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(See Note 13) Finance lease right-of-use assets are recorded within property and equipment, net of accumulated amortization of approximately $926,000 and $788,000 at September 30, 2020 and December 31, 2019, respectively. 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~[X]~~☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2019~~2020

[☐ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 001-38116

YOUNGEVITY INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		90-0890517
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2400 Boswell Road, Chula Vista, CA		91914
(Address of Principal Executive Offices)		(Zip Code)

~~Registrant’s Telephone Number, Including Area Code:~~ (619) 934-3980

Registrant’s Telephone Number, Including Area Code

Not applicable

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act: None.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 par value	YGYI	The Nasdaq Capital Market
9.75% Series D Cumulative Redeemable Perpetual Preferred Stock, $.001 par value	YGYIP	The Nasdaq Capital Market

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

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 (Sec.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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [☐ ] Accelerated filer [☐ ] Non-accelerated filer ~~[X]~~☒ Smaller reporting company ~~[X]~~☒ Emerging growth company ~~[ ]~~☐

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. ~~[ ]~~☐

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 ~~November~~June 1517, ~~2019~~2022, the issuer had 30 34,~~270~~044,~~422~~ 176 shares of its Common Stock, par value $0.001 per share, issued and outstanding.

Table of Contents

YOUNGEVITY INTERNATIONAL, INC.

TABLE OF CONTENTS

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2019 (unaudited) & December 31, 2018	1
	Condensed Consolidated Balance Sheets as of September 30, 2020 (unaudited) & December 31, 2019	1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (unaudited)	2
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited)	2
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018 (unaudited)	3
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019 (unaudited)	3
	Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2019 and Condensed Consolidated Statements of Stockholders' Equity and Mezzanine Equity for the three and nine months ended September 30, 2018 (unaudited)	4
	Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2020 and 2019 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4046
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5261
Item 4.	Controls and Procedures	5262
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	5365
Item 1A.	Risk Factors	5365
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5766
Item 3.	Defaults Upon Senior Securities	5866
Item 4.	Mine Safety Disclosures	5866
Item 5.	Other Information	5867
Item 6.	Exhibits	5867
Signatures		5968

-i-

Table of Contents

PART I. FINANCIAL INFORMATION

~~ITEM~~Item 1. ~~FINANCIAL~~ ~~STATEMENTS~~Financial Statements

Youngevity International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

	As of
		September 30, 2020			December 31, 2019
	September 30, 2019	December 31, 2018
ASSETS		(Unaudited)
ASSETS	(Unaudited)
Current Assets
Current Assets
Cash and cash equivalents		$	1,238		$	4,463
Cash and cash equivalents	$7,270	$2,879
Accounts receivable, trade			3,043			2,902
Accounts receivable, trade (1)	35,662	4,028
Income tax receivable			81			81
Income tax receivable	307	74
Inventory			22,036			22,706
Inventory	23,109	21,776
Prepaid expenses and other current assets			5,432			3,982
Advances (Note 1)	-	5,000
Total current assets			31,830			34,134
Prepaid expenses and other current assets	5,925	5,263
Property and equipment, net			25,189			23,316
Total current assets	72,273	39,020
Operating lease right-of-use assets			6,467			8,386
Property and equipment, net	22,540	15,105
Deferred tax assets			75			75
Operating lease right-of-use assets	7,443	-
Intangible assets, net			13,726			15,566
Deferred tax assets	75	148
Goodwill			6,992			6,992
Intangible assets, net	22,083	15,377
Other assets			1,279			1,222
Goodwill	10,676	6,323
Total assets		$	85,558		$	89,691
Note receivable (Note 1)	5,146	-
LIABILITIES AND STOCKHOLDERS' EQUITY
Other assets – notes receivable	949	-
Current Liabilities
Total assets	$141,185	$75,973
Accounts payable		$	9,405		$	9,069
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued distributor compensation			4,167			3,164
Current Liabilities
Accrued expenses			5,732			5,108
Accounts payable	$34,108	$8,478
Deferred revenues			8,527			1,943
Accrued distributor compensation	3,252	3,289
Line of credit			1,955			2,011
Accrued expenses	10,304	6,582
Other current liabilities			3,018			2,664
Deferred revenues	2,005	2,312
Operating lease liabilities, current portion			1,290			1,740
Line of credit	1,981	2,256
Finance lease liabilities, current portion			1,703			736
Other current liabilities	1,205	1,912
Notes payable, net of debt discounts, current portion (Note 3)			5,340			4,085
Operating lease liabilities, current portion	1,484	-
Notes payable, net of debt discounts, current portion			2,108			191
Finance lease liabilities, current portion	921	1,168
Convertible notes payable, net of debt discounts, current portion			2,927			25
Notes payable, current portion	162	141
Short term loans			3,923			-
Convertible notes payable, current portion	25	647
Warrant derivative liability			-			1,542
Warrant derivative liability	2,699	9,216
Contingent acquisition debt, current portion			1,341			1,263
Contingent acquisition debt, current portion	673	795
Total current liabilities			51,436			33,541
Total current liabilities	58,819	36,796
Operating lease liabilities, net of current portion			5,497			6,646
Operating lease liabilities, net of current portion	5,959	-
Finance lease liabilities, net of current portion			1,081			408
Finance lease liabilities, net of current portion	593	1,107
Notes payable, net of debt discounts, net of current portion (Note 3)			392			-
Notes payable, net of current portion	10,705	7,629
Notes payable, net of debt discounts, net of current portion			4,883			6,790
Convertible notes payable, net of current portion	2,592	-
Convertible notes payable, net of debt discounts, net of current portion			-			2,675
Contingent acquisition debt, net of current portion	~~6,344~~	~~7,466~~	5,455			7,348
Total liabilities	85,012	52,998
Other long-term liabilities			-			2,115
Commitments and contingencies (Note 1)
Total liabilities			68,744			59,523
Stockholders’ Equity
Commitments and contingencies (Note 11)
Preferred Stock, $0.001 par value: 5,000,000 shares authorized
Stockholders’ Equity
Series A – 8% Convertible Preferred Stock, par value $0.001 per share; 161,135 shares issued and outstanding at September 30, 2019 and December 31, 2018	-	-
Preferred stock, $0.001 par value: 5,000,000 shares authorized
Series B – 6% Convertible Preferred Stock, par value $0.001 per shares; 129,332 and 129,437 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively; $1,244 liquidation preference as of September 30, 2019	-	-
Series A – 8% convertible preferred stock; 161,135 shares issued and outstanding at September 30, 2020 and December 31, 2019			–			–
Series D – 9.75% Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per shares; 333,500 shares issued and outstanding at September 30, 2019 and zero at December 31, 2018; $8,405 liquidation preference as of September 30, 2019	-	-
Series B – 5% convertible preferred stock; zero and 129,332 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively			–			–
Common Stock, $0.001 par value: 50,000,000 shares authorized; 30,270,360 and 25,760,708 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	30	26
Series D – 9.75% cumulative redeemable perpetual preferred stock; 590,273 and 578,898 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively; $14,877 liquidation preference at September 30, 2020			–			–
Additional paid-in capital	260,083	206,757
Common stock, $0.001 par value: 50,000,000 shares authorized; 32,236,994 and 30,274,601 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively			32			30
Accumulated deficit	(203,944)	(183,763)
Additional paid-in capital			268,390			265,825
Accumulated other comprehensive loss (income)	4	(45)
Accumulated deficit			(251,154	)		(235,751	)
Total stockholders’ equity	56,173	22,975
Accumulated other comprehensive income (loss)			(454	)		64
Total Liabilities and Stockholders’ Equity	$141,185	$75,973
Total stockholders’ equity			16,814			30,168
Total Liabilities and Stockholders’ Equity		$	85,558		$	89,691

~~‘(1)~~ See ~~Note~~accompanying 1notes –to ~~Accounts~~condensed ~~Receivable~~consolidated ~~and~~financial ~~Other Relationship Transactions~~ statements.

