UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ [X] Quarterly Report Pursuant Toto Section 13 or 15(d) of the Securities Exchange Act Of 1934

For the quarterly period ended ~~June~~September 30, 2021

[ ] ☐ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act Of 1934

For the transition period from __________ to __________

Commission File Number: 333-212055

PURE HARVEST CORPORATE GROUP, INC.

(Exact name of registrant as specified in its charter)

Colorado		71-0942431
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

7400 E. Crestline Cir. Ste. 130

Greenwood Village, CO 80111

Address of principal executive offices

(800) 924-3716

(Registrant’s telephone number, including area code)

N/A

(Former name or former address if changed since last report)

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

Title of each class		Trading Symbol		Name of each exchange on which registered
N/A		N/A		N/A

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 electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ [X] No ☐[ ]

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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

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

As of ~~June~~September 30, 2021, there were 6771,~~080~~027,~~523~~131 outstanding shares of the registrant’s common stock.

Pure Harvest Corporate Group, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

	As of June 30, 2021			As of December 31, 2020
	As of September 30, 2021			As of December 31, 2020
ASSETS
Current assets
Cash	$	~~452~~409,~~033~~357		$	856,844
Accounts receivable		~~117~~34,~~788~~221			91,371
Inventory		1,~~087~~085,~~846~~282			1,047,690
Deferred rent		7149,~~111~~778			113,778
Prepaids and other current assets		~~319~~363,~~356~~335			235,335
Notes receivable and advances on pending acquisitions, net of allowance of $533,000 and $33,000, respectively		2,250,000			2,750,000
Notes receivable and advances on pending acquisitions, net allowance of $533,000 and $33,000, respectively		2,250,000			2,750,000
Total current assets		4,~~298~~191,~~134~~973			5,095,018
Long-term assets
Property, plant and equipment		1,~~628~~630,~~574~~986			1,599,088
Accumulated depreciation		(~~622~~692,~~670~~868	)		(469,315	)
Deferred rent, net of current portion		—			26,446
Right of use asset		~~401~~333,~~736~~907			537,393
Goodwill		1,550,225			1,550,225
Intangible assets, net		2,~~321~~377,~~398~~067			2,399,524
Other assets		~~341~~39,~~127~~331			301,604
Total assets	$	9,~~918~~430,~~524~~621		$	11,039,983
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	~~275~~305,~~575~~976		$	91,741
Accrued expenses		1,~~283~~168,~~079~~844			1,324,936
Notes payable		334,074			431,919
Common stock to be issued		133,250			—
Convertible notes payable, net of discount of $21,060 and $146,967, respectively		1,778,940			1,353,033
Notes payable		232,732			431,919
Convertible notes payable, net of discount of $290,277 and $146,967, respectively		2,009,723			1,353,033
Related party convertible notes payable		1,427,504			1,412,504
Total current liabilities		5,~~099~~278,~~172~~029			4,614,133
Long term liabilities
Notes payable		—			6,000
Right of use liability		~~242~~179,~~114~~329			293,971
Convertible notes payable, net of discount of $1,865,146 and $1,723,835, respectively		743,604			226,165
Convertible notes payable, net of discount of $1,650,045 and $1,723,835, respectively		958,705			226,165
Derivative liabilities		21,~~650~~583,~~979~~894			1,879,776
Total liabilities		87,~~735~~999,~~869~~957			7,020,045
Commitments and contingencies (Note 9)
Stockholders’ equity
Stockholders' equity
Preferred stock; $0.01 par value; 25,000,000 shares authorized; no shares issued and outstanding, respectively		—			—
Series A Preferred stock; $0.01 par value; 40,000 shares authorized; 6,660 shares issued and outstanding		538,842			—
Series A Preferred stock; $0.01 par value; 40,000 shares authorized; 6,660 shares issued and outstanding at June 30, 2021.		538,842			—
Common stock, $0.01 par value; 250,000,000 shares authorized, 71,027,131 and 64,117,846 shares issued and outstanding, respectively		710,275			641,179
Common stock, $0.01 par value; 250,000,000 shares authorized, 67,340,765 and 64,117,846 shares issued and outstanding, respectively		673,409			641,179
Additional paid-in capital		18,426,695			11,111,799
Additional paid-in capital		14,216,743			11,111,799
Accumulated deficit		(18,245,148	)		(7,733,040	)
Accumulated deficit		(14,246,339	)		(7,733,040	)
Total stockholders' equity		1,430,664			4,019,938
Total stockholders’ equity		1,182,655			4,019,938
Total liabilities and stockholders' equity	$	9,430,621		$	11,039,983
Total liabilities and stockholders’ equity	$	9,918,524		$	11,039,983

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

Pure Harvest Corporate Group, Inc.

Condensed Consolidated Statements of Operations

For the Three and Nine ~~Six~~ Months Ended ~~June~~September 30, 2021 and 2020

(Unaudited)

	For the Three Months Ended June 30, 2021			For the Three Months Ended June 30, 2020			For the Six Months Ended June 30, 2021			For the Six Months Ended June 30, 2020
	For the Three Months Ended September 30, 2021			For the Three Months Ended September 30, 2020			For the Nine Months Ended September 30, 2021			For the Nine Months Ended September 30, 2020
REVENUES
Product sales and royalty income	$	~~762~~507,~~778~~865		$	3318,~~951~~690		$	12,~~556~~064,~~926~~791		$	5323,~~041~~731
Cost of sales		~~612~~334,~~118~~147			4060,~~066~~552			1,~~080~~414,~~070~~217			40100,~~066~~617
Gross profit		~~150~~173,~~660~~718			~~(36~~258,~~114~~138	)		~~476~~650,~~856~~574			~~(35~~223,~~024~~114	)
OPERATING EXPENSES
Advertising and promotion		2568,~~804~~475			5032,~~043~~970			42111,~~818~~293			5285,~~602~~572
General and administrative expenses, including stock-based compensation of $1,262,077, $3,026,036, $1,612,485 and $3,039,538, respectively		2,487,327			3,892,549			4,043,885			4,448,199
General and administrative expenses, including stock-based compensation of $915,918, $457,492, $2,494,001 and $3,497,030, respectively		1,841,290			1,177,949			5,885,175			5,626,148
Research and development		—3,285			—			36,~~708~~993			—
Depreciation expense		9780,~~375~~928			2851,~~947~~121			~~174~~255,~~811~~739			3384,~~589~~710
Total operating expenses		21,~~610~~993,~~506~~978			31,~~971~~262,~~539~~040			46,~~265~~259,~~222~~200			45,~~534~~796,~~390~~430
Loss from operations		(21,~~459~~820,~~846~~260	)		(41,~~007~~003,~~653~~902	)		(35,~~788~~608,~~366~~626	)		(45,~~569~~573,~~414~~316	)
Other income (expense):
Interest expense		(~~960~~3,~~312~~243,479	)		(~~194~~432,~~608~~732	)		(14,~~481~~725,~~683~~162	)		(~~325~~758,~~349~~081	)
Interest income		—			48176,~~618~~782			55,000			~~114~~290,~~183~~965
Loss on extinguishment of notes payable		—(136,640	)		(~~756~~120,~~254~~721	)		—(136,640	)		(~~756~~876,~~254~~975	)
Change in fair market value of derivative liabilities		~~(576~~1,~~701~~201,570	)		49(1,~~380~~480,105	)		~~(731~~470,~~203~~367	)		49(1,~~380~~430,725	)
Loss on equity method investment		—			—			(73,047	)		—
Other income (expense)		—			—			6,000			—
Bad debt expense		—			(1,863,137	)		(500,000	)		(~~823~~1,863,960	)
Total other income (expense)		(12,~~537~~178,~~013~~549	)		(~~852~~3,~~864~~719,913	)		(24,~~724~~903,~~933~~482	)		(~~918~~4,~~863~~638,776	)
Loss before provision for income taxes		(3,~~996~~998,~~859~~809	)		(4,~~860~~723,~~517~~815	)		(610,~~513~~512,~~299~~108	)		(510,~~488~~212,~~277~~092	)
Provision for income taxes		—			—			—			—
NET LOSS	$	(3,~~996~~998,~~859~~809	)	$	(4,~~860~~723,~~517~~815	)	$	(610,~~513~~512,~~299~~108	)	$	(510,~~488~~212,~~277~~092	)
Basic and diluted net loss per common share	$	(0.06	)	$	(0.10	)	$	(0.10	)	$	(0.13	)
Preferred stock dividends		(25,180	)		—			(25,180	)		—
Basic and diluted weighted-average number of common shares outstanding		66,775,124			46,826,515			66,016,310			42,338,456
NET LOSS TO COMMON SHAREHOLDERS	$	(4,023,989	)	$	(4,723,815	)	$	(10,537,288	)	$	(10,212,092	)
Basic and diluted net loss per common share	$	(0.06	)	$	(0.09	)	$	(0.16	)	$	(0.22	)
Basic and diluted weighted-average number of common shares outstanding		69,071,098			54,122,813			67,098,389			46,302,546

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

Pure Harvest Corporate Group, Inc.

Condensed Consolidated Statements of Cash Flows

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020

(Unaudited)

