license~~lab pursuant to ~~cultivate~~the ~~and~~Good Manufacturing Practice regulations enforced by the Federal Drug Administration (“FDA”). We expect that our facility will ~~not~~meet ~~until~~proper ~~construction~~design, ~~has~~monitoring, ~~begun~~and oncontrol of our ~~cultivation~~manufacturing ~~facility~~processes to assure the strength, quality, and purity of all Hourglass products manufactured by us during the construction. We ~~own~~anticipate ~~two~~the ~~acres~~FDA ofmandating ~~fully~~all ~~entitled~~ cannabis ~~real~~facilities be ~~property~~CGMP ~~located~~certified into ~~the~~continue ~~Coachillin’~~in ~~Industrial~~operation ~~Cultivation~~once ~~and~~cannabis ~~Ancillary~~is ~~Canna-Business~~federally ~~Park~~legalized. ~~The~~Obtaining ~~location within~~CGMP ~~Coachillin’~~certification ~~allows~~will make the ~~Company~~eventual federalization toof ~~apply~~cannabis a very smooth transition for ~~and~~our ~~hold~~company ~~every~~because ~~cannabis~~most ~~license~~of ~~available~~what ~~under~~is required by the ~~California~~FDA ~~Cannabis~~will be already addressed ~~laws~~and implemented at our facility.

WeAuctus ~~intend~~Fund on building out the real property into a distribution, manufacturing and high-tech cultivation facility to further its goal to become a seed to sale, fully vertically integrated Cannabis and CBD product Company. Grapefruit’s plans include an indoor 22,000 square foot multi-tiered canopy and adjoining tissue culture rooms.Financing

WeOn May 31, 2019, the Company executed the Share ~~became~~Purchase ~~members~~Agreement (“SPA”) with Auctus Fund pursuant to the terms of which the ~~Indian~~Company ~~Canyon~~agreed to sell $4,000,000 of the Notes and ~~18th~~issue ~~Property~~$6,200,000 ~~Association~~of callable warrants (the “Warrants” and, together with the Notes, the “Securities”) to Auctus. Auctus is the Selling Security Holder. In addition, on ~~September~~May 1931, ~~2017~~2019, ~~and~~we ~~have~~also anentered ~~ownership~~into ~~interest~~a registration rights agreement with Auctus (the “Registration Rights Agreement”) whereby we are obligated to file a registration statement to register the resale of 1the shares underlying the Securities.~~46%~~ On July 25, 2019 (as amended on January 17, 2020), a registration statement was filed ~~based~~to ~~upon~~comply with the 77Registration Rights Agreement. Pursuant to the SPA,~~156~~ ~~gross~~Auctus ~~parcel~~became ~~square~~obligated ~~foot~~to ofpurchase ~~our~~the ~~property~~$4,000,000 ~~located~~of Notes from Grapefruit in anfour ~~approximately~~tranches ~~5.3~~as follows: $600,000 at the SPA closing, which was funded on June 6, 2019; the second tranche of $1,422,750 on the day IGNG filed the registration statement, which was funded on August 16, 2019; the third tranche of $1,030,000 was funded the day the SEC declares the registration statement effective and the fourth tranche of $1 million ~~square~~was ~~foot~~funded ~~facility.~~90 Asdays after effectiveness. As of December 31, ~~2020~~2021, ~~the~~all ~~common~~tranches ~~areas~~of ~~continue~~this tofinancing bewere ~~built~~completed. ~~throughout~~The ~~the~~Company ~~entire~~has ~~canna-business~~received ~~park~~gross ~~and~~proceeds ~~are~~of ~~not~~$4,052,750. ~~complete~~On August 23, 2021, an updated registration statement was filed to comply with the Registration Rights Agreement.

~~Share~~On ~~Exchange~~April 15, 2021, the Company and Auctus Fund agreed to a fixed conversion price regarding all Notes at $0.075 (the “Global Amendment”) subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events. Furthermore, in consideration of the Global Amendment, Auctus was granted cash Warrants by the Company for the purchase of 20,000,000 shares of the Company at an exercise price of $0.075 per share. The effective date of the Global Amendment is December 31, 2020.

IGNG began discussions with Grapefruit Boulevard Investments, Inc., a California corporation, on March 1, 2019, regarding the possible reverse acquisition of IGNG by Grapefruit.

On March 11, 2019, IGNG signed a non-binding letter of intent (“LOI”) to be acquired in a reverse acquisition via a share exchange agreement to be completed at some later date (the “Acquisition”) by Grapefruit. Grapefruit holds licenses issued by the State of California to manufacture and distribute cannabis products in California. Grapefruit commenced operations in mid-2018 and has received more than $450,000 in revenue from operations since Grapefruit own and operate a manufacturing plant and distribution center within the Coachillin’ Industrial Cultivation and Ancillary Canna Business Park in Desert Hot Springs near Palm Springs in Riverside County, California (the “Coachillin Site”). On Thursday, March 7, 2019 Grapefruit obtained its final permit and clearance from local authorities to commence operation of an ethanol extraction laboratory (the “Extraction Lab”) at the Coachillin site and commenced extraction and post-production processing operations. The Extraction Lab is expected to be able to produce both THC and CBD oils from either Biomass or unrefined biomass or crude oil.

Pursuant to the terms of the LOI, IGNG and Grapefruit initiated negotiations intended to result in completion of a definitive Share Exchange Agreement (the “Exchange Agreement”) encompassing all of the material terms of the Exchange Agreement during the second quarter of 2019. Pursuant to the terms of the LOI, the Exchange Agreement provided, among other things, that upon conclusion of the Acquisition, Grapefruit’s designees would own 81% of the then outstanding common shares of the Company and the Company’s current shareholders would own 19% of such outstanding common shares. In addition, IGNG was required to settle certain outstanding creditor obligations on terms acceptable to both Grapefruit and IGNG.

On July 10, 2019, IGNG effectuated a Share Exchange pursuant to that certain Exchange Agreement. On the Closing Date, IGNG issued to the Stakeholders an aggregate of three hundred sixty-two million, two hundred, twenty-nine thousand, one hundred and one (362,979,114) newly issued shares of Common Stock of the Company, $0.0001 par value, in exchange for 100% of the shares of Grapefruit’s common stock. As a result, thereof, Grapefruit became a wholly owned subsidiary of IGNG.

By early June 2019, the Company had shifted its focus to manufacturing cannabis distillates and edibles and distribution of such cannabis products.

The Company is now focused on becoming a premier manufacturer and distributor of legal cannabis products in California. We will distribute our own branded product lines as well as product produced by other manufacturers. We will continue to service the wholesale cannabis marketplace by selling bulk Honey THC Oil, Flower and Trim to manufactures and other distributors throughout California. We will also offer our expert cannabis advice to others in connection with their branding, compliance, packaging, extraction, edible manufacturing and distribution logistics efforts.

Auctus Financing

On May 31, 2019, the Company executed the SPA with Auctus pursuant to the terms of which the Company agreed to sell $4,000,000 of the Notes and issue $6,200,000 of callable warrants (the “Warrants” and, together with the Notes, the “Securities”) to Auctus. Auctus is the Selling Security Holder. In addition, on May 31, 2019, we also entered into a registration rights agreement with Auctus (the “Registration Rights Agreement”) whereby we are obligated to file a registration statement to register the resale of the shares underlying the Securities. On July 25, 2019 (as amended on January 17, 2020), a registration statement was filed to comply with the Registration Rights Agreement . Pursuant to the SPA, Auctus became obligated to purchase the $4,000,000 of Notes from Grapefruit in four tranches as follows: $600,000 at the SPA closing, which was funded on June 6, 2019; the second tranche of $1,422,750 on the day IGNG filed the registration statement, which was funded on August 16, 2019; the third tranche of $1,030,000 was funded the day the SEC declares the registration statement effective and the fourth tranche of $1 million was funded 90 days after effectiveness. As of December 31, 2020, all tranches of this financing were completed. The Company has received gross proceeds of $4,052,750.

Industry Overview

Global consumer spending on legal cannabis in 2018 showed a growth rate of 20 percent in sales of cannabis in regulated markets. Cannabis sales are on track to increase 36 percent to $14.9 billion in 2019 and reach $40 billion by 2024 according to the “State of Legal Cannabis Markets” Report released by Arcview Market Research and BDS Analytics. This report points to growth in the cannabis markets while underlining the challenges that face the sector. The “Total Cannabinoid Market” (“TCM”) in the United States, which includes medical and recreational cannabis sales in regulated dispensaries, plus sales of FDA-approved pharmaceuticals and hemp-based CBD products.

Most notably, in 2018 the U.S. Food and Drug Administration (FDA) approved GW Pharmaceutical’s Epidiolex and passed the 2018 Farm Bill legalizing hemp and cannabidiol oil derived from hemp as long as it contained less than 0.3% THC. According to State of Legal Cannabis Markets, 7th Edition, by Arcview Market Research and BDS Analytics, the 2018 Farm Bill allows pharmacies, extraction labs, and general retailers to sell CBD-based products in all 50 states, which is expected to enhance the TCM. In the U.S. alone, sales of CBD products in all channels are expected to reach $20 billion by 2024.

In 2018 the legal cannabis industry experienced one of its slowest annual expansion rates since Colorado launched the adult-use era in 2014.

In California, its legal spending on cannabis fell, from $3 billion in 2017 to $2.5 billion, in the year in which it implemented an adult-use regulatory regime. A key takeaway from the California market is that highly restrictive regulations and high tax rates are hurting the legal market’s ability to compete with the illicit market. The barriers to enter into the legal cannabis market are also increasing in California because its temporary cannabis licensing scheme has ended. Currently any license applicant must now wait a protracted amount of time before the applicant receives its license and must wait a year in some cases for the application to make its way through the local and state licensing authorities.

According to the “State of Legal Cannabis Markets” Report, other key trends in the United States Legal Cannabis Markets include:

	●	Total legal cannabis spending in regulated dispensaries in the U.S. topped $9.8 billion in 2018, and is forecast to grow to $30 billion in 2024, a compound annual growth rate (CAGR) of 20 percent.

	●	Investment capital raised by cannabis companies more than quadrupled to $14 billion in 2018, according to Viridian Capital Advisors.

	●	Despite a 55 percent decline in 2018 in New Cannabis Ventures’ Global Cannabis Stock Index, the five largest Canadian licensed producers closed the first quarter of 2019 at a combined market capitalization of $48 billion.

	●	A total of 13 state markets will have passed the $1 billion mark in total annual legal cannabis spending by the end of 2024—by the end of 2018, only three had done so (California, Colorado and Washington).

Grapefruit’s Competitive Advantage in the Industry

~~Grapefruit~~In ~~holds~~December ~~its~~2020, ~~State~~we ofshifted ~~California~~our ~~provisional~~corporate ~~licensing~~focus ~~from~~becoming an innovative cannabiotech company following the ~~Bureau~~successful development of ~~Cannabis~~our patented ~~Control~~Hourglass™ ~~and~~Time Release THC+CBD-Infused Topical Cream. Hourglass is the ~~California~~first ~~Department~~and ofonly ~~Public~~patented Full Spectrum THC+ Cannabinoid ~~Health.~~Topical ~~The~~Cream ~~Company~~that ~~has~~provides its ~~permanent~~users ~~annually~~with ~~renewable~~a ~~provisional~~full ~~license~~body, assynergistic ~~opposed~~entourage toeffect athat ~~temporary~~was ~~license.~~only ~~The~~available ~~Company~~by ~~expects~~smoking, vaping or consuming ~~the~~cannabis. ~~annual~~Our ~~renewal~~Topical Cream is scientifically designed to bedeliver the full effects of THC combined with a ~~non-intrusive~~broad range of cannabinoids for your overall health, wellness, and ~~scaled~~well-being. ~~down~~Laboratory astested ~~opposed~~with tocomplete ~~what~~results ~~the~~available ~~renewal~~on ~~process~~every ~~was~~package ~~previously.~~via ~~The~~a ~~Company~~designated QR Code. There is ~~one~~ ofno other topical cream product on the ~~earliest~~market ~~registered~~with ~~distribution~~our ~~companies~~patented technology that provides users with the ~~State~~holistic benefits of ~~California~~the toentourage ~~have~~effect anof ~~annually~~THC+CBD, ~~renewable~~CBN, ~~license~~CBG, asDelta8, ~~opposed~~THCV and CBE. Hourglass™ is currently available in licensed retail and mobile tocannabis ~~the~~dispensaries ~~temporary~~in ~~licenses~~Central ~~previously~~California ~~granted.~~and InLos ~~January~~Angeles ~~2019~~County, ~~the~~California. ~~State~~USA. ofHourglass™ ~~California~~is ~~revised~~not ~~its~~intended ~~cannabis~~for ~~regulations~~use to ~~restrict~~cure, ~~the~~mitigate, ~~ability~~treat, ofor ~~companies~~prevent todisease ~~become~~and ~~licensed~~we ~~businesses~~are not claiming otherwise.

~~California~~In ~~has~~July ~~three~~2022, ~~distinct~~we ~~regulatory~~decided ~~agencies~~to ~~that~~bring ~~govern~~our ~~the~~patented ~~issuance~~Hourglass™ ofTime ~~cultivation~~Release ~~licenses,~~THC+CBD-Infused ~~manufacturing~~Topical ~~licenses~~Cream ~~and~~to ~~distribution~~the federally legalized Canadian ~~licenses~~cannabis marketplace. In ~~order~~January to2022, ~~foster~~ the ~~then-nascent~~company’s ~~commercial~~licensed ~~cannabis~~Canadian ~~industry,~~distribution ~~the~~partner ~~State~~Medz ofCannabis ~~California~~filed ~~initially~~a ~~allowed~~Notice ~~each~~of ~~regulatory~~New ~~agency~~Cannabis toProduct ~~grant~~(“NNCP”) ~~temporary~~with ~~licensing~~Health toCanada ~~companies~~on ~~with~~Grapefruit’s ~~very~~behalf ~~minimal~~for ~~regulatory~~its ~~requirements~~Hourglass ~~and~~THC+CBD ~~oversight~~Topical cream. InHealth Canada ~~fact,~~is athe ~~new~~Canadian orfederal ~~then-existing cannabis~~government ~~company~~department ~~only~~that ~~had~~is toresponsible ~~show~~for ~~State~~national ~~Regulators~~health ~~that~~policy. ~~their~~It ~~local~~approves ~~city~~and ~~was~~oversees ~~allowing~~the ~~their~~production of ~~commercial~~all cannabis ~~business~~products toand ~~operate which~~is ~~was~~the anlicensing ~~uncomplicated~~authority ~~task.~~for Aall ~~temporary~~companies ~~license~~involved ~~was~~in athe ~~conditional~~cannabis ~~license~~industry. ~~that~~Health ~~allowed~~Canada arequires that all cannabis ~~business~~products tomeet ~~engage~~federal regulatory requirements before they can be sold in ~~commercial~~Canada. Under Canada’s Federal Cannabis Regulatory ~~cannabis~~scheme, ~~activity~~Health ~~for~~Canada amust ~~period~~be notified of ~~120~~a ~~days.~~company’s ~~The~~intent ~~State~~to ~~granted~~sell ~~operators~~a ~~90-day~~cannabis ~~extensions~~product ofthat ~~their~~has ~~temporary~~not ~~license~~previously ~~while~~been ~~final~~sold in the ~~cannabis~~country. ~~regulations~~Approval ~~were~~of ~~being~~the ~~developed~~NNCP ~~and~~is ~~officially~~a ~~implemented~~mandatory byprerequisite to the ~~State~~launch of Grapefruit’s Hourglass technology-based products in Canada.

On ~~January~~March 121, ~~2019~~2022, ~~the~~Health ~~State~~Canada ofapproved ~~California eliminated~~ the ~~temporary~~Company’s ~~cannabis~~NNCP ~~licensing~~application ~~scheme.~~authorizing ~~The~~Grapefruit ~~impact~~to ofsell ~~this~~its ~~regulatory~~patented ~~restriction~~Hourglass™ ~~prevents~~Time ~~all~~Release ~~new~~THC+CBD-Infused ~~cannabis~~Topical ~~companies~~Cream from starting their operations without first applying for, and obtaining, a provisional license from the appropriate regulatory agency. The same regulatory restriction prevents existing, but unregulated, cannabis companies from continuing to ~~engage~~licensed inretail ~~commercial~~outlets ~~cannabis~~throughout ~~operations~~Canada ~~without~~under ~~shutting~~NNCP ~~down~~ID ~~while applying for, and obtaining, an annual license from the appropriate regulatory agency~~No. ~~The elimination of the temporary license scheme significantly thinned out the number of commercial cannabis businesses operating in the State~~NP-V2EHUWO907. This was due to the regulatory requirements required to apply for an annual license which include compliance with the California Environmental Quality Act, provision of a Hazardous Waste Disposal Plan and the multitude of other regulatory requirements to operate a compliant cannabis business.

5Grapefruit holds its State of California annual licensing from the Bureau of Cannabis Control and the California Department of Public Health. The Company has its permanent annually renewable licensure as opposed to a provisional or temporary license. The Company has found the annual renewal to be a non-intrusive and scaled down as opposed to what the renewal process was previously. The Company is one of the earliest registered distribution companies with the State of California to have an annually renewable license as opposed to the provisional licenses previously granted.

~~The~~On January 1, 2019, the State of California eliminated the temporary cannabis licensing scheme. The regulatory changes have impacted the ability of new businesses to enter the marketplace and compete with Grapefruit. However, none of Grapefruit’s commercial cannabis businesses have been impacted by the regulatory changes to the marketplace.

Grapefruit ~~owns~~chose ~~two~~to ~~acres~~operate ofwithin ~~fully~~the ~~entitled~~Coachillin’ ~~cannabis~~Industrial ~~real~~Cultivation ~~property~~and Ancillary Canna-Business Park (the “Park”), located in Desert Hot Springs, California, 14 miles north of downtown Palm Springs. The Park is the first and largest cooperative canna-business compound of its kind. It is unique in that the ~~Coachillin~~landowners each own a proportionate interest in a collaborative owner’s ~~Industrial~~association, which ~~Cultivation~~allows them to share much of the park overhead such as clean cultivation water, park security and ~~Ancillary Canna-Business~~access ~~Park~~to agricultural power rates. Grapefruit understood the State’s regulatory burdens and expense for commercial cannabis businesses to successfully operate. For example, the State requires cannabis business to provide 24 hour-per-day on-site armed security for their facility. This is a shared expense of the property Coachillin property owners. In addition, Coachillin property owners pay agricultural power rates of ~~nine~~sixteen (916) cents per kilowatt hour which is significantly less than what others pay for power. The location within Coachillin allows the Company to apply for and hold every cannabis license available under the California Cannabis laws.

Grapefruit intends on building out the real property into a distribution, manufacturing and high-tech cultivation facility to further its goal to become a seed to sale, fully vertically integrated Cannabis and CBD product Company. Grapefruit’s plans include an indoor 22,000 square foot multi-tiered canopy and adjoining tissue culture rooms. The canopy is estimated to produce thousands of pounds of the highest quality indoor cultivars of cannabis annually.

The Coachillin’ property owners’ association, which Grapefruit is a part of, will feature a unique drive through retail cannabis dispensary right off highway 10 on the way to Coachella and Palm Springs. Grapefruit will have the right to sell its cannabis products directly to the public through the drive through dispensary. Coachillin’ will also feature a cannabis hotel and music stadium and other visitor areas. By Grapefruit locating in Coachillin, the company gains instant exposure to thousands of hotel guests and other cannabis visitors that will visit the Coachillin’ cannabis friendly resort over time. Grapefruit believes that the canna-tourism industry will mature to be similar to the wine industry and can capitalize on this industry by virtue of its location within the Canna-business park.

Distribution

Grapefruit initially obtained its California wholesale recreational and medicinal cannabis distribution license on January 4, 2018. Thereafter, Grapefruit met all of its ongoing regulatory requirements and ~~filed~~was ~~its~~granted ~~application for~~ an annual distribution license. InThe ~~May 2019,~~Company ~~Grapefruit~~will ~~was~~continue ~~granted its provisional distribution license, thereby acquiring the regulatory foundation necessary~~ to ~~expand~~ ~~its~~be ~~distribution~~a ~~business.~~premier ~~From~~manufacturer ~~July~~and ~~2018~~distributor ~~through~~of ~~2020,~~legal ~~Grapefruit used its distribution license to sell bulk~~ cannabis ~~flowers and~~products ~~trim~~in ~~to other distributors and to manufacturers to satisfy their own raw materials requirements. In addition, Grapefruit sold flowers, vape cartridges and concentrates to licensed retailers throughout~~ California.