-1- ~~See accompanying notes to condensed consolidated financial statements.~~

~~-1-~~ Table of Contents

~~Table~~Youngevity ofInternational, ~~Contents~~Inc. and Subsidiaries

~~Youngevity~~Unaudited ~~International,~~Condensed ~~Inc.~~Consolidated ~~and Subsidiaries~~Statements of Operations

~~Unaudited~~(In ~~Condensed~~thousands, ~~Consolidated Statements~~except ofshare ~~Operations~~and per share amounts)

(In thousands, except share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenues	$	34,002		$	33,380		$	102,525		$	112,789
Cost of revenues		14,248			13,642			42,938			40,522
Gross profit		19,754			19,738			59,587			72,267
Operating expenses
Distributor compensation		13,262			13,122			40,044			42,509
Sales and marketing		3,053			4,432			9,398			11,237
General and administrative		8,101			10,663			25,336			38,795
Total operating expenses		24,416			28,217			74,778			92,541
Operating loss		(4,662	)		(8,479	)		(15,191	)		(20,274	)
Other income (expenses), net
Interest expense, net		(658	)		(1,109	)		(1,917	)		(3,678	)
Change in fair value of warrant derivative liability		101			2,457			1,542			4,344
Loss on modification of warrants		-			(876	)		-			(876	)
Total other income (expenses), net		(557	)		472			(375	)		(210	)
Loss before income taxes		(5,219	)		(8,007	)		(15,566	)		(20,484	)
Income tax benefit		(147	)		(133	)		(163	)		(61	)
Net loss		(5,072	)		(7,874	)		(15,403	)		(20,423	)
Preferred stock dividends		(362	)		(85	)		(1,104	)		(127	)
Net loss attributable to common stockholders	$	(5,434	)	$	(7,959	)	$	(16,507	)	$	(20,550	)

Net loss per share, basic	$	(0.17	)	$	(0.27	)	$	(0.52	)	$	(0.71	)
Net loss per share, diluted (Note 1)	$	(0.17	)	$	(0.27	)	$	(0.52	)	$	(0.76	)

Weighted average shares outstanding, basic		32,233,622			30,035,182			31,479,884			28,924,305
Weighted average shares outstanding, diluted		32,233,622			30,039,676			31,479,884			29,003,331

	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
Revenues	$34,017	$39,082	$144,004	$126,331
Cost of revenues	14,279	15,370	71,495	52,225
Gross profit	19,738	23,712	72,509	74,106
Operating expenses
Distributor compensation	13,122	15,076	42,509	47,141
Sales and marketing	4,432	3,962	11,237	10,537
General and administrative	10,663	3,880	38,795	14,957
Loss on impairment of intangible assets	-	2,200	-	2,200
Total operating expenses	28,217	25,118	92,541	74,835
Operating loss	(8,479)	(1,406)	(20,032)	(729)
Interest expense, net	(1,109)	(1,407)	(3,678)	(4,668)
Change in fair value of warrant derivative liability	2,457	(5,538)	4,344	(4,634)
Loss on modification of warrants (Note 10)	(876)	-	(876)	-
Extinguishment loss on debt	-	-	-	(1,082)
Total other income (expense)	472	(6,945)	(210)	(10,384)
Loss before income taxes	(8,007)	(8,351)	(20,242)	(11,113)
Income tax (benefit) provision	(133)	59	(61)	219
Net loss	(7,874)	(8,410)	(20,181)	(11,332)
Preferred stock dividends	(85)	(92)	(127)	(137)
Accretion of discount from beneficial conversion feature on preferred stock	-	(1,386)	-	(1,386)
Net loss attributable to common stockholders	$(7,959)	$(9,888)	$(20,308)	$(12,855)
Net loss per share, basic	$(0.27)	$(0.46)	$(0.70)	$(0.61)
Net loss per share, diluted (Note 2)	$(0.27)	$(0.46)	$(0.75)	$(0.61)
Weighted average shares outstanding, basic	30,035,182	21,686,085	28,924,305	20,986,151
Weighted average shares outstanding, diluted	30,039,676	21,686,085	29,003,331	20,986,151

See accompanying notes to condensed consolidated financial statements.

~~See~~ -2- ~~accompanying notes to condensed consolidated financial statements.~~

~~-2-~~ Table of Contents

~~Table~~Youngevity ofInternational, ~~Contents~~Inc. and Subsidiaries

~~Youngevity~~Unaudited ~~International,~~Condensed ~~Inc.~~Consolidated ~~and Subsidiaries~~Statements of Comprehensive Loss

~~Unaudited Condensed Consolidated Statements of Comprehensive Income~~ (~~Loss~~In thousands)

(In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Net loss	$	(5,072	)	$	(7,874	)	$	(15,403	)	$	(20,423	)
Foreign currency translation		(299	)		9			(518	)		49
Total other comprehensive income (loss)		(299	)		9			(518	)		49
Comprehensive loss	$	(5,371	)	$	(7,865	)	$	(15,921	)	$	(20,374	)

	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
Net loss	$(7,874)	$(8,410)	$(20,181)	$(11,332)
Foreign currency translation	9	105	49	334
Total other comprehensive income	9	105	49	334
Comprehensive loss	$(7,865)	$(8,305)	$(20,132)	$(10,998)

See accompanying notes to condensed consolidated financial statements.

-3- ~~See accompanying notes to condensed consolidated financial statements.~~

~~-3-~~ Table of Contents

~~Table~~Youngevity ofInternational, ~~Contents~~Inc. and Subsidiaries

~~Youngevity~~Unaudited ~~International,~~Condensed ~~Inc.~~Consolidated ~~and Subsidiaries~~Statements of Stockholders' Equity

~~Unaudited~~(In ~~Condensed~~thousands, ~~Consolidated Statements~~except ~~of Stockholders' Equity~~shares)

(In thousands, except shares)

	Three Months Ended September 30, 2020
	Preferred Stock
	Series A				Series B				Series D				Common Stock					Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount		Capital			Loss			Deficit			Equity
Balance at June 30, 2020		161,135	$	-		-	$	-		590,273	$	-		32,216,599		$	32	$	268,473		$	(155	)	$	(246,082	)	$	22,268
Net loss		-		-		-		-		-		-		-			-		-			-			(5,072	)		(5,072	)
Foreign currency translation adjustment		-		-		-		-		-		-		-			-		-			(299	)		-			(299	)
Issuance of common stock for vesting of restricted stock units		-		-		-		-		-		-		31,416			-		-			-			-			-
Shares surrendered for tax obligations for employee restricted stock units		-		-		-		-		-		-		(9,632	)		-		-			-			-			-
Shares surrendered for prior year vesting due to forfeitures for non-employee restricted stock units		-		-		-		-		-		-		(1,389	)		-		-			-			-			-
Fair value of common stock issued related to advance for working capital (recorded in prepaid expenses and other current assets)		-		-		-		-		-		-		-			-		(101	)		-			-			(101	)
Dividends on preferred stock		-		-		-		-		-		-		-			-		(362	)		-			-			(362	)
Equity-based compensation for services		-		-		-		-		-		-		-			-		128			-			-			128
Stock based compensation expense		-		-		-		-		-		-		-			-		252			-			-			252
Balance at September 30, 2020		161,135	$	-		-	$	-		590,273	$	-		32,236,994		$	32	$	268,390		$	(454	)	$	(251,154	)	$	16,814

	Preferred Stock
	Series A		Series B		Series D		Common Stock		Additional Paid-in	Accumulated Other Comprehensive Income	Accumulated	Total Stockholders'
	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Capital	(Loss)	Deficit	Equity
Balance at June 30, 2019	161,135	$-	129,437	$-	-	$-	29,316,445	$29	$246,584	$(5)	$(196,070)	$50,538
Net loss	-	-	-	-	-	-	-	-	-	-	(7,874)	(7,874)
Foreign currency translation adjustment	-	-	-	-	-	-	-	-	-	9	-	9
Issuance of common stock from exercise of stock options and warrants	-	-	-	-	-	-	790,942	1	3,630	-	-	3,631
Issuance of common stock, related to ATM Financing	-	-	-	-	-	-	16,524	-	96	-	-	96
Issuance of common stock for services	-	-	-	-	-	-	75,600	-	478	-	-	478
Issuance of warrants for services	-	-	-	-	-	-	-	-	414	-	-	414
Issuance of common stock for inducement shares	-	-	-	-	-	-	64,250	-	478	-	-	478
Preferred stock-Series D issued through Underwritten Registered Public Offering, net	-	-	-	-	333,500	-	-	-	7,323	-	-	7,323
Vesting of Restricted Stock Units	-	-	-	-	-	-	1,389	-	-	-	-	-
Warrant issued upon vesting for services	-	-	-	-	-	-	-	-	270	-	-	270
Issuance of common stock for conversion of Series B preferred stock	-	-	(105)	-	-	-	210	-	-	-	-	-
Issuance of common stock for convertible note financing, net of issuance costs	-	-	-	-	-	-	5,000	-	23	-	-	23
Release of warrant liability upon reclassification of liability to equity	-	-	-	-	-	-	-	-	211	-	-	211
Dividends on preferred stock	-	-	-	-	-	-	-	-	(85)	-	-	(85)
Stock based compensation expense	-	-	-	-	-	-	-	-	661	-	-	661
Balance at September 30, 2019	161,135	$-	129,332	$-	333,500	$-	30,270,360	$30	$260,083	$4	$(203,944)	$56,173