	For the Six Months Ended June 30, 2021			For the Six Months Ended June 30, 2020
	For the Nine Months Ended September 30, 2021			For the Nine Months Ended September 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(610,~~513~~512,~~299~~108	)	$	(510,~~488~~212,~~277~~092	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		~~328~~398,~~166~~364			3384,~~589~~710
Stock-based compensation		12,~~612~~494,~~483~~001			3,~~039~~497,~~538~~030
Common stock issued for services		(34,400	)		—
Amortization of debt discount		1,250,865			468,113
Amortization of debt discount		681,096			141,980
Common stock and warrants issued for debt extension		2,835,047			—
Common stock issued for debt extension		334,141			—
Allowance on notes receivable		500,000			1,863,137
Allowance on notes receivable		500,000			—
Change in fair value of derivative liability		(470,367	)		1,430,725
Change in fair value of derivative liability		731,203			(49,380	)
Loss on extinguishment of note payable		136,640			876,975
Loss on extinguishment of note payable		—			756,254
Extension fee added to note payable		81,667			—
Changes in operating assets and liabilities:
Accounts receivable		~~(26~~57,~~417~~150	)		~~381~~(61,492	)
Interest receivable on notes receivable		—			(~~113~~151,~~360~~580	)
Inventory		(4037,~~156~~592	)		(40238,~~935~~291	)
Other assets		~~(151~~102,~~372~~014	)		—(5,985	)
Deferred rent		6990,~~113~~446			4285,~~666~~332
Prepaid and other current assets		(84128,~~021~~000	)		4(47,~~293~~916	)
Accounts payable		~~183~~214,~~834~~235			37(51,~~272~~535	)
Accrued expense		344,909			480,000
Accrued interest		—			248,184
Accrued expense		347,424			192,386
Royalty payable		—			(770	)
Right of use asset and liability		8388,~~800~~844			(7375,~~139~~364	)
Net cash used in operating activities		(12,~~899~~551,~~253~~370	)		(12,~~229~~098,~~888~~433	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable and advances of pending acquisitions		—			(1,~~274~~429,~~793~~725	)
Notes receivable					—
Net cash received (paid) in connection with acquisition		—			(162,292	)
Net cash received (paid) in connection with acquisition		—			(382,010	)
Purchase of machinery and equipment		(31,898	)		(188,689	)
Purchase of machinery and equipment		(29,486	)		(24,685	)
Purchase of Intangible assets		(130,896	)		—
Intangible assets		(75,227	)		—
Net cash used in investing activities		(162,794	)		(1,780,706	)
Net cash used in investing activities		(104,713	)		(1,681,488	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances (payments) from (to) related parties		—			(87116,~~500~~667	)
Proceeds from issuance of convertible notes payable		~~500~~976,000			—1,950,000
Proceeds from notes payable		—			1,586,000
Repayment of notes payable		(~~103~~147,~~845~~323	)		(1,500,000	)
Proceeds from related party notes payable		—			~~330~~460,000
Proceeds from sale of common stock		543,000			100,000
Proceeds from exercise of options		10,000			—
Proceeds from sale of common stock		768,000			150,000
Proceeds from sale of preferred stock		660,000			—
Net cash provided by financing activities		12,~~599~~266,~~155~~677			12,~~428~~529,~~500~~333
Change in cash and cash equivalents		(~~404~~447,~~811~~487	)		(1,~~482~~349,~~876~~806	)
Cash and cash equivalents, beginning of period		856,844			1,665,247
Cash and cash equivalents, end of period	$	~~452~~409,~~033~~357		$	~~182~~315,~~371~~441
Supplemental disclosures of cash flow information:
Cash paid for interest	$	160,541		$	5,217
Cash paid for income taxes	$	—		$	—
Non-cash investing and financing activities:
Discount on note payable due to common stock, warrants or derivatives	$	460,000		$	~~387~~171,~~517~~082
Common stock issued for accrued interest	$	3,363		$	3152,~~762~~294
Common stock issued for business acquisitions	$	—		$	24,~~436~~210,~~000~~701
Exchange of note receivable and accrued interest for business acquisition	$	—		$	~~1,650,000~~
Common stock and warrants issued in connection with note extensions	$	~~311~~2,958,500		$	~~308~~429,~~803~~524
Discounts due to common stock and derivative liabilities	$	134,485		$	2,314,973
Common stock issued for conversion of related party notes payable	$	—		$	30,000
Accrued interest and extension fee added to principal balance	$	300,000		$	—
Warrants issued with preferred stock	$	121,158		$	—
Common stock issued for license	$	128,750		$	—
Beneficial conversion feature recorded on convertible debt	$	186,500		$	—
Common stock to be issued as additional interest on convertible debt	$	133,250		$	—

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

Pure Harvest Corporate Group, Inc.

Condensed Consolidated Statements of Stockholder’s Equity

For the Three and Nine ~~Six~~ Months Ended ~~June~~September 30, 2021 and 2020

(Unaudited)

Three Months Ended June 30, 2021	Preferred Stock				Common Stock				Additional			Accumulated			Stockholders’
Three Months Ended September 30, 2021	Preferred Stock				Common Stock				Additional			Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Paid-in Capital			Deficit			Equity
Balance, March 31, 2021		—		—		65,354,522	$	653,546	$	11,922,301		$	(10,249,480	)		2,326,367
Balance, June 30, 2021		6,660	$	538,842		67,340,765	$	673,409	$	14,216,743		$	(14,246,339	)		1,182,655
Stock-based compensation		—		—		—		—		1770,~~262,077~~505			—			1770,~~262,077~~505
Issuance of common stock to note holder		—		—		1,600,000		16,000		732,000			—			748,000
Issuance of common stock for services		—		—		283,357		2,834		142,579			—			145,413
Issuance of common stock and warrants to note holder		—		—		2,690,000		26,900		2,899,000			—			2,925,900
Issuance of common stock for cash		—		—		513,009		5,132		219,868			—			225,000
Exercise of stock options and warrants		—		—		200,000		2,000		16,680			—			18,680
Beneficial conversion feature on convertible notes payable		—		—		—		—		186,500			—			186,500
Series A preferred stock dividends		—		—		—		—		(25,180	)		—			(25,180	)
Net loss		—		—		—		—		—			(3,998,809	)		(3,998,809	)
Balance, September 30, 2021		6,660	$	538,842		71,027,131	$	710,275	$	18,426,695		$	(18,245,148	)	$	1,430,664
Three Months Ended September 30, 2020		Preferred Stock				Common Stock				Additional			Accumulated			Stockholders'
		Shares		Amount		Shares		Amount		Paid-in Capital			Deficit			Equity
Balance, June 30, 2020		—	$	—		52,125,144	$	521,252	$	10,777,309		$	(6,874,458	)	$	4,424,103
Stock-based compensation		—		—		—		—		457,492			—			457,492
Issuance of common stock for acquisition		—		—		3,508,397		35,084		1,546,594			—			1,581,678
Issuance of common stock to note holder		—		—		98,750		988		53,387			—			54,375
Issuance of common stock for accrued interest		—		—		43,611		436		20,096			—			20,532
Issuance of common stock and warrants for extension of notes payable		—		—		100,000		1,000		119,721			—			120,721
Issuance of common stock to investor		—		—		100,000		1,000		49,000			—			50,000
Issuance of common stock for conversion of related party note		—		—		75,000		750		29,250			—			30,000
Discount on convertible notes payable related party due to common stock issued and derivative liability		—		—		100,000		1,000		(1,000	)		—			—
Net loss		—		—		—		—		—			(4,723,815	)		(4,723,815	)
Balance, September 30, 2020		—	$	—		56,150,902	$	561,510	$	13,051,849		$	(11,598,273	)	$	2,015,086
Nine Months Ended September 30, 2021		Preferred Stock, Series A				Common Stock				Additional			Accumulated			Stockholders'
		Shares		Amount		Shares		Amount		Paid-in Capital			Deficit			Equity
Balance, December 31, 2020		—	$	—		64,117,846	$	641,179	$	11,111,799		$	(7,733,040	)	$	4,019,938
Stock-based compensation		—		—		—		—		2,382,988			—			2,382,988
Issuance of common stock for services		—		—		203,357		2,034		108,979			—			111,013
Issuance of common stock to note holder		—		—		4,340,000		43,400		3,654,000			—			3,697,400
Issuance of common stock for accrued interest		—		—		8,515		85		3,278			—			3,363
Issuance of common stock for license		—		—		250,000		2,500		126,250			—			128,750
Issuance of common stock for cash		—		—		~~136~~1,~~243~~907,413		119,~~363~~077		61748,~~637~~923			—			63768,000
Issuance of preferred stock for cash		6,660		538,842		—		—		121,158			—			660,000
Series A preferred stock dividends		—		—		—		—		(8,680	)		—			(8,680	)
Exercise of stock options and warrants		—		—		200,000		2,000		8,000			—			10,000
Net loss		—		—		—		—		—			(3,996,859	)		(3,996,859	)
Beneficial conversion feature on convertible notes payable		—		—		—		—		186,500			—			186,500
Balance, June 30, 2021		6,660	$	538,842		67,340,765	$	673,409	$	14,216,743		$	(14,246,339	)	$	1,182,655
Series A preferred stock dividends		—		—		—		—		(25,180	)					(25,180	)
Net loss		—		—		—		—		—			(10,512,108	)		(10,512,108	)
Balance, September 30, 2021		6,660	$	538,842		71,027,131	$	710,275	$	18,426,695		$	(18,245,148	)	$	1,430,664
Nine Months Ended September 30, 2020		Preferred Stock, Series A				Common Stock				Additional			Accumulated			Stockholders'
		Shares		Amount		Shares		Amount		Paid-in Capital			Deficit			Equity
Balance, December 31, 2019		—	$	—		37,716,330	$	377,164	$	4,391,587		$	(1,386,181	)	$	3,382,570
Stock-based compensation		—		—		—		—		926,486			—			926,486
Issuance of common stock for services		—		—		6,528,000		65,280		2,505,264			—			2,570,544
Issuance of common stock for acquisition		—		—		10,508,397		105,084		3,912,594			—			4,017,678
Issuance of common stock to note holder		—		—		248,750		2,488		168,594			—			171,082
Issuance of common stock for accrued interest		—		—		124,425		1,244		51,050			—			52,294
Issuance of common stock and warrants for extension of notes payable		—		—		500,000		5,000		424,524			—			429,524
Issuance of common stock to investor		—		—		300,000		3,000		147,000			—			150,000
Issuance of common stock for conversion of related party note		—		—		75,000		750		29,250			—			30,000
Discount on convertible notes payable to related party due to common stock issued and derivative liability		—		—		150,000		1,500		67,500			—			69,000
Extinguishment of related party notes payable		—		—		—		—		428,000			—			428,000
Net loss		—		—		—		—		—			(10,212,092	)		(10,212,092	)
Balance, September 30, 2020		—	$	—		56,150,902	$	561,510	$	13,051,849		$	(11,598,273	)	$	2,015,086

Three Months Ended June 30, 2020	Preferred Stock				Common Stock				Additional		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Paid-in Capital		Deficit			Equity
Balance, March 31, 2020		—	$	—		38,066,330	$	380,664	$	4,616,296	$	(2,013,940	)	$	2,983,020
Stock-based compensation		—		—		—		—		457,492		—			457,492
Issuance of common stock for services		—		—		6,528,000		65,280		2,505,264		—			2,570,544
Issuance of common stock for acquisition		—		—		7,000,000		70,000		2,366,000		—			2,436,000
Issuance of common stock for accrued interest		—		—		80,814		808		30,954		—			31,762
Issuance of common stock and warrants for extension of notes payable		—		—		400,000		4,000		304,803		—			308,803
Discount on convertible notes payable related party due to common stock issued and derivative liabilty		—		—		50,000		500		68,500		—			69,000
Extinguishment of related party notes payable		—		—		—		—		428,000		—			428,000
Net loss		—		—		—		—		—		(4,860,518	)		(4,860,517	)
Balance, June 30, 2020		—	$	—		52,125,144	$	521,252	$	10,777,309	$	(6,874,458	)	$	4,424,103