In California, cannabis cultivators and manufactures are prohibited from selling their products – e.g., flowers or edibles - directly into the marketplace. These companies are required to use a licensed distributor, such as Grapefruit. Grapefruit’s distribution license affords it a twofold strategic advantage: first, to market and sell its own cannabis product lines to retailers throughout California; and second to buy and resell bulk cannabis oil, flower and trim as an unfettered middleman to any properly licensed customer anywhere in California that it identifies a profit opportunity.5

~~Additionally,~~In ~~after marijuana plants are mature~~California, ~~they’re~~cannabis ~~harvested~~cultivators ~~within~~and amanufactures ~~certain~~are ~~time~~prohibited ~~frame~~from toselling ~~keep~~their ~~the~~products ~~product~~– ~~fresh~~e.g., ~~Throughout~~topicals, ~~the growth~~flowers ~~cycle~~or ~~and~~edibles - ~~during~~directly ~~this~~into ~~specific~~the ~~time~~marketplace. ~~period~~These ~~after~~companies ~~the~~are ~~plant~~required ~~has~~to ~~been~~use ~~harvested,~~ a ~~grower~~licensed ~~will~~distributor, ~~trim~~such ~~the~~as ~~plant~~Grapefruit. ofGrapefruit’s ~~its leaves,~~distribution ~~focusing~~license ~~mostly~~affords onit ~~the~~a ~~remaining~~twofold ~~buds.~~strategic ~~Specifically~~advantage: ~~speaking~~first, ~~trim~~to ismarket ~~defined~~and assell ~~the~~its ~~excess~~own ~~snipping~~cannabis ofproduct ~~leaves~~lines ~~from~~to ~~buds~~retailers ofthroughout ~~marijuana~~California; ~~plants.~~and ~~Note~~second ~~that~~to ~~leftover~~buy ~~product~~and ~~can~~resell ~~still~~bulk becannabis ~~used~~oil, toflower ~~make~~and ~~extractions,~~trim ~~tinctures,~~as ~~hash~~an ~~and~~unfettered ~~edibles,~~middleman soto ~~growers~~any ~~and~~properly ~~trimmers alike~~licensed ~~can~~customer ~~always~~anywhere in ~~increase~~California ~~sales~~that ~~with~~it identifies a ~~larger~~profit ~~product offering~~opportunity.

Manufacturing

The Company owns a fully licensed ethanol extraction facility in the City of Desert Hot Springs, CA. The Company owns and operates a Type 6 Ethanol Extraction Plant which removes the essential cannabis compounds, such as THC Distillate, that we, and others use, to produce cannabis products.

Grapefruit manufactures its patented Hourglass™ Time Release THC+CBD-Infused Topical Cream at its facility allowing it to maintain strict quality control standards. In addition, Grapefruit’s extraction lab produces high quality distillate or “Honey Oil” from trim that Grapefruit sources utilizing its distribution license as set forth above. THC Honey Oil is a fundamental cannabis commodity which serves as the active ingredient in products from infused edibles to tinctures/creams to the cartridges used in vapes or e-cigarettes. Honey Oil sells in the wholesale marketplace at approximately $62,250 to $83,~~800~~250 per liter. Pricing is dependent on quantity purchased as well as other market factors such as the availability and cost of the underlying trim – the raw cannabis material from which Grapefruit produces oil. Grapefruit began extraction operations in May 2019. Plans to expand the lab’s production capacity were altered based on the demands of the marketplace. Additionally, the installation of lab equipment would have interfered with the production capacities of the lab. The Company decided to manufacture its own RSO (“Rick Simpson Oil”) infused product line ~~as well as prepare the lab for the production run of its patchless patch topical cream~~. Grapefruit chose to set up its extraction laboratory in the City of Desert Hot Springs because the City does not tax the manufacture of oil by Grapefruit at its Desert Hot Springs extraction facility, thereby providing Grapefruit with an additional competitive advantage.

THC Distillate is an all-purpose product that is used in the manufacture of everything from cannabis edibles to “e-cigarette” vape carts to tinctures, to creams and pre-rolled cannabis “joints”. We sell our distillate in California to companies that manufacturer their own product lines of edibles and/or vape cards. We also intend to use our own Distillate to produce our branded line of edibles and vape carts to allow us to control the quality of our product lines. We also manufacture marijuana cigarettes (which we market as pre-rolls) for sale into the retail marketplace. This manufacturing process is streamlined through the use of machinery and our employees who inspect each marijuana cigarette to ensure quality control. We have partnered with different manufactures in California to manufacture our line of branded products we intend to distribute and/or sell into the marketplace. We do not restrict our needs to a single manufacturer or distribution company as we maintain ongoing relationships with Tier 1 vendors across the cannabis eco-system.

Branding

We package and brand cannabis products. One of the key elements to our branding strategy is performing an analysis on a product’s competitor(s) currently in the retail space and working to make our product stand out. We work on pricing strategies, boutique branding elements and other ways to differentiate when shelf space gets limited and retailers slow down on taking certain product classes.

Hourglass™ byTime ~~Grapefruit~~Release ~~commonly~~THC+CBD-Infused ~~referred~~Topical ~~to as the Company’s “Patchless Patch” Cannabinoid Delivery System~~Cream

The Company is currently manufacturing, marketing, and selling “its patented Hourglass™” byTime ~~Grapefruit,~~Release ~~its~~THC+CBD-Infused ~~patented~~Topical ~~time~~Cream ~~release~~throughout ~~THC~~California. +Hourglass ~~Cannabinoid~~is ~~delivery~~the ~~cream~~only ~~commonly~~Full ~~referred~~Spectrum toTHC+ asCannabinoid ~~the~~Topical ~~“Patchless~~Cream ~~Patch”.~~that ~~Due~~provides toits ~~complications~~users ~~beyond~~with ~~our~~a ~~control~~full body, synergistic ~~with~~entourage ~~our~~effect ~~former~~that ~~licensed~~was ~~cannabis~~only ~~testing~~available ~~lab~~by ~~partner~~smoking, ~~CannaSafe,~~vaping ~~the~~or ~~Company~~consuming ~~was~~cannabis. ~~significantly~~This ~~delayed~~is inthe ~~its~~first ~~efforts~~and toonly ~~sell~~patented Topical Cream ~~Hourglass~~that ~~into~~scientifically delivers the ~~retail~~full ~~marketplace.~~effects ~~The~~of ~~Bureau~~THC ofcombined ~~Cannabis~~with ~~Control~~a ~~shut~~broad ~~down~~range ~~CannaSafe~~of cannabinoids for ~~issues~~your ~~that~~overall ~~has~~health, ~~nothing~~wellness, toand well-being. doLaboratory tested with ~~the~~ ~~Company~~complete results available on every package via a designated QR Code. ~~However,~~There ~~CannaSafe~~is ~~was~~no inother topical cream product on the ~~process~~market ofwith ~~final~~our ~~regulatory~~patented ~~testing~~technology ~~for~~that ~~Hourglass~~provides ~~when~~users itwith ~~was~~the ~~shut~~holistic ~~down.~~benefits ~~This,~~of inthe ~~turn~~entourage effect of THC+CBD, ~~delayed~~CBN, ~~our~~CBG, ~~efforts~~Delta8, THCV and ~~timeline~~CBE. toUsers ~~bring~~will ~~Hourglass~~no tolonger be prevented from enjoying the ~~retail~~many ~~marketplace.~~benefits ~~The~~of ~~Company~~cannabis ~~was~~without ~~ultimately~~eating ~~forced~~an toedible, using ~~seek~~a ~~out~~tincture or lighting a ~~new~~ ~~State~~joint, ~~Certified~~pipe ~~Laboratory~~or vape and ~~then~~will ~~had~~be able to ~~start~~discreetly ~~from~~apply ~~ground~~additional ~~zero~~cream ~~working~~for ~~with~~any ~~the~~desired ~~new~~effect. ~~laboratory’s~~Hourglass™ is ~~science~~currently ~~team~~available toin licensed retail and mobile cannabis dispensaries in Central California and Los Angeles County, California. ~~train~~USA. ~~them~~Hourglass™ is not intended for use to ~~properly~~cure, ~~test~~mitigate, ~~the~~treat, ~~Hourglass~~or ~~cream~~prevent disease and we are not claiming otherwise.

~~Hourglass~~The ~~provides~~Company ~~users~~has ~~with~~also developed a ~~defined~~2018 ~~“time-released”~~Farm ~~amount~~Bill ofcompliant ~~THC~~hemp-based ~~and~~ CBD ~~through~~version ~~the skin to provide the user with the full synergistic and holistic benefits~~ of ~~cannabis.~~ Hourglass™ which is ancurrently ~~innovative~~being ~~THC~~sold ~~and~~on ~~Cannabinoid delivery system that~~its ~~has~~e-commerce ~~solved~~website, ~~the~~www.hourglassonlinestore.com. ~~inherent~~The ~~difficulties~~2018 ofFarm ~~efficient~~Bill ~~skin~~compliant ~~absorption~~hemp version of ~~THC~~Hourglass™ ~~and~~contains ~~other~~no ~~cannabinoids.~~THC ~~Grapefruit developed this innovative~~whatsoever ~~product~~which asallows anfor ~~efficient~~greater ~~means~~flexibility to ~~deliver~~market ~~THC to those who need it. Hourglass™ is currently available in licensed retail~~ and ~~mobile~~sell ~~cannabis~~this ~~dispensaries~~version in ~~Los~~traditional ~~Angeles~~sale’s ~~County,~~channels. ~~California,~~The ~~USA.~~Hemp-derived version of Hourglass™ is not intended for use to cure, mitigate, treat, or prevent disease and we are not claiming otherwise.

~~The~~Summit Company has also developed a 2018 Farm Bill compliant hemp based CBD version of Hourglass™. We anticipate that the CBD version of Hourglass will be retail ready for sale throughout the United States and Internationally in the second quarter of 2021. The 2018 Farm Bill compliant hemp version of Hourglass™ contains no THC whatsoever which allows for greater flexibility to market and sell this version in traditional sale’s channels. We anticipate that the CBD version of Hourglass will be widely distributed domestically because there is no Federal prohibition on CBD sales across state lines throughout the United States. The Hemp-derived version of Hourglass™ is not intended for use to cure, mitigate, treat, or prevent disease and we are not claiming otherwise.Boys

~~Sugar~~In ~~Stoned~~August 2021, the Company entered into a Stock Purchase Agreement acquiring the majority ownership and control of Summit Boys, Inc., a very well-known and established cannabis extraction brand with product lines in retail stores throughout the State of California. The Company plans on continuing the business without interruption and plans on licensing the Summit Boys brand in the State of Oklahoma under that State’s newly enacted legalized statutory scheme for cannabis products. This non-significant and non-operating subsidiary has been consolidated with Grapefruit’s financial statements. As consideration, the Company issued 4,545,455 shares of common stock for 51% ownership if Summit Boys, Inc.

~~Grapefruit~~Summit ~~acquired~~Boys ~~the~~premium ~~Sugar~~extracts ~~Stoned®~~include ~~brand~~sugar, incrumble, ~~the~~badder, ~~winter~~live ofresin, ~~2018~~diamonds, ~~for~~budder, ~~use~~sauce, ~~through~~caviar ~~the winter of 2021. We began the manufacturing process~~ and ~~research~~other ~~and~~extracted ~~development~~cannabis ~~process for our~~ products ~~immediately~~, which ~~and~~are ~~recently~~currently ~~began~~placed toin ~~sell~~licensed ~~and~~dispensaries ~~distribute Sugar Stoned branded products~~ throughout California. ~~Retail cannabis product consumers can purchase Sugar Stoned infused gummies that have been tested~~ and are ~~certified~~protected ~~to be pesticide and heavy metal free~~ by aUnited ~~third-party~~States ~~laboratory~~of ~~before~~America ~~being~~Trademark ~~released at retail~~Reg. ~~Sugar Stoned~~ ~~brand~~No. ~~is now a Grapefruit portfolio brand consisting of a premium quality cannabis infused gummy line with eight different flavors: Blue Raspberry~~6406802, ~~Cherry,~~July ~~Grape~~6, ~~Peach, Pineapple, Sour Apple, Strawberry and Watermelon~~2021.

Rainbow Dreams

Grapefruit recently launched a new life-style brand designed specifically for the recreational cannabis marketplace called “Rainbow Dreams.” The Rainbow Dreams brand captures the “anything goes party vibe” of the 1970s by offering an array of cannabis products such as a line of vape cartridges with unique cannabis strains combined with all natural flavors for a no-burn experience compared to the traditional or earlier generation cartridges which burn at much higher temperatures and provide the user with a burning sensation when inhaling. Rainbow Dreams fills a niche in the marketplace – a top shelf quality product line that we expect to be competitively priced. The Company made a strategic decision to delay the THC and CBD of infused gummies and mints due to saturation of the marketplace for these types of products.

The Company has manufactured an infused product known as “RSO”, which is commonly known as Rick Simpson Oil and is used in the medicinal marketplace. The Company’s RSO product line is currently being marketed to cannabis retailers.

Hourglass

Full Spectrum THC+ Cannabinoid Time Release Topical Delivery Cream provides users with a full body, synergistic entourage effect that was only available by smoking, vaping or consuming cannabis. This is the first and only patented Topical Cream that scientifically delivers the full effects of THC combined with a broad range of cannabinoids for your overall health, wellness, and well-being. Laboratory tested with complete results available on every package via a designated QR Code. There is no other topical cream product on the market with our patented and novel delivery technology that provides users with the holistic benefits of the entourage effect of THC+CBD, CBN, CBG, Delta8, THCV and CBE. Users will no longer be prevented from enjoying the many benefits of cannabis without eating an edible, using a tincture or lighting a joint, pipe or vape and will be able to discreetly apply additional cream for any desired effect. The Company is currently in the process of adapting our proprietary manufacturing protocols to our new hemp-derived CBD cream.

Intellectual Property

The Company filed trademark and service mark applications with the State of California to protect its Company name as well as its Rainbow Dreams and Sugar Stoned cannabis product names. The Company received the following Registration Statements from the California Secretary of State:

1. On August 20, 2019, the Secretary of State of the State of California issued the Company its Registration of Service Mark, Registration No. Y1GZNV6, for its corporate name, Grapefruit, thereby protecting its Service Mark and line of business from other competitors within the industry. The term of the Grapefruit Service Mark Registration extends to and includes August 19, 2024. 2. On August 20, 2019, the Secretary of State of the State of California issued to Grapefruit its Registration of Trademark, Registration No. Y3EMZM6, for its Rainbow Dreams cannabis products name under “Cartridges sold filled with cannabis infused natural flavorings in liquid form for electronic cigarettes.” The term of the Rainbow Dreams Trademark Registration extends to and includes August 19, 2024. 3. On August 21, 2019, the Secretary of State of the State of California issued to Grapefruit its Registration of Trademark, Verification No. Q6A98B3, for its Sugar Stoned cannabis product name under “Cannabis Infused Cookies and Candies.” The term of the Trademark Registration extends to and includes August 20, 2024. 4. On February 4, 2021, the Secretary of State of the State of California issued to Grapefruit its Registration of Trademark, Registration Nos. 02009331 and 02009332, for its Hourglass patented time release THC + Cannabinoid delivery cream under “Cannabis infused skin cream.” The term of the Trademark Registrations extends to and includes February 3, 2026.

The Company currently maintains a portfolio of trade secrets relating to the formulas for its CBD gummies, vaporization cartridges and oils as well as its proprietary manufacturing process for its Hourglass creams.

	4.	On February 4, 2021, the Secretary of State of the State of California issued to Grapefruit its Registration of Trademark, Registration Nos. 02009331 and 02009332, for its Hourglass patented time release THC + Cannabinoid delivery cream under “Cannabis infused skin cream.” The term of the Trademark Registrations extends to and includes February 3, 2026.

	5.	On July 6, 2021, the United States Patent and Trademark Office issued a Trademark protecting the Summit Boys Brand under Registration No. 6406802.

~~Tolling~~The Company currently maintains a portfolio of trade secrets relating to the formulas for its patented Hourglass topical creams, CBD gummies, vaporization cartridges and oils as well as its proprietary manufacturing process for its Hourglass line of topical creams.

We expect to enter into toll processing agreements by which cultivators will provide us with their dried biomass (i.e., Trim) which we then process at our extraction facility into finished distillate. In exchange, we provide 50% of the finished product to the cultivator. The cultivator is free to use our distribution service to sell their finished product or transfer the finished product to another distributor.

Packaging

We provide packaging services to re-integrate formally unlicensed products back into the legal marketplace. The space on packaging is limited due to compliance laws. We spend a significant amount of time working out these issues in a pre-production phase. Our goal is to keep a brand’s original design work while complying with al the government regulations. We devote serious efforts to re-brand an unlicensed product to quickly and efficiently re-integrate it into the retail space.

Marketing and Sales

We have retained employees with cannabis-related experience in product manufacturing, branding, marketing and retail sales in the ~~State~~ State of California. We have a strategic relationship with a full service traditional and digital marketing agency that will promote our company and products. We have a multi-pronged approach to marketing our Company and its branded product lines: (1) social media – including Instagram, Facebook and Twitter; (2) influencers who are expected to promote our branded products directly to recreational cannabis users; (3) attendance at specific industry events that are designed to promote our company to both macro and micro targeted audiences; (4) ~~targeted radio advertising designed to reach the recreational marketplace and~~ static ~~marketing~~ marketing (e.g., well placed bill board advertising); and (5) use of ~~our~~an outside sales force for the personal touch required to obtain shelf-space in all recreational and medicinal dispensaries.

The Company employs inside salespersons for retail, and outside salespeople for wholesale purchases. Additionally, the Company maintains an online digital platform where customers may purchase the Company’s products.7

9Additionally, the Company maintains an online digital platform where customers may purchase the Company’s products.

Sources and Availability of Raw Materials; Principal Suppliers

In general, raw materials essential to our business are readily available from multiple sources. SoWe ~~far, we~~ have been able to source the materials required to manufacture our ~~THC~~entire ~~Distillate~~line asof ~~well~~branded asproducts ~~our edibles and vape cartridges.~~ Our products use both non-cannabis and cannabis raw materials. We have the entire United States for the sourcing non-cannabis raw materials – such as terpenes, which are the compounds from plant extracts that provide the unique flavor profile in cannabis products, and cells, which are the industry standard vaporization carts. The California cannabis marketplace is diverse, and we have developed the relationships with other companies to ensure the consistent availability of the raw materials.

Because we have no direct control over these suppliers, interruptions or delays in the products and services provided by these parties may be difficult to remedy in a timely fashion. In addition, if such suppliers are unable or unwilling to deliver the necessary products or raw materials, we may be unable to redesign or adapt our technology to work without such raw materials or products or find alternative suppliers or manufacturers. In such events, we could experience interruptions, delays, increased costs or quality control problems, or be unable to sell the applicable products, all of which could have a significant adverse impact on our revenue.

Competition

The cannabis industry is subject to significant competition and pricing pressures. We may experience significant competitive pricing pressures as well as competitive products and services providers. Several significant competitors may offer products and/or services with prices that may match or are lower than ours. We believe that the products and services we offer are generally competitive with those offered by other cannabis companies. It is possible that one or more of our competitors could develop a significant research advantage over us that allows them to provide superior products or pricing, which could put us at a competitive disadvantage. Continued pricing pressure or improvements in research and shifts in customer preferences away from natural supplements could adversely impact our customer base or pricing structure and have a material and adverse effect on our business, financial condition, results of operations and cash flows.

Additionally, CBD is a naturally occurring cannabinoid constituent of cannabis. It was discovered in 1940 and is known to exhibit neuroprotective properties in many experimental systems. However, development of CBD as a drug has been confounded by the following: 1) low potency; 2) a large number of molecular targets; 3) marginal pharmacokinetic properties; and 4) designation as a schedule 1 controlled substance. We view that companies specializing in the sale, distribution and manufacturing of CBD based products as some of our stronger competitors based on recent laws and regulatory schemes.

Government Approvals and Regulations

The formulation, manufacturing, processing, labelling, packaging, advertising and distribution of our products are subject to regulation by several federal agencies, including the Food and Drug Administration (“FDA”), the Federal Trade Commission (“FTC”), the Consumer Product Safety Commission, the U.S. Department of Agriculture (“USDA”) and the Environmental Protection Agency (“EPA”). These activities are also regulated by various agencies of the states and localities in which our products are sold. The FDA regulates the processing, formulation, safety, manufacture, packaging, labelling and distribution of dietary supplements (including vitamins, minerals, and herbs) and cosmetics, whereas the FTC has jurisdiction to regulate the advertising of these products.

The FDA’s Good Manufacturing Practices (“GMP”) regulations require dietary supplements to be prepared, packaged and held in compliance with strict rules, and require quality control provisions similar to those in the GMP regulations for drugs. The FDA could in the future choose to inspect one of our facilities for compliance with these regulations and could cause non-compliant products made or held in the facility to be subject to FDA enforcement actions.

The FDA has broad authority to enforce the provisions of the FDCA and their regulation of foods, dietary supplements and cosmetics may increase or become more restrictive in the future. Additional legislation could be passed which would impose substantial new regulatory requirements for dietary supplements, potentially raising our costs and hindering our business. We do not believe our current products are subject to the FDCA as our products are not intended to cure, mitigate, treat, or prevent disease.