-4-

~~-4-~~ Table of Contents

Table of Contents

	Nine Months Ended September 30, 2020
	Preferred Stock
	Series A				Series B					Series D				Common Stock					Additional Paid-in			Accumulated Other Income			Accumulated			Total Stockholders'
	Shares		Amount		Shares			Amount		Shares		Amount		Shares			Amount		Capital			(Loss)			Deficit			Equity
Balance at December 31, 2019		161,135	$	-		129,332		$	-		578,898	$	-		30,274,601		$	30	$	265,825		$	64		$	(235,751	)	$	30,168
Net loss		-		-		-			-		-		-		-			-		-			-			(15,403	)		(15,403	)
Foreign currency translation adjustment		-		-		-			-		-		-		-			-		-			(518	)		-			(518	)
Issuance of common stock for conversion of Series B preferred stock		-		-		(129,332	)		-		-		-		258,664			1		-			-			-			1
Issuance of common stock for vesting of restricted stock units		-		-		-			-		-		-		39,750			-		-			-			-			-
Shares surrendered for tax obligations for employee restricted stock units		-		-		-			-		-		-		(9,632	)		-		-			-			-			-
Shares surrendered for prior year vesting due to forfeitures for non-employee restricted stock units		-		-		-			-		-		-		(1,389	)		-		-			-			-			-
Issuance of common stock for debt financing, net of issuance costs		-		-		-			-		-		-		50,000			-		65			-			-			65
Preferred stock-Series D issued through Underwritten Registered Public Offering, net		-		-		-			-		11,375		-		-			-		233			-			-			233
Fair value of common stock issued related to Nica Hemp Project		-		-		-			-		-		-		1,500,000			1		2,489			-			-			2,490
Fair value of common stock issued related to advance for working capital (recorded in prepaid expenses and other current assets)		-		-		-			-		-		-		-			-		(324	)		-			-			(324	)
Dividends on preferred stock		-		-		-			-		-		-		-			-		(1,104	)		-			-			(1,104	)
Equity-based compensation for services		-		-		-			-		-		-		125,000			-		429			-			-			429
Stock based compensation expense		-		-		-			-		-		-		-			-		777			-			-			777
Balance at September 30, 2020		161,135	$	-		-		$	-		590,273	$	-		32,236,994		$	32	$	268,390		$	(454	)	$	(251,154	)	$	16,814

	Preferred Stock
	Series A		Series B		Series D		Common Stock		Additional Paid-in	Accumulated Other Comprehensive Income	Accumulated	Total Stockholders'
	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Capital	(Loss)	Deficit	Equity
Balance at December 31, 2018	161,135	$-	129,437	$-	-	$-	25,760,708	$26	$206,757	$(45)	$(183,763)	$22,975
Net loss	-	-	-	-	-	-	-	-	-	-	(20,181)	(20,181)
Foreign currency translation adjustment	-	-	-	-	-	-	-	-	-	49	-	49
Issuance of common stock from exercise of stock options and warrants	-	-	-	-	-	-	1,164,102	2	5,371	-	-	5,373
Issuance of common stock, related to ATM Financing	-	-	-	-	-	-	17,524	-	102	-	-	102
Issuance of common stock for services	-	-	-	-	-	-	250,600	-	1,466	-	-	1,466
Issuance of warrants for services	-	-	-	-	-	-	-	-	414	-	-	414
Issuance of common stock for inducement shares	-	-	-	-	-	-	64,250	-	478	-	-	478
Preferred stock-Series D issued through Underwritten Registered Public Offering, net	-	-	-	-	333,500	-	-	-	7,323	-	-	7,323
Vesting of Restricted Stock Units	-	-	-	-	-	-	1,389	-	-	-	-	-
Warrant issued upon vesting for services	-	-	-	-	-	-	-	-	2,196	-	-	2,196
Issuance of common stock for conversion of Series B preferred stock	-	-	(105)	-	-	-	210	-	-	-	-	-
Issuance of common stock for true-up shares	-	-	-	-	-	-	44,599	-	281	-	-	281
Issuance of common stock for debt financing, net of issuance costs	-	-	-	-	-	-	40,000	-	350	-	-	350
Issuance of common stock, Private Placement, net of issuance costs	-	-	-	-	-	-	505,000	-	3,125	-	-	3,125
Issuance of common stock for convertible note financing, net of issuance costs	-	-	-	-	-	-	77,250	-	451	-	-	451
Issuance of common stock related to advance for working capital (note receivable) net of settlement of debt	-	-	-	-	-	-	295,910	1	2,308	-	-	2,309
Issuance of common stock for related to purchase of land - H&H	-	-	-	-	-	-	153,846	-	1,200	-	-	1,200
Issuance of common stock for related to purchase of trademark - H&H	-	-	-	-	-	-	100,000	-	750	-	-	750
Issuance of common stock for acquisition of Khrysos	-	-	-	-	-	-	1,794,972	1	12,649	-	-	12,650
Release of warrant liability upon warrant exercises	-	-	-	-	-	-	-	-	1,077	-	-	1,077
Release of warrant liability upon reclassification of liability to equity	-	-	-	-	-	-	-	-	1,494	-	-	1,494
Dividends on preferred stock	-	-	-	-	-	-	-	-	(127)	-	-	(127)
Stock based compensation expense	-	-	-	-	-	-	-	-	12,418	-	-	12,418
Balance at September 30, 2019	161,135	$-	129,332	$-	333,500	$-	30,270,360	$30	$260,083	$4	$(203,944)	$56,173

-5-

~~-5-~~ Table of Contents

~~Table~~Youngevity ofInternational, ~~Contents~~Inc. and Subsidiaries

~~Youngevity International,~~Unaudited ~~Inc.~~Condensed ~~and~~Consolidated ~~Subsidiaries~~Statements of Stockholders' Equity

~~Unaudited~~(In ~~Condensed~~thousands, ~~Consolidated~~except ~~Statements of Stockholders' Equity and Mezzanine Equity~~shares)

(In thousands, except shares)

	Three Months Ended September 30, 2019
	Preferred Stock
	Series A				Series B					Series D				Common Stock				Additional Paid-in			Accumulated Other Comprehensive Income			Accumulated			Total Stockholders'
	Shares		Amount		Shares			Amount		Shares		Amount		Shares		Amount		Capital			(Loss)			Deficit			Equity
Balance at June 30, 2019		161,135	$	-		129,437		$	-		-	$	-		29,316,445	$	29	$	247,935		$	(5	)	$	(196,312	)	$	51,647
Net loss		-		-		-			-		-		-		-		-		-			-			(7,874	)		(7,874	)
Foreign currency translation adjustment		-		-		-			-		-		-		-		-		-			9			-			9
Issuance of common stock from exercise of stock options and warrants		-		-		-			-		-		-		790,942		1		3,630			-			-			3,631
Issuance of common stock, related to ATM Financing		-		-		-			-		-		-		16,524		-		96			-			-			96
Issuance of common stock for services		-		-		-			-		-		-		75,600		-		478			-			-			478
Issuance of warrants for services		-		-		-			-		-		-		-		-		414			-			-			414
Issuance of common stock for inducement shares		-		-		-			-		-		-		64,250		-		478			-			-			478
Preferred stock-Series D issued through Underwritten Registered Public Offering, net		-		-		-			-		333,500		-		-		-		7,323			-			-			7,323
Vesting of Restricted Stock Units		-		-		-			-		-		-		1,389		-		-			-			-			-
Warrant issued upon vesting for services		-		-		-			-		-		-		-		-		270			-			-			270
Issuance of common stock for conversion of Series B preferred stock		-		-		(105	)		-		-		-		210		-		-			-			-			-
Issuance of common stock for convertible note financing, net of issuance costs		-		-		-			-		-		-		5,000		-		23			-			-			23
Release of warrant liability upon reclassification of liability to equity		-		-		-			-		-		-		-		-		211			-			-			211
Dividends on preferred stock		-		-		-			-		-		-		-		-		(85	)		-			-			(85	)
Stock based compensation expense		-		-		-			-		-		-		-		-		661			-			-			661
Balance at September 30, 2019		161,135	$	-		129,332		$	-		333,500	$	-		30,270,360	$	30	$	261,434		$	4		$	(204,186	)	$	57,282