Six Months Ended June 30, 2021
	Preferred Stock, Series A				Common Stock						Additional			Accumulated			Stockholders’
	Shares		Amount		Shares			Amount			Paid-in Capital			Deficit			Deficit
Balance, December 31, 2020		—	$	—		64,117,846		$	641,179		$	11,111,799		$	(7,733,040	)	$	4,019,938
Stock-based compensation		—		—		—			—			1,612,483			—			1,612,483
Issuance of common stock for services		—		—		(80,000	)		(800	)		(33,600	)		—			(34,400	)
Issuance of common stock to note holder		—		—		1,650,000			16,500			755,000			—			771,500
Issuance of common stock for accrued interest		—		—		8,515			85			3,278			—			3,363
Issuance of common stock for license		—		—		250,000			2,500			126,250			—			128,750
Issuance of common stock for cash		—		—		1,394,404			13,945			529,055			—			543,000
Issuance of preferred stock for cash		6,660		538,842		—			—			121,158			—			660,000
Series A preferred stock dividends												(8,680	)					(8,680	)
Net loss		—		—		—			—			—			(6,513,299	)		(6,513,299	)
Balance, June 30, 2021		6,660	$	538,842		67,340,765		$	673,409		$	14,216,743		$	(14,246,339	)	$	1,182,655

Six Months Ended June 30, 2020
	Preferred Stock, Series A				Common Stock				Additional		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Paid-in Capital		Deficit			Deficit
Balance, December 31, 2019		—	$	—		37,716,330	$	377,164	$	4,391,587	$	(1,386,181	)	$	3,382,570
Stock-based compensation		—		—		—		—		468,994		—			468,994
Issuance of common stock for services		—		—		6,528,000		65,280		2,505,264		—			2,570,544
Issuance of common stock for acquisition		—		—		7,000,000		70,000		2,366,000		—			2,436,000
Issuance of common stock to note holder		—		—		150,000		1,500		115,207		—			116,707
Issuance of common stock for accrued interest		—		—		80,814		808		30,954		—			31,762
Issuance of common stock and warrants for extension of notes payable		—		—		400,000		4,000		304,803		—			308,803
Issuance of common stock to investor		—		—		200,000		2,000		98,000		—			100,000
Discount on convertible notes payable related party due to common stock issued and derivative liabilty		—		—		50,000		500		68,500		—			69,000
Extinguishment of related party notes payable		—		—		—		—		428,000		—			428,000
Net loss		—		—		—		—		—		(5,488,277	)		(5,488,277	)
Balance, June 30, 2020		—	$	—		52,125,144	$	521,252	$	10,777,309	$	(6,874,458	)	$	4,424,103

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

Pure Harvest Corporate Group, Inc.

Notes to Condensed Consolidated Financial Statements

~~June~~September 30, 2021

(Unaudited)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Pure Harvest Corporate Group, Inc. (the “Company”), formerly Pure Harvest Cannabis Group, Inc., was formed as a Colorado corporation in April 2004.

On December 31, 2018, the Company acquired all the outstanding common stock of Pure Harvest Cannabis Producers, Inc., (“PHCP”) in exchange for 17,906,016 (post-split) shares of the Company’s common stock. The transaction was accounted for as a reverse acquisition.

As a result of the acquisition of PHCP, the Company now operates in various segments of the cannabis and hemp-CBD industries with a focus on health and wellness products and applying education, research and development, and technology to each sector. The Company’s new business also involves the acquisition and operation of licensed marijuana cultivation facilities, manufacturing facilities, and dispensaries.

The Company changed its name to Pure Harvest Cannabis Group, Inc. in February 2019.

The Company changed its name to Pure Harvest Corporate Group, Inc. on June 8, 2020.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all accruals and adjustments (each of which is of a normal, recurring nature) necessary for a fair presentation of the Company’s financial position as of ~~June~~September 30, 2021, and the results of its operations for the three and ~~six~~nine months then ended. Significant accounting policies have been consistently applied in the interim consolidated financial statements. The results reported in these interim financial statements are not necessarily indicative of the expected results for the entire year. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2020 and notes thereto that are included in the Company’'s Annual Report on Form 10-K.

Going Concern

The Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Management plans to fund future operations by raising capital and / or seeking joint venture opportunities.

Principles of Consolidation

The Company evaluates the need to consolidate affiliates based on standards set forth in Accounting Standards Codification (“ASC”) 810 Consolidation (“ASC 810”). The Consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant consolidated transactions and balances have been eliminated in consolidation.

Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated fair market value of assets and liabilities acquired under business combinations, useful lives and potential impairment of property and equipment, recoverability of goodwill and estimates of fair value of share-based payments.

Fair Value of Financial Instruments

The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB” ACS 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.

The guidance also establishes a fair value hierarchy for measurements of fair value as follows:

	●	Level 1 - quoted market prices in active markets for identical assets or liabilities.

	●	Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

	●	Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amount of the Company’s financial instruments approximates their fair value as of ~~June~~September 30, 2021, and December 31, 2020, due to the short-term nature of these instruments. The Company’s derivative liabilities are considered a Level 2 liability.

Net Loss per Share

Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share”. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding during the period. For the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, dilutive instruments consisted of convertible notes payable, options and warrants to purchase shares of the Company’s common stock ~~totalling~~totaling approximately 5771.57 million and 28.4 million shares of common stock, respectively, the effects of which to the net loss are anti-dilutive.

Recent Accounting Pronouncements

In January 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, which clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting under Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The Company adopted the new standard on January 1, 2021, which did not have a significant impact on the Company.

The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs issued to date, including the one above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements.

NOTE 3 – ACQUISITIONS

During the ~~three~~nine months ended ~~March~~September ~~31, 2021, and the three months ended June~~ 30, 2021, the Company has not entered into any additional acquisitions other than those previously reported in its Form 10-K for the ~~period~~year ending December 31, 2020. For information regarding the Company’s prior year acquisitions see the Company’s Form 10-K for the ~~period~~year ending December 31, 2020.

NOTE 4 – NOTES RECEIVABLE

In May and June 2019, the Company advanced $28,593 to two unrelated individuals in connection with potential acquisitions for the Company. The amounts were to be repaid, without interest, in October 2019. As of ~~June~~September 30, 2021, and December 31, 2020, the Company has settled and received payment in kind for one of the notes and ~~has continued collection efforts on~~ the other ~~note~~loan ~~receivable,~~was ~~but~~forgiven ~~has~~pursuant ~~provided an allowance of such due~~ to the ~~unlikelihood~~acquisition of ~~closing~~Sofa ~~the~~King ~~acquisitions~~Medicinal Wellness orProducts, ~~collecting on the notes receivable~~LLC.

In December 2019, the Company advanced $800,000 to How Smooth It Is, Inc. (“HSII”). In January 2020, the Company advanced an additional $700,000 to HSII. The note receivable was due June 1, 2020 and incurs interest at 6% per annum for sixty days and then is increased to 10% per annum thereafter. In March 2020, the Company entered into an acquisition agreement to acquire the entity for which the note receivable was used to offset a portion of the purchase price. ~~see~~See the Company’s Form 10-K for the period ending December 31, 2020 for more information. On April 9, 2020, the Company submitted the required applications to the Michigan Department of Licensing and Regulatory Affairs (LARA) to be approved and pre-qualified as a Processor to be added to the HSII license. Upon approval, PHCG will become 51% owners and can participate in revenue. The transaction will not close until the appropriate Michigan approvals are obtained. During the year ended December 31, 2020, the Company advanced HSII as an additional $247,845 for operations. The additional advances were due on November 1, 2020, and accrue interest at a rate of 7.5% per annum.

On March 12, 2020, the Company entered into an agreement to acquire fifty-one percent (51%) of the outstanding membership interests in How Smooth It Is, Inc. (“HSII”) for $1,500 ,000 in cash and 7,000,000 shares of the Company’s restricted common stock. On July 29, 2020, the Company terminated its agreement to acquire 51% of HSII. As a part of the termination agreement:9

On March 12, 2020, the Company entered into an agreement to acquire fifty-one percent (51%) of the outstanding membership interests in HSII for $1,500,000 in cash and 7,000,000 shares of the Company’s restricted common stock. On July 29, 2020, the Company terminated its agreement to acquire 51% of HSII. As a part of the termination agreement:

	●	The sole shareholder of HSII agreed to pay the Company $2,150,000 by August 7, 2020, and

	●	HSII agreed to manufacture up to 24 separate products for the Company (such as edibles and vaporizers) upon terms agreeable to both the Company and HSII. The products manufactured by HSII will be sold under Pure Harvest brands with the Company receiving royalties from the sale of the products.

On December 31, 2020, the Company entered into an amended note receivable loan and security agreement with HSII for $2,750,000 with an initial maturity date of March 31, 2021. The note incurs interest at 8% per annum through the initial maturity date. Under the agreement, if the loan is not repaid by March 31, 2021, if there have been no defaults, the loan will be extended to July 31, 2021. During the extended period, the interest rate increases to 12% per annum. In addition, with the extended period, the Company receives various royalties on products sold by the borrower for a period of three year commencing on April 1, 2021. On March 31, 2021, the note was extended to July 31, 2021, in accordance with the terms. The loan is secured by all the assets of HSII.

On April 14, 2021, the Company was sued by ~~How~~HSII ~~Smooth It Is, Inc.~~ in an effort to stall its obligations under the Business Loan and Security Agreement between the Company and HSII ~~effective December 31, 2020~~. The Company has submitted its response and counterclaims to HSII’s complaint. The Company believes that the suit is meritless and that the Company will likely prevail should the case go to trial. In the interim, the Company has provided a default notice to HSII and increased the interest rate on the amounts due to 25% as provided by the Business Loan and Security Agreement. As of ~~June~~September 30, 2021, the Company has recorded a reserve of $500,000 against the outstanding note receivable.

In December 2019, the Company advanced $1,650,000 to EdenFlo, LLC in connection with the potential acquisition of that entity by the Company. The note receivable was due June 1, 2020, and incurs interest at 6% per annum for sixty days and then is increased to 10% per annum thereafter. In addition, the note receivable is secured by all the asset of EdenFlo, LLC. In April 2020, EdenFlo was acquired by the Company and the Note was consolidated into the acquisition, subsequently eliminating its balance on the Balance Sheet. See the Company’s Form 10-K for the period ending December 31, 2020 for more information regarding the acquisition of EdenFlo.

7In 2020, prior to Solar Cultivation Technologies Inc.’s (“SCT”) acquisition, the Company advanced SCT $476,507 for operations. The additional advances were not under a formal arrangement and thus did not incur interest and were due on demand. See the Company’s Form 10-K for the period ending December 31, 2020 for more information regarding the acquisition of SCT.

In 2020, prior to SCT’s acquisition, the Company advanced SCT $476,507 for operations. The additional advances were not under a formal arrangement and thus did not incur interest and were due on demand. See the Company’s Form 10-K for the period ending December 31, 2020 for more information regarding the acquisition of SCT.

NOTE 5 – LEASE AGREEMENTS

In May 2019, the Company entered into a lease agreement for property to be used as a marijuana retail store. The initial term of the lease is for a period of three years. The Company has an option to purchase the property at prices ranging between $1,400,000 and $1,600,000 at various dates prior to May 1, 2022. The Company issued the landlord 400,000 shares of its post-split common stock in consideration for the option to purchase the property for which was recorded as deferred rent and is being amortized to rent expense using the straight-line method over the term of the lease. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 10% within the calculation.