Our advertising is subject to regulation by the Federal Trade Commission, or FTC, under the Federal Trade Commission Act. In recent years the FTC has initiated numerous investigations of dietary supplement and weight loss products and companies. Additionally, some states also permit advertising and labelling laws to be enforced by private attorney generals, who may seek relief for consumers, seek class action certifications, seek class wide damages and product recalls of products sold by us. Any of these types of adverse actions against us by governmental authorities or private litigants could have a material adverse effect on our business, financial condition and results of operations.

In addition to FDA and FTC regulations, our products may face further regulation under the Single Convention on Narcotic Drugs 1961, which governs international trade and domestic control of narcotic substances including cannabis extracts. Countries may interpret and implement their treaty obligations in a way that creates a legal obstacle to our obtaining marketing approval for our products in those countries. These countries may not be willing or able to amend or otherwise modify their laws and regulations to permit our products to be marketed or achieving such amendments to the laws and regulations may take a prolonged period of time. In the case of countries with similar obstacles, we would be unable to market our product candidates in countries in the near future or perhaps at all if the laws and regulations in those countries do not change.

Additionally, the Company is also subject to California law regarding dissemination of information via advertising. Mainly, these rules and regulations relate to directing advertisements to people aged 21 years and older. The type of advertising the Company expects to conduct and pursue is similar to how alcohol companies direct their advertising and marketing efforts.

Controlled Substance Regulation

At some point our products may be developed and be subject to U.S. controlled substance laws and regulations and failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, both during clinical development and post approval, and our financial condition.

Certain products we may develop could contain controlled substances as defined in the federal Controlled Substances Act of 1970, or CSA. ~~Controlled~~ Controlled substances that are pharmaceutical products are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements ~~administered~~ administered by the DEA. The DEA classifies controlled substances into five schedules: Schedule I, II, III, IV or V substances. Schedule I substances by definition have a high potential for abuse, not currently “accepted medical use” in the United States, lack accepted safety for use under medical supervision, and may not be prescribed, marketed or sold in the United States. Pharmaceutical products approved for use in the United States may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest potential for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances. Schedule I and II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security requirements and criteria for importation. In addition, dispensing of Schedule II drugs is further restricted. For example, they may not be refilled without a new prescription. We do not intend to produce “controlled substances” at this time, due to regulatory complications.

Employees

As of December 31, ~~2020~~2021, we had 149 full-time employees. Grapefruit has 43 employees at its lab facilities. One of the lab employees is responsible for managing onsite operations at the Warehouse. ~~Grapefruit~~The ~~has a total of 5 inside sales and branding employees as well as 2 employees for operational support. Finally, the~~ Company has 3 outside salespeople located in Northern California. These salespeople manage ~~are~~the inmarketing ~~charge~~and sales of Grapefruit’s ~~bulk~~Summit ~~flower~~Boys ~~and~~extract ~~trim~~product ~~sales~~lines. Our employees are not represented by a labor union or other collective bargaining groups at this point in time, and we consider relations with our employees to be good. We ~~currently~~ currently plan to retain and utilize the services of outside consultants for additional research, testing, regulatory, legal compliance and other services on an as needed basis.

ITEM 1A. RISK FACTORS

Smaller reporting companies are not required to provide the information required by this item.

ITEM 2. PROPERTIES

We own approximately two acres of real property located in the Coachillin’ Industrial Cultivation and Ancillary Canna-Business Park in Desert Hot Springs, located on the extension of North Canyon Rd., approximately 10 miles north of the center of Palm Springs. We intend on building a fully integrated distribution, manufacturing and cultivation facility to become a seed to sale, fully vertically integrated Cannabis and CBD product Company.

Additionally, our cannabis and CBD extraction laboratory and distribution facility are located in the same Canna-Business Park. On September 1, ~~2018~~2021, the Company ~~entered~~extended ~~into~~its a three-year lease for approximately 2,268 square feet ~~which~~for ~~commenced~~an onadditional ~~March~~three ~~1, 2018~~years.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become involved in lawsuits, investigations and claims that arise in the ordinary course of business. As of the date of this prospectus, we are not a party to any litigation whereby the outcome of such litigation, if determined adversely to us, would materially affect our financial position, results of operations or cash flows.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock trades on the OTC Pink marketplace owned by OTC Markets Group Inc. under the symbol “GPFT.” Any over-the-counter market quotations reflect inter-dealer prices, without retail markup, mark-down, or commission and may not necessarily represent actual transactions.

As of ~~March~~April 241, ~~2021~~2022, there were approximately ~~610~~608 record holders of our common stock, not including shares held in “street name” in brokerage accounts which is unknown. As of ~~March~~April 241, ~~2021~~2022, there were ~~510~~559,~~797~~512,~~041~~622 shares of our common stock outstanding on record. As of ~~March~~April 241, ~~2021~~2022, the Company has 1,000,000,000 shares of authorized common stock.

Dividends

We have not declared or paid any cash dividends on our common stock and do not anticipate paying dividends for the foreseeable future.

Stock Option Plan

During 2014, the Board of Directors adopted, and the shareholders approved, the 2014 Stock Option Plan under which a total of 1,811,401 shares of common stock had been reserved for issuance. The 2014 Stock Option Plan will terminate in September 2024.

Stock Options

As of December 31, ~~2020~~2021, ~~former~~ employees of the Company hold options to purchase 250,000 shares of common stock granted in 2016 at an exercise ~~price~~ price of $1.00. On March 28, 2021, the Company granted a board member an option to purchase 750,000 shares of common stock at $0.025. There are six month vesting periods for a block of 250,000 shares starting October 1, 2021

Transactions in FY 2019	Quantity		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life
Transactions in FY 2021	Quantity		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life
Outstanding, December 31, 2019		250,000	$	1.00		5.57
Outstanding, December 31, 2020		250,000	$	1.00		3.57
Granted		750,000		0.025		5.25
Exercised		-
Cancelled/Forfeited		-
Outstanding, December 31, 2020		250,000	$	1.00		4.57
Outstanding, December 31, 2021		1,000,000	$	0.27		4.83
Exercisable, December 31, 2020		250,000	$	1.00		4.57
Exercisable, December 31, 2021		500,000	$	0.51		4.16

The weighted average remaining contractual life of options outstanding issued under the Plan was 4.5716 years at December 31, ~~2020~~2021.

Warrants

Following is a summary of warrants outstanding at December 31, ~~2020~~2021:

Number of Warrants		Exercise Price		Expiration Date
	37,500	$	0.10	~~April 2022~~Apr-22
	500,00	$	0.10	August 2022
	2,800,000		0.40	May-22
	575,000	$	0.10	April 2023
	500,000		0.10	Aug-22
	125,000	$	0.10	May 2023
	575,000		0.10	Apr-23
	162,500	$	0.10	August 2023
	125,000		0.10	May-23
	2,800,000	$	0.40	May 2022
	162,500		0.10	Aug-23
	302,776	$	0.10	~~January 2024~~Jan-24
	12,000,000	$	0.10	March 2021
	14,000,000		0.125	May-24
	2,160,000	$	0.10	June 2021
	15,000,000		0.15	May-24
	16,000,000	$	0.125	May 2021
	8,000,000		0.25	May-24
	15,000,000	$	0.15	May 2021
	20,000,000		0.075	Apr-26
	8,000,000	$	0.25	May 2021
	2,250,000		0.20	Feb-26

Grapefruit acquired warrants to issue common stock upon exercise in its acquisition of Imaging3, Inc. on July 10, 2019. As part of the SPA, the Company also issued 16,000,000 warrants to purchase 16,000,000 shares of the Company’s common stock at an exercise price of $0.125 per share, 15,000,000 warrants to purchase 15,000,000 shares of the Company’s common stock at an exercise price of $0.15 per share, 8,000,000 warrants to purchase 8,000,000 shares of the Company’s common stock at an exercise price of $0.25 (collectively, the “Warrants”) per share for a period of two year from the date of issuance. The Warrants are “cash only” and are callable if Grapefruit stock trades on the OTCQB at 200% or more of a given exercise price for 5 consecutive days.

In the first quarter of 2021, Auctus exercised 2,000,000 warrants at $.125 in relation to the SPA. On April 15, 2021, the Company restructured a large majority of their convertible notes, and as part of the agreement an additional 20,000,000 warrants were issued with an exercise price of $0.075 per share. In relation to these 20,000,000 warrants, the holder may elect to receive warrant shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this warrant.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable because we are a smaller reporting company.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL AND CONDITION RESULTS OF OPERATIONS

Cautionary Statements

This Form 10-K contains financial projections and other “forward-looking statements,” as that term is used in federal securities laws, about Grapefruit’s financial condition, results of operations and business. These statements include, among others, statements concerning the potential for revenues and expenses and other matters that are not historical facts. These statements may be made expressly in this Form 10-K. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “estimates,” or similar expressions used in this Form 10-K. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied by us in those statements. The most important facts that could prevent us from achieving our stated goals include, but are not limited to, the following:

	(a)	volatility or decline of our stock price;

	(b)	potential fluctuation in quarterly results;

	(c)	our failure to earn revenues or profits;

	(d)	inadequate capital to continue the business and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;

	(e)	failure to make sales;

	(f)	changes in demand for our products and services;

	(g)	rapid and significant changes in markets;

	(h)	litigation with or legal claims and allegations by outside parties, causing us to incur substantial losses and expenses;

	(i)	insufficient revenues to cover operating costs;

	(j)	dilution in the ownership of the Company through the issuance by us of additional securities and the conversion of outstanding warrants, notes and other securities;

We cannot assure that we will be profitable. We may not be able to develop, manage or market our products and services successfully. We may not be able to attract or retain qualified executives and technology personnel. We may not be able to obtain customers for our products or services. Our products and services may become obsolete. Government regulation may hinder our business. Additional dilution in outstanding stock ownership will be incurred due to the issuance or exercise of more shares, warrants and other convertible securities.

Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. We caution you not to place undue reliance on the statements, which speak only as of the date of this Form 10-K. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may make. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events.

The following discussion should be read in conjunction with our financial statements and notes to those statements. In addition to historical information, the following discussion and other parts of this annual report contain forward-looking information that involves risks and uncertainties.

Critical Accounting Policies

Our 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. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We monitor our estimates on an on-going basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.

We have identified the policies below as critical to our business operations and the understanding of our results of operations.

Basis of Consolidation – Subsidiaries are entities controlled by the Company. Control exists when the Company either has a controlling voting interest or is the primary beneficiary of a variable interest entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

In August 2021, the Company entered into a Stock Purchase Agreement acquiring the majority ownership and control of Summit Boys, Inc., a very well-known and established cannabis extraction brand with product lines in retail stores throughout the State of California. The Company plans on continuing the business without interruption and plans on licensing the Summit Boys brand in the State of Oklahoma under that State’s newly enacted legalized statutory scheme for cannabis products. This non-significant and non-operating subsidiary has been consolidated with Grapefruit’s financial statements. As consideration, the Company issued 4,545,455 shares of common stock for 51% ownership if Summit Boys, Inc. Summit Boys holds intellectual property and is non-operational. Due to the fact that there is minimal to no activity at this point, we determined that a breakout of Summit Boys’ financials was inconsequential and immaterial.

Use of Estimates – The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our financial statements and the reported amounts of revenues and expenses during the periods presented.

We make our estimate of the ultimate outcome for these items based on historical trends and other information available when our financial statements are prepared. We recognize changes in estimates in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available. We believe that our significant estimates, assumptions and judgments are reasonable, based upon information available at the time they were made. Our actual results could differ from these estimates, making it possible that a change in these estimates could occur in the near term. The company’s most significant estimates related to useful life for depreciation, the value of long-lived assets and related impairment, and provision for income taxes of property and equipment.

Fair Value of Financial Instruments – We value our financial assets and liabilities using fair value measurements. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

The carrying amount of our cash and cash equivalents approximates fair value because of the short-term nature of the instruments. The carrying amount of our notes payable at December 31, 2020, approximates their fair values based on comparable borrowing rates available to the company. The Company evaluated the fair market value of LVCA using Level 3 inputs. From that measurement, the Company recorded an impairment of LVCA.

There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the years ended December 31, ~~2020~~2021 and ~~2019~~2020.

15Inventory – Inventory is comprised of raw material, work in process and finished goods. The following sets forth selected items from our inventory for the years ended December 31, 2021 and 2020:

Inventory – Inventory is comprised of raw material, work in process and finished goods. The following sets forth selected items from our inventory for the years ended December 31, 2020 and 2019:

	December 31, 2021		December 31, 2020
Raw material	$	84,951	$	16,892
Work in process		-		23,566
Finished goods		304,331		461,657
	$	389,282	$	502,115

	December 31, 2020		December 31, 2019
Raw material	$	16,892		-
Work in process		23,566		-
Finished goods		461,657		263,985
	$	502,115	$	263,985

We periodically review the value of our inventory and provide a write-down of inventory based on our assessment of the market conditions. Any write-down is charged to cost of goods sold.

Property, Plant and Equipment, net – Our property and equipment are recorded at cost. Assets held under capital leases are capitalized at the commencement of the lease at the lower of the present value of minimum lease payments at the inception of the lease or fair value. Maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line method over estimated useful lives of four to seven years, and amortization is computed using the straight-line method over the life of the applicable lease. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from our accounts and any resulting gain or loss is reflected in our consolidated statements of operations.

Land Improvements – Our land improvements are recorded at cost provided by our property association. These costs will continue to be capitalized until construction has been completed. Land improvements will not be depreciated after the construction has been completed by the property association.

Long-Lived Assets Impairment Assessment – Our long-lived assets are subject to an impairment test if there is an indicator of impairment. The carrying value and ultimate realization of these assets is dependent upon our estimates of future earnings and benefits that we expect to generate from their use. If our expectations of future results and cash flows are significantly diminished, other long-lived assets may be impaired and the resulting charge to operations may be material. When we determine that the carrying value of intangibles or other long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, we use the projected undiscounted cash flow method or realizable value to determine whether an impairment exists, and then measure the impairment using discounted cash flows.

Revenue Recognition –

The Company derives revenues from the sale of product in accordance to ASC Topic 606. Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services.

Revenue is recognized based on the following five step model:

	-	Identification of the contract with a customer
	-	Identification of the performance obligations in the contract
	-	Determination of the transaction price
	-	Allocation of the transaction price to the performance obligations in the contract
	-	Recognition of revenue when, or as, the Company satisfies a performance obligation

Performance Obligations

Sales of products are recognized when all the following criteria are satisfied: (i) a contract with an end user exists which has commercial substance; (ii) it is probable the Company will collect the amount charged to the end user; and (iii) the Company has completed its performance obligation whereby the end user has obtained control of the product. A contract with commercial substance exists once the Company receives and accepts a purchase order or once it enters into a contract with an end user. If collectability is not probable, the sale is deferred and not recognized until collection is probable or payment is received. Control of products typically transfers when title and risk of ownership of the product has transferred to the customer. For contracts with multiple performance obligations, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. The Company uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost-plus margin approach when one is not available. Historically the Company’s contracts have not had multiple performance obligations. The large majority of the Company’s performance obligations are recognized at a point in time related to the sale of products.

Cost of Goods Sold –Our cost of goods sold includes the costs directly attributable to revenue recognized and includes expenses related to the production, packaging and labelling of cannabis products; personnel-related costs, fees for third-party services, such as testing and transportation costs related to our distribution services.

Research and Development Expenses – Research and development (“R&D”) costs are charged to expense as incurred. Our R&D expenses include, but are not limited to, consulting service fees and materials and supplies used in the development of our proprietary products and services.

General and Administrative Expenses – General and administrative expenses consist primarily of personnel-related costs, fees for professional and consulting services, travel costs, rent, bad debt expense, general corporate costs, and other costs of administration such as human resources, finance and administrative roles.

Income Taxes – Income tax assets and liabilities are recorded using the asset and liability method. Under the asset and liability method, tax assets and liabilities are recognized for the tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and tax credit carryovers. Future tax assets and liabilities are measured using the enacted tax rates expected to apply when the asset is realized, or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that enactment occurs. To the extent that we do not consider it more likely than not that a future tax asset will be recovered, we will provide a valuation allowance against the excess.

We follow the provisions of ASC 740, Income Taxes. Because of ASC 740, we make a comprehensive review of our portfolio of tax positions in accordance with recognition standards established by ASC 740.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in our consolidated financial statements in the period during which, based on all available evidence, we believe it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

We have created our tax provision leveraging known tax court cases involving various marijuana dispensaries and other cannabis related businesses, including the section of the IRS Tax code of 280E. The U.S. Tax Code Section 280E is the federal statute that states that a business engaging in the trafficking of a Schedule I or II controlled substance, which includes cannabis and cannabis related products, are barred from taking the tax deductions or credits in their federal tax returns which are not considered as part of the business’ cost of goods sold. Given the guidance offered by the Tax code 280E we have prepared our tax provision according to this tax code.

Interest and penalties associated with unrecognized tax benefits, if any, are classified as interest expense and penalties and are included in selling, general and administrative expenses in our consolidated statements of operations.

17On December 22, 2017, the U.S. Tax Cuts and Jobs Act was enacted. U.S. tax reform introduced many changes, including lowering the U.S. corporate tax rate to 21 percent, changes in incentives, provisions to prevent U.S. base erosion and significant changes in the taxation of international income, including provisions which allow for the repatriation of foreign earnings without U.S. tax. The enactment of U.S. tax reform had no significant impact on our income taxes for the year ended December 31, 2021 and 2020, respectively.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act was enacted. U.S. tax reform introduced many changes, including lowering the U.S. corporate tax rate to 21 percent, changes in incentives, provisions to prevent U.S. base erosion and significant changes in the taxation of international income, including provisions which allow for the repatriation of foreign earnings without U.S. tax. The enactment of U.S. tax reform had no significant impact on our income taxes for the year ended December 31, 2020 and 2019, respectively.

Commitments and Contingencies – Certain conditions may exist as of the date our financial statements are issued, which may result in a loss, but which will only be resolved when one or more future events occur or fail to occur. We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, we evaluate the perceived merits of the legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in our consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

Net Loss Per Share – We compute net loss per share in accordance with ASC 260, Earnings per Share. Under the provisions of ASC 260, basic net loss per share includes no dilution and is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share takes into consideration shares of common stock outstanding (computed under basic net loss per share) and potentially dilutive securities that are not anti-dilutive.

Cash and Cash Equivalents – The Company considers all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents. Cash equivalents may be invested in money market funds, certificates of deposit or other interest-bearing accounts.

Concentration of Credit Risk – Financial instruments that potentially subject us to credit risk consist of cash. We maintain our cash with high credit quality financial institutions; at times, such balances with any one financial institution may not be insured by the FDIC.

Accounts Receivable and Revenue – The accounts receivable balance was $39278,~~480~~422 as of December 31, ~~2020~~2021 and $039,480 as of December 31, ~~2019~~2021. In ~~2020~~2021, 99 62% of accounts receivable consisted of ~~one~~two ~~customer~~customers. In ~~2020~~2021, ~~63%~~the ofwas ~~the~~not ~~net~~one ~~revenues~~customer ~~generated~~that ~~with~~had ~~two~~over ~~customers~~20% of the sales. In ~~2019~~2020, 7099% of ~~net~~accounts ~~revenues~~receivable ~~generated~~consisted ~~were~~of ~~the~~one ~~result~~customer. In 2020, 63% of ~~transactions~~the net revenues generated with ~~one~~two ~~customer~~customers.

Recently Issued Accounting Pronouncements – From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the FASB ASCs are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our condensed consolidated financial statements upon adoption.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— – Contracts in Entity’s Own Equity (Subtopic 815-–40): ~~Accounting~~(“ASU ~~for~~No. ~~Convertible Instruments and Contracts in an Entity’s Own Equity~~2020-06”). ASU No. 2020-06 simplifies ~~reduces~~ the ~~number of~~ accounting ~~models~~ for ~~convertible~~certain ~~debt~~ financial instruments ~~and~~with ~~convertible~~characteristics ~~preferred~~of ~~stock.~~liabilities ~~Limiting~~and ~~the~~equity, ~~accounting~~including ~~models~~convertible ~~results in fewer embedded conversion features being~~instruments ~~separately~~and ~~recognized~~contracts ~~from~~on ~~the~~an ~~host~~entity’s ~~contract~~own ~~as compared with current GAAP~~equity. ASU No 2020-06 ~~amends~~is ~~the~~part ~~guidance~~of ~~for~~ the ~~derivatives scope exception for contracts in an entity~~FASB’s ~~own~~simplification ~~equity~~initiative, which aims to reduce unnecessary ~~form-over-substance-based~~complexity ~~accounting~~in ~~conclusions~~U.S. GAAP. ASU No 2020-06 is effective for ~~the~~fiscal ~~Company~~years ~~for~~beginning ~~annual~~after December 15, 2021, and interim ~~reporting~~ periods within ~~beginning~~those ~~December~~fiscal ~~15, 2021~~years. The Company isdoes ~~currently evaluating~~not expect the ~~impact~~adoption of ASU ~~2018~~No. 2020-1306 ~~will~~to have a material impact on its consolidated financial statements.