	Preferred Stock										Preferred Stock
	Series A		Series B		Common Stock		Additional Paid-in	Accumulated Other Comprehensive Income	Accumulated	Total Stockholders'	Series C		Total Mezzanine
	Shares	Amount	Shares	Amount	Shares	Amount	Capital	(Loss)	Deficit	Equity	Shares	Amount	Equity
Balance at June 30, 2018	161,135	$-	328,541	$-	21,536,019	$22	$182,475	$(52)	$(166,615)	$15,830	-	$-
Net loss	-	-	-	-	-	-	-	-	(8,410)	(8,410)	-	-	-
Foreign currency translation adjustment	-	-	-	-	-	-	-	105	-	105	-	-	-
Issuance of Series C preferred stock, net of issuance cost	-	-	-	-	-	-	67	-	-	67	354,704	-	2,309
Issuance of common stock, Private Placement, net of issuance costs	-	-	-	-	285,527	-	985	-	-	985	-	-	-
Issuance of common stock pursuant to the exercise of stock options	-	-	-	-	175	-	(1)	-	-	(1)	-	-	-
Issuance of common stock for services	-	-	-	-	110,000	-	465	-	-	465	-	-	-
Issuance of common stock for conversion of Series B preferred stock	-	-	(12,574)	-	25,148	-	-	-	-	-	-	-	-
Dividends on preferred stock	-	-	-	-	-	-	(3)	-	-	(3)	-	-	-
Dividends declared	-	-	-	-	-	-	(89)	-	-	(89)
Stock based compensation expense	-	-	-	-	-	-	470	-	-	470	-	-	-
Balance at September 30, 2018	161,135	$-	315,967	$-	21,956,869	$22	$184,369	$53	$(175,025)	$9,419	354,704	$-	$2,309

-6-

	Preferred Stock										Preferred Stock
	Series A		Series B		Common Stock		Additional Paid-in	Accumulated Other Comprehensive Income	Accumulated	Total Stockholders'	Series C		Total Mezzanine
	Shares	Amount	Shares	Amount	Shares	Amount	Capital	(Loss)	Deficit	Equity	Shares	Amount	Equity
Balance at December 31, 2017	161,135	$-	-	$-	19,723,285	$20	$171,405	$(281)	$(163,693)	$7,451	-	$-	$-
Net loss	-	-	-	-	-	-	-	-	(11,332)	(11,332)	-	-	-
Foreign currency translation adjustment	-	-	-	-	-	-	-	334	-	334	-	-	-
Issuance of Series B preferred stock, net of issuance cost	-	-	381,173	-	-	-	3,289	-	-	3,289	-	-	-
Issuance of Series C preferred stock, net of issuance cost	-	-	-	-	-	-	67	-	-	67	354,704	-	2,309
Issuance of common stock, Private Placement, net of issuance costs	-	-	-	-	285,527	-	985	-	-	985	-	-	-
Issuance of common stock pursuant to the exercise of stock options	-	-	-	-	612	-	-	-	-	-	-	-	-
Issuance of common stock for services	-	-	-	-	240,000	-	1,010	-	-	1,010	-	-	-
Issuance of common stock for conversion of Series B preferred stock	-	-	(65,206)	-	130,412	1	-	-	-	1	-	-	-
Issuance of common stock for conversion of Notes - 2017 Notes	-	-	-	-	1,577,033	1	6,544	-	-	6,545	-	-	-
Dividends on preferred stock	-	-	-	-	-	-	(137)	-	-	(137)	-	-	-
Warrant modification	-	-	-	-	-	-	284	-	-	284	-	-	-
Stock based compensation expense	-	-	-	-	-	-	922	-	-	922	-	-	-
Balance at September 30, 2018	161,135	$-	315,967	$-	21,956,869	$22	$184,369	$53	$(175,025)	$9,419	354,704	$-	$2,309

Table of Contents

-6-

	Nine Months Ended September 30, 2019
	Preferred Stock
	Series A				Series B					Series D				Common Stock				Additional Paid-in			Accumulated Other Comprehensive Income			Accumulated			Total Stockholders'
	Shares		Amount		Shares			Amount		Shares		Amount		Shares		Amount		Capital			(Loss)			Deficit			Equity
Balance at December 31, 2018		161,135	$	-		129,437		$	-		-	$	-		25,760,708	$	26	$	206,757		$	(45	)	$	(183,763	)	$	22,975
Net loss		-		-		-			-		-		-		-		-		-			-			(20,423	)		(20,423	)
Foreign currency translation adjustment		-		-		-			-		-		-		-		-		-			49			-			49
Issuance of common stock from exercise of stock options and warrants		-		-		-			-		-		-		1,164,102		2		5,371			-			-			5,373
Issuance of common stock, related to ATM Financing		-		-		-			-		-		-		17,524		-		102			-			-			102
Issuance of common stock for services		-		-		-			-		-		-		250,600		-		1,466			-			-			1,466
Issuance of warrants for services		-		-		-			-		-		-		-		-		414			-			-			414
Issuance of common stock for inducement shares		-		-		-			-		-		-		64,250		-		478			-			-			478
Preferred stock-Series D issued through Underwritten Registered Public Offering, net		-		-		-			-		333,500		-		-		-		7,323			-			-			7,323
Vesting of Restricted Stock Units		-		-		-			-		-		-		1,389		-		-			-			-			-
Warrant issued upon vesting for services		-		-		-			-		-		-		-		-		2,196			-			-			2,196
Issuance of common stock for conversion of Series B preferred stock		-		-		(105	)		-		-		-		210		-		-			-			-			-
Issuance of common stock for true-up shares		-		-		-			-		-		-		44,599		-		281			-			-			281
Issuance of common stock for debt financing, net of issuance costs		-		-		-			-		-		-		40,000		-		350			-			-			350
Issuance of common stock, Private Placement, net of issuance costs		-		-		-			-		-		-		505,000		-		3,125			-			-			3,125
Issuance of common stock for convertible note financing, net of issuance costs		-		-		-			-		-		-		77,250		-		451			-			-			451
Issuance of common stock related to advance for working capital (note receivable) net of settlement of debt		-		-		-			-		-		-		295,910		1		2,308			-			-			2,309
Issuance of common stock for related to purchase of land - H&H		-		-		-			-		-		-		153,846		-		1,200			-			-			1,200
Issuance of common stock for related to purchase of trademark - H&H		-		-		-			-		-		-		100,000		-		750			-			-			750
Issuance of common stock for acquisition of Khrysos		-		-		-			-		-		-		1,794,972		1		13,999			-			-			14,000
Release of warrant liability upon warrant exercises		-		-		-			-		-		-		-		-		1,077			-			-			1,077
Release of warrant liability upon reclassification of liability to equity		-		-		-			-		-		-		-		-		1,494			-			-			1,494
Dividends on preferred stock		-		-		-			-		-		-		-		-		(127	)		-			-			(127	)
Stock based compensation expense		-		-		-			-		-		-		-		-		12,418			-			-			12,418
Balance at September 30, 2019		161,135	$	-		129,332		$	-		333,500	$	-		30,270,360	$	30	$	261,434		$	4		$	(204,186	)	$	57,282

~~Table of Contents~~ -7-

~~Youngevity~~ Table ~~International,~~of ~~Inc. and~~Contents ~~Subsidiaries~~

~~Unaudited~~Youngevity ~~Condensed~~International, ~~Consolidated Statements~~Inc. ofand ~~Cash Flows~~Subsidiaries