In August ~~April~~ 2020, ina ~~connection~~wholly ~~with~~owned ~~the~~subsidiary ~~EdenFlo~~of ~~asset acquisition,~~ the Company ~~assumed~~entered into a lease agreement for property to be used as a ~~hemp~~marijuana cultivation and processing facility. The initial term of the lease is for a period of three years. At the inception of the lease, the Company recorded a right of use asset and liability of $~~140~~226,~~988~~077. The Company used an effective borrowing rate of 10% ~~within~~percent within the calculation. ~~The lease runs through September 2021.~~

In April 2020, in connection with the EdenFlo asset acquisition, the Company assumed a lease for a hemp processing facility. At inception of the lease, the Company recorded a right of use asset and liability of $140,988. The Company used an effective borrowing rate of 10% within the calculation.

The lease runs through September 2021. On October 1, 2021, the Company entered into a month-to-month tenancy of the facility at an increased monthly lease rate.

In May 2020, the Company entered into a lease for its corporate offices. The lease requires monthly payments ranging from $12,330 to $12,861 through the maturity of the lease in October 2023. At inception of the lease, the Company recorded a right of use asset and liability of $399,766. The Company used an effective borrowing rate of 10.35% within the calculation.

NOTE 6 –NOTES PAYABLE

Convertible Note ~~Notes~~ Payable

During the year ended December 31, 2019, the Company issued a series of convertible notes with original principal balances of $1,000,000. The convertible notes had original maturity dates ranging from November 1, 2021 to December 1, 2021 and incur interest at 20% per annum. In July 2020, the due date of the convertible notes was extended to November 1, 2023. In April 2021, the convertible notes were further amended to define the timing for quarterly interest payments due under the convertible notes and impose a penalty payable in cash and stock for late interest payments. In connection with this amendment, the Company increased the principal balance by $233,333 of accrued interest and $66,667 classified as an extension fee for the remaining accrued interest of $114,568 for which the payment was extended until early July 2021. The extension fee was recorded as interest expense during the ~~six~~nine months ended ~~June~~September 30, 2021. As of ~~June~~ September 30, 2021, the balance due on the convertible ~~note~~notes was $1,300,000, net a discount of $21,060 recorded within convertible notes payable.

In addition, the convertible notes are convertible upon issuance at a fixed price of $0.50 per common share. In connection with the issuance, the Company recorded a beneficial conversion feature of $44,000 resulting in a discount to the convertible notes. The discount is being amortized to interest expense using the straight-line method, due to the short-term nature of the convertible notes, over the term. During the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company amortized $728,~~092~~152 and $1113,~~424~~376, respectively, to interest expense. ~~The~~Due to the modification below, whereby the remaining discount ofwas ~~$21~~extinguished,~~060~~ isas ~~expected~~of toSeptember be30, ~~amortized throughout~~ 2021, tono ~~2023~~discount remained. The convertible notes include other provisions such as first right of refusal on additional capital raises, authorization of holder to incur debts senior to the convertible notes, etc. Additionally, should the holder exercise the option to exercise, a warrant to purchase an additional share of common stock for which the terms are not defined in the agreement. Thus, the issuance of the warrant is contingent to which the Company has not accounted for. Should warrants be ultimately issued, the Company expects to record the fair value of such as additional interest expense.

8On August 31, 2021, the Company and the note holder agreed to settle the balance due under the convertible notes. The Company agreed to make a cash payment to the note holder of $1,000,000 on or before January 4, 2022 and the note holder has the option to elect to receive 2,000,000 shares of the Company’s restricted common stock in lieu of the $1,000,000 cash payment. Additionally, the Company issued the note holder 2,000,000 shares of common stock and 6,000,000 warrants to purchase the Company’s common stock which expire August 31, 2025. The common stock issued to the note holder is convertible to the Company’s preferred stock, at the note holder’s option, should the Company issue a new class of Preferred Stock. The Company accounted for the transaction as an extinguishment of the convertible note whereby the transaction was recorded as its fair market value. In connection with the extinguishment, the Company recorded additional interest expense of $940,000 related to the fair market value of the common stock issued and $1,665,000 related to the fair market value of the warrants. The fair value of the warrants granted was estimated using a Black-Scholes Options Pricing Model with the following assumptions:

In August 2020, the Company entered into an agreement for borrowings up to $4.0 million. Upon closing, the Company received $1,950,000 and provided for a six-month interest reserve. Additional amounts are advanced as varies milestones are reached. The borrowing incur interest at 15% per annum with principal and outstanding interest due three years from the date of issuance. The Company’s assets secure the borrowings. In addition, the borrowings have a variety of financial and non-financial covenants. In addition, the borrowings are convertible at the lesser of $2.00 or 75% of the average closing price of the Company’s common stock for the preceding 30 days. Additionally, for every dollar advanced under the borrowing, the holder receives two shares of common stock. In 2020, the Company issued the holder 4,192,500 shares of common stock in connection with the convertible note. The agreement also includes a variety of other provisions related to inventory sold with specific discounts, markups, etc.

Schedule of fair value warrants granted Black-Scholes Options
Exercise price per share	$	0.25 - $2.00
Expected life (years)		4.00
Risk-free interest rate		0.64	%
Expected volatility		107	%

In August 2021, the Company received an additional $500,000 under the terms of the initial agreement. In connection with this tranche, the Company issued 1.0 million shares of common stock. Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. Upon initial valuation, the derivative liabilities value of $395,891, as well as the fair market value of the 1.0 million shares of common stock exceeded the face values of the convertible notes payable by $355,891, which was recorded as a day one loss on derivative liabilities. The variables to value the derivatives on issuance were similar to those disclosed below. As of June 30, 2021, the principal balance due on the convertible notes was $2,450,000, and accrued interest of $158,750, net a discount of $1,865,146 recorded within long-term convertible notes payable.11

~~The~~Convertible Note ~~derivative~~Payable ~~liabilities~~– ~~are~~Up ~~valued~~to on the date the borrowings become convertible and revalued at each reporting period. During the six months ended June 30, 2021, the Company revalued the fair market value of the derivative liabilities at $24,~~379~~000,080 resulting in a loss of $234,032. The valuation of the derivative liabilities was based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.34 our stock price on the date of revalue of $0.51, expected dividend yield of 0%, expected volatility of 98.00%, risk free interest rate of 0.01% and expected term of 2.12 years.000

In August ~~connection~~2020, ~~with~~ the ~~derivative~~Company ~~liabilities~~entered ~~and~~into ~~common~~an ~~stock~~agreement ~~issued~~for borrowings up to $4.0 million. Upon closing, the Company ~~recorded~~received $1,950,000 and provided for a ~~total~~six-month ~~discount~~interest ~~related~~reserve. toAdditional ~~the~~amounts ~~two~~are ~~notes~~advanced ofas ~~$2,450,000~~varies milestones are reached. The ~~discount~~borrowing isincur ~~being~~interest at ~~amortized~~15% ~~over~~per annum with principal and outstanding interest due three years from the ~~term~~date of issuance. The Company’s assets secure the borrowings. ~~using~~The ~~the~~borrowings ~~straight-line~~have ~~method~~a ~~due~~variety toof ~~the~~financial ~~short~~and non-~~term~~financial ~~nature.~~covenants ~~During~~for which the ~~six~~Company ~~months~~is ~~ended~~in ~~June~~compliance ~~30,~~with ~~2021~~as of the filing date. In addition, the ~~Company~~borrowings ~~amortized~~are convertible at the lesser of $~~358,689~~2.00 or 75% of the ~~discount~~average toclosing ~~interest~~price ~~expense.~~of Asthe ofCompany’s common ~~June~~stock for the preceding 30 days. Additionally, ~~2021~~for every dollar advanced under the borrowing, athe ~~discount~~holder receives two shares of common $1stock. In 2020,~~865,146~~ ~~remained~~the ~~for~~Company ~~which~~issued ~~will~~the beholder ~~amortized~~4,192,500 shares of common stock in ~~periods~~connection ~~from~~with ~~2021~~the convertible note. The agreement also includes a variety of other provisions related to ~~2023~~inventory sold with specific discounts, markups, etc.

In August 2021, the Company received an additional $500,000 under the terms of the initial agreement. In connection with this tranche, the Company issued 1.0 million shares of common stock. Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. Upon initial valuation, the derivative liabilities value of $395,891, as well as the fair market value of the 1.0 million shares of common stock exceeded the face values of the convertible notes payable by $355,891, which was recorded as a day one loss on derivative liabilities. The variables to value the derivatives on issuance were similar to those disclosed below. As of September 30, 2021, the principal balance due on the convertible notes was $2,450,000, and accrued interest of $158,750, net a discount of $1,650,045 recorded within long-term convertible notes payable.

Convertible Note Payable - $500,000

On November 17, 2020, the Company borrowed $500,000 from an unrelated third party. The note incurs interest at 8% per annum and initially matured on January 31, 2021. See below for discussion regarding the extension of the note. At the option of the lender, the loan and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser of 75% of the ten-day average closing price of the Company’s common stock immediately prior to the date of conversion or $0.50. As of September 30, 2021, the principal balance due on the convertible note was $500,000 and recorded within convertible notes payable.

On April 16, 2021, the holder of the note agreed to extend the due date for the note to June 18, 2021. In consideration for extending the repayment date, the Company issued to the note holder 100,000 shares of its common stock, 100,000 shares of common stock for accrued interest through execution date and provided the holder with the option to extend the payment to September 15, 2021, for which an additional 150,000 shares of common stock would be provided, if extended. In June 2021, the payment date was extended to September 15, 2021.

Effective September 15, 2021, the holder of the note agreed to extend the due date for the note to October 31, 2021. In consideration for extending the repayment date, the Company issued to the note holder 100,000 shares of its common stock and provided the holder with the option to extend the payment to January 31, 2022, for which an additional 100,000 shares of common stock would be provided, if extended. If the balance of the Note is unpaid on October 31, 2021, the note shall bear interest at a rate of 18% per annum beginning November 1, 2021.

The Company recorded the fair market value of the common stock issued in connection with the above issuances of $233,500 as additional interest expense during the nine months ended September 30, 2021.

Convertible Notes - $400,000

On July 15, 2021, the Company borrowed a total of $400,000 from two third parties. The loans are evidenced by two convertible promissory notes which bear total interest of $30,000, are convertible at $0.40 per share, and mature on August 20, 2021. In addition, the holders received a total of 76,500 shares of common stock. The Company recorded the value of the common stock issued and a beneficial conversion feature resulting in a $263,000 discount to the convertible promissory notes. The Company amortized the entire discount to interest expense during the nine months ended September 30, 2021. See Note 9 for subsequent events related to the transaction.