18In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This update requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. This standard will be effective for the Company in the first quarter of 2023 and will be applied prospectively to business combinations occurring on or after the effective date of the standard. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the guidance and the impact on its consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements Adopted

InOn ~~August~~January ~~2018~~1, 2021, the ~~FASB~~Company ~~issued~~adopted Accounting Standards Update (“ASU”) ~~2018~~No. 2020-1301, ~~“Fair~~Investments ~~Value~~– ~~Measurement~~Equity Securities (Topic ~~820~~321):, ~~Disclosure~~Investments ~~Framework—Changes~~– ~~to the~~Equity ~~Disclosure~~Method ~~Requirements~~and ~~for~~Joint ~~Fair~~Ventures ~~Value Measurement”~~ (~~“ASU~~Topic ~~2018-13”~~323)~~. ASU 2018-13 removes~~, ~~modifies~~ and ~~adds~~ ~~certain~~Derivatives ~~disclosure~~and ~~requirements~~Hedging in (Topic ~~820~~ 815) (“~~Fair~~ASU ~~Value~~No. ~~Measurement~~2020-01”). ASU ~~2018~~No. 2020-1301 ~~eliminates~~clarifies ~~certain disclosures related to transfers and~~ the ~~valuations~~interaction ~~process,~~of ~~modifies~~accounting ~~disclosures~~ for ~~investments~~the ~~that~~transition ~~are~~into ~~valued~~and ~~based~~out onof ~~net~~the ~~asset value,~~equity ~~clarifies~~method ~~the~~as ~~measurement~~well ~~uncertainty~~as ~~disclosure,~~measuring ~~and~~certain ~~requires~~purchased ~~additional~~options ~~disclosures~~and ~~for~~forward ~~Level~~contracts 3to ~~fair~~acquire ~~value measurements~~investments. ~~ASU 2018-13~~The ~~became~~adoption ~~effective~~of ~~for~~ASU ~~the~~No. ~~Company in the third quarter of~~ 2020-01 ~~and~~did not ~~had~~have noan impact on the Company’s consolidated financial statements.

On January 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”). ASU No. 2019-12 eliminates certain exceptions and simplifies the application of U.S. GAAP-related changes in enacted tax laws or rates and employee stock option plans. The adoption of ASU No. 2019-12 did not have an impact on the Company’s consolidated financial statements.

Company performs ongoing credit evaluations of its customers and historic credit losses have been within management’s expectations. The Company has a revenue receivables policy for service and warranty contracts. Equipment sales usually have a one-year warranty of parts and service. After a one-year period, the Company contacts the buyer to initiate the sale of a new warranty contract for one year. Warranty revenues are deferred and recognized on a straight-line basis over the term of the contract or as services are performed.

Other Accounting Factors

The effects of inflation have not had a material impact on our operation, nor are they expected to in the immediate future.

Results of Operations for the Year Ended December 31, ~~2020~~2021 as compared to the Year Ended December 31, ~~2019~~2020.

The following sets forth selected items from our statements of operations for the years ended December 31, ~~2020~~2021 and ~~2019~~2020.

	Year Ended			Year Ended
	Twelve Months Ended			Twelve Months Ended
	December 31, 2020			December 31, 2019
	December 31, 2021			December 31, 2020
Net revenues	$	3588,~~672,353~~957		$	~~451~~3,~~196~~672,353
Cost of goods sold		31,~~391~~119,~~888~~125			~~708~~3,~~567~~391,888
Gross profit (loss)		280,465			(257,371	)
Gross income (loss)		(530,168	)		280,465
Sales expense		~~169~~7,~~350~~660			-169,350
General and administrative expense		1,317,327			1,618,981
Stock based compensation		265,024			-
Loss from operations		(1,206,212	)		(1,876,352	)
Stock option expenses		98,631			-
Change in value of derivatives		(40,394,176	)		(1,626,634	)
General and administrative expense		1,514,052			1,317,327
Gain (loss) on extinguishment of debt		39,640,477			(355,700	)
Loss from operations		(2,415,535	)		(1,206,212	)
Interest and other income (expense)		(2,097,085	)		(740,879	)
Change in value of derivatives		(8,751	)		(40,394,176	)
Net income attributable to noncontrolling interest		-			(9,468	)
Interest and other income (expense)		(3,080,737	)		37,543,392
Net loss	$	(4,056,996	)	$	(4,609,033	)
Net loss before income taxes		(5,505,023	)		(4,056,996	)
Tax provision		-			-
Net loss		(5,505,023	)		(4,056,996	)
Loss attributable to noncontrolling interest		(353	)		-
Net loss attributable to Grapefruit USA, Inc. and subsidiary	$	(5,504,670	)	$	(4,056,996	)

Revenue for the year ended December 31, 2020 was $3,672,353 compared to $451,196 for the corresponding year in 2019, an increase of $3,221,157, or 714%. The increase was primarily due to the ability of management to focus on its business plan for an entire year, as compared with the prior year in which management effectuated the reverse merger. During the fourth quarter of 2020, the company introduced its new HourGlass product, a full spectrum THC+ cannabinoid time release topical delivery cream, from which we expect continued significant growth in revenues in 2021.17

19Revenue for the year ended December 31, 2021 was $588,957 compared to $3,672,383 for the corresponding year in 2020, a decrease of $3,083,396, or 84%. The decrease was primarily due to the decline of our distribution business from a combination of decreased demand for and an over-supply of cannabis flowers in California. As a result of these market forces beyond our control we have severely limited our distribution operations and commenced the process of transitioning into a canna-biotech firm focusing on further developing and marketing of cannabis products based on our patented Hourglass Technology. We have received approval of our NNCP from Health Canada which authorizes us to manufacture and sell our Hourglass™ products throughout Canada.

Cost of goods sold for the year ended December 31, ~~2020~~2021 were $31,~~391~~119,~~888~~125 as compared to $~~708~~3,~~567~~391,888 for the corresponding year in ~~2019~~2020, an ~~increase~~a decrease of $2,~~668~~272,~~122~~763, or ~~369~~67%. Included in cost of goods sold for the years ended December 31, ~~2020~~2021 and ~~2019~~2020 are plant operation and other direct overhead expenses incurred to maintain our production facilities. These fixed carrying costs affect our gross margin more significantly at lower revenues than at our anticipated full operating activity levels. Consequently, we expect our gross margins to significantly improve in 2021. For the year ended December 31, 2020, our revenue ramp resulted in increased sales to more than cover those fixed costs resulting in a positive gross profit, while in 2019, when the Company had just begun processing product and incurred the additional fixed costs for running, maintaining and financing the warehouse and extraction facility.

Our resulting gross ~~profit~~ (loss) ~~for~~profit for the year ended December 31, ~~2020~~2021 was $~~280~~(530,~~465~~168) compared with $~~(257~~280,~~371)~~465 for the year ended December 31, ~~2019~~2020, ana ~~increase~~ decrease of $553,036, or ~~203~~289%. The loss is mainly do to a reduction in the inventory value due to the salability of the product and changes in the market. In addition, the company continue to incur fixed costs regardless of the revenue.

Our sales expenses for the year ended December 31, ~~2020~~2021 was $~~169~~7,~~350~~660 compared to $0169,350 for the corresponding period in ~~2019~~2020. As management focused on ~~growth~~the ~~and~~transition ~~development~~to ofthe ~~new~~cannabiotech industry ~~products,~~and ~~the~~Hourglass ~~Company~~initiative, ~~hired~~sales ~~additional~~significantly ~~employees~~decreased toalong ~~focus~~with on sales expense.

~~Our general~~In ~~and~~2021, ~~administrative~~Grapefruit ~~expenses~~compensated ~~for~~vendors ~~the~~and ~~year~~board members ~~ended~~with ~~December~~stock. ~~31,~~Stock ~~2020~~based compensation was $1265,~~317,327~~024 ~~compared~~and tostock ~~$1,618,981~~option ~~for~~expense ~~2019,~~was ~~a decrease of~~ $~~117~~98,~~105,~~631 orfor ~~7%.~~the ~~The~~year ~~decrease~~ended inDecember ~~costs~~31, ~~are~~2021. No ~~primarily~~such ~~due~~expenses towe ~~the cost of the reverse merger~~ incurred in ~~2019~~2020.

Our ~~resulting~~ ~~net~~general ~~loss~~and ~~from~~administrative ~~operations~~expenses for the year ended December 31, ~~2020~~2021 ~~and 2019~~ were $1,~~206~~514,~~212~~052 ~~and~~compared to $1,~~876~~317,~~352,~~327 ~~respectively~~for 2020, an ~~improvement~~increase of $~~670~~196,~~140~~725, or 3615%. The increase in costs is primarily due to expenses associated with the development and marketing of Hourglass-based products.

~~As part~~Our ofresulting ~~the~~net ~~reverse~~loss ~~merger~~from inoperations ~~July~~for ~~2019,~~ the ~~Company acquired derivative liabilities substantially in the form of convertible~~ ~~notes~~year ~~and~~ended ~~related~~December ~~warrants with variable conversion features. On April 15~~31, 2021, ~~the~~and ~~company~~2020 ~~renegotiated~~were ~~the debt agreement with the lender modifying the convertible notes conversion price from a variable rate to a fixed rate conversion price for~~ $42,~~502~~415,~~750 of~~535 ~~convertible~~and ~~notes~~$1, ~~with an effective date of December 31~~206, ~~2020. As a result of the agreement~~212, ~~the Company recorded a noncash expense for the change in the value of derivative instruments of $40~~respectively,~~372,883,~~ ~~which was simultaneously offset by~~ a ~~noncash~~decrease ~~gain~~ of $391,~~640~~209,~~477 from the extinguishment of debt~~323, ~~resulting a net loss of $753,699 from the renegotiation of the debt. (See Note~~or ~~14 to financial statements~~100%.)

~~During~~As part of the reverse merger in July 201, the Company acquired derivative liabilities substantially in the ~~year~~form ~~ended~~of convertible notes and related warrants with variable conversion features. On April 15, 2021, the company renegotiated the debt agreement with the lender modifying the convertible notes conversion price from a variable rate to a fixed rate conversion price for $4,502,750 of convertible notes, with an effective date of December 31, 2020. As a result of the agreement, wethe Company recorded a ~~loss~~noncash onexpense for the change in the value of ~~derivatives~~derivative instruments of $40,~~394~~372,~~176 compared to the $1~~883,~~626,634~~ which ~~loss~~was insimultaneously ~~2019.~~offset ~~Future~~by ~~gains~~a ornoncash ~~losses~~gain ~~related~~of to$39,640,477 ~~the~~from ~~change in~~ the ~~value~~extinguishment of ~~derivatives~~debt, ~~will~~resulting bea ~~minimal~~net ~~after~~loss ~~renegotiating~~of $753,699 from the ~~terms~~renegotiation of the ~~convertible~~debt. ~~notes~~(See Note 14 to financial statements.)

During the year ended December 31, 2021, we recorded a loss on the change in the value of derivatives of $8,751 compared to the $40,394,176 loss in 2020. Future gains or losses related to the change in the value of derivatives will be minimal after renegotiating the terms of the convertible notes.

During the year 2021, Grapefruit acquired a majority of Summit Boys, a non-operating subsidiary with minimal expenses. The loss attributable to noncontrolling interest was $353 (see 2021 Business Highlights).

The net loss attributable to Grapefruit USA, Inc. for the year ended December 31, 2021 was $5,504,670 compared to the $4,056,996 loss in 2020.

Liquidity and Capital Resources

Our cash position ~~increased~~decreased to $~~299~~9,~~895~~ 095 as of December 31, ~~2020~~2021 from $~~266~~299,~~607~~895 as of December 31, ~~2019~~2020. ~~The increase in cash was primarily due to the issuance of debt offset by operating activities.~~ Our total current assets ~~increased~~decreased to $~~948~~714,~~862~~199 as of December 31, ~~2020~~ 2021, from $~~543~~948,~~051~~862 as of December 31, ~~2019~~2020.

Our total current liabilities ~~decreased~~increased to $47,~~379~~703,~~581~~573 as of December 31, ~~2020~~2021 from $54,~~115~~379,~~438~~581 as of December 31, ~~2019~~2020. This ~~decrease~~increase is primarily due to the ~~modified~~fact that ~~conversion price of~~ the convertible notes ~~and~~maturity ~~elimination~~will ofbe reached within the ~~related derivatives~~next twelve months.

During the year ended December 31, ~~2020~~2021, we used $1,~~625~~203,~~908~~388 of net cash for operating activities, as compared to cash used by operations of $1,~~307~~625,~~990~~908 used during the year ended December 31, ~~2019~~2020. Net cash used in investing activities during the year ended December 31, ~~2020~~2021 was $3062,~~926~~250, as compared to $~~481~~30,~~515~~926 during the year ended December 31, ~~2019~~2020. Net cash provided by financing activities during the year ended December 31, 2021 ~~2020~~ was $1974,~~690~~838,~~122,~~ as compared to $1,~~990~~690,~~190~~122 during the year ended December 31, ~~2019~~2020.

We expect our working capital requirements in the next year to be met primarily by the proceeds of issuance of debt, equity and other securities to our existing creditor, shareholders, and other investors, as well as from cash flow from operations. We expect to ~~need~~ require additional working capital from outside sources to cover our anticipated operating expenses. There is no assurance that the Company will be able to raise sufficient additional capital or financing to continue in business or to effectively execute its business plan.

Going Concern Qualification

Our consolidated financial statements have been prepared on a going concern basis which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. During the year ended December 31, ~~2020~~ 2021, we incurred a net loss of $45,~~056~~504,~~955~~670, had a working capital deficit of $36,~~430~~989,~~719~~374 and had an accumulated deficit of $1116,~~494~~826,~~349~~517 at December 31, ~~2020~~2021. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and, or, obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations as they come due. There is no assurance that these events will be satisfactorily completed. As a result, there is doubt about our ability to continue as a going concern for one year from the issuance date of these financial statements.

Management’s plan regarding this matter is to, amongst other things, seek additional equity financing by selling our equity securities and obtaining funds through the issuance of debt. We cannot be certain that funds from these sources will be available when needed or, if available, will be on terms favorable to us or to our stockholders. If we raise additional funds or settle liabilities by issuing equity securities, the percentage ownership of our stockholders may be reduced, stockholders may experience additional dilution, or such equity securities may provide for rights, preferences and/or privileges senior to those of the holders of our common stock. Our ability to execute our business plan and continue as a going concern may be adversely affected if we are unable to raise additional capital or operate profitably.

On July 10, 2019, Grapefruit USA, Inc. and Imaging3, Inc. (“IGNG”) closed a Share Exchange after the completion of all conditions subsequent contemplated by the Share Exchange Agreement among the parties thereto (the “SEA”), by which IGNG was acquired in a reverse acquisition (the “Acquisition”) by the former shareholders of Grapefruit Boulevard Investments, Inc (“Grapefruit). Under the terms of the SEA executed on May 31, 2019 IGNG became obligated to issue to Grapefruit’s existing shareholders that number of newly issued restricted IGNG common shares such that the former Grapefruit shareholders (now new IGNG shareholders) own approximately 81% of the post-Acquisition IGNG common shares and the current IGNG shareholders retain approximately 19~~% of the post-Acquisition IGNG common shares.~~

InCOVID-19 connection with and dependent upon the successful consummation of the above transaction, on May 31, 2019, the Company executed the SPA with Auctus pursuant to the terms of which the Company agreed to sell $4,000,000 of the Notes and issue $6,200,000 of callable warrants (the “Warrants” and, together with the Notes, the “Securities”) to Auctus. Auctus is the Selling Security Holder. In addition, on May 31, 2019, we also entered into a registration rights agreement with Auctus (the “Registration Rights Agreement”) whereby we are obligated to file a registration statement to register the resale of the shares underlying the Securities. On July 25, 2019 (as amended on January 17, 2020), a registration statement was filed to comply with the Registration Rights Agreement . Pursuant to the SPA, Auctus became obligated to purchase the $4,000,000 of Notes from Grapefruit in four tranches as follows: $600,000 at the SPA closing, which was funded on June 6, 2019; the second tranche of $1,422,750 on the day IGNG filed the registration statement, which was funded on August 16, 2019; the third tranche of $1,030,000 was funded the day the SEC declares the registration statement effective and the fourth tranche of $1 million was funded 90 days after effectiveness. As of December 31, 2020, all tranches of this financing were completed. The Company has received gross proceeds of $4,052,750.Impact

InDuring the ~~first~~nine ~~quarter~~months ofended September 30, 2021, ~~Auctus~~the ~~exercised~~company ~~2,000,000~~experienced ~~warrants~~severe atrestrictions ~~$.125~~on inconsumers ~~relation~~and to the ~~“SPA.”~~retail Inlocations ~~addition,~~at ~~the~~which ~~company~~consumers ~~issued~~purchase aour ~~$450,000~~products. ~~convertible~~As toa ~~Auctus~~result ~~bearing~~of ~~12%~~these ~~interest~~restrictions, ~~and~~we ~~2-year~~believe ~~maturity~~demand ~~date.~~for ~~Principal~~our ~~payments~~products ~~shall be~~was ~~made~~subdued induring ~~six~~the ~~(6)~~period. During ~~installments~~the ~~each~~comparable innine ~~the~~months ~~amount~~in ~~of $75~~2020,~~000~~ ~~commencing one hundred~~ and ~~eighty~~as ~~(180)~~a ~~days~~result ~~following~~of the ~~Issue Date~~COVID-19 ~~and~~pandemic, ~~continuing~~we ~~thereafter~~saw ~~each~~an ~~thirty~~increase ~~(30)~~in ~~days~~demand for ~~six~~our ~~(6)~~cannabis ~~months.~~products driven ~~Notwithstanding~~by ~~the~~consumer ~~forgoing,~~pantry-loading ~~the~~and ~~final~~increased ~~payment~~consumption of ~~Principal and~~our ~~Interest~~products ~~shall~~due beto ~~due~~concerns onabout ~~the~~future ~~Maturity~~availability ~~Date.~~of ~~The~~products ~~conversion~~and or ~~price~~concerns isabout ~~the~~whether ~~lower~~retail oflocations ~~(i)~~that ~~the~~sell ~~lowest~~our ~~trading~~products ~~price~~would ~~prior~~remain toopen. Despite the ~~date~~ ofCOVID-19 ~~the~~pandemic, ~~note~~we orhave ~~(ii)~~been ~~the~~able to ~~volume~~keep ~~weighted~~up ~~average~~with ~~price~~fluctuating consumer demand for ~~the~~our 5products ~~days~~and ~~prior~~have continued to ~~conversion.~~introduce ~~(Item~~new ~~14.~~products ~~Subsequent~~in ~~Events)~~the market.

The full extent to which COVID-19 may impact our business, including our operations and the market for our securities and our financial condition, will depend on future developments, which are highly uncertain and cannot be predicted at this time. These include the duration, severity and scope of the pandemic, the development and availability of effective treatments and vaccines, and further action taken by the government and other third parties in response to the pandemic. In particular, COVID-19 and government efforts to curtail COVID-19 could impede our production facilities, increase operating expenses, result in loss of sales, affect our supply chains, impact performance of contractual obligations and require additional expenditures to be incurred.

Off-Balance Sheet Arrangements

None.

2120

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GRAPEFRUIT USA, INC. AND SUBSIDIARY

FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, ~~2020~~2021 and ~~2019~~2020

CONTENTS

Report of Independent Registered Public Accounting Firm	23
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 454)	22
Balance Sheets as of December 31, 2020 and December 31, 2019	24
Balance Sheets as of December 31, 2021 and December 31, 2020	24
Statements of Operations for the years ended December 31, 2020 and December 31, 2019	25
Statements of Operations for the years ended December 31, 2021 and December 31, 2020	25
Statements of Cash Flows for the years ended December 31, 2020 and December 31, 2019	26
Statements of Cash Flows for the years ended December 31, 2021 and December 31, 2020	26
Statement of Stockholders’ Deficit for the years ended December 31, 2020 and December 31, 2019	27
Statement of Stockholders’ Deficit for the years ended December 31, 2021 and December 31, 2020	27
Notes to Financial Statements	28

2221

FL Office

7951 SW 6^th Street, Suite 216

Plantation, FL 33324

Tel: 954-424-2345

Fax: 954-424-2230

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Grapefruit USA, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Grapefruit USA, Inc. and its subsidiary (“the Company”) as of December 31, 2021 ~~2020~~ and December 31, ~~2019~~202 ~~and~~a0nd the related statements of operations, stockholders’ deficit, cash flow and the related notes to consolidated financial statements (collectively referred to as the consolidated financial statements) for the year ended December 31, 2021 ~~2020~~ and December 31, ~~2019~~2020. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, ~~2020~~2021 and December 31, ~~2019~~2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 8 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses,. ~~and~~These ~~has~~factors ~~stated~~raise ~~that~~ substantial doubt ~~exists~~ about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 78. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Convertible Notes

As discussed in Notes 7 and 11 to the consolidated financial statements, the Company had various debt instruments which included conversion features requiring bifurcation and separate accounting. Management evaluated the required accounting, significant estimates, and judgments around the valuation for these embedded derivatives. These embedded derivatives were initially measured at fair value and have subsequently been remeasured to fair value at each reporting period and at settlement. There is no current observable market for these types of features and, as such, the Company determined the fair value of the embedded derivatives using a binomial option pricing model to measure the fair value of the bifurcated derivative. As a result, a high degree of auditor judgment and effort was required in performing audit procedures to evaluate the conclusions reached by management as well as the inputs to the Company’s binomial option pricing model.