~~(In~~Unaudited ~~thousands)~~Condensed Consolidated Statements of Cash Flows

	Nine Months Ended September 30,
	2019	2018
Cash Flows from Operating Activities:
Net loss	$(20,181)	$(11,332)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	4,199	3,781
Stock-based compensation expense	12,418	922
Amortization of debt discounts and issuance costs	924	1,158
Equity issuance costs for services	3,982	249
Change in fair value of warrant derivative liability	(4,344)	4,634
Change in fair value of contingent acquisition debt	(911)	(4,076)
Change in inventory reserve	889	765
Stock issuance for true-up shares	281	-
Loss on modification of warrants (Note 10)	876	-
Loss on impairment of intangible assets	-	2,200
Extinguishment loss on debt	-	1,082
Deferred taxes	73	137
Changes in operating assets and liabilities, net of effect from business combinations:
Accounts receivable	(31,325)	(1,823)
Inventory	(958)	(2,470)
Prepaid expenses and other current assets	(1,411)	(263)
Accounts payable	26,148	(1,642)
Accrued distributor compensation	(37)	(221)
Deferred revenues	(307)	1,130
Accrued expenses and other liabilities	2,155	1,071
Income taxes receivable	(233)	(34)
Net Cash Used in Operating Activities	(7,762)	(4,732)
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired	(925)	(50)
Purchases of property and equipment	(5,177)	(252)
Net Cash Used in Investing Activities	(6,102)	(302)
Cash Flows from Financing Activities:
Proceeds from issuance of promissory notes, net of offering costs	5,125	-
Proceeds from issuance of preferred stock - series B, net of offering costs	-	3,289
Proceeds from issuance of preferred stock - series C, net of offering costs	-	3,197
Proceeds from issuance of preferred stock - series D, net of offering costs	7,323	-
Proceeds from private placement of common stock, net of offering costs	2,871	985
Proceeds from exercise of stock options and warrants, net	5,214	3
Proceeds from short-term notes payable	-	1,907
Proceeds from at-the-market offering transactions	102	-
Payments net of repayment on line of credit	(275)	(1,308)
Payments of notes payable	(108)	(732)
Payments of convertible notes payable	(568)	-
Payments of contingent acquisition debt	(333)	(137)
Payments of finance leases	(1,099)	(840)
Payments of dividends	(46)	(39)
Net Cash Provided by Financing Activities	18,206	6,325
Foreign Currency Effect on Cash	49	334
Net increase in cash and cash equivalents	4,391	1,625
Cash and Cash Equivalents, Beginning of Period	2,879	673
Cash and Cash Equivalents, End of Period	$7,270	$2,298
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$2,641	$3,517
Income taxes	$164	$33
Supplemental Disclosures of Noncash Investing and Financing Activities
Purchases of property and equipment funded by finance leases	$42	$1,113
Purchases of property and equipment funded by mortgage agreements	$977	$-
Fair value of stock issued for services (Note 10)	$1,880	$1,010
Fair value of stock issued for property and equipment (land)	$1,200	$-
Fair value of stock issued for purchase of intangibles (tradename)	$750	$-
Fair value of stock issued for note receivable, net of debt settlement	$2,309	$-
Fair value of warrant issued for services, vested portion	$2,196	$-
Issuance of common stock for the noncash exercise of warrants	$157	$-
Change in warrant derivative liability to equity classification, warrant modification	$-	$284
Dividends declared but not paid at the end of period (Note 10)	$83	$89
Acquisitions of net assets in exchange for contingent debt, net of purchase price adjustments	$-	$527
Acquisition of net assets acquired, net of purchase price adjustments (Note 4)	$2,260	$-
Conversion of 2017 Notes to Common Stock	$-	$7,254

(In thousands)

-7-

	Nine Months Ended September 30,
	2020			2019
Cash Flows from Operating Activities:
Net loss	$	(15,403	)	$	(20,423	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,808			4,199
Stock-based compensation expense		777			12,418
Equity-based compensation for services		1,132			3,982
Amortization of debt discounts and issuance costs		1,099			924
Change in fair value of warrant derivative liability		(1,542	)		(4,344	)
Change in fair value of contingent acquisition debt		(1,640	)		(911	)
Change in allowance for other receivable (Note 3)		(324	)		-
Change in allowance for notes receivable (Note 3)		337			-
Change in inventory reserve		(84	)		889
Changes in allowance for accounts receivable		(30	)		-
Gain on debt extinguishment		(48	)		-
Loss on disposal of property and equipment		101			-
Loss on impairment of inventory		200			-
Non-cash operating lease expense		1,919			-
Stock issuance for true-up shares		-			281
Loss on modification of warrants		-			876
Deferred taxes		-			73
Changes in operating assets and liabilities, net of effect from business combinations:
Accounts receivable		(111	)		(5,389	)
Inventory		554			(958	)
Prepaid expenses and other current assets		337			(1,411	)
Income taxes receivable		-			(233	)
Other assets		(395	)		-
Accounts payable		336			454
Accrued distributor compensation		1,003			(37	)
Deferred revenues		6,584			(307	)
Accrued expenses and other liabilities		982			2,155
Operating lease liabilities		(1,599	)		-
Other long-term liabilities		(68	)		-
Net Cash Used in Operating Activities		(2,075	)		(7,762	)

Cash Flows from Investing Activities:
Acquisitions, net of cash acquired		-			(925	)
Purchases of property and equipment		(3,515	)		(5,177	)
Net Cash Used in Investing Activities		(3,515	)		(6,102	)

Cash Flows from Financing Activities:
Proceeds from issuance of promissory notes, net of offering costs		1,000			5,125
Proceeds from private placement of common stock, net of offering costs		-			2,871
Proceeds from the exercise of stock options and warrants, net		-			5,214
Proceeds from at-the-market-offering transaction		-			102
Proceeds from the issuance of preferred stock – series D, net of offering costs		233			7,323
Proceeds from short-term debt		3,923			-
Payments from line of credit, net		(56	)		(275	)
Payments of notes payable		(77	)		(108	)
Payments of convertible notes payable		(25	)		(568	)
Payments of contingent acquisition debt		(175	)		(333	)
Payments of finance leases		(832	)		(1,099	)
Payments of dividends		(1,108	)		(46	)
Net Cash Provided by Financing Activities		2,883			18,206
Foreign Currency Effect on Cash		(518	)		49
Net decrease in cash and cash equivalents		(3,225	)		4,391
Cash and Cash Equivalents, Beginning of Period		4,463			2,879
Cash and Cash Equivalents, End of Period	$	1,238		$	7,270

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	883		$	2,641
Income taxes	$	30		$	164

Supplemental Disclosures of Noncash Investing and Financing Activities
Purchases of property and equipment funded by finance leases	$	427		$	42
Purchases of property and equipment funded by mortgage agreements	$	-		$	977
Fair value of stock issued for Nica Hemp Project (Note 3)	$	2,490		$	-
Issuance of common stock for promissory note financing (Note 10)	$	65		$	-
Change in fair value of common stock issued for in relation to advance for working capital (Note 3)	$	324		$	-
Fair value of stock issued in connection with the acquisition of Khrysos Global, Inc. (Note 2)	$	-		$	14,000
Fair value of stock issued for services (Note 10)	$	-		$	1,880
Fair value of warrant issued for services, vested portion (Note 10)	$	-		$	2,196
Fair value of stock issued for property and equipment (land)	$	-		$	1,200
Fair value of stock issued for purchase of intangibles (tradename)	$	-		$	750
Fair value of stock issued for note receivable, net of debt settlement	$	-		$	2,309
Issuance of common stock for the noncash exercise of warrants	$	-		$	157
Dividends declared but not paid at the end of period (Note 10)	$	120		$	83

~~Table~~See ofaccompanying ~~Contents~~notes to condensed consolidated financial statements.