Convertible Note Payable - $400,000

On August 26, 2021, the Company completed the sale of a Promissory Note in the principal amount of $400,000 (the “Note”) to a third party for a purchase price of $376,000. After payment of the legal fees and finder’s fees and closing cost, the sale of the Note resulted in $358,000 in net proceeds to the Company. The Note matures on February 25, 2022, bears interest at a rate of 5% per annum for the first three months and 10% per annum thereafter, and, following an event of default only, is convertible into shares of the Company’s common stock at a conversion price equal to the lesser of 90% of the lowest trading price during (i) the 10 trading day period preceding the issuance date of the note, or (ii) the 20 trading day period preceding date of conversion of the Note. The borrowings have a variety of financial and non-financial covenants for which the Company is in compliance with as of the filing date.

Due to the variable conversion price, the Company recorded a derivative liability of $134,485 upon issuance. The derivative liability was valued using similar inputs to those disclosed below. In addition, the holder received 440,000 shares of common stock valued at $202,400 and an on issuance discount of $24,000. These items resulted in a discount of $360,885 being recorded against the Note. During the nine months ended September 30, 2021, the Company amortized $70,608 of the discount to interest expense. As of September 30, 2021, a discount of $290,277 remained which is being amortized using the straight-line method over the remaining term.

Derivative Liabilities

The derivative liabilities are valued on the date the borrowings become convertible and revalued at each reporting period. During the nine months ended September 30, 2021, the Company revalued the fair market value of the derivative liabilities at $1,583,894 resulting in a gain of $470,367. The valuation of the derivative liabilities was based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.35 our stock price on the date of revalue of $0.33, expected dividend yield of 0%, expected volatility of 108.00%, risk free interest rate of 0.01% and expected term of 0.96 years.

Related Party Convertible Notes Payable

On June 15, 2020, the Company borrowed $30,000 from an individual related to a significant member of management. The loan is evidenced by a promissory note which bears interest at 10% per year and is due and payable on October 8, 2020. At the option of the lender, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by $0.40. On the date of issuance, the conversion price of $0.40 was the closing market price of the Company’s common stock and thus a beneficial conversion feature was not recorded. In September 2020, the note was converted into 75,000 shares of common stock.

At various times in 2020, the Company borrowed a total of $430,000 from an individual related to a director of the Company and a director of the Company. The loans are evidenced by a promissory note which bear interest at 12% per year and are due and payable at dates ranging from December 10, 2020, to January 10, 2021. The proceeds were used for operations. At the option of the holders, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser of $0.30 or 80% of the ten-day average closing price of the Company’s common stock immediately prior to the date of conversion. The holders also have the option to convert $900,000 owed to them from EdenFlo, LLC, as disclosed below, which debt was assumed the Company in connection with the acquisition of EdenFlo, at a price of $0.30 per share for a period of 12 months. Additionally, the holders were issued 215,000 shares of common stock in connection with the notes. On December 7, 2020, the loans were amended whereby the various promissory notes were consolidated into two notes with a maturity date of June 30, 2021, and the variable conversion price was removed. See below for additional accounting impact. On April 23, 2021, the consolidated promissory notes were amended to allow the Company to extend the maturity date of the consolidated notes to December 31, 2021, in exchange for an aggregate of 250,000 shares of common stock and $15,000 added to the principal balance of the note. The shares of common stock were valued at $115,000 ad recorded as interest expense during six months ended June 30, 2021. As of June 30, 2021, the principal balance due on the convertible notes was $1,427,504 and recorded within related party convertible notes payable.13

9At various times in 2020, the Company borrowed a total of $430,000 from an individual related to a director of the Company and a director of the Company. The loans are evidenced by a promissory note which bear interest at 12% per year and are due and payable at dates ranging from December 10, 2020, to January 10, 2021. The proceeds were used for operations. At the option of the holders, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser of $0.30 or 80% of the ten-day average closing price of the Company’s common stock immediately prior to the date of conversion. The holders also have the option to convert $900,000 owed to them from EdenFlo, LLC, as disclosed below, which debt was assumed the Company in connection with the acquisition of EdenFlo, at a price of $0.30 per share for a period of 12 months. Additionally, the holders were issued 215,000 shares of common stock in connection with the notes. On December 7, 2020, the loans were amended whereby the various promissory notes were consolidated into two notes with a maturity date of June 30, 2021, and the variable conversion price was removed. See below for additional accounting impact. On April 23, 2021, the consolidated promissory notes were amended to allow the Company to extend the maturity date of the consolidated notes to December 31, 2021, in exchange for an aggregate of 250,000 shares of common stock and $15,000 added to the principal balance of the note. The shares of common stock were valued at $115,000 and recorded as interest expense during nine months ended September 30, 2021. As of September 30, 2021, the principal balance due on the convertible notes was $1,427,504 and recorded within related party convertible notes payable.

Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. The derivative liabilities are valued on the date the convertible note payable become convertible and revalued at each reporting period. During the year ended December 31, 2020, the Company recorded initial derivative liabilities of $298,913 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.30 our stock price on the date of grant ranging from $0.40 - $0.49, expected dividend yield of 0%, expected volatility of 103.00%, risk free interest rate of 0.64% and expected terms of 0.5 years. Upon initial valuation, the derivative liabilities, as well as the fair market value of the 215,000 shares of common stock exceeded the face values of the convertible notes payable by $2,940, which was recorded as a day one loss in derivative liability. On December 7, 2020, the derivative liabilities were revalued at $540,475 resulting in a loss of $241,562. The value of the derivatives of $540,475 was recorded as a gain on extinguishment due to the modification of the exercise price. The inputs to value the derivative liabilities were similar to those on the date of issuance.

In connection with the ~~derivative~~SKM ~~liabilities and common stock issued~~acquisition, the Company ~~recorded~~assumed afour ~~$396,223~~notes ~~discount.~~payable ~~The~~totaling ~~discount~~$275,756 iswith ~~being amortized over~~ the ~~term~~former ofmember. ~~the~~The ~~convertible~~notes ~~note~~are ~~using~~being paid by the ~~straight-line~~Company ~~method~~according ~~due~~ to the ~~short-term~~original ~~nature.~~terms Asbetween ofthe ~~December~~note ~~31,~~holders ~~2020,~~and ~~no discount remained~~SKM.

In connection with the EdenFlo asset acquisition, the Company assumed two notes payable with the former shareholders. Under the terms of the agreements $600,000 is payable on June 1, 2021 and does not incur interest and $300,000 is due on August 1, 2022 and does not incur interest. As disclosed above, both notes were modified to include a conversion feature at a price of $0.30 per share. The modification was treated as an extinguishment of the original note for which a loss on extinguishment of $448,000 was recorded.

In connection with the SKM acquisition, the Company assumed four notes payable totalling $275,756 with the former membership. The notes are dobeing ~~not~~paid ~~incur~~by ~~interest~~the ~~and~~Company ~~are~~according ~~due~~to onthe ~~demand~~original terms between the note holders and SKM.

Notes Payable

On March 6, 2020, the Company borrowed $1,500,000 from an unrelated third party. The loan is evidenced by a promissory note which bears interest at 8% per year.

The note is due and payable as follows:

	●	$500,000, together with all accrued and unpaid interest, on April 13, 2020
	●	$1,000,000, together with all accrued and unpaid interest, on May 6, 2020

Accrued interest will be paid in shares of the Company’s common stock based upon a 25% discount to the ten-day average closing price of the Company’s common stock immediately prior to May 6, 2020. Accrued interest will include 150,000 additional shares of the Company’s common stock and warrants to purchase 150,000 shares of the Company’s common stock. The warrants are exercisable at any time on or before January 1, 2025 at a price of $2.00 per share. The first payment of $500,000 was made on a timely basis.

On issuance, the Company valued the 150,000 shares of common stock and the 150,000 warrants for common stock and recorded the relative fair market of $116,707 as a discount to the note payable. The Company is amortizing the discount over the term of the note payable using the straight-line method due to the short term of the note. During the ~~six~~nine months ended ~~June~~September 30, 2020, the Company amortized $92,256 to interest expense.

On April 20, 2020, the holder of the Note agreed to extend the due date for the $1,000,000 payment from May 6, 2020 to June 15, 2020. In consideration for extending the repayment date for the second amount to June 15, 2020, the Company issued to the note holder 200,000 shares of its common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. A late payment penalty of $5,000 per day will be due if the $1,000,000 is not paid by June 15, 2020. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $157,784.

On June 9, 2020, the holder of the Note agreed to further extend the due date for the $1,000,000 payment to July 15, 2020. In consideration for extending the repayment date, the Company issued to the note holder an additional 200,000 shares of the Company’s common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $170,470.

On July 14, 2020, the holder of the Note agreed to further extend the due date for the $1,000,000 payment to August 15, 2020. In consideration for extending the repayment date, the Company issued to the note holder an additional 100,000 shares of the Company’s common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $120,721.

In addition, during the ~~twelve~~year ~~months~~ ended December 31, 2020, the Company issued 124,425 shares of common stock in satisfaction of $52,293 in accrued interest.

The note was paid in full in August 2020.

Note Payable - $200,000

On October 9, 2020, the Company borrowed $200,000 from an unrelated third party. The note incurred interest at 12% per annum and was due by November 9, 2020. ~~The note was repaid.~~ As further consideration, the Company issued 100,000 shares of its restricted common stock to the lender. The note was repaid in full. The Company recorded the fair market value of the shares as a discount of $40,000 to the note for which all was amortized to interest expense during the year ended December 31, 2020.

Note Payable - $173,705

On November 1, 2020, the Company entered into an agreement to convert accounts payable of $173,705 into a note payable. The note incurred interest at 8% per annum and is payable in monthly payments. On September 30, 2021, the Company determined to terminate the note and began discussions with the note holder to affect the termination of the note. See Note 9 for subsequent events related to the transaction.

~~Convertible~~ Note Payable – -Up to $~~500~~156,000

On July ~~November 17~~26, ~~2020~~2021, the Company ~~borrowed $500~~,~~000~~ ~~from~~through ana ~~unrelated~~subsidiary, ~~third~~obtained ~~party.~~a ~~The~~line ~~note~~of ~~incurs~~credit ~~interest~~for atits 8%cannabis ~~per~~operations ~~annum~~in ~~and~~an ~~initially~~amount ~~matured~~up onto ~~January 31~~$156,000 ~~2021.~~which is ~~See~~formalized ~~below~~in ~~for~~a ~~discussion~~Business ~~regarding~~Loan ~~the~~and ~~extension~~Security ~~of the note~~Agreement. AtThe ~~the~~line ~~option~~ of ~~the~~credit ~~lender,~~is ~~the~~secured ~~loan~~by invoices and ~~any~~accounts ~~accrued~~receivable and incurs interest ~~may~~at beescalating ~~converted~~rates ~~into~~based ~~shares~~on of the ~~Company’s~~time ~~common~~of ~~stock~~repayment. The ~~number~~borrowings ofhave ~~shares~~a ofvariety ~~the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser~~ of ~~75%~~financial ofand ~~the ten~~non-~~day~~financial ~~average~~covenants ~~closing~~for which ~~price of~~ the Company’s ~~common~~is ~~stock~~in ~~immediately~~compliance ~~prior~~with toas ~~the date~~ of ~~conversion~~the orfiling $0date.~~50.~~ As of ~~June~~September 30, 2021, the ~~principal~~Company’s ~~balance~~subsidiary ~~due~~had not drawn on the ~~convertible~~line ~~note~~of ~~was $500,000 and recorded within convertible notes payable~~credit.

Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. The derivative liabilities are valued on the date the borrowings become convertible and revalued at each reporting period. On June 30, 2021, the derivative liabilities were revalued at $271,897 resulting in a gain of $13,223. The derivative liabilities were revalued based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.38 our stock price on the date of revalue of $0.51, expected dividend yield of 0%, expected volatility of 113.00%, risk free interest rate of 0.01% and expected term of 0.50 years.

In connection with the derivative liabilities and common stock issued, the Company recorded a $287,454 discount. The discount is being amortized over the term of the borrowings using the straight-line method due to the short-term nature. During the six months ended June 30, 2021, the Company amortized $118,815 of the discount to interest expense. As of June 30, 2021, no discount remained.

On January 31, 2021, the holder of the note agreed to extend the due date for the note to April 2, 2021. In consideration for extending the repayment date to April 2, 2021, the Company issued to the note holder 50,000 shares of its common stock and the interest rate of the Note was increased to 10% per annum. The Company recorded the fair market value of the common stock issued of $23,500 as a discount to the note for which was fully amortized to interest expense during the six months ended June 30, 2021.

On April 16, 2021, the holder of the Note agreed to extend the due date for the note to June 18, 2021. In consideration for extending the repayment date, the Company issued to the note holder 100,000 shares of its common stock, 100,000 shares of common stock for accrued interest through execution date and provided the holder with the option to extend the payment to September 15, 2021, for which an additional 150,000 shares of common stock would be provided, if extended. The payment date was extended to September 15, 2021 at the option of the note holder in June 2021. The Company recorded the fair market value of the common stock issued of $173,000 as additional interest expense during the six months ended June 30, 2021.

NOTE 7 – STOCKHOLDER’S EQUITY

Stock-Based Compensation

The Company has entered into various employment and advisory agreements for which shares of common stock are issued with a variety of vesting provisions. The Company typically determines the fair market value of these awards on the date of grant and expensing that value over the vesting period which mirrors the service period.

In May 2020, the Company entered into two-year employment agreements with Matthew Gregarek, the Company’s Chairman and Chief Executive Officer, David Burcham, the Company’s President, and Daniel Garza, the Company’s former Chief Marketing Officer. Among various other salary and bonus terms, the agreements also provide for the award of shares of the Company’s restricted common stock and options to purchase shares of the Company’s common stock. Under these agreements, a total of 6,300,000 fully vested shares of common stock were granted upon execution of the agreements. An additional 1,300,000 shares of common stock were awarded with a vesting date of April 1, 2021, 900,000 of which have vested. The agreements also provide for the future grant of 1,300,000 additional shares of common stock should the individuals remain employed following the April 1, 2021 expiration date, 400,000 of which have been cancelled and will not be subject to issuance. For the ~~six~~nine months ended ~~June~~September 30, 2021, the Company recorded $2021,~~664~~000 as stock-based compensation. The remaining expense outstanding is $5818,~~364~~000 for which will be recorded through 2022.

During the year ended December 31, 2020, the Company entered into agreements with consultants for which provided investor awareness, research materials and other services. ~~During~~In addition, during the ~~three~~nine months ended ~~March~~the 31Company entered into agreements for legal, ~~2021~~marketing, 80consulting,~~000~~ etc for which 203,357 shares of common stock were ~~returned to the Company and cancelled~~issued. The Company recorded ~~a reduction to~~ stock-based compensation of $34111,~~400~~013 during the ~~six~~nine months ended ~~June~~September 30, 2021 in connection with the common stock issued for services.

On April 5, 2021 the Company issued 250,000 shares to a third party for assignment of intellectual property, including patents and patent applications, agreed to on January 26, 2021. The common stock was valued at $128,750 for which is being amortized over the term of the licensing agreement.

Options

In May 2020, effective April 1, 2020, the individuals noted above were also granted a total of 5,750,000 options to purchase shares of the Company’s common stock. These options vested in tranches at various dates through May 1, 2021, with escalating exercise prices ranging from $0.50 to $7.50 and are exercisable for approximately ~~five~~5five 5 years. These options were valued at $1,056,695 using a Black-Scholes Options Pricing Model.

The fair value of the options granted in 2020 ~~are~~is estimated using a Black-Scholes Options Pricing Model with the following assumptions:

Schedule of Fair Value Black-Scholes Options Pricing
Schedule of fair value Black-Scholes Options pricing
Exercise price per share	$	3.40
Expected life (years)		2.97
Risk-free interest rate		0.64	%
Expected volatility		135	%

InDuring the nine months ended September 30, 2021, the Company granted options to purchase 912,~~647~~015,~~500~~700 shares of common stock to employees and consultants. Some of the grants had effective dates within the 2020 calendar year. These options will vest in tranches at various points through 2023 with escalating prices ranging from $0.05 to $7.50 and are exercisable through various points through ~~2023~~2025.

12These options were valued at $3,163,622 using a Black-Scholes Options Pricing Model. For the nine months ended September 30, 2021, the Company recorded $2,350,834 as stock-based compensation. The remaining expense outstanding is $806,629 for which will be recorded through 2024. During the nine months ended September 30, 2021, 660,000 options were either cancelled or forfeited.

~~These~~The fair value of the options ~~were~~granted ~~valued~~in at2021 ~~$2,287,556~~is estimated using a Black-Scholes Options Pricing Model. ~~For~~with the ~~six~~following ~~months ended June 30, 2021, the Company recorded $1,591,819 as stock-based compensation. The remaining expense outstanding is $698,737 for which will be recorded through 2024.~~assumptions:

The fair value of the options granted in 2021 are estimated using a Black-Scholes Options Pricing Model with the following assumptions:

Exercise price per share	$	1.03
Expected life (years)		2.22
Risk-free interest rate		0.64	%
Expected volatility		111	%

Exercise price per share $ 0.96

Expected life (years)	2.56
Risk-free interest rate	0.64	%
Expected volatility	122	%

Offering of Common Stock and Warrants

In February 2019, the Company commenced a private offering of shares of common stock at a purchase price of $0.50 per share. In addition, for each share purchased the investor received a warrant to purchase one additional share of common stock at a price of $2.00 per share. The warrants expire on December 31, 2021, or sooner at the Company’s option, if the Company’s stock trades for a price of $3.00 per share for 10 days with an average volume of 100,000 shares per day. During the year ended December 31, 2020, the Company received $150,000 related to the sale of 300,000 shares of common stock and warrants.

OnIn the ~~October~~year 23ending December 31, 2020, the Company ~~sold~~received 2$100,~~750,~~000 ~~shares~~related ofto ~~its~~the ~~common~~sale ~~stock~~of to200,000 ashares ~~private~~of ~~investor~~common ~~for~~stock ~~$1,000,000~~and ~~in proceeds~~warrants.

~~Between~~During the ~~December~~nine 28months ~~and~~ended ~~December~~September 30, ~~2020~~2021, the Company received $~~100~~768,000 related to the sale of ~~200~~1,~~000~~907,413 shares of common stock ~~and warrants~~.

~~During~~On July 2, 2021, the ~~six~~Company ~~months~~entered ~~ended~~into ~~June~~an agreement with a third party for an equity investment of $30,000,000 ~~2021~~in two tranches beginning August 16, 2021. For the ~~Company~~first ~~received~~tranche, the investor will purchase preferred stock for $~~543~~15,000,000, valued ~~related~~at to$0.40 per share of common stock. For the ~~sale~~second tranche, the investor will make an additional equity investment of 1$15,~~394~~000,~~404~~000, valued ~~shares~~at $0.455 per share of common stock, within ninety (90) days of the funding of the first tranche. On August 25, 2021, the Company and the investor amended the definitive share purchase agreement to allow the investor more time to complete the first tranche of funding and provide for a penalty if the funds were not received. See Note 9 for subsequent events related to the transaction.

Offering of Preferred Stock

In March 2021, the Company commenced and subsequently closed a private offering of its preferred stock for up to $2 million in proceeds. The offering consisted of 20,000 shares of preferred stock at a price of $100 per share. The purchaser of the preferred stock has agreed to purchase the preferred stock in three tranches provided certain sales milestones are met. Concurrently with each issuance of preferred stock, the Company shall issue the preferred stockholder 500,000 warrants to purchase the Company’s common stock at a price of $0.75 per share. Preferred stockholders are entitled to a 10% dividend paid in additional shares of preferred stock on a quarterly basis and will receive dividend and liquidation preferences over the Company’s common stockholders. During the ~~six~~nine months ended ~~June~~ September 30, 2021, the Company received $660,000 related to the sale of 6,660 shares of preferred stock. In connection with the sale, the Company issued the holder warrants to purchase 500,000 shares of the Company’s common stock at $0.75 per share for a period of four years. The Company valued the warrants at $148,400 using the Black-Scholes pricing model for which a discount of $121,158 using the relative fair market value was recorded preferred stock and the offset to additional paid-in capital. In addition, the holders of the preferred stock receive dividends at a rate of 10% per annum. As of ~~June~~September 30, 2021, the Company recorded accrued dividends of $825,~~680~~180 as an increase to accrued liabilities and an offset to additional paid-in capital. Each share of preferred stock is convertible into 200 shares of common stock.

Common Stock and Warrants Issued with Notes Payable

See Note 6 for issuance of shares in connection with note agreements.

NOTE 8 – RELATED PARTY TRANSACTIONS

See Note 7 for shares and options issued to management under employment contracts. In connection with the employment contracts, the Company accrued total deferred salaries and bonuses of $~~531~~474,~~823~~ 744 and $225,000 as of ~~June~~September 30, 2021, respectively.

See Note 6 for discussion related to related party convertible notes payable.