Our principal audit procedures performed to address this critical audit matter included the following:

●

We obtained an understanding of the controls and processes surrounding the evaluation, initial measurement and revaluation of the bifurcated derivatives.

●

We evaluated management’s assessment and the conclusions reached to ensure these instruments were recorded in accordance with the relevant accounting guidance.

●

We evaluated the fair value of the bifurcated derivatives that included testing the valuation models and assumptions utilized by management. We reviewed and tested the fair value model used, significant assumptions, and underlying data used in the model.

Valuation of Inventories

As described in Note 2 to the consolidated financial statements, the gross inventories balance was $368,378 and the balance net of reserves was $0 as of December 31, 2021. The Company values its inventories at the lower of cost or net realizable value, and cost being determined using the average costing method. The Company writes down inventory for slow-moving and obsolete inventory based on historical selling trends for finished goods. Per discussion with the management, if this factor is less favorable than those projected, additional inventory write-downs may be required.

The principal considerations for our determination that performing procedures relating to valuation of inventories is a critical audit matter are the significant assumptions and complex judgments by management when determining the future salability of the inventory and its net realizable value. These assumptions and judgments include the assessment of the net realization value by inventory category considering retention periods, future usage and market demand for products which in turn led to high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s methods, calculations, and assumptions.

The following are the primary procedures we performed to address this critical audit matter:

●

We obtained an understanding of management’s process and methodology to develop the estimates.

●

We evaluated the reasonableness of assumptions used by management in forming the forecasted inventory usage and future salability, including examining historical accuracy of the Company’s prior estimates by considering subsequent sales and write-off activity.

●

We tested the completeness, accuracy, and relevance of the underlying data used in management’s estimate.

●

We tested the mathematical accuracy and computation related to the application of the methodology to specific inventory items and categories.

The firm has served this client since January 2020.

/s/ L&L CPAS, PA L&L CPAS, PA

L&L CPAS, PA

Certified Public Accountants Plantation, FL

The United States of America A

April 1915, ~~2021~~2022

GRAPEFRUIT USA, INC. AND SUBSIDIARY

BALANCE SHEETS

AS OF DECEMBER 31, ~~2020~~2021 AND DECEMBER 31, ~~2019~~2020

	December 31, 2020			December 31, 2019
	December 31, 2021 (Unaudited)			December 31, 2020 (Audited)
ASSETS
CURRENT ASSETS:
Cash	$	~~299~~9,~~895~~095		$	~~266~~299,~~607~~895
Accounts receivable		39278,~~408~~422			-39,408
Inventory		~~502~~389,~~115~~282			~~263~~502,~~985~~115
Licensee Agreement		63,800
Licensee agreement		37,400			63,800
Other		~~43,644~~-			1243,~~459~~644
Total current assets		~~948~~714,~~862~~199			~~543~~948,~~051~~862
NON-CURRENT ASSETS:
Property, plant and equipment, net		1,~~790~~769,~~930~~627			1,~~809~~790,~~326~~930
Operating right of use - assets		~~131~~74,~~786~~886			~~219~~131,~~961~~786
Investment in hemp		~~169,950~~-			169,950
Other		7,459			-
Goodwill		250,000			-
TOTAL ASSETS	$	3,048,987		$	2,742,288
Other		7,459			7,459
TOTAL ASSETS	$	2,816,171		$	3,048,987
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Notes payable	$	~~256~~262,~~436~~839		$	~~351~~256,~~569~~436
Accrued loan interest		~~758~~1,~~107~~044,612			~~398~~758,~~720~~107
Related party payable		~~488~~702,~~433~~581			~~281~~488,~~626~~433
Legal settlements - current portion		~~180~~541,~~740~~697			~~159~~180,~~543~~740
Subscription payable		~~791~~251,~~992~~727			~~891~~791,~~738~~992
Derivative liability		~~118~~127,~~641~~392			1118,~~433,597~~641
Capital lease - current portion		6731,~~071~~166			5567,~~565~~071
Operating right of use - liability - current portion		8265,~~038~~486			9882,~~031~~038
Convertible notes - current portion		~~829~~3,~~072~~640,959			~~371~~829,~~173~~072
Accounts payable and accrued expenses		~~807~~1,~~051~~035,114			1807,~~073,876~~051
Total current liabilities		47,~~379~~703,~~581~~573			54,~~115~~379,~~438~~581
Legal settlements - long-term		~~29,226~~-			5029,~~659~~226
Capital lease		387,~~835~~669			~~106~~38,~~005~~835
Operating right of use - liability		5211,~~724~~097			~~123~~52,~~210~~724
Long-term notes payable, net		~~904~~908,~~633~~617			~~866~~904,~~700~~633
Long-term convertible notes, net of discount		~~2,323,735~~-			~~914~~2,~~303~~323,735
Total long-term liabilities		3927,~~349,153~~383			23,~~060~~349,~~877~~153
TOTAL LIABILITIES		78,~~728~~630,~~734~~956			7,~~176~~728,~~315~~734
STOCKHOLDERS’ DEFICIT
Stock compensation for non-employee		-			(244,167	)
Common stock ($0.0001 par value, 1,000,000,000 shares authorized; 557,162,744 and 505,700,437 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively)		55,716			50,570
Common stock ($0.0001 par value, 1,000,000,000 shares authorized; 505,700,437 and 486,320,329 shares issued and outstanding as of December 31, 2020 and 2019, respectively)		50,570			48,632
Preferred stock ($0.0001 par value, 1,000,000 shares authorized; no shares issued and outstanding as of December 31, 2021 and December 31, 2020)		-			-
Preferred stock ($0.0001 par value, 1,000,000 shares authorized; no shares issued and outstanding as of December 31, 2020 and 2019)		-			-
Additional paid in capital		10,962,797			6,591,177
Additional paid in capital		6,591,177			3,026,006
Accumulated deficit		(16,826,517	)		(11,321,494	)
Accumulated deficit		(11,321,494	)		(7,264,498	)
Total stockholders’ deficit		(5,808,004	)		(4,679,747	)
Total stockholders’ deficit		(4,679,747	)		(4,434,027	)
Noncontrolling interest		(6,781	)		-
TOTAL LIABILITIES AND STOCKHOLERS’ DEFICIT	$	3,048,987		$	2,742,288
Total deficit		(5,814,785	)		(4,679,747	)
TOTAL LIABILITIES AND STOCKHOLERS’ DEFICIT	$	2,816,171		$	3,048,987

The accompanying notes are an integral part of these consolidated audited financial statements.

GRAPEFRUIT USA, INC. AND SUBSIDIARY

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, ~~2020~~2021 AND DECEMBER 31, ~~2019~~2020

	Twelve months ended			Twelve months ended
	December 31, 2020			December 31, 2019
	December 31, 2021			December 31, 2020
Revenues
Revenue	$	588,957		$	3,672,353
Bulk sales	$	3,667,164		$	442,355
Cost of goods sold		1,119,125			3,391,888
Distribution services		5,189			8,841
Gross profit (loss)		(530,168	)		280,465
Total revenues		3,672,353			451,196
Cost of goods sold		3,391,888			708,567
Gross profit (loss)		280,465			(257,371	)
Operating expenses:
Sales		~~169~~7,~~350~~660			-169,350
General and administrative		1,317,327			1,618,981
Stock based compensation		265,024			-
Total operating expenses		1,486,677			1,618,981
Stock option expense		98,631			-
Loss from operations		(1,206,212	)		(1,876,352	)
General and administrative		1,514,052			1,317,327
Total operating expenses		1,885,367			1,486,677
Loss from operations		(2,415,535	)		(1,206,212	)
Other income (expense):
Interest expense		(21,~~097~~684,~~085~~695	)		(~~571~~2,~~047~~097,085	)
Change in value of derivative instruments		(408,~~394,176~~751	)		(140,~~626~~394,~~634~~176	)
Gain (loss) on extinguishment of debt		39(904,~~640,477~~044	)		~~(355~~39,~~700~~640,477	)
Impairment charge - LVCA		-			(169,832	)
Gain (loss) on extinguishment of debt - related parties		(491,998	)		-
Total other income (expense)		(23,~~850~~089,~~784~~488	)		(2,~~723~~850,~~213~~784	)
Income (loss) before income taxes		(45,~~056~~505,~~996~~023	)		(4,~~599~~056,~~565~~996	)
Tax provision		-			-
Net income (loss)		(45,~~056~~505,~~996~~023	)		(4,~~599~~056,~~565~~996	)
Less: Net income attributable to noncontrolling interests		-			(9,468	)
Loss atributable to noncontrolling interest		(353	)		-
Net income (loss) attributable to Grapefruit USA, Inc.	$	(4,056,996	)	$	(4,609,033	)
Net (loss) income attibutable to Grapefruit USA, Inc. and subsidiary	$	(5,504,670	)	$	(4,056,996	)
Net loss per share - Basic and diluted	$	(0.01	)	$	(0.0301	)
Weighted average common stock outstanding - Basic and diluted		~~498~~515,~~230~~339,~~051~~023			~~140~~498,~~042~~230,~~737~~051

The accompanying notes are an integral part of these consolidated audited financial statements.

GRAPEFRUIT USA, INC. AND SUBSIDIARY

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, ~~2020~~2021 AND DECEMBER 31, ~~2019~~2020

	Twelve months ended			Twelve months ended
	December 31, 2020			December 31, 2019
	December 31, 2021			December 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(45,~~056~~504,~~996~~670	)	$	(4,~~609~~056,~~033~~996	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization expense		82,889			62,699
Net loss attributable to non-controlling interest		(353	)		-
Fixed asset deposit forfeiture		-			97,000
Depreciation and amortization expense		93,223			82,889
Amortization/acquisition of right of use asset		88,175			(219,961	)
Non-cash interest/acquisition of right of use asset		648,375			88,175
Change in value of derivative		408,~~394,176~~751			140,~~626~~394,~~634~~176
Non-cash interest		1,576,091			289,009
Stock-based compensation for services		351,759			244,167
(Gain) Loss on extinguishment of debt		(39,640,477	)		355,700
Stock option expense		80,744			-
Stock-based compensation for services		244,167			138,333
(Gain) Loss on extinguishment of debt		904,044			(39,640,477	)
Loss on investment in LVCA					169,832
Amortization		922,903			1,576,091
Loss on extinguishment of debt - related parties		491,998			-
Changes in operation assets and liabilities:
Accounts Receivables		(39239,~~408~~014	)		-(39,408	)
Inventory		~~(238~~112,~~130~~833	)		(~~263~~238,~~985~~130	)
Other		(102,443	)		(8,636	)
Prepaid expense and current assets		70,044			-
Legal settlement					(69,370	)
Investment in hemp		169,950			-
Accounts payable and accrued expenses		(293,339	)		953,511
Right-of-use assets		56,900			-
Accrued loan interest expense		359,387			170,277
Accounts payable		228,063			(293,339	)
Net cash used for used for operating activities		(1,625,908	)		(1,307,990	)
Other		-			(102,443	)
Accrued expenses and other current liabilities		-			822,391
Accrued loan interest expense		286,505			359,387
Right-of-use liability		(58,179	)		-
Net cash (used for)/provided by used for operating activities		(1,203,388	)		(1,625,908	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of land and equipment		(30,926	)		(293,765	)
Net cash received from acquisition		69			-
Investment in joint venture		-			(169,950	)
Purchase of land and equipment		(62,319	)		(30,926	)
Capitalized expenses in LVCA		-			(17,800	)
Net cash used for investing activities		(62,250	)		(30,926	)
Net cash used for investing activities		(30,926	)		(481,515	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayment of capital lease liability		(5567,~~665~~071	)		(4055,~~120~~665	)
Reduction/acquisition of right of use liability		(86,479	)		221,241
Repayment of legal liability		(16,746	)		-
Proceeds from convertible notes, net		1450,~~727,264~~000			1,~~472~~727,~~500~~264
Proceeds from loans, net		105,002			101,569
Proceeds from (repayment of) loans, net		-			105,002
Proceeds from issuance of stock					235,000
Repayment of loan principal		(4,772	)		-
Net cash proceeds from financing activities		1,690,122			1,990,190
Proceeds from related parties		214,148			-
NET INCREASE (DECREASE) IN CASH		33,288			200,685
Reduction/acquisition of right of use liability		-			(86,479	)
CASH, BEGINNING BALANCE		266,607			65,922
Contributions from non-controlling interest		(721	)		-
CASH, ENDING BALANCE	$	299,895		$	266,607
Proceeds from exercise of warrants		250,000			-
Proceeds from sale of common stock		150,000			-
Net cash proceeds from financing activities		974,838			1,690,122
NET INCREASE (DECREASE) IN CASH		(290,800	)		33,288
CASH, BEGINNING BALANCE		299,895			266,607
CASH, ENDING BALANCE	$	9,095		$	299,895
SUPLEMENTAL DISCLOSURE ON CASH FINANCING ACTIVITY
Cash paid for interest expense		112,137			185,820
SUPLEMENTAL DISCLOSURE ON NON-CASH FINANCING ACTIVITY
Cash paid for interest expense		185,820			146,503
Shares issued for legal settlement		1,113,261			-
Debt converted to common stock		640,597			-
Shares issued for conversion of notes payable		996,620			640,597
Compensation paid through issuance of common stock		347,792			137,883
Shares issued for debt settlement with related parties		699,236			-
Notes and accrued interest converted to common stock		79,754			429,843
Shares issued for compensation		-			347,792
Capitalization of interest for land improvements					150,827
Shares issued for settlement of debt		-			79,754
Reclassification of derivative liabilities to APIC		423,340			1,890,461
Shares issued for acquisition		250,000			-
Reclassification of derivative liabilities to APIC		-			423,340

The accompanying notes are an integral part of these consolidated audited financial statements.

GRAPEFRUIT USA, INC. AND SUBSIDIARY

STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, ~~2020~~2021 AND DECEMBER 31, ~~2019~~2020

	Equity (Deficit) Attributable to Grapefruit USA, Inc.
	Number of Shares		Amount		Paid in Capital			Accumulated Deficit			Stockholders’ Deficit			controlling Interest			Total Deficit
											Total
	Deficit Attributable to Grapefruit USA, Inc.
	Common Stock				Additional						~~Stockholders’~~Total			Non-			~~Total~~
	Number of Shares		Amount		Paid in Capital			Accumulated Deficit			~~Equity~~Stockholders’ (Deficit)			controlling Interest			~~Equity~~Total (Deficit)
Balance as of December 31, 2018		362,979,119		36,298		2,813,701			(2,655,465	)		194,534			15,085			209,619
Reorganization due to Recapitalization		97,393,688		9,739		(4,442,133	)		-			(4,432,394	)		-			(4,432,394	)
Shares issued for cash						235,000						235,000			-			235,000
Shares from the conversion of notes		9,947,842		995		429,837			-			430,832			-			430,832
Shares issued for services		5,500,000		550		206,950			-			207,500			-			207,500
Shares issued for Settlement		10,499,680		1,050		1,648,023			-			1,649,073			-			1,649,073
Reclassification of derivative liability associated with debt conversion		-		-		1,890,461			-			1,890,461			-			1,890,461
Noncontrolling interest LVCA		-		-		-			-			-			(15,085	)		(15,085	)
Net loss		-		-		-			(4,609,033	)		(4,609,033	)		-			(4,609,033	)
Balance as of December 31, 2019		486,320,329	$	48,632	$	2,781,839		$	(7,264,498	)	$	(4,434,027	)	$	-		$	(4,434,027	)
Shares issued for services		1,150,000		115		287,917			-			288,032			-			288,032
Shares issued for license agreement		1,000,000		100		15,900			-			16,000			-			16,000
Shares issued for settlement		7,213,933		721		565,572			-			566,293			-			566,293
Shares issued with debt		915,795		92		44,782			-			44,874			-			44,874
Shares from the conversion of notes		9,100,380		910		79,844			-			80,754			-			80,754
Shares issued for note conversion		9,100,380		910		79,844			-			80,754			-			80,754
Reclassification from derivative liability		-		-		423,340			-			423,340			-			423,340
Beneficial conversion feature related to warrants		-		-		2,391,983			-			2,391,983			-			2,391,983
Net loss		-		-		-			(4,056,996	)		(4,056,996	)		-			(4,056,996	)
Balance as of December 31, 2020		505,700,437	$	50,570	$	6,591,177		$	(11,321,494	)	$	(4,679,747	)	$	-		$	(4,679,747	)
Shares issued for services		8,849,937		885		351,759			-			352,644			-			352,644
Shares issued for settlement		9,004,186		900		1,112,360			-			1,113,260			-			1,113,260
Shares issued upon warrant exercise		2,000,000		200		249,800			-			250,000			-			250,000
Shares issued for note conversion		13,352,264		1,335		995,285			-			996,620			-			996,620
Shares issued for related party debt		11,710,465		1,171		1,190,063			-			1,191,234			-			1,191,234
Stock options granted pursuant to board of director agreement		-		-		80,744			-			80,744			-			80,744
Shares issued for purchase of stock		2,000,000		200		149,800			-			150,000			-			150,000
Shares issued for acquisition		4,545,455		455		249,545			-			250,000			-			250,000
Equity investment		-		-		(7,736	)		-			(7,736	)		(6,781	)		(14,517	)
Net loss		-		-		-			(5,504,670	)		(5,504,670	)		(353	)		(5,505,023	)
Balance as of December 31, 2021		557,162,744	$	55,716	$	10,962,797		$	(16,826,164	)	$	(5,807,651	)	$	(7,134	)	$	(5,814,785	)

The accompanying notes are an integral part of these consolidated audited financial statements.

GRAPEFRUIT USA, INC. AND SUBSIDIARY

Notes to Financial Statements

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Grapefruit USA, Inc (“we”, “our”, “us”, “GBI”, “Grapefruit”, or “the Company”) was formed as a California corporation on August 28, 2017 and began operating in September 2017.

On July 10, 2019, Grapefruit closed the Share Exchange after the completion of all conditions subsequent contemplated by the Share Exchange Agreement among the parties thereto ( “SEA”), by which Imaging3, Inc. (“IGNG”) was acquired in a reverse acquisition (the “Acquisition”) by the former shareholders of Grapefruit, the accounting acquirer. Under the terms of the SEA executed on May 31, 2019, IGNG became obligated to issue to Grapefruit’s existing shareholders that number of newly issued restricted IGNG common shares such that the former Grapefruit shareholders (now new IGNG shareholders) will own approximately 81% of the post-Acquisition IGNG common shares and the current IGNG shareholders will retain 19% of the post-Acquisition IGNG common shares. At the time of the execution of the SEA, IGNG had approximately 85,218,249 outstanding shares of common stock. Therefore, IGNG issued to Grapefruit’s shareholders 362,979,114 IGNG common shares to Grapefruit’s current shareholder on a pro rata basis with their then-current ownership of Grapefruit of which Bradley Yourist and Daniel J. Yourist own a combined 72.26%, or approximately 259,967,136 shares. Accordingly, the financial statements are prepared using the acquisition method of accounting with GBI as the accounting acquirer and IGNG treated as the legal acquirer and accounting acquiree. Because Imaging3, Inc. did not meet the accounting definition of an operating business, having only nominal assets, the reverse merger transaction was treated as a recapitalization and no goodwill was recognized.

The Company has applied for and received our provisional distribution renewal licensure which allows us to operate through ~~May~~June 1314, ~~2021.~~ 2022. Our annual manufacturing license has been renewed by the California Department of Health. Grapefruit has not yet applied for a license to cultivate and will not until construction has begun on our cultivation facility. We own two acres of fully entitled cannabis real property located in the Coachillin’ Industrial Cultivation and Ancillary Canna-Business Park. The location within Coachillin’ allows the Company to apply for and hold every cannabis license available under the California Cannabis laws.

We intend onto ~~building~~buildout out the real property into a distribution, manufacturing and high-tech cultivation facility to ~~further~~facilitate ~~its goal~~our goal to become a seed to sale, fully vertically integrated Cannabis and CBD product Company. Grapefruit’s plans include an indoor 22,000 square foot multi-tiered canopy and adjoining tissue culture rooms.