-8- ~~Youngevity International, Inc. and Subsidiaries~~

~~Notes~~ Table toof ~~Unaudited Condensed Consolidated Financial~~Contents ~~Statements~~

~~Note 1.~~Youngevity ~~Basis~~International, ofInc. ~~Presentation~~ and ~~Description of Business~~Subsidiaries

~~Basis~~Notes ofto ~~Presentation~~Unaudited Condensed Consolidated Financial Statements

~~The~~Note 1. ~~accompanying~~Description ~~unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations~~ of ~~the~~Business ~~Securities~~ and ~~Exchange~~Basis ~~Commission~~of (the “SEC”) for interim financial information. Accordingly, certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations.Presentation

~~Youngevity~~Description ~~International,~~of ~~Inc. consolidates all wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.~~Business

~~The~~Youngevity ~~statements~~International, ~~presented~~Inc. as(the of“Company”) ~~September~~operates ~~30,~~in ~~2019~~three ~~and~~segments: ~~for~~(i) the ~~three and~~direct ~~nine~~selling ~~months~~segment ~~ended~~where ~~September~~products ~~30,~~are ~~2019~~offered ~~and~~through ~~2018~~a ~~are~~global ~~unaudited.~~distribution ~~In the~~network ~~opinion~~ of ~~management,~~preferred ~~these~~customers ~~financial statements reflect all normal recurring~~ and ~~other adjustments necessary for a fair presentation~~distributors, ~~and~~(ii) ~~to make~~ the ~~financial~~commercial ~~statements~~coffee ~~not~~segment ~~misleading. These~~where ~~condensed~~products ~~consolidated~~are ~~financial~~sold ~~statements~~directly ~~should~~to bebusinesses ~~read~~and ~~in conjunction~~(iii) ~~with~~ the ~~audited~~commercial ~~consolidated~~hemp ~~financial~~segment ~~statements included~~where in the Company’s ~~Form~~manufactures ~~10-K~~proprietary ~~for~~systems ~~the~~to ~~year~~provide ~~ended December~~end-to-end ~~31,~~extraction ~~2018,~~and ~~filed~~processing ~~with~~of ~~the~~hemp ~~SEC~~feed onstock ~~April~~into ~~15,~~hemp ~~2019.~~oil ~~The results~~and ~~for~~hemp ~~interim~~extracts, ~~periods~~oil ~~are~~extraction ~~not~~services, ~~necessarily~~and ~~indicative~~contract ofmanufacturing ~~the results for the entire year~~services.

~~Nature~~Information on the operations of ~~Business~~the Company’s three segments is as follows:

~~Youngevity~~● ~~International,~~The ~~Inc. (the “Company”), founded in 1996, develops and distributes health and nutrition related products through its global independent~~ direct selling ~~network, also~~segment ~~known~~is asoperated ~~multi-level~~through ~~marketing,~~the ~~sells~~Company’s ~~coffee~~three ~~products~~domestic ~~to commercial customers~~subsidiaries, ~~and~~AL ~~provides~~Global ~~end to end extraction and processing for the conversion of hemp feedstock into hemp oil. During the year ended December 31~~Corporation, ~~2018,~~2400 ~~the~~Boswell ~~Company operated in two business segments~~LLC, ~~its direct selling segment where products are offered through a global distribution network of preferred customers~~ and ~~distributors~~Youngevity ~~and its commercial coffee segment where products are sold directly to businesses. During the first quarter of 2019, the Company through the acquisition of the assets of Khrysos~~ Global, ~~Inc. added a third business segment to its operations~~LLC, ~~the~~and ~~commercial~~twelve ~~hemp~~foreign ~~segment. The Company's three segments are listed below~~subsidiaries:

● ~~Direct selling network is operated through the following (i) domestic subsidiaries: AL Global Corporation, 2400 Boswell LLC, MK Collaborative LLC, and~~ Youngevity ~~Global LLC and (ii) foreign subsidiaries: Youngevity~~ Australia Pty. Ltd., Youngevity NZ, Ltd., Youngevity Mexico S.A. de CV, Youngevity Russia, LLC, Youngevity Colombia S.A.S, Youngevity International Singapore Pte. Ltd., Mialisia Canada, Inc. and Legacy for Life Limited (Hong Kong). The Company also operates through the BellaVita Group LLC, with operations in Taiwan, Hong Kong, Singapore, Indonesia, Malaysia and Japan. The Company also operates subsidiary branches of Youngevity Global LLC in the Philippines and Taiwan.

● ~~Commercial~~Youngevity ~~coffee business is operated through CLR Roasters LLC (“CLR”) and its wholly-owned subsidiary~~NZ, ~~Siles Plantation Family Group S~~Ltd.~~A. (“Siles”).~~,

● ~~Commercial~~Youngevity ~~hemp~~Mexico ~~business is operated through our domestic operations Khrysos Industries, Inc~~S.~~, a Delaware corporation~~A. ~~Khrysos~~de ~~Industries~~CV, Inc. acquired the assets of Khrysos Global Inc. a Florida corporation in February 2019 and the wholly-owned subsidiaries of Khrysos Global Inc., INXL Laboratories, Inc., a Florida corporation and INX Holdings, Inc., a Florida corporation.

~~Segment~~● ~~Information~~Youngevity Russia, LLC,

~~The~~● ~~Company~~Youngevity ~~has three reportable segments: direct selling~~Israel, ~~commercial~~ ~~coffee, and commercial hemp~~Ltd. The direct selling segment develops and distributes health and wellness products through its global independent direct selling network also known as multi-level marketing. The commercial coffee segment is a coffee roasting and distribution company specializing in gourmet coffee. The determination that the Company has three reportable segments is based upon the guidance set forth in Accounting Standards Codification (“ASC”) Topic 280, ~~“Segment Reporting.”~~

~~During~~● ~~the~~Youngevity ~~three~~Europe ~~months~~SIA ~~ended September 30~~(Latvia), 2019, the Company derived approximately 89.0% of its revenue from its direct selling segment and approximately 10.5% of its revenue from its commercial coffee segment and approximately 0.5% from the commercial hemp segment. During the three months ended September 30, 2018, the Company had two reportable segments and derived approximately 88% of its revenue from its direct selling segment and approximately 12% of its revenue from its commercial coffee segment.

~~During~~● ~~the~~Youngevity ~~nine~~Colombia ~~months ended September 30, 2019, the Company derived approximately 66~~S.~~5% of its revenue from its direct selling segment and approximately 33~~A.~~1% of its revenue from its commercial coffee segment and approximately 0.4% from the commercial hemp segment. During the nine months ended September 30~~S, ~~2018, the Company had two reportable segments and derived approximately 84% of its revenue from its direct selling segment and approximately 16% of its revenue from its commercial coffee segment.~~

~~-8-~~● Youngevity International Singapore Pte. Ltd.,

~~Table~~● ofMialisia ~~Contents~~Canada, Inc.,

~~Liquidity~~● ~~and~~Youngevity ~~Going~~Global ~~Concern~~LLC, Taiwan Branch,

~~The~~● ~~accompanying~~Youngevity ~~condensed~~Global consolidated financial statements have been prepared and presented on a basis assuming the Company will continue as a going concern. The Company has sustained significant net losses during the nine months ended September 30LLC, ~~2019~~Philippine ~~and 2018 of approximately $20~~Branch,~~181,000~~ and $11,332,000, respectively. Net cash used in operating activities was approximately $7,762,000 and $4,732,000 for the nine months ended September 30, 2019 and 2018, respectively. The Company does not currently believe that its existing cash resources are sufficient to meet the Company’s anticipated needs over the next twelve months from the date hereof. Based on its current cash levels and its current rate of cash requirements, the Company will need to raise additional capital and/or will need to further reduce its expenses from current levels. As discussed in Accounts Receivable and Other Relationship Transactions below, the Company could experience further restraint on liquidity if the Company does not collect the accounts receivable balance with H&H Coffee Group Export Corp., in full, which the Company believes is not likely based on current negotiations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

~~The Company~~● ~~anticipates~~Youngevity ~~that~~International ~~revenues~~(Hong ~~will grow, and it intends to make necessary cost reductions related to international operations that are not performing well and reduce non-essential expenses~~Kong).

The Company is also ~~considering~~operate ~~multiple~~in ~~other~~Indonesia, ~~fund-raising alternatives~~Malaysia, and Japan through its sales force of independent distributors.