NOTE 9 – SUBSEQUENT EVENTS

On ~~July~~October 222, 2021, the Company ~~entered~~provided ~~into~~written annotice ~~agreement~~of ~~with~~termination ato ~~third~~the ~~party~~investor ~~for~~in anthe equity investment in Note 7 as a result of ~~$30,000,000~~the ininvestor’s breach ~~two~~of ~~tranches~~the ~~beginning~~Definitive ~~August~~Share 16Purchase Agreement, ~~2021.~~as ~~For~~amended, between the ~~first~~purchaser ~~tranche~~and the Company. Per the Agreement, the termination occurred after the investor ~~will~~was ~~purchase~~provided ~~preferred~~written ~~stock for~~notice ~~$15,000,000, valued~~of atits ~~$0.40~~breach ~~per~~and ~~share of~~given ~~common~~ten ~~stock. For~~(10) ~~the~~days ~~second~~to ~~tranche,~~cure the breach. The investor ~~will make~~and anthe Company ~~additional~~are ~~equity~~currently ~~investment~~in ofdiscussions ~~$15,000,000, valued~~to atrenegotiate ~~$0.455 per~~terms ~~share of~~and ~~common~~settle ~~stock, within~~any ~~ninety~~potential ~~(90)~~damages ~~days~~and ofliabilities arising from the ~~funding~~investor’s breach of the ~~first~~Agreement. ~~tranche~~However, the Company is also preparing to pursue legal remedies in the event such action becomes necessary.

OnEffective ~~July 2~~October 1, 2021, the Company ~~entered~~and ~~into~~the annote ~~assignment~~holder ~~agreement~~terminated ~~with a third party under which~~ the ~~Company~~note ~~obtained~~in the ~~rights~~amount toof ~~provide~~$173,705 ~~CBD~~described ~~and~~in ~~other~~Note ~~plant-based~~6. ~~health~~Pursuant ~~and wellness products~~ to ~~patients~~the ~~covered~~terms ~~under~~of the ~~corporate health insurance plans. In consideration for assigning such rights~~note, the Company ~~entered~~transferred ~~into~~the acollateral ~~profit-sharing~~securing ~~arrangement~~payment ~~with~~of the ~~third~~note ~~party~~to ~~whereby~~ the ~~Company~~note ~~shall~~holder ~~receive~~in ~~51%~~exchange offor terminating the ~~total profits~~ agreement and ~~pay~~cancelling ~~the~~all ~~third~~amounts ~~party~~due ~~49%~~under of the ~~profits derived from such product sales~~note.

OnIn October ~~July 15,~~ 2021, the Company ~~borrowed~~entered into a ~~total~~material ofagreement ~~$400,000~~with ~~from~~a ~~unrelated~~ third-party ~~parties.~~(“Client”) ~~The~~to ~~loans~~distribute ~~are~~health ~~evidenced~~and bywellness products ~~two~~to ~~convertible~~customers ~~promissory~~of ~~notes~~the ~~which~~Client ~~bear~~through ~~total~~a ~~interest~~subsidiary named Phytocare, Inc. Under the terms of ~~$30~~the agreement,~~000~~ Phytocare, ~~are~~Inc ~~convertible~~will have atexclusive $0rights to distribute plant-based health and wellness products to the Clients network and customers.40 ~~per~~The ~~share,~~initial products are currently being developed and ~~mature~~formulated onin ~~August~~Quarter ~~20,~~4 ~~2021~~with manufacturing and product launch by Q2 2022.

InOn November ~~July~~4, 2021, the Company ~~received~~amended the terms of the notes in the amount of $~~125~~400,000 ~~related~~described in Note 6 to extend the ~~sale~~payment date of ~~290~~the notes to December 19th,~~787~~ 2021, issue an additional 225,000 shares as interest over the extension, and provide for semi-monthly payments of ~~common~~the ~~stock~~principal balance of the notes.

The Company has evaluated subsequent events through the filing date of these consolidated financial statements and has disclosed that there are no other events that are material to the financial statements to be disclosed.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company’s business plan involves the acquisition of licensed medical and recreational marijuana dispensaries, cultivation facilities and production facilities in states which allow publicly traded companies to own and operate dispensaries, cultivation facilities and production facilities. Depending on the markets entered and state regulation, the Company’s business plan may also include asset purchases, management/consulting agreements, operating agreements, or similar allowable agreements. The Company plans to use a combination of cash, shares of common or preferred stock, notes, or other financing vehicles to complete these acquisitions.

Love Pharm, LLC

On February 12, 2020, the Company entered into an Operating Agreement with Dr. James Rouse, MD regarding the ownership, operation, and management of Love Pharm, LLC. Love Pharm was organized to formulate, develop, manufacture, and brand hemp/CBD products for sale and distribution as well as to form a multi-channel media platform for public and patient education regarding the endocannabinoid system utilizing Dr. Rouse’s name, public image and his extensive experience and expertise in medicine and entrepreneurship. Under the Operating Agreement between the Company and Dr. Rouse, the Company owns 51% of Love Pharm and has a right of first refusal to purchase the remaining 49% of Love Pharm from Dr. Rouse. Additionally, Dr. Rouse will become the Company’s Chief Medical Advisor. Dr. Rouse will receive 400,000 shares of the Company’s common stock for services provided to the Company.

As of ~~June~~ September 30, 2021 Love Pharm had not generated any revenue.

Sofa King

On March 13, 2020, the Company entered into an agreement to acquire all of the outstanding membership interests in Sofa King Medicinal Wellness Products, LLC (“SKM”) for 3,000,000 shares of the Company’s common stock.

On August 11, 2020, following receipt of approval of the transaction by the Colorado Marijuana Enforcement Division, the Company closed the acquisition of SKM and the change of ownership on SKM’s six licenses (now owned by the Company) was completed.

SKM is a vertically integrated cannabis operator located in Dumont, CO and recently moved its dispensary to a corner location along the busy I-70 corridor between Denver and Colorado’s world-class ski destinations.

EdenFlo

On April 24, 2020, the Company acquired substantially all the assets of EdenFlo, LLC, a producer of CBD extracts and concentrates, for 7,000,000 shares of the Company’s restricted common stock and the release of its obligation of a previous promissory note in the amount of $1,650,000.

The Company expects EdenFlo will ~~join Prolific Nutrition and Love Pharm, LLC to secure and~~ expand the Company’s position in the national Hemp/CBD industry. EdenFlo can produce pure CBD isolate and full-spectrum hemp distillate. EdenFlo’s isolate is made from the highest quality ingredients, utilizing only the best extraction and distillation methods to ensure a final product of extreme purity. Their scientific procedures used for the remediation of THC provide some of the cleanest broad-spectrum (distillate) oil available in the cannabis extraction industry. The acquisition of EdenFlo will support the Company’s manufacturing operations by supplying the Company’s raw materials requirements for its branded products.

As of September 30, 2021 EdenFlo had not generated any revenue.

Test Kitchen

On August 17, 2020, the Company acquired all the outstanding shares of Test Kitchen, Inc. for 50,000 shares of its restricted common stock.

Test Kitchen’s only ~~assets~~asset as of August 17, 2020, was a product containing CBD oil. Test Kitchen filed a provisional patent application for this product on June 12, 2020. There can be no assurance that a patent will be issued for this product.

Solar Cultivation Technologies, Inc.

On September 29, 2020, the Company acquired all the assets of Solar Cultivation Technologies, Inc. for 1,200,792 shares of the Company’s common stock. SCT provides commercial cannabis cultivators with solar, battery storage, and high-efficiency lighting.

On November 12, 2020, the Company contributed SCT’s assets valued at $530,000 less the cash consideration provided by DC Energy Group, LLC (“DCEG”) of $200,000 for a 40% interest in DC Energy Group, LLC, an entity which is focused on renewable energy generation, storage, and distribution. The investment is accounted for using the equity method.

Impact of the Coronavirus

The Company’s business could be disrupted and materially adversely affected by the recent outbreak of COVID-19. As a result of measures imposed by the governments in affected regions, businesses and schools have temporarily closed due to quarantines intended to contain this outbreak. The spread of COVID-19 from China to other countries has resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic on March 11, 2020. International stock markets have reflected the uncertainty associated with the slow-down in the world economies. The significant declines in the Dow Industrial Average were also largely attributed to the effects of COVID-19. The Company is still assessing the impact COVID-19 may have on its business, but there can be no assurance that this analysis will enable the Company to avoid part or all of any impact from the spread of COVID-019 or its consequences, including downturns in business sentiment generally. The extent to which the COVID-19 pandemic and global efforts to contain its spread will impact the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic.

1520

Results of Operations

Three Months Ended ~~June~~September 30, 2021, compared to the Three Months Ended ~~June~~September 30, 2020

Revenue

We generated $~~762~~507,~~778~~865 of revenues for the three-month period ended ~~June~~September 30, 2021, in comparison with $3318,~~951~~690 for the comparable quarter a year ago. The increase of $~~758~~189,~~827~~175 is primarily due to operational sales from the Company’s acquisition in SKM, as well as wholesale sales of hemp distillate product sold through Test Kitchen. During the three months ended ~~June~~September 30, 2021, approximately 8492% of the Company’s revenue was from sales made by the Company’s SKM dispensary in Dumont, Colorado, and approximately 168% of the Company’s revenue was from sales made by Test Kitchen. During the three months ended ~~June~~September 30, 2021, no sales were generated by Prolific Nutrition, Gratus Living, Love Pharm or EdenFlo.

Cost of Goods Sold.

We generated $~~612~~334,~~118~~147 of cost of goods sold for the three-month period ended ~~June~~September 30, 2021, in comparison with $4060,~~066~~552 for the comparable quarter a year ago. The increase of $~~572~~273,~~052~~595 is due to sales activity stated above.

Gross Profit/(Loss).

We generated $~~150~~173,~~660~~718 gross profit for the three-month period ended ~~June~~September 30, 2021, in comparison with gross ~~loss~~profit of ($36258,~~114)~~138 for the comparable quarter a year ago. The ~~increase~~decrease of $~~186~~84,~~774~~420 is due to operational activity. The Company, in prior years did not have on-going sales operations.

General and Administrative Expenses

General and administrative expenses for the three-month period ended ~~June~~September 30, 2021, ~~totalled~~totaled $21,~~487~~841,~~327~~290 in comparison with $31,~~892~~177,~~549~~949, for the comparable quarter a year ago. The decrease of $1663,~~405,222~~341 ~~or 36%~~ is primarily due to a significant amount of stock-based compensation recorded in the prior year in connection with options and shares granted to officers.

Other Income / Expense

Other expense for the three-month period ended ~~June~~September 30, 2021, ~~totalled~~totaled $12,~~537~~178,~~013~~549, in comparison with $~~852~~3,~~864~~719,913, for the comparable quarter a year ago. The ~~increased~~decreased expense of $~~684~~1,~~149~~541,364, is primarily due to ~~increased interest from additional funding and discount amortization, fair value of common stock issued for note extensions, losses on investment valuation, and~~ changes in the fair market value of derivative liabilities incurred.

~~Six~~Nine Months Ended ~~June~~September 30, 2021, compared to the ~~Six~~Nine Months Ended ~~June~~September 30, 2020

Revenue

We generated $12,~~556~~064,~~926~~791 of revenues for the ~~six~~nine-month period ended ~~June~~September 30, 2021, in comparison with $5323,~~041~~731 for the comparable quarter a year ago. The increase of $1,~~551~~741,~~885~~060 is primarily due to operational sales from the Company’s acquisition in SKM, as well as wholesale sales of hemp distillate product sold through Test Kitchen. During the ~~six~~nine months ended ~~June~~September 30, 2021, approximately 85 86% of the Company’s revenue was from sales made by the Company’s SKM dispensary in Dumont, Colorado, and approximately 1514% of the Company’s revenue was from sales made by Test Kitchen. During the ~~six~~nine months ended ~~June~~September 30, 2021, no sales were generated by Prolific Nutrition, Gratus Living, Love Pharm or EdenFlo.