We became members of the Indian Canyon and 18th Property Association on September 19, 2017 and have an ownership interest of 1.46% ~~based~~ based upon the 77,156 gross parcel square foot of our property located in an approximately 5.3 million square foot facility. As of December 31, ~~2020~~2021, the common areas continue to be built throughout the entire canna-business park and are not complete.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”).

The audited financial statements as of December 31, ~~2020~~2021 and December 31, ~~2019~~2020, and for the year ended December 31, ~~2020~~2021 and December 31, ~~2019~~ 2020, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial ~~information~~ information on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. They do not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes filed with the SEC for the year ended December 31, ~~2019~~2020.

Inventory – Inventory is comprised of raw material, work in process and finished goods. The following sets forth selected items from our inventory for the years ended December 31, ~~2020~~2021 and ~~2019~~2020:

	December 31, 2020		December 31, 2019
Raw material	$	16,892		-
Work in process		23,566		-
Finished goods		461,657		263,985
	$	502,115	$	263,985

SCHEDULE OF INVENTORY

	December 31, 2021		December 31, 2020
Raw material	$	84,951	$	16,892
Work in process		-		23,566
Finished goods		304,331		461,657
Total inventory	$	389,282	$	502,115

We periodically review the value of our inventory and provide a write-down of inventory based on our assessment of the market conditions. Any write-down is charged to cost of goods sold.

Revenue Recognition – The Company derives revenues from the sale of product in accordance to ASC Topic 606. Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services.

Revenue is recognized based on the following five step model:

	-	Identification of the contract with a customer
	-	Identification of the performance obligations in the contract
	-	Determination of the transaction price
	-	Allocation of the transaction price to the performance obligations in the contract
	-	Recognition of revenue when, or as, the Company satisfies a performance obligation

Performance Obligations

Cost of Goods Sold – Our cost of goods sold includes the costs directly attributable to revenue recognized and includes expenses related to the production, packaging and labelling of cannabis products; personnel-related costs, fees for third-party services, such as testing and transportation costs related to our distribution services.

Basic and Diluted Net Income Per Share – Basic net income per share is based upon the weighted average number of common ~~shares~~ shares outstanding. Diluted net income per share assumes that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. ~~During 2019, potentially dilutive securities were excluded from the computation of weighted average shares outstanding-diluted because their effect was anti-dilutive.~~

	December 31, 2020			December 31, 2019
Numerator:
Net income attributable to common shareholders	$	(4,229,851	)		(4,609,033	)
Denominator:
Weighted-average number of common shares outstanding during the period		498,230,051			140,042,737
Dilutive effect of stock options, warrants, and convertible promissory notes		-			-
Common stock and common stock equivalents used for diluted earnings per share	$	498,230,051		$	140,042,737

	December 31, 2021			December 31, 2020
Numerator:
Net income attributable to common shareholders	$	(5,504,670	)		(4,056,996	)
Denominator:
Weighted-average number of common shares outstanding during the period		515,339,023			498,230,051
Dilutive effect of stock options, warrants, and convertible promissory notes		-			-
Common stock and common stock equivalents used for diluted earnings per share	$	(0.01	)	$	(0.01	)

Derivative Financial Instruments - The Company generally does not use derivative financial instruments to hedge exposures to cash-flow risks or market-risks that may affect the fair values of its financial instruments. The Company utilizes various types of financing to fund its business needs, including convertible notes and warrants and other instruments not indexed to our stock. The Company is required to record its derivative instruments at their fair value. Changes in the fair value of derivatives are recognized in earnings in accordance with ASC 815. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with warrants to purchase common stock and convertible notes.

Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

The carrying amount of our cash and cash equivalents approximates fair value because of the short-term nature of the instruments. The carrying amount of our notes payable at December 31, ~~2019~~2021, approximates their fair values based on comparable borrowing rates ~~available~~ available to the company. The Company evaluated the fair market value of LVCA using Level 3 inputs. From that measurement, the Company recorded an impairment of LVCA.

There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the year ended December 31, ~~2019~~2021. ~~No derivatives pre acquisition.~~

	Level 1		Level 2		Level 3		Total
Derivative Liabilities 2020	$	-	$	-	$	118,641	$	118,641
Derivative Liabilities 2019	$	-	$	-	$	1,433,597	$	1,433,597

SUMMARY OF DERIVATIVE LIABILITIES

	Level 1		Level 2		Level 3		Total
Derivative Liabilities 2021	$	-	$	-	$	127,392	$	127,392
Derivative Liabilities 2020	$	-	$	-	$	118,641	$	118,641

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

32Accounts Receivable and Revenue – The accounts receivable balance was $278,422 as of December 31, 2021 and $39,480 as of December 31, 2021. In 2021, 82% of accounts receivable consisted of four customers. In 2021, the were four customers that had over 54% of the sales. In 2020, 99% of accounts receivable consisted of one customer. In 2020, 63% of the net revenues generated with two customers.

Accounts Receivable and Revenue – The accounts receivable balance was $39,480 as of December 31, 2020 and $0 as of December 31, 2019. In 2020, 99% of accounts receivable consisted of one customer. In 2020, 63% of the net revenues generated with two customers. In 2019, 70% of net revenues generated were the result of transactions with one customer.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August ~~2018~~2020, the FASB issued ASU ~~2018~~2020-1306, ~~“Fair~~Debt ~~Value~~– ~~Measurement~~Debt with Conversion and Other Options (~~Topic~~Subtopic ~~820~~470-20): ~~Disclosure~~and ~~Framework—Changes to~~Derivatives ~~the~~and ~~Disclosure~~Hedging ~~Requirements~~– ~~for~~Contracts ~~Fair~~in ~~Value~~Entity’s ~~Measurement”~~Own Equity (Subtopic 815–40) (“ASU ~~2018~~No. 2020-1306”). ASU ~~2018~~No. 2020-1306 simplifies ~~removes,~~the ~~modifies~~accounting ~~and adds~~for certain ~~disclosure~~financial ~~requirements~~instruments inwith ~~Topic~~characteristics ~~820~~of ~~“Fair~~liabilities ~~Value~~and ~~Measurement”.~~equity, ~~ASU~~including ~~2018-13~~convertible ~~eliminates certain disclosures~~instruments ~~related to transfers~~ and ~~the~~contracts ~~valuations~~on ~~process,~~an ~~modifies~~entity’s ~~disclosures~~own ~~for~~equity. ~~investments~~ASU ~~that~~No ~~are~~2020-06 ~~valued~~is ~~based~~part onof ~~net asset value, clarifies~~ the ~~measurement~~FASB’s ~~uncertainty~~simplification ~~disclosure~~initiative, ~~and~~which ~~requires~~aims ~~additional~~to ~~disclosures~~reduce unnecessary ~~for~~complexity ~~Level~~in 3U.S. ~~fair value measurements~~GAAP. ASU ~~2018~~ No 2020-1306 is effective for ~~the~~fiscal ~~Company~~years ~~for~~beginning ~~annual~~after December 15, 2021, and interim ~~reporting~~ periods within ~~beginning~~those ~~July~~fiscal ~~1, 2020~~years. The Company isdoes ~~currently evaluating~~not expect the ~~impact~~adoption of ASU ~~2018~~No. 2020-1306 ~~will~~to have a material impact on its consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This update requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. This standard will be effective for the Company in the first quarter of 2023 and will be applied prospectively to business combinations occurring on or after the effective date of the standard. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the guidance and the impact on its consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements Adopted

InOn ~~February~~January ~~2016~~1, 2021, the ~~FASB~~Company ~~issued~~adopted Accounting Standards Update (“ASU”) ~~2016~~No. 2020-0201, ~~Leases~~Investments – Equity Securities (Topic ~~842~~321), ~~which~~Investments ~~supersedes~~– ~~existing~~Equity ~~guidance~~Method onand ~~accounting~~Joint ~~for~~Ventures ~~leases in “Leases~~ (Topic ~~840~~323)”, and ~~generally~~Derivatives ~~requires~~and ~~all~~Hedging ~~leases~~(Topic to815) (“ASU beNo. ~~recognized~~2020-01”). inASU ~~the~~No. ~~consolidated~~2020-01 ~~balance~~clarifies ~~sheet.~~the ~~ASU 2016-02~~interaction isof ~~effective~~accounting for ~~annual~~the transition into and ~~interim~~out ~~reporting~~of ~~periods~~the ~~beginning~~equity method ~~after~~as ~~December~~well ~~15,~~as ~~2018;~~measuring ~~early~~certain ~~adoption~~purchased isoptions ~~permitted~~and forward contracts to acquire investments. The ~~provisions~~adoption of ASU ~~2016~~No. 2020-0201 ~~are~~did not tohave bean ~~applied~~impact ~~using~~on athe ~~modified~~Company’s ~~retrospective~~consolidated ~~approach~~financial statements.

InOn ~~March~~January ~~2016~~1, 2021, the ~~FASB~~Company ~~issued~~adopted ASU ~~2016~~2019-0912, ~~Improvements~~Income toTaxes ~~Employee~~(Topic ~~Share-Based~~740): ~~Payment~~Simplifying the Accounting. ~~This~~for ~~ASU~~Income ~~affects~~Taxes ~~entities~~(“ASU ~~that~~No. ~~issue share~~2019-~~based~~12”). ~~payment~~ASU ~~awards to their employees~~No. ~~The~~2019-12 ~~ASU~~eliminates iscertain ~~designed~~exceptions toand ~~simplify~~simplifies ~~several~~the ~~aspects~~application of ~~accounting~~U.S. ~~for share~~GAAP-~~based payment~~related ~~award~~changes ~~transactions~~in ~~which include – the income~~ enacted tax ~~consequences,~~laws ~~classification~~or ofrates ~~awards~~and asemployee ~~either~~stock ~~equity~~option orplans. ~~liabilities, classification~~The onadoption ~~the statement~~ of ~~cash~~ASU ~~flows~~No. ~~and~~2019-12 ~~forfeiture~~did ~~rate~~not ~~calculations.~~have ~~ASU~~an ~~2016-09~~impact ~~became~~on ~~effective for~~ the Company’s inconsolidated ~~the~~financial ~~first quarter of 2018~~statements.

InCompany ~~August~~performs ~~2015,~~ongoing ~~the~~credit ~~FASB~~evaluations ~~issued~~of ~~ASU~~its ~~2015-14,~~customers ~~Revenue~~and ~~from~~historic ~~Contracts~~credit ~~with~~losses ~~Customers~~have ~~(Topic~~been ~~606)~~within —management’s ~~Deferral~~expectations. ~~of the Effective~~The ~~Date~~Company ~~(ASU~~has ~~2015-14),~~a ~~which~~revenue ~~defers~~receivables ~~the~~policy ~~effective date of ASU 2014-09~~ for ~~one~~service ~~year~~ and ~~permits~~warranty ~~early~~contracts. ~~adoption~~Equipment assales ~~early as~~usually ~~the~~have ~~original~~a ~~effective~~one-year ~~date~~warranty of ~~ASU~~parts and ~~2014-09~~service. ~~The~~After ~~new~~a ~~revenue~~one-year ~~standard may be applied retrospectively to each prior~~ period, ~~presented or retrospectively with~~ the ~~cumulative~~Company ~~effect~~contacts ~~recognized as of~~ the ~~date~~buyer ~~of adoption. In 2016, the FASB issued additional guidance~~ to ~~clarify~~initiate the ~~implementation~~sale ~~guidance~~of ~~(ASU~~a ~~2016-08,~~new ~~Revenue~~warranty ~~from~~contract ~~Contracts~~for ~~with~~one ~~Customers~~year. ~~(Topic 606): Principal versus Agent~~Warranty ~~Considerations;~~revenues ~~ASU~~are ~~2016-10,~~deferred ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations~~ and ~~Licensing;~~ ~~and~~recognized ~~ASU~~on ~~2016-12,~~a ~~Revenue from Contracts with Customers (Topic 606): Narrow~~straight-~~Scope~~line ~~Improvements~~basis ~~and~~over ~~Practical Expedients). ASU 2015-14 became effective for~~ the ~~Company~~term inof the ~~first~~contract ~~quarter~~or ofas ~~2018~~services ~~and~~are ~~had no impact on the financial statements~~performed.

3. INCOME TAXES

The Company has generated losses before income tax of approximately $45,~~057~~505,000 and $4,~~609~~057,000 as of December 31, ~~2020~~ 2021 and ~~2019~~2020, respectively. The company recognized a deferred tax asset of approximately $~~257~~351,~~100~~ 700 and $~~442~~257,~~500~~ 100 for the related NOL carry forward as of December 31, ~~2020~~2021 and ~~2019~~2020, respectively. The Company operates in the cannabis industry, which incurs regulatory taxes in addition to comparable taxes of other industries.

On December 22, 2017, the legislation commonly referred to as the Tax Cuts and Jobs Act was enacted, which contains significant changes to U.S. tax law and was leveraged in our tax provision process.

The Company’s effective income tax differs from the statutory federal income tax as follows:

	2020			2019
Net loss	$	4,057,000		$	4,609,000
Expected federal tax expense		(852,000	)		(967,900	)
Increase (decrease) in income tax resulting from:
Permanent differences		910,000			852,400
State and local income taxes, net of Federal benefit		(283,300	)		(321,900	)
Change in valuation allowance		224,400			437,400
Current year tax provision	$	-		$	-

In 2020, the net operating loss led to a deferred tax asset of approximately $257,100 and a deferred tax liability of $32,700 related to property and equipment. In 2019, the net operating loss led to a deferred tax asset of approximately $442,500 and includes a deferred tax asset of $58,000 related to the impairment loss of LVCA and a deferred tax liability of $59,800 related to property and equipment. On December 31, 2020 and 2019, based on the guidance in ASC 740-10-45-10A, we provided an allowance of $224,400 and $437,400, respectively, related to these tax benefits given the uncertainty of utilizing the asset.

	2021			2020
Net loss	$	5,505,000		$	4,057,000

Expected federal tax expense		(1,156,100	)		(852,000	)
Increase (decrease) in income tax resulting from:
Permanent differences		1,215,000			910,000
State and local income taxes, net of Federal benefit		(384,400	)		(283,300	)
Change in valuation allowance		325,500			224,400
Current year tax provision	$	-		$	-

In 2021, the net operating loss led to a deferred tax asset of approximately $351,700 and a deferred tax liability of $26,200 related to property and equipment. On December 31, 2021 and 2020, based on the guidance in ASC 740-10-45-10A, we provided an allowance of $224,400 and $325,500, respectively, related to these tax benefits given the uncertainty of utilizing the asset.

4. NOTES PAYABLE

In October 2017, in connection with our purchase of two acres of fully entitled cannabis real property located in the Coachillin’ Industrial Cultivation and Ancillary Canna-Business Park, the Company issued a first and second trust deed note in the amounts of $700,000 and $200,000, respectively. The first and second trust deed notes are long-term notes and are interest only notes, at 13.0%, and mature in August 2022, with the principal payment due at maturity. For the $700,000 loan, the monthly payment is approximately $7,500. For the $200,000 loan, the monthly payment is approximately $2,200. The 1st and 2nd trust deeds are secured by the land as well as property owned by two officers of the company and three other related parties. Also, each party has personally guaranteed or pledged additional collateral. The notes include a debt discount as of December 31, ~~2020~~2021 of $2211,~~500~~700.

In April 2018, the Company issued a note due 60 days after funding with a principal amount of $250,000 and interest ~~totalling~~ totaling $125,000. As of ~~September~~December 3031, ~~2019~~2021, the note has not been repaid and was amended to add an interest rate of 10% of the total balance due, which is included in our current liabilities. The note is past due. Two officers of the Company have personally guaranteed the loan.

In ~~September 2019~~2021, the Company issued another note of $~~102~~6,~~569~~000 to ancover ~~unrelated~~operational ~~party~~costs. ~~with~~In ~~5% interest~~addition, ~~which~~there ~~was~~is ~~repaid~~a inbalance ~~full~~of $27,156 on the loan for ~~October~~the ~~20,~~vehicle ~~2020~~on which we make $689 monthly payment until July 2025.

5. NOTES PAYABLE, RELATED PARTY PAYABLES, AND OPERATING LEASE – RELATED PARTY

Notes payable to officers and directors as of December 31, ~~2020~~2021 and related party payables to officers and directors as of December 31, ~~2019~~ 2020 are due on demand and consisted of the following:

	Related Party Notes Payable December 31, 2020		Related Party Payables December 31, 2019
Payable to an officer and director	$	82,056	$	115,249
Payable to an individual affiliate of an officer and director		40,000		40,000
Payable to a company affiliate to an officer and director		366,377		126,377
	$	488,433	$	281,626

	Related Party Notes Payable December 31, 2021		Related Party Payables December 31, 2020
Payable to an officer and director	$	528,404	$	82,056
Payable to an individual affiliate of an officer and director		47,560		40,000
Payable to a company affiliate to an officer and director		126,617		366,377
	$	702,581	$	488,433

Related party notes payable bear interest at 10%.

A related party leased two eco-pods in April 2019 and May 2019, which are refurbished shipping containers, located on this specific parcel within Coachillin’. The lease is treated as an operating lease and payment responsibility is ultimately the responsibility of the related party. The Company assumed these lease payment obligations in May 2019. The monthly payments are $1,055 and $880, for the duration of the lease terms of four and five years, respectively.

Included in related party payable as of December 31, 2020, there is $240,000 of related party expenses. The expenses bear a 10% annual interest rate consistent with the other related party notes. As of February 2021, the Board of Directors has decided to retire all related party debt through the issuance of stock.

6. LEGAL SETTLEMENTS

As of December 31, ~~2020~~2021, legal settlements consist of a $7358,~~966~~826 balance and $~~673~~482,~~021~~871 balance bearing interest at 10% and 6%, respectively. (Note 12 Commitments and contingencies).

7. CONVERTIBLE NOTES PAYABLE

InAmortization ~~August~~of ~~2020,~~note 9discounts,~~100,380~~ ~~shares~~which ~~were~~is ~~issued~~included toin ~~settle~~interest ~~$80~~expense,~~754~~ ~~debt~~amounted ofto a$922,902 ~~note~~during ~~and~~the ~~accrued~~year ~~interest~~ended ~~resulting~~December ~~in a loss of $5~~31,~~225. During~~ ~~2019,~~2021 ~~debt~~ and ~~accrued interest in the amount of~~ $~~429~~1,~~843 were converted to 9~~425,~~947,843 shares of common stock. As a result~~234 offor ~~these conversions,~~ the ~~Company~~year ~~recognized~~ended ~~approximately~~December ~~$77~~31, ~~as a gain on extinguishment of debt~~2020.

~~Amortization of note discounts, which is included in interest expense, amounted to $1,425,224 during the year ended December 31, 2020 and $278,209 for the year ended December 31, 2019.~~34

Grapefruit acquired convertible notes in its acquisition of Imaging3, Inc. on July 10, 2019. (See Note 15.) On May 31, 2019, the Company executed the SPA with Auctus pursuant to the terms of which the Company agreed to sell $4,000,000 of the Notes and issue $6,200,000 of callable warrants (the “Warrants” and, together with the Notes, the “Securities”) to Auctus. Auctus is the Selling Security Holder. In addition, on May 31, 2019, we also entered into a registration rights agreement with Auctus (the “Registration Rights Agreement”) whereby we are obligated to file a registration statement to register the resale of the shares underlying the Securities. On July 25, 2019 (as amended on January 17, 2020), a registration statement was filed to comply with the Registration Rights Agreement . Pursuant to the SPA, Auctus became obligated to purchase the $4,000,000 of Notes from Grapefruit in four tranches as follows: $600,000 at the SPA closing, which was funded on June 6, 2019; the second tranche of $1,422,750 on the day IGNG filed the registration statement, which was funded on August 16, 2019; the third tranche of $1,030,000 was funded the day the SEC declares the registration statement effective and the fourth tranche of $1 million was funded 90 days after effectiveness. As of December 31, 2020, all tranches of this financing were completed. The Company has received gross proceeds of $4,052,750. The Notes have a two-year term and will bear interest at 10%.

On April 15, 2021, the company renegotiated the debt agreement related to these notes modifying the convertible notes conversion price from a variable rate to a fixed rate conversion price with an effective date of December 31, 2020. As a result of the agreement, the Company recorded a noncash expense for the change in the value of derivative instruments of $40,372,883, which was simultaneously offset by a noncash gain of $39,640,477 from the extinguishment of debt, resulting a net loss of $753,699 from the renegotiation of the debt.

On February 26, 2021, the company issued a convertible note for $450,000. ~~(Note~~The 14note ~~Subsequent~~has ~~Events)~~an interest rate of 10% and matures in 12 months. This note was included in the amendment making it convertible at $0.075 per share. The note is unpaid at this point.

In addition, the Company has eleven other convertible notes comprising $296,000 outstanding and they are currently in default. The ~~interest~~ interest on these notes varies from 5-10%. AsWe ~~of March 12, 2021, we~~ are in the process of converting eight of the notes amounting to $241,000.