~~On September~~● ~~24,~~The ~~2019,~~commercial ~~the~~coffee ~~Company~~business ~~closed~~is aoperated ~~firm~~through ~~commitment public offering in which~~ the Company’s ~~issued~~wholly-owned ~~and~~subsidiary, ~~sold~~CLR aRoasters ~~total~~LLC of(“CLR”) ~~333,500 shares~~and of its ~~9.75%~~wholly-owned ~~Series D Cumulative Preferred Stock~~subsidiary, ~~$0.001~~Siles ~~par value~~Plantation ~~per~~Family ~~share,~~Group ~~at a price to the public of $25~~S.~~00 per share, which included 43,500 shares issued upon the underwriters’ full exercise of their option to purchase additional shares~~A. ~~Net proceeds from the offering, after deducting commissions, closing and issuance costs, were approximately $7,323,000~~(“Siles”). ~~The Company will use the net proceeds for working capital and other general corporate purposes.~~

~~Between February~~● ~~2019~~The ~~and~~commercial ~~July~~hemp ~~2019,~~business ~~the~~is ~~Company~~operated ~~closed~~through ~~five tranches related to~~ the ~~2019~~Company’s ~~January~~wholly-owned ~~Private~~subsidiary, ~~Placement~~Khrysos ~~debt~~Industries, ~~offering~~Inc., ~~pursuant~~ toa ~~which~~Delaware ~~the~~corporation ~~Company~~(“KII”). ~~offered~~KII ~~for~~acquired ~~sale~~the upassets toof ~~$10,000,000~~Khrysos ~~in principal~~Global ~~amount~~Inc., ofa ~~notes~~Florida ~~(the~~corporation (“~~2019~~Khrysos ~~PIPE Notes~~Global”), ~~with each~~in ~~investor~~February ~~receiving~~2019 ~~2,000~~and ~~shares~~the wholly-owned subsidiaries of ~~common~~Khrysos ~~stock~~Global, ~~for~~INXL ~~each $100~~Laboratories,~~000~~ ~~invested~~Inc., ~~The~~a ~~Company~~Florida ~~received~~corporation ~~aggregate~~(“INXL”) ~~gross~~and ~~proceeds~~INX ~~of $3~~Holdings,~~090~~ Inc.,~~000~~ ~~and~~a ~~issued~~Florida ~~the~~corporation ~~2019 PIPE Notes in the aggregate principal amount of $3,090,000.~~ (~~See Note 7~~“INXH”).

~~On March~~In ~~18, 2019,~~ the ~~Company~~following ~~entered~~text, ~~into a two-year Secured Promissory Note (~~the ~~“Note”~~term or “~~Notes”) with two (2) accredited investors that had a substantial pre-existing relationship with~~ the Company” ~~pursuant~~refers collectively to ~~which~~ the Company ~~raised~~and ~~cash~~its ~~proceeds of $2,000,000~~subsidiaries. ~~(See Note 6)~~

~~On February~~Basis 6, 2019, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with one accredited investor that had a substantial pre-existing relationship with the Company pursuant to which the Company sold 250,000 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $7.00 per share. Pursuant to the Purchase Agreement, the Company also issued to the investor a three-year warrant to purchase 250,000 shares of common stock at an exercise price of $7.00. The proceeds to the Company were $1,750,000. Consulting fees for arranging the Purchase Agreement include the issuance of 5,000 shares of restricted shares of the Company’s common stock, par value $0.001 per share, and a 3-year warrant priced at $10.00 per share convertible into 100,000 shares of the Company’s common stock upon exercise. No cash commissions were paid.Presentation

~~On January~~The 7,accompanying ~~2019,~~unaudited ~~the~~condensed ~~Company entered~~consolidated ~~into~~financial ~~an at-the-market~~statements ~~offering~~have ~~agreement~~been ~~(the~~prepared ~~“ATM~~in ~~Agreement”)~~ accordance with ~~The Benchmark Company, LLC (“Benchmark”), pursuant to which~~ the ~~Company~~rules ~~may~~and ~~sell~~regulations ~~from~~of ~~time to time, at~~ the ~~Company’s~~ ~~option,~~Securities ~~shares~~and ofExchange ~~its~~Commission ~~common stock, par value $0.001 per share, through Benchmark~~ (the “~~Sales Agent~~SEC”), for ~~the~~interim ~~sale~~financial ofinformation. ~~up to $60~~Accordingly,~~000,000~~ ofcertain ~~shares~~information ofand ~~the Company’s~~footnote ~~common~~disclosures, ~~stock.~~normally ~~The~~included ~~Company~~in isfinancial ~~not~~statements ~~obligated~~prepared toin ~~make any~~accordance ~~sales~~with ofgenerally ~~common~~accepted ~~stock~~accounting ~~under~~principles, ~~the~~have ~~ATM~~been ~~Agreement~~condensed ~~and~~or ~~the~~omitted ~~Company cannot provide any assurances that it will continue to issue any shares~~ pursuant to ~~the~~such ~~ATM~~rules ~~Agreement. During the three~~ and nine months ended September 30, 2019, the Company sold 16,524 and 17,524, shares of common stock under the ATM Agreement respectively, and received net proceeds of approximately $96,000 and $102,000, respectivelyregulations. ~~The Company paid the Sales Agent 3.0% commission of the gross sales proceeds.~~

~~Depending on~~Youngevity ~~market conditions~~International, ~~there~~Inc. ~~can~~(the be“Company”) noconsolidates ~~assurance~~all ~~that~~wholly-owned ~~additional capital~~subsidiaries. ~~will~~All besignificant ~~available~~intercompany ~~when~~accounts ~~needed~~and ortransactions ~~that,~~have ifbeen ~~available,~~eliminated ~~it will~~in ~~be obtained on terms favorable to the Company or to its stockholders~~consolidation.

~~Failure to~~The ~~raise~~condensed ~~additional~~consolidated ~~funds~~financial ~~from~~statements presented as of September 30, 2020 and for the ~~issuance~~three and nine months ended September 30, 2020 and 2019 are unaudited. In the opinion of ~~equity~~management, ~~securities~~ these unaudited condensed consolidated financial statements reflect all normal recurring and ~~failure~~other adjustments necessary for a fair presentation, and to ~~implement~~make ~~cost~~the ~~reductions~~financial ~~could~~statements ~~adversely~~not ~~affect~~misleading. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s ~~ability~~Annual toReport ~~operate~~on asForm a10-K ~~going~~for ~~concern~~the year ended December 31, 2019, filed with the SEC on June 25, 2021. The ~~financial~~ ~~statements~~results dofor ~~not~~interim ~~include~~periods ~~any~~are ~~adjustments~~not ~~that~~necessarily ~~might~~indicative ~~be necessary~~of ~~from~~ the ~~outcome~~results offor ~~this~~the ~~uncertainty~~entire year.

- 9-

Table of Contents

~~Use~~Segment ~~of Estimates~~Information

The ~~preparation~~Company ofhas ~~financial~~three ~~statements~~reportable insegments: ~~conformity~~direct ~~with accounting~~selling, ~~principles~~commercial ~~generally~~coffee, ~~accepted~~and incommercial ~~the~~hemp. ~~United~~The ~~States (“GAAP”)~~direct ~~requires~~selling ~~the~~segment ~~Company~~develops toand ~~make~~distributes ~~estimates~~health and ~~assumptions~~ ~~that~~wellness ~~affect~~products ~~the~~through ~~reported~~its ~~amounts~~global ofindependent ~~assets~~direct ~~and liabilities~~selling ~~and~~network ~~disclosure~~also ofknown ~~contingent~~as ~~assets~~multi-level ~~and~~marketing. ~~liabilities~~The ~~at the~~commercial ~~date~~coffee ofsegment ~~the~~is ~~financial~~engaged ~~statements~~in ~~and~~coffee ~~the~~roasting ~~reported amounts of revenue~~ and ~~expense~~distribution, ~~for~~specializing ~~each~~in ~~reporting~~gourmet ~~period~~coffee. ~~Estimates~~ ~~are used~~The incommercial ~~accounting~~hemp ~~for,~~segment ~~among~~manufactures ~~other~~proprietary ~~things,~~systems ~~allowances~~to ~~for~~provide ~~doubtful accounts,~~end-to-end ~~deferred~~extraction ~~taxes~~ and ~~related~~processing ~~valuation~~that ~~allowances, fair~~allow ~~value~~for ofthe ~~derivative~~conversion ~~liabilities, uncertain tax positions, loss contingencies, fair value~~ of ~~options~~hemp ~~granted~~feed ~~under the Company’s~~ stock~~-based~~ ~~compensation~~into ~~plan,~~hemp ~~fair~~oil ~~value of assets~~ and ~~liabilities~~hemp ~~acquired~~extracts. inThe ~~business~~determination ~~combinations,~~that ~~finance~~the ~~leases, asset~~Company ~~impairments,~~has ~~estimates~~three ofreportable ~~future~~segments ~~cash~~is ~~flows~~based ~~used~~upon tothe ~~evaluate impairments,~~guidance ~~useful~~set ~~lives~~forth ofin ~~property,~~Accounting ~~equipment~~Standards ~~and~~Codification ~~intangible assets,~~(“ASC”) ~~value~~Topic ~~of contingent acquisition debt~~280, ~~inventory obsolescence,~~“Segment ~~and sales returns~~Reporting. ”

~~Actual~~During ~~results~~the ~~may~~three ~~differ~~months ended September 30, 2020, the Company derived approximately 92.1% of its revenue from ~~previously~~its ~~estimated~~direct ~~amounts~~selling segment and ~~such~~ ~~differences~~7.3% ~~may~~of beits ~~material~~revenue tofrom its commercial coffee segment and 0.6% from the ~~consolidated~~commercial ~~financial statements~~hemp segment. ~~Estimates~~ ~~and~~During ~~assumptions~~the ~~are~~three ~~reviewed periodically~~months ended September 30, ~~and~~2019, the ~~effects~~Company derived approximately 90.6% of ~~revisions~~its ~~are~~revenue ~~reflected prospectively~~from inits direct selling segment, 8.8% of its revenue from its commercial coffee segment and 0.6% from the ~~period~~commercial ~~they~~hemp ~~occur~~segment.