~~Cost of Goods Sold.~~21

WeCost ~~generated $1,080,070~~ of ~~cost of goods sold for the six-month period ended June 30, 2021, in comparison with $40,066 for the comparable quarter a year ago. The increase of $1,040,004 is due to sales activity stated above.~~Goods Sold

~~Gross~~We generated ~~Profit/(Loss)~~$1,414,217 of cost of goods sold for the nine-month period ended September 30, 2021, in comparison with $100,617 for the comparable quarter a year ago. The increase of $1,313,600 is due to sales activity stated above.

WeGross ~~generated $476,856 gross profit for the six-month period ended June 30, 2021, in comparison with gross loss of~~ Profit/(~~$35,024~~Loss) ~~for the comparable quarter a year ago. The increase of $511,880 is due to operational activity. The Company, in prior years did not have on-going sales operations.~~

16We generated $650,574 gross profit for the nine-month period ended September 30, 2021, in comparison with gross profit of $223,114 for the comparable quarter a year ago. The increase of $427,460 is due to operational activity. The Company, in prior years did not have on-going sales operations.

General and Administrative Expenses

General and administrative expenses for the ~~six~~nine-month period ended ~~June~~September 30, 2021, ~~totalled~~totaled $45,~~043,~~885,175 in comparison with $45,~~448~~626,~~199~~148, for the comparable quarter a year ago. The ~~decrease~~increase of $~~404~~259,~~314~~027 ~~or 9%~~ is primarily due to aan ~~significant~~increase ~~amount of stock-based compensation recorded~~ in ~~the~~operational ~~prior~~activity ~~year~~from insales ~~connection with options and shares granted to officers~~stated above.

Research and Development Expenses

Research and development expenses for the ~~six~~nine-month period ended ~~June~~September 30, 2021, ~~totalled~~totaled $36,~~708~~993, in comparison with $0 for the comparable quarter a year ago. The increase of $36,~~708~~993 is due to product creation in the current year.

Other Income / Expense

Other expense for the ~~three~~nine-month period ended ~~June~~September 30, 2021, ~~totalled~~totaled $24,~~724~~903,~~933~~482, in comparison with $~~918~~4,~~863~~638,776, for the comparable quarter a year ago. The increased expense of $1264,~~806~~706,~~070,~~ is primarily due to increased interest from additional funding, an allocation of bad debt expense on a note receivable, losses on investment valuation, and changes in the fair market value of derivative liabilities incurred.

Liquidity and Capital Resources

Our principal source of liquidity has been funds received from the sale of our common stock and issuance of notes including convertible notes. During the current reporting period and subsequent we have funded our operations through cash flows from operations and the following significant transactions.

On August 18, 2020, the Company entered into a Loan Agreement with an unrelated third party. The Loan Agreement provides the Company with the option, subject to certain conditions, to borrow up to $4,000,000 under the Loan Agreement. As of November 16, 2020 the Company had borrowed $1,950,000 pursuant to the Loan Agreement, which amount includes $146,250 which the Company will use to pay the first six month’s interest on the borrowed funds. The Company used $1,000,000 of the initial advance to repay the $1,000,000 loan described above. The funds remaining from the initial advance will be used to purchase raw materials for the Company’s products and for general corporate purposes. All funds borrowed bear interest at 15% per year, are secured by substantially all of the Company’s assets, and are due and payable on August 18, 2023. The Lender will receive two shares of the Company’s restricted common stock for every $1.00 loaned to the Company. At the option of the Lender, the amounts loaned to the Company may be converted into shares of the Company’s common stock. The number of shares to be issued will be determined by dividing the amount to be converted by the Conversion Price. The Conversion Price is the lessor of: (1) $2.00 or (2) 75% of the average closing price of the Company’s common stock for the 30 consecutive trading days ending on the last business day immediately prior to the conversion date.

On April 28, 2021, the Company received $500,000 related to additional borrowings under the Loan Agreement.

During the ~~six~~nine-month ~~months~~period ended ~~June~~September 30, 2021, the Company received $~~543~~768,000 related to the sale of 1,~~394~~907,~~404~~413 shares of common stock.

On May 14, 2021, the Company received $660,000 related to the issuance of the first tranche of 660 shares of the Company’s preferred stock and 500,000 warrants to purchase the Company’s common stock at a price of $0.75.

17Going forward we are dependent upon raising capital to the extent cash flows from our operations are not significant enough to our cash flow needs. We currently have various financing agreements in place, as disclosed above.

~~Going~~For the ~~forward~~next we12 ~~are~~months ~~dependent~~our ~~upon~~plan ~~raising~~of ~~capital~~operations is to expand our current activity at SKM, increase consumer product offerings in Test Kitchen, and develop the ~~extent~~infrastructure required to support Phytocare’s initial operations. We believe that our current cash on hand, cash flows from ~~our~~ operations, ~~are~~and ~~not~~expected ~~significant~~proceeds ~~enough~~from ongoing investments will allow us to meet our cash flow ~~needs.~~requirements Wefor ~~currently~~a ~~have~~period ~~two financing agreements~~ in excess ~~place,~~of as12 ~~disclosed above~~months.

For the next 12 months our plan of operations is to expand our current activity at SKM and increase consumer product offerings in Test Kitchen. We believe that our current cash on hand, cash flows from operations and expected proceeds from financing agreements in place will allow us to meet our cash flow requirements for a period in excess of 12 months.

Cash Flows

Net Cash used in Operating Activities.

We used cash in our operating activities due to our losses from operations. Net cash used in operating activities was $12,~~899~~551,~~253~~370 for the ~~six~~ nine-month period ended ~~June~~September 30, 2021 in comparison to $12,~~229~~098,~~888~~433 for the comparable period a year ago, an increase of $~~669~~452,~~365~~ 937 or 5422%. The increase in cash used in operations was primarily related to operating activities in the current year that did not exist in the prior year.

Net Cash used in Investing Activities.

Net cash used in our investing activities was $~~104~~162,~~713~~794 for the ~~six~~nine-month period ended ~~June~~September 30, 2021 in comparison to $1,~~681~~780,~~488~~706 for the comparable period a year ago, a decrease of $1,~~576~~617,~~775~~912 or 9491%. The decrease in cash was primarily related to the change in value of the note receivable with HSII.

Net Cash from Financing Activities.

Net cash provided by financing activities was $12,~~599~~266,~~155~~677 for the ~~six~~nine-month period ended ~~June~~September 30, 2021 in comparison to $12,~~428~~529,~~500~~333 for the comparable period a year ago, an ~~increase~~decrease of $~~170~~262,~~655~~656 or 1210%. In the ~~six~~nine-month period ended ~~June~~September 30, 2021, we raised $~~543~~768,000 primarily through the issuance of common stock, $660,000 through the sale of preferred stock and $~~500~~976,000 from a convertible note payable. ~~In the six-month period ended June 30, 2020, we raised $1,586,000 primarily through the issuance of notes.~~

Adjusted EBITDA, for the purposes of these financial statements, shall mean:

The Company’s loss before interest, taxes, depreciation, and amortization adjusted to exclude the impact of (a) loss on impairment of tangible or intangible assets; (b) gain or loss on disposal of assets, including notes receivables; (c) gain or loss from the early extinguishment, redemption or repurchase of debt, (d) stock-based compensation expense and (e) the loss from derivative liabilities. Adjusted EBITDA will also exclude any expenses incurred by the Company in connection with the Company’s evaluation, pursuit, or consummation of one or more acquisitions or transactions (which such expenses are considered to be incurred in connection with extraordinary, unusual, or infrequently occurring events reported in the Company’s public filings).

During the ~~six~~nine-month ~~months~~period ended ~~June~~September 30, 2021, Adjusted EBITDA decreased to $2,~~233~~020,~~899~~502 from $3,~~005~~229,~~477~~130 in the prior comparable year.

Off Balance Sheet Arrangements

As of ~~June~~ September 30, 2021, the Company did not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

See Note 2 to the ~~June~~September 30, 2021, financial statements included as part of this report for a description of the Company’s critical accounting policies and estimates.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports filed under the Securities Exchange Act of 1934, is recorded, processed, summarized, and reported within the time periods specified by the Commission’s rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. We evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act, as amended) as of the end of the period covered by this report. As a result of this evaluation, management concluded that our disclosure controls and procedures were not effective as of ~~June~~September 30, 2021, due to the following material weakness:

	●	Lack of appropriate segregation of duties,

	●	Lack of control procedures that include multiple levels of supervision and review, and

	●	An overreliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material, nonstandard transactions.

Changes in Internal Control over Financial Reporting

On January 11, 2021, the Company hired Alexander Glueckler as its CFO to reduce reliance on independent financial reporting consultants for review or critical accounting areas, disclosures, and material nonstandard transactions. The hiring of Mr. Glueckler has allowed the Company to take greater internal control over its financial reporting in the three months ended ~~June~~September 30, 2021.

There were no ~~other~~ changes in our internal control over financial reporting that occurred during the quarter ended ~~June~~September 30, 2021, that materially affect, or are reasonably likely to materially affect, our internal control over financial reporting.

1924

PART II

ITEM 1.

LEGAL PROCEEDINGS

See Note 4 to the Financial Statements included as part of this report.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company’'s sale of unregistered securities during the ~~six~~nine months ended ~~June~~September 30, 2021 are shown in the Statement of Stockholders Equity which is part of the financial statements included as part of this report. Refer also to Note 7 to these financial statements.

The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933 in connection with issuance of the shares described above. The persons who acquired the shares were sophisticated investors and were provided full information regarding the Company’s business and operations. There was no general solicitation in connection with the issuance of the shares. The persons who acquired the shares acquired them for their own accounts. No commissions or other form of remuneration was paid in consideration with the issuance of these shares.

ITEM 6.

EXHIBITS

Exhibit
Number		Description
3.1		Articles of Incorporation (1)
3.2		Amended Articles of Incorporation (1)
3.3		Bylaws (1)
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

(1)	Incorporated by reference to the same exhibit filed with the Company’s annual report on Form 10-K for the year ended December 31, 2018

2025

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on ~~August~~November 1315, 2021.

	PURE HARVEST CORPORATE GROUP, INC.

	By:	/s/ Matthew Gregarek
		Matthew Gregarek
		Principal Executive Officer


	By:	/s/ Alexander Glueckler
		Alexander Glueckler
		Principal Financial and Accounting Officer

2126

Filing Compare · Pure Harvest Corporate Group, Inc.