8. GOING CONCERN

Our consolidated financial statements have been prepared on a going concern basis which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. During the year ended December 31, ~~2020~~ 2021, we incurred a net loss of $45,~~056~~504,~~955~~670, had a working capital deficit of $36,~~430~~989,~~719~~374 and had an accumulated deficit of $1116,~~494~~826,~~349~~ 517 at December 31, ~~2020~~2021. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and, or, obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations as they come due. There is no assurance that these events will be satisfactorily completed. As a result, there is doubt about our ability to continue as a going concern for one year from the issuance date of these financial statements.

In connection with and dependent upon the successful consummation of the above transaction, on May 31, 2019, the Company executed the SPA with Auctus pursuant to the terms of which the Company agreed to sell $4,000,000 of the Notes and issue $6,200,000 of callable warrants (the “Warrants” and, together with the Notes, the “Securities”) to Auctus. Auctus is the Selling Security Holder. In addition, on May 31, 2019, we also entered into a registration rights agreement with Auctus (the “Registration Rights Agreement”) whereby we are obligated to file a registration statement to register the resale of the shares underlying the Securities. On July 25, 2019 (as amended on January 17, 2020), a registration statement was filed to comply with the Registration Rights Agreement . Pursuant to the SPA, Auctus became obligated to purchase the $4,000,000 of Notes from Grapefruit in four tranches as follows: $600,000 at the SPA closing, which was funded on June 6, 2019; the second tranche of $1,422,750 on the day IGNG filed the registration statement, which was funded on August 16, 2019; the third tranche of $1,030,000 was funded the day the SEC declares the registration statement effective and the fourth tranche of $1 million was funded 90 days after effectiveness. As of December 31, 2020, all tranches of this financing were completed. The Company has received gross proceeds of $4,052,750.

In the first quarter of 2021, Auctus exercised 2,000,000 warrants at $.125 in relation to the “SPA.” In addition, the company issued a $450,000 convertible to Auctus bearing 12% interest and 21-year maturity date. Principal payments shall be made in six (6) installments each in the amount of $75,000 commencing one hundred and eighty (180) days following the Issue Date and continuing thereafter each thirty (30) days for six (6) months. Notwithstanding the forgoing, the final payment of Principal and Interest shall be due on the Maturity Date. The conversion price is ~~the lower of (i) the lowest trading price prior to the date of the note or (ii) the volume weighted average price for the 5 days prior to conversion~~$0. ~~(Item 14~~75. ~~Subsequent Events)~~

9. STOCKHOLDERS’ EQUITY

Preferred Stock

The Company has authorized 1,000,000 shares of $0.0001 par value preferred stock. As of December 31, ~~2020~~2021, and ~~2019~~2020, there are no ~~shares~~ shares of preferred stock outstanding.

Common Stock

The Company is authorized to issue 1,000,000,000 shares of $0.0001 par value common stock.

36During the year ended December 31, 2021 the Company issued a total of 8,849,937 shares for services rendered valued at $352,644; 11,710,465 shares were issued related debt settlement with related parties valued at $1,191,234; 9,004,086 shares were issued related to legal settlement valued at 1,113,260; 13,352,264 shares were issued related to the conversion of convertible notes valued at $996,620; 2,000,000 shares were issued for a stock purchase valued at $0.075 per share; 2,000,000 shares were issued for warrant exercised at $0.125 per share; and 4,545,455 shares were issued for the Summit Boys acquisition (Note – 14 Investments) valued at $250,000.

During the year ended December 31, 2020 a total of 1,150,000 shares were issued for services rendered valued at $ 288,032; 915,795 ~~shares~~ shares were issued upon receiving a loan valued at $44,874; 9,100,380 shares were issued to settle $80,754 debt of a note and accrued interest resulting in a loss of $5,225; and 7,213,933 shares were issued related to for a settlement valued at $566,294. In 2021, 1,000,000 shares were issued for a licensing agreement valued at $38,700 put into effect in 2020.

~~During~~As ~~the~~of ~~year ended~~ December 31, ~~2019~~2021, ~~the~~there ~~Company~~were ~~issued~~approximately a608 ~~total~~record ofholders ~~470,000 shares~~ of our common stock, ~~for~~not ~~cash~~including inshares ~~the~~held ~~amount~~in of“street ~~$235,000;~~name” ~~4,500,000~~in ~~shares~~brokerage ~~were~~accounts ~~issued for services rendered valued at $382,500 of~~ which ~~$127,500~~is ~~has been expensed; and 9,947,842 shares were issued related to conversion of notes payable~~unknown. As ~~a result~~ of ~~the~~December ~~acquisition~~31, ~~460~~2021,~~702,487~~ ~~shares~~there were ~~issued~~559,512,622 toshares ~~Grapefruit shareholders~~of ~~and~~our ~~other~~common ~~parties~~stock ~~involved~~outstanding ~~with~~on ~~the acquisition~~record.

As of December 31, 2020, there were approximately 614 record holders of our common stock, not including shares held in “street name” in brokerage accounts which is unknown. As of December 31, 2019, there were 504,700,437 shares of our common stock outstanding on record.

Stock Compensation for Non-employee

In August 2019, the Company issued 4,500,000 shares of common stock to a cannabis specialist to sit on an advisory board. The value of the shares totaled $382,500 and is to be expensed over a twelve-month period. As of December 31, 2020, the full amount has been expense.

Stock Option Plan

Stock Options

As of ~~December~~September 3130, ~~2020~~2021, employees of the Company hold options to purchase 250,000 shares of common stock granted in 2016 at an exercise price of $1.00. On March 28, 2021, the Company granted a board member an option to purchase 750,000 shares of common stock at $0.025. There are six month vesting periods for a block of 250,000 shares starting October 1, 2021. Options were valued at fair value using the Binomial Tree method and has been expensed over the life of the option. For the year ended December 31, 2021, the company has $80,744 in stop option expense.

Transactions in FY 2020	Quantity		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life
Outstanding, December 31, 2019		250,000	$	1.00		5.57
Granted
Exercised		-
Cancelled/Forfeited		-
Outstanding, December 31, 2020		250,000	$	1.00		4.57
Exercisable, December 31, 2020		250,000	$	1.00		4.57

SCHEDULE OF STOCK OPTIONS ACTIVITY

The weighted average remaining contractual life of options outstanding issued under the Plan was 4.57 years at December 31, 2020.

Transactions in FY 2021	Quantity		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life
Outstanding, December 31, 2020		250,000	$	1.00		3.57
Granted		750,000		0.025		5.25
Exercised		-
Cancelled/Forfeited		-
Outstanding, December 31, 2021		1,000,000	$	0.27		4.83
Exercisable, December 31, 2021		500,000	$	0.51		4.16

37The weighted average remaining contractual life of options outstanding issued under the Plan was 4.16 years at December 31, 2021.

10. WARRANTS

Following is a summary of warrants outstanding at December 31, ~~2020~~2021:

SUMMARY OF WARRANTS OUTSTANDING

Number of Warrants		Exercise Price		Expiration Date
	37,500	$	0.10	April 2022
	500,00	$	0.10	August 2022
	575,000	$	0.10	April 2023
	125,000	$	0.10	May 2023
	162,500	$	0.10	August 2023
	2,800,000	$	0.40	May 2022
	302,776	$	0.10	January 2024
	12,000,000	$	0.10	March 2021
	2,160,000	$	0.10	June 2021
	16,000,000	$	0.125	May 2021
	15,000,000	$	0.15	May 2021
	8,000,000	$	0.25	May 2021

11. DERIVATIVE LIABILITIES

Grapefruit ~~acquired~~recorded derivative instruments in its acquisition of Imaging3, Inc. on July 10, 2019. ~~(See Note 15.)~~ The Company’s only ~~asset~~ asset or liability measured at fair value on a recurring basis was its derivative liability associated with related warrants to purchase common stock and the conversion features embedded in convertible promissory notes.

In connection with financing transactions, the Company issued warrants to purchase common stock and convertible promissory notes. These instruments included provisions that could result in a reduced exercise price based on specified full-ratchet anti-dilution provisions. The “reset” provisions were triggered in the event the Company subsequently issued common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than contractually specified amounts. Upon triggering the “reset” provisions, the exercise / conversion price of the instrument will be reduced. Accordingly, pursuant to ASC 815, these instruments were not considered to be solely indexed to the Company’s own stock and were not afforded equity treatment.

AsOn of April 15, ~~2020~~2021, the company ~~has,~~renegotiated ~~for~~conversion ~~the past six weeks, been in the process of renegotiating certain key~~ terms ofon ~~its approximately~~ $4,~~500~~502,~~000~~750 of convertible notes ~~(the~~with ~~“Notes”) issued to its sole institutional investor in 2019, 2020 and 2021~~Auctus. ~~A key~~All ~~element of these negotiations has been modifying the note conversion price from a~~ variable ~~rate to a fixed rate~~ conversion ~~price.~~ ~~It has required more time than expected for the parties to reach agreement on this issue than originally anticipated, but~~prices ~~after~~were ~~several~~replaced ~~weeks~~with ~~of talks, the parties reached agreement today, April 15, 2021 on~~ a fixed conversion price ~~(See~~of ~~“Note 7~~$0. ~~Convertible Notes Payable” for terms)~~075. ~~These~~In ~~highly favorable terms has also eliminated several derivatives~~addition, ~~and~~ the ~~company~~ ~~does~~Company ~~not~~issued toan ~~anticipate~~additional ~~seeing~~20,000,000 ~~large~~warrants ~~cashless~~with ~~gains~~an orexercise price ~~losses from the changes in fair value~~ of ~~the~~$0.075 ~~derivatives~~per share.

The following table summarizes activity in the Company’s derivative liability during the year ended December 31, ~~2020~~2021:

12-31-19 Balance	$	1,433,597
Creation		1,434,345
Reclassification of equity		(1,652,615	)
Settlement of debt		(41,490,862	)
Change in Value		40,394,176
12-31-2020 Balance	$	118,641

SUMMARY OF DERIVATIVE LIABILITY


12-31-2020 Balance	$	118,641
Creation		-
Reclassification of equity		-
Settlement of debt		-
Change in Value		8,751
12-31-2021 Balance	$	127,392

The Company classifies the fair value of these derivative liabilities under level 3 of the fair value hierarchy of financial instruments. The fair value of the derivative liability was calculated using a Black Scholes model. The Company’s stock price and estimates of volatility are the most sensitive inputs in validation of assets and liabilities at fair value. The liabilities were measured using the following assumptions:

SCHEDULE OF ASSUMPTIONS USED

Term	0.01 years -5.0 years
Dividend Yield		0	%
Risk-free rate		2.33% - 2.49	%
Volatility		65-220	%

12. COMMITMENTS AND CONTINGENCIES

Alpha Capital Anstalt and Brio Capital Master Fund, LTD

On September 13, 2017, Alpha Capital Anstalt and Brio Capital Master Fund, LTD, two minority members of a group of investors in the Company (the “Plaintiff”) filed a lawsuit seeking damages and injunctive relief in the United States District Court for the Southern District of New York claiming that the Company breached certain Note and Warrant agreements among the parties to the action. The holders of the majority of the investment involved in the above lawsuit chose not to join in the lawsuit and have informed the Company that they believe the lawsuit to be baseless. On November 21, 2017, the Court denied the Plaintiff’s request for injunctive relief against the Company. As a result, the case essentially became an action for money damages against the Company, which the Company believed to be without merit and defended vigorously. However, on July 27, 2018 United States District Court for the Southern District of New York granted the plaintiffs motion for summary judgement, awarding them approximately $1.4 million dollars. On April 15, 2019 the Company executed a settlement agreement (the “Settlement Agreement”) with the defendants to settle the matter by agreeing to pay the defendants an aggregate of $200,000 and issuing them an aggregate of 7,705,698 of the Company’s common shares (subject to certain possible adjustments to the amount of shares to be issued to the Defendants by the Company). The Company paid this $200,000 to the defendants and issued the 7,705,698 shares to the defendants in the fourth quarter of 2019. Subsequently, the defendant’s claimed the aforementioned share adjustment had been triggered and made a demand that the Company issue additional shares pursuant to the terms of the Settlement. In ~~March~~April 2021, the Company ~~agreed~~issued ~~to issue~~ an additional aggregate of 2,822,654 shares the Company’s stock to these defendants in final settlement of the dispute.

Administrative Claim of Greenberg Glusker Fields Claman & Machtinger LLP

The Company came to a settlement agreement with Greenberg Glusker Fields Claman & Machtinger LLP (“Greenberg”). The full debt of $1,117,547 bearing on interest of 6% is to be repaid. Three $68,000 payments are to be made in relation to the timing of the three tranches mentioned in “Auctus Financing” or before November 30, 2019. As of now, $68,000 has been paid. In addition, 7,628,567 shares are to be issued as part of the settlement agreement—7,213,933 of the shares were issued as of December 31, 2020. The settlement includes a make-whole provision in which additional shares are to be issued if the above mentions shares do not repay the debt in full. In 2021, 4,520,865 shares have been issued as part of the make-whole provision. We anticipate issuing additional shares in 2022.

Galileo Surgery Center LP/Cypress Ambulatory Surgery Center LP vs Imaging3, Inc. Settlement

The Company came to a settlement with Galileo Surgery Center LP/Cypress Ambulatory Surgery Center LP (“Galileo”) for $75,572 with an interest rate of 10%, requiring payments of $27,~~000~~300 per month beginning in August ~~2019~~2021 until paid in full. ~~The company is currently behind on payments.~~

13. INVESTMENTS

Acquisition of Lake Victoria Mining Company

In December 2018, we purchased a public shell company, Lake Victoria Mining Company. (“LVCA”), for $150,000 cash and $30,300, which included a noncontrolling interest of $15,085 for a total investment amount of $195,385, through which we originally intended to effectuate becoming a public company through a reverse merger transaction. We accounted for the purchase as an asset acquisition whereby the total investment amount was recorded as an intangible asset. In early 2019 however, we determined that LVCA was not a suitable entity through which we could accomplish our objective. Accordingly, we recorded a permanent impairment charge related to the intangible asset in the amount of $195,385, leaving a net realizable value of $0 as of December 31, 2019.

In July 2019, we sold our investment in LVCA to an entity owned by the CEO and COO of the Company for $1,000 and the assumption of $24,553 of liabilities resulting in a net gain of $25,553.

Investment in Hemp

In September 2019, the Company invested in hemp product that was purchased and stored by a third party. The Company expects to sell the product by the beginning of next year. Due to the increased harvests, the salability of the product decreased, necessitating the markdown this year.

14. SEGMENT INFORMATION

Accounting Standards Codification subtopic Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. At this time, Grapefruit does not have any reportable segments.

15. SUBSEQUENT EVENTS

On March 8, 2022, Grapefruit USA, Inc. was contacted by an attorney about outstanding litigation with Mentor Group, Inc. against Imagaing3, Inc. Judgement against Imaging3 now falls to Grapefruit in the amount of $36,462.

14. SUBSEQUENT EVENTS

On February 18, 2021, Auctus exercised 2,000,000 warrants at $.125 in relation to the “SPA.”

On February 26, 2021, the Company issued a $450,000 convertible to Auctus bearing 12% interest and 2-year maturity date. Principal payments shall be made in six (6) installments each in the amount of $75,000 commencing one hundred and eighty (180) days following the Issue Date and continuing thereafter each thirty (30) days for six (6) months. Notwithstanding the forgoing, the final payment of Principal and Interest shall be due on the Maturity Date. The conversion price is the lower of (i) the lowest trading price prior to the date of the note or (ii) the volume weighted average price for the 5 days prior to conversion.

On March 16, 2021, the Company agreed to issue 3,920,865 shares to Greenberg Glusker Fields Claman & Machtinger LLP as part of the make-whole provision as part of their settlement, which is expected to be issued in the second quarter of 2021. (See Note 12. Commitments and Contingencies).

On April 15, 2021, the company renegotiated conversion terms on $4,502,750 of convertible notes with Auctus; $4,052,750 from the “SPA” and $450,000 from the February 26, 2021 note. All variable conversion prices were replaced with a fixed conversion price of $0.075. In additions, 20,000,000 we warrants were issued with an exercise price of $0.075 per share. In relation to these 20,000,000 warrants, the holder may elect to receive warrant shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this warrant.

On April 19, 2021, Alpha Capital Anstalt and Brio Capital Master Fund, LTD was issued 2,822,654 shares as part of their true-up provision in their settlement. (See Note 12. Commitments and Contingencies).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

ITEM 9A. CONTROL AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure, due to the material weaknesses identified below.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive and financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

As of December 31, ~~2020~~2021, our management assessed the effectiveness of our internal control over financial reporting using the criteria ~~set~~ set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, our management concluded that, as of December 31, ~~2020~~2021, our internal control over financial reporting was effective based on those criteria.

Independent Registered Accountant’s Internal Control Attestation

This annual report does not include an attestation report of our public accounting firm regarding our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting through the date of this report or during the quarter ended ~~December~~ December 31, ~~2020~~2021, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The following table lists our executive officers and directors as of December 31, ~~2020~~2021:

Name	Age	Position
John Hollister	58	Chief Executive Officer (through June 3, 2019), Director (through February 26, 2021)
Bradley J Yourist	52	Chief Executive Officer and Director
Bradley J Yourist	50	Chief Executive Officer and Director
Daniel J Yourist	54	Chief Operating Officer, Corporate Secretary, and Director
Daniel J Yourist	52	Chief Operating Officer, Corporate Secretary, and Director
Kenneth J. Biehl	64	Executive Vice President & Chief Financial Officer
James Jordan	41	Director
Sharon Boddie	43	Director

Bradley J Yourist - In July 2019, Mr. Yourist was appointed the Chief Executive Officer and Chairman of the Board of Imaging3, Inc., a Delaware corporation (“IGNG”).

In August 2017, Mr. Bradley J. Yourist was appointed the Chief Executive Officer and Chairman of the Board of Grapefruit Boulevard Investment, Inc.

From June 2007 to the present, Mr. Yourist has been a partner in Yourist Law Corporation which is based in Los Angeles, California.

Mr. Yourist possesses a combined twenty-five years of senior management experience from running his own law firm to Grapefruit’s Cannabis Distribution and Manufacturing Divisions. He has gained significant hands-on experience in the daily operations of Grapefruit’s licensed cannabis business and he fully understands the California wholesale cannabis market and its current market trends.

Moreover, Mr. Yourist was instrumental in launching Grapefruit’s edible division and has set-up strategic relationships to work with other California licensed companies to produce high quality cannabis infused edibles for the retail market. He and his team are also responsible for planning, licensing and permitting Grapefruit’s ‘Type 6’ ethanol cannabis extraction laboratory located in the City of Desert Hot Springs. Since 2007, Mr. Yourist advised Prop. 215 ‘compliant’ medical cannabis cultivation operations and learned first-hand of the potential medical benefits of cannabis use for both cancer and terminally ill patients.

In December 1995, Mr. Yourist became a member of the State Bar of California and has remained in good standing ever since. He also has several published appellate opinions to his credit. Mr. Yourist also holds a California Real Estate Broker’s License from 1995 to present date.

In June 1995, Mr. Yourist graduated law school with honors as a member of the law review at the University of La Verne School of Law and in 1992, he earned his BA in Political Science from California State University of Northridge.

Daniel J Yourist has been a Director and the Chief Operating Officer of Grapefruit Boulevard Investments, Inc. since the company was formed in August 2017. Mr. Yourist is a licensing expert in the cannabis space. He has extensive compliance and operational experience in all facets of managing a California Cannabis business – from sourcing, purchasing and selling compliant cannabis goods to retailers, manufacturers and distributors to ensuring compliance with all State and Local Cannabis Laws and Regulations. Mr. Yourist is seasoned, precise and brings clarity to the regulatory atmosphere at Grapefruit as well as his comprehensive working knowledge of the operational aspects of distribution and manufacturing. Mr. Yourist was admitted to the State Bar of California in December 1995. He has worked for Yourist Law Corporation as Partner/Shareholder continuously since 2003. He has extensive litigation experience in business and regulatory disputes, employment law/class action litigation, as well as appellate experience in both the State and Federal arenas. Mr. Yourist has held a California Real Estate Broker license since 2000.

Kenneth J. Biehl joined the company as Executive Vice President & Chief Financial Officer in March of 2018. He is a C-level, strategic, operations and finance executive with over 25 years of experience in leading private, public, and nonprofit companies through growth, mergers and acquisitions, and IPOs. Mr. Biehl is also the CEO of CxCTeams, a provider of finance and accounting services, which was founded in 2005. Mr. Biehl has served as an executive finance and operations officer of several public and private companies. From 2000 to 2005, he was the COO and CFO of Integrated Information Systems (IIS), a public IT consultancy corporation specializing in Microsoft and custom application development solutions in Tempe, Arizona. Prior to IIS, from 1997 to 2000, he served as EVP and CFO for Sunstone Hotel Investors, a public real estate investment trust, investing in and operating lodging assets, headquartered in San Clemente, California. Prior to Sunstone, Mr. Biehl served as Vice President & Corporate Controller of Starwood Lodging. Prior to Starwood, Mr. Biehl served with KPMG, PricewaterhouseCoopers, and Ernst & Young international accounting firms. He is a graduate from the Brigham Young Marriott School of Accountancy.

James Jordan joined Grapefruit USA, Inc. in January 2020 and he currently serves as a member of the Board of Directors. Mr. Jordan has nearly 20 years of cannabis and marketing leadership. Mr. Jordan is currently, and has been since January 2017, the CEO of C2 Brand Ventures, a Los Angeles, CA based cannabis consulting company that specializes in the development of early and middle stage cannabis companies in California and Nevada. Mr. Jordan has built and advised dozens of start-ups and helped secure multi-million dollar funds for growth and expansion including cannabis dispensaries in Los Angeles. Mr. Jordan is also the Founder and Executive Director of Southern California Cannabis Business and Investment Group (SCCBIG), a Los Angeles based Cannabis Industry meet-up and networking group founded by him in 2016 which sponsors monthly events with over ten thousand active members, 100’s of Cannabis companies and start-ups, dozens of funding sources, new market leading technology launches, and a deep network of attorneys, investors, operators and much more. SCCBIG is currently partners with the Emerald Forge and is developing new platforms for cannabis event solutions online and promoting new products and services with their weekly broadcasts and partner programs.

Sharon Boddie joined the Board of Directors, effective March 29, 2021. Sharon has over 20 years’ experience working in global media and digital marketing roles, leading Amazon, Apple, Fox, Farmers Insurance, Hulu and other Fortune 500 media campaigns. She is currently the Head of Media for Amazon Studios and Prime Video in Los Angeles, California. Most recently, she led breakthrough media campaigns in support of feature films including “Borat Subsequent Moviefilm” as well as “Coming 2 America” featuring Eddie Murphy, which have created cultural zeitgeist launches globally. Sharon Boddie is an experienced media executive with a proven, successful track record of releasing new products and IP for the world’s leading brands, advertising firms and media agencies, including successfully launching Apple Watch, Apple Music and the iPhone 6 in the role of the global digital media lead for Apple at their partner media agency OMD.

Limitation of Liability and Indemnification of Officers and Directors

Under the California Corporation Code, our directors will have no personal liability to us or our stockholders for monetary damages incurred as the result of the breach or alleged breach by a director of his “duty of care.” This provision does not apply to the directors’ (i) acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) acts or omissions that a director believes to be contrary to the best interests of the corporation or its shareholders or that involve the absence of good faith on the part of the director, (iii) approval of any transaction from which a director derives an improper personal benefit, (iv) acts or omissions that show a reckless disregard for the director’s duty to the corporation or its shareholders in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing a director’s duties, of a risk of serious injury to the corporation or its shareholders, (v) acts or omissions that constituted an unexcused pattern of inattention that amounts to an abdication of the director’s duty to the corporation or its shareholders, or (vi) approval of an unlawful dividend, distribution, stock repurchase or redemption. This provision would generally absolve directors of personal liability for negligence in the performance of duties, including gross negligence.

The California Corporations Code grants corporations the right to indemnify their directors, officers, employees and agents in accordance with applicable law. Our bylaws provide for indemnification of such persons to the full extent allowable under applicable law. These provisions will not alter the liability of the directors under federal securities laws.

We intend to enter into agreements to indemnify our directors and officers, in addition to the indemnification provided for in our bylaws. These agreements, among other things, indemnify our directors and officers for certain expenses (including attorneys’ fees), judgments, fines, and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of Imaging3, arising out of such person’s services as a director or officer of Imgagin3, any subsidiary of Imaging3 or any other company or enterprise to which the person provides services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Board Committees

Our board of directors does not have a compensation committee so all decisions with respect to management compensation are made by the whole board. Our board of directors does not have a nominating committee. Therefore, the selection of persons or election to the board of directors was neither independently made nor negotiated at arm’s length.

AUDIT COMMITTEE

Report of the Audit Committee

The members of our Audit Committee are Bradley J. Yourist, Chair and Daniel J. Yourist. Our audit committee has reviewed and discussed ~~our~~ our audited financial statements for the fiscal year ended December 31, ~~2019~~2021 with senior management. The audit committee has reviewed and discussed with management our audited financial statements. The audit committee has also discussed with L&L CPAs, PA (“L&L”), our independent auditors, the matters required to be discussed by the statement on Auditing Standards No. 16 (Communication with ~~Audit~~ Audit Committees) and received the written disclosures and the letter from L&L required by Independence Standards Board Standard No. 1 (Independence Discussion with Audit Committees). The audit committee has discussed with L&L the independence of L&L as our auditors. Based on the foregoing, our audit committee has recommended to the board of directors that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2021 for filing with the United States Securities and Exchange Commission. Our audit committee did not submit a formal report regarding its findings.

Notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this report in future filings with the Securities and Exchange Commission, in whole or in part, the foregoing report shall not be deemed to be incorporated by reference into any such filing.

Code of Conduct

We have adopted a code of conduct that applies to all of its directors, officers and employees. The text of the code of conduct has been posted on our Internet website and can be viewed at www.imaging3.com. Any waiver of the provisions of the code of conduct for executive officers and directors may be made only by our audit committee or the full board of directors and, in the case of a waiver for members of the audit committee, by the board of directors. Any such waivers will be promptly disclosed to our shareholders.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of our common stock, to file reports of ownership and changes in ownership with the SEC. Our current officers and directors have not yet filed their Form 3s with the SEC.

Legal Proceedings

During the past ten years, none of our current directors or executive officers has been:

● the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; ● convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); ● subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; ● found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, that has not been reversed, suspended, or vacated; ● subject of, or a party to, any order, judgment, decree or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of a federal or state securities or commodities law or regulation, law or regulation respecting financial institutions or insurance companies, law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

● subject of, or a party to, any order, judgment, decree or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of a federal or state securities or commodities law or regulation, law or regulation respecting financial institutions or insurance companies, law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or ● subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

None of our directors, officers or affiliates, or any beneficial owner of 5% or more of our common stock, or any associate of such persons, is an adverse party in any material proceeding to, or has a material interest adverse to, us or any of our subsidiaries.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following Compensation Discussion and Analysis describes the material elements of compensation for our executive officers identified in the Summary Compensation Table (“Named Executive Officers”), and executive officers that we may hire in the future. As more fully described below, our board of directors makes all decisions for the total compensation of our executive officers, including the Named Executive Officers. We do not have a compensation committee, so all decisions with respect to management compensation are made by the whole board.

Compensation Program Objectives and Rewards

Our compensation philosophy is based on the premise of attracting, retaining, and motivating exceptional leaders, setting high goals, working toward the common objectives of meeting the expectations of customers and stockholders, and rewarding outstanding performance. Following this philosophy, in determining executive compensation, we consider all relevant factors, such as the competition for talent, our desire to link pay with performance in the future, the use of equity to align executive interests with those of our stockholders, individual contributions, teamwork and performance, and each executive’s total compensation package. We strive to accomplish these objectives by compensating all executives with total compensation packages consisting of a combination of competitive base salary and, once we grow more and increase our staff, incentive compensation. Because of our small size and staff to date, we have not yet adopted a management equity incentive plan, nor have we yet used equity incentives as part of our management compensation policy.

While we have not hired at the executive level significantly since inception because our business has not grown sufficiently to justify increasing staff, we expect to grow and hire in the future. Our Named Executive Officers have been with us for many years and their compensation has basically been static, based primarily on levels at which we can afford to retain them, and their responsibilities and individual contributions. To date, we have not applied a formal compensation program to determine the compensation of the Named Executives. In the future, as we and our management team expand, our board of directors expects to add independent members, form a compensation committee comprised of independent directors, adopt a management equity incentive plan and apply the compensation philosophy and policies described in this section of the Form 10-K.

The primary purpose of the compensation and benefits described below is to attract, retain and motivate highly talented individuals when we do hire, who will engage in the behaviors necessary to enable us to succeed in our mission while upholding our values in a highly competitive marketplace. Different elements are designed to engender different behaviors, and the actual incentive amounts which may be awarded to each Named Executive Officer are subject to the annual review of the board of directors. The following is a brief description of the key elements of our planned executive compensation structure.

Base salary and benefits are designed to attract and retain employees over time. Incentive compensation awards are designed to focus employees on the business objectives for a particular year. Equity incentive awards, such as stock options and non-vested stock, focus executives’ efforts on the behaviors within the recipients’ control that they believe are designed to ensure our long-term success as reflected in increases to our stock prices over a period of several years, growth in our profitability and other elements. Severance and change in control plans are designed to facilitate a company’s ability to attract and retain executives as it competes for talented employees in a marketplace where such protections are commonly offered.

The Elements of Grapefruit’s Compensation Program

Base Salary

Executive officer base salaries are based on job responsibilities and individual contribution. The board reviews the base salaries of our ~~executive~~ executive officers, including our Named Executive Officers, considering factors such as corporate progress toward achieving objectives (without reference to any specific performance-related targets) and individual performance experience and expertise. None of our Named Executive Officers have employment agreements with us. Additional factors reviewed by the board of directors in determining appropriate base salary levels and raise’s include subjective factors related to corporate and individual performance. For the year ended December 31, ~~2019~~ 2021, all executive officer base salary decisions were approved by the board of directors.

Incentive Compensation Awards

The Named Executives have not been paid bonuses and our board of directors has not yet established a formal compensation policy for the determination of bonuses. If our revenue grows and bonuses become affordable and justifiable, we expect to use the following parameters in justifying and quantifying bonuses for our Named Executive Officers and other officers of Imaging3: (1) the growth in our revenue, (2) the growth in our earnings before interest, taxes, depreciation and amortization, as adjusted (“EBITDA”), and (3) our stock price. The board has not adopted specific performance goals and target bonus amounts for any of its fiscal years but may do so in the future. It is anticipated that such an incentive compensation awards program may commence during the year ~~2019~~ 2022.

Equity Incentive Awards

As stated previously, in the future we plan to adopt a formal management equity incentive plan pursuant to which we plan to grant stock options and make restricted stock awards to members of management, which would not be assignable during the executive’s life, except for certain gifts to family members or trusts that benefit family members. These equity incentive awards, we believe, would motivate our employees to work to improve our business and stock price performance, thereby further linking the interests of our senior management and our stockholders. The board will consider several factors in determining whether awards are granted to an executive officer, including those previously described, as well as the executive’s position, his or her performance and responsibilities, and the amount of options or other awards, if any, currently held by the officer and their vesting schedule. Our policy will prohibit backdating options or granting them retroactively.

Benefits and Prerequisites

At this stage of our business we have limited benefits and no prerequisites for our employees other than health insurance and vacation benefits that are generally comparable to those offered by other small private and public companies or as may be required by applicable state employment laws. We do not have a 401(k) Plan or any other retirement plan for our Named Executive Officers. We may adopt these plans and confer other fringe benefits for our executive officers in the future if our business grows sufficiently to enable us to afford them.

Executive Compensation

The following table summarizes compensation paid or accrued by us for the years ended December 31, 2020 and December 31, 2019 for services rendered in all capacities, by our chief executive officer and our two other most highly compensated executive officers who were paid total compensation of at least $100,000 during the fiscal years ended December 31, 2020 and December 31, 2019.

Executive Compensation

The following table summarizes compensation paid or accrued by us for the years ended December 31, 2021 and December 31, 2020 for services rendered in all capacities, by our chief executive officer and our two other most highly compensated executive officers who were paid total compensation of at least $100,000 during the fiscal years ended December 31, 2021 and December 31, 2020.

Summary Compensation Table

Name and Principal Position (1)	Year			Salary		Bonus		Option Awards		Non-Equity Incentive Plan Compensation		Non-Qualified Deferred Compensation Earnings		All Other Compensation		Total
John Hollister,		2020		$	-		-	$	-		-		-		-	$	-
Bradley J. Yourist,		2021		$	180,000		-	$	-		-		-		-	$	180,000
CEO		~~2019~~2020	~~(1)~~	$	~~128~~280,~~125~~000		-		-		-		-		-	$	~~128~~280,~~125~~00
Bradley J. Yourist,		2020		$	180,000		-	$	-		-		-		-	$	180,000
Daniel J. Yourist,		2021		$	180,000		-	$	-		-		-		-	$	180,000
CEO		~~2019~~2020		$	90280,000		-		-		-		-		-	$	90280,000

(1) Mr. Hollister resigned as CEO on June 3, 2019. He remained a Director through February 26, 2021.

Employment Agreements

We entered into an employment agreement with our former chief executive officer, John Hollister, which commenced in November 2017. Mr. Hollister’s employment agreement provides for him to be paid an initial Salary of $17,500 per month rising to $26,500 per month if he achieves certain goals, and an annual bonus of up to $200,000 and certain Special Bonuses at the discretion of the Company’s board of directors. As of June 3, 2019, Mr. Hollister’s contract was terminated, and he has received no compensation since then.

The Company has not yet entered into employment agreements with Mr. Bradley Yourist or Mr. Dan Yourist but expects to do so in the future.

Employee Benefit Plans

We have not yet, but may in the future, establish a management stock option plan pursuant to which stock options may be authorized and granted to the executive officers, directors, employees and key consultants of Grapefruit.

Director Compensation

~~None~~On March 28, 2021, the Company granted a Sharon Boddie an option to purchase 750,000 shares of common stock at $0.025. There are six month vesting periods for a block of 250,000 shares starting October 1, 2021.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth the names of our executive officers and directors and all persons known by us to beneficially own 5% or more of the issued and outstanding common stock of Grapefruit USA, Inc. at March 5, 2021. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage of ownership of that person, shares of common stock subject to options held by that person that are currently exercisable or become exercisable within 60 days of March 5, 2021 are deemed outstanding even if they have not actually been exercised. Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person. The percentage ownership of each beneficial owner is based on 510,567,041 outstanding shares of common stock. Except as otherwise listed below, the address of each person is c/o Grapefruit USA, Inc., 10866 Wilshire Blvd. Suite 225, Los Angeles, CA 90024. Except as indicated, each person listed below has sole voting and investment power with respect to the shares set forth opposite such person’s name.

Name, Title and Address	Number of Shares Beneficially Owned	~~Number of Shares Beneficially Owned~~	Percentage Ownership	~~Percentage Ownership~~
Bradley Yourist, Chief Executive Officer and Director		129,~~983~~198,~~568~~426		~~25.46~~23,19	%
Dan Yourist, Chief Operating Officer and Director		~~129~~128,~~983~~125,~~568~~206		2523.4600	%
Luise & David Yourist (1)		32,495,892		6.37	%
Officers and Directors as a group (4 people)		257,323,632		46.19	%
John Hollister, Director		4,250,000		*
Officers and Directors as a group (4 people)		296,713,028		57.29	%

*	Less than 1%.
(1)	Shares are held as joint tenants with right of survivorship

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

	Related Party Notes Payable December 31, 2020		Related Party Payables December 31, 2019
	Related Party Notes Payable December 31, 2021		Related Party Payables December 31, 2020
Payable to an officer and director	$	82528,~~056~~404	$	~~115~~82,~~249~~056
Payable to an individual affiliate of an officer and director		4047,~~000~~560		40,000
Payable to a company affiliate to an officer and director		~~366~~126,~~377~~617		~~126~~366,377
	$	~~488~~702,~~433~~581	$	281,626

Related party notes payable bear interest at 10%.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Presently and since December 28, 2019, L&L CPAs, PA (“L&L”) has been and is our principal auditing firm. The audit committee approved the engagement of L&L before they rendered audit services to us. Prior to December 28, 2019, our principal auditing firm was SingerLewak Accounting and Consultants, who performed the audit for S-1/A filing.

Each year the retention of the independent auditor to audit our financial statements, including the associated fee, is approved by the board of directors before the filing of the previous year’s Annual Report on Form 10-K.

	2020		2019
	2021		2020
Audit Fees	$	4044,000	$	3640,~~500~~000
Audit Related Fees		-0-		-0-
All Other Fees(1)		-0-		-0-
	$	4044,000	$	3640,~~500~~000

Pre-Approval Policies and Procedures of Audit and Non-Audit Services of Independent Registered Public Accounting Firm

The audit committee’s policy is to pre-approve, typically at the beginning of our fiscal year, all audit and non-audit services, other than de minimis non-audit services, to be provided by an independent registered public accounting firm. These services may include, among others, audit services, audit-related services, tax services and other services and such services are generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the full board of directors regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. As part of the board’s review, the board will evaluate other known potential engagements of the independent auditor, including the scope of work proposed to be performed and the proposed fees, and approve or reject each service, taking into account whether the services are permissible under applicable law and the possible impact of each non-audit service on the independent auditor’s independence from management. At audit committee meetings throughout the year, the auditor and management may present subsequent services for approval. Typically, these would be services such as due diligence for an acquisition, that would not have been known at the beginning of the year.

The audit committee has considered the provision of non-audit services provided by our independent registered public accounting firm to be compatible with maintaining their independence. The audit committee will continue to approve all audit and permissible non-audit services provided by our independent registered public accounting firm.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit		Reference		Filed or Furnished
Number	Exhibit Description	Form	Exhibit	Filing Date	Herewith
2.1	Amended and Restated Share Exchange Agreement and Plan of Reorganization by and among Imaging3, Inc., Grapefruit Boulevard Investments, Inc. and the Shareholders of Grapefruit Boulevard Investments, Inc.	S-1	2.1	07/25/2019

3.1	Articles of Incorporation	10SB/A	3	12/09/2002

3.2	Amendment of Articles of Incorporation	SB-2/A	3.2	10/06/2004

3.3	Amendment of Articles of Incorporation	SB-2/A	3.3	10/21/2004

3.4	Amendment of Articles of Incorporation	SB-2/A	3.5	10/21/2004

3.5	Amendment of Articles of Incorporation	SB-2/A	3.6	10/21/2004

3.6	Amendment of Articles of Incorporation	SB-2/A	3.7	10/21/2004

3.7	Delaware Certificate of Merger	8-K	2.2	03/16/2018

3.8	Certificate of Incorporation	8-K	3.1	03/16/2018

3.9	Bylaws	10SB/A	3	12/09/2002

3.10	Delaware Bylaws	8-K	3.2	03/16/2018

3.11	Certificate of Determination for Series A Preferred Stock	8-K	3.1	03/23/2012

3.12	Amendment to Certificate of Determination for Series A Preferred Stock	8-K	3.1	03/23/2012

4.1	10% Convertible Promissory Note, dated May 31, 2019, issued by Imaging3, Inc. to Auctus Fund, LLC	S-1	4.1	07/25/2019

10.1	Securities Purchase Agreement, dated May 31, 2019, by and between Imaging3, Inc. and Auctus Fund, LLC	S-1	10.1	07/25/2019
10.2	Registration Rights Agreement, dated May 31, 2019, by and between Imaging3, Inc. and Auctus Fund, LLC	S-1	10.2	07/25/2019
10.3	Common Stock Purchase Warrant dated May 31, 2019, issued to Auctus Fund, LLC	S-1	10.3	07/25/2019
10.4	Common Stock Purchase Warrant dated May 31, 2019, issued to Auctus Fund, LLC	S-1	10.4	07/25/2019
10.5	Common Stock Purchase Warrant dated May 31, 2019, issued to Auctus Fund, LLC	S-1	10.5	07/25/2019
10.6	Lease by and between Coachillin’ Holdings LLC and Grapefruit BLVD Investments	S-1	10.6	07/25/2019
10.7	Employment Agreement dated November 19, 2018 by and between Grapefruit Boulevard Investments, Inc. and Kristian B. Contreras	S-1	10.7	07/25/2019
10.8	Greenberg Settlement Agreement dated July 5, 2019 by and between the Company and Greenberg Glusker Fields Claman & Machtinger, LLP	S-1	10.8	07/25/2019
21.1	List of Subsidiaries	S-1	21.1	07/25/2019
31.1	Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).				X
31.2	Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).				X
32.1+	Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+				X
32.2+	Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+				X
101.INS	Inline XBRL Instance Document				X
101.SCH	Inline XBRL Taxonomy Extension Schema Document				X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document				X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document				X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document				X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document				X
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

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

	Grapefruit USA, Inc.
Dated: April 20, 2021	By:	/s/ Bradley J Yourist
Dated: April 15, 2022	By:	/s/ Bradley J Yourist
		Bradley J. Yourist
		Chief Executive Officer (Principal Executive Officer)
Dated: April 20, 2021
Dated: April 15, 2022
	/s/ Kenneth J. Biehl
	Kenneth J. Biehl Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer)

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

Dated: April 20, 2021
Dated: April 15, 2022
	/s/ Bradley J Yourist
	Bradley J. Yourist
	Chief Executive Officer

Dated: April 2015, ~~2021~~2022 /s/ Daniel J Yourist Daniel J Yourist Director

Dated: April 2015, ~~2021~~2022 /s/ John Hollister John Hollister Director

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