~~Cash~~During the nine months ended September 30, 2020, the Company derived approximately 90.5% of its revenue from its direct selling segment and ~~Cash~~8.5% ~~Equivalents~~of its revenue from its commercial coffee segment and 1.0% from the commercial hemp segment. During the nine months ended September 30, 2019, the Company derived approximately 84.9% of its revenue from its direct selling segment, 14.6% of its revenue from its commercial coffee segment and 0.5% from the commercial hemp segment.

~~The~~Use ~~Company considers only its monetary liquid assets with original maturities~~ of ~~three months or less as cash and cash equivalents.~~Estimates

~~Related~~The ~~Party~~preparation ~~Transactions~~of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense for each reporting period. Estimates are used in accounting for, among other things, allowances for doubtful accounts, deferred taxes and related valuation allowances, fair value of derivative liabilities, uncertain tax positions, loss contingencies, fair value of options granted under the Company’s stock-based compensation plan, fair value of assets and liabilities acquired in business combinations, finance leases, asset impairments, estimates of future cash flows used to evaluate impairments, useful lives of property, equipment and intangible assets, value of contingent acquisition debt, inventory obsolescence, and sales returns.

~~Richard~~Actual ~~Renton~~results may differ from previously estimated amounts and such differences may be material to the consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected prospectively in the period they occur.

~~Richard Renton~~Liquidity ~~is a member of the Board of Directors~~ and ~~owns~~Going and operates WVNP, Inc., a supplier of certain inventory items sold by the Company. The Company made purchases of approximately $8,000 and $34,000 from WVNP Inc., for the three months ended September 30, 2019 and 2018, respectively, and approximately $120,000 and $151,000 for the nine months ended September 30, 2019 and 2018, respectively.Concern

~~Carl~~The ~~Grover~~accompanying consolidated financial statements have been prepared and presented on a basis assuming the Company will continue as a going concern. The Company has sustained significant net losses during the nine months ended September 30, 2020 and 2019 of approximately $15,403,000 and $20,423,000, respectively. Net cash used in operating activities was approximately $2,075,000 and $7,762,000 for the nine months ended September 30, 2020 and 2019, respectively.

~~Carl~~Management ~~Grover~~has isassessed the ~~sole~~Company’s ~~beneficial~~ability ~~owner~~to ofcontinue inas ~~excess~~a ofgoing ~~five percent~~concern ~~(5%)~~and ofconcluded ~~the~~that ~~Company’s~~additional ~~outstanding~~capital ~~common~~will ~~shares.~~be ~~On December~~required ~~13,~~during ~~2018,~~the ~~CLR,~~twelve-months ~~entered~~subsequent ~~into~~to ~~a credit agreement with Mr. Grover (~~the ~~“Credit~~filing ~~Agreement”)~~date ~~pursuant~~of tothis ~~which~~Quarterly ~~CLR borrowed~~Report ~~$5,000,000~~on ~~from~~Form Mr10-Q. ~~Grover~~The ~~and~~timing inof ~~exchange~~when ~~issued~~the toadditional ~~him~~capital ~~a $5,000,000~~will ~~credit~~be ~~note~~required ~~(the~~is ~~“Credit~~uncertain ~~Note”)~~and ~~secured~~highly ~~by its~~dependent ~~green~~on ~~coffee~~factors ~~inventory~~discussed ~~under~~below. aThere ~~Security~~can ~~Agreement,~~be ~~dated December~~no ~~13,~~assurance ~~2018~~that (the ~~“Security~~Company ~~Agreement”),~~will ~~with~~be ~~Mr. Grover~~able ~~and~~to ~~CLR’s~~execute ~~subsidiary,~~license ~~Siles~~or ~~Family~~purchase ~~Plantation~~agreements ~~Group S.A.~~or ~~(“Siles”),~~to asobtain ~~guarantor,~~equity ~~and~~or ~~Siles~~debt ~~executed~~financing, ~~a separate~~or ~~guaranty~~on ~~agreement.~~terms ~~The~~acceptable ~~Company issued~~ to Mrit. ~~Grover~~Factors ~~a four-year~~within ~~warrant~~and tooutside ~~purchase~~the ~~250,000~~Company’s ~~shares~~control ofcould ~~its~~have ~~common~~a ~~stock, exercisable~~significant atbearing ~~$6.82~~on ~~per~~its ~~share,~~ability ~~and~~to aobtain ~~four-year~~additional ~~warrant~~financing. toAs ~~purchase 250~~a result,~~000~~ ~~shares~~management ofhas ~~the~~determined ~~Company’s~~that ~~common~~there ~~stock,~~are ~~exercisable~~material ~~at $7.82~~uncertainties ~~per~~that ~~share,~~raise ~~pursuant~~substantial todoubt aupon ~~warrant~~the ~~purchase~~Company’s ~~agreement,~~ability ~~dated December~~to ~~13,~~continue ~~2018,~~as ~~with~~a ~~Mr.~~going ~~Grover~~concern. ~~(See Note 6)~~

OnThe ~~July 31,~~Company ~~2019,~~has ~~Mr.~~and ~~Grover~~continues ~~acquired~~to ~~600,242~~take ~~shares~~actions ofto alleviate the ~~Company's common~~cash ~~stock,~~used $0in operations.~~001~~ ~~par~~During ~~value, upon~~ the ~~partial~~nine ~~exercise~~months atending September ~~$4.60 per~~30 ~~share~~2020, ofthe aCompany ~~2014~~reported ~~warrant~~total torevenue ~~purchase~~of ~~782~~approximately $102,~~608~~525,000 ~~shares~~a decrease of ~~common stock~~approximately ~~held by him~~9.1% Incompared ~~connection~~to ~~with such exercise,~~ the ~~Company received~~same ~~$2,761,113~~period ~~from~~a Mryear ago. ~~Grover,~~The ~~issued~~Company continues to ~~Mr.~~focus ~~Grover~~on 50revenue growth,~~000 shares~~ ofbut ~~restricted~~the ~~common~~Company ~~stock~~cannot asmake anassurances ~~inducement~~that ~~fee~~revenues ~~and~~will ~~agreed to~~grow. ~~extend~~Additionally, the ~~expiration~~Company ~~date~~has ofplans ~~the~~to ~~July~~make ~~31,~~the ~~2014~~necessary ~~warrant~~cost ~~held~~reductions ~~by him~~and to ~~December~~reduce ~~15,~~non-essential ~~2020~~expenses, ~~and~~including ~~the~~international ~~exercise~~operations ~~price~~that ofare ~~the~~not ~~warrant~~performing ~~was adjusted~~well to ~~$4.75~~help ~~with~~alleviate ~~respect~~the tocash ~~182,366~~used ~~shares~~in ofoperating ~~common stock remaining for exercise thereunder~~activities.

- ~~Paul Sallwasser~~ 10-

~~Mr.~~ Table ~~Paul Sallwasser is a member~~ of ~~the board of directors~~Contents and prior to joining the Company’s board of directors he acquired a note (the “2014 Note”) issued in the Company’s private placement consummated in 2014 (the “2014 Private Placement”) in the principal amount of $75,000 convertible into 10,714 shares of common stock and a warrant (the “2014 Warrant”) issued, in the 2014 Private Placement, exercisable for 14,673 shares of common stock. Prior to joining the Company’s Board of Directors, Mr. Sallwasser acquired in the 2017 Private Placement a 2017 Note in the principal amount of approximately $38,000 convertible into 8,177 shares of common stock and a warrant (the “2017 Warrant”) issued, in the 2017 Private Placement, exercisable for 5,719 shares of common stock. Mr. Sallwasser also acquired in the 2017 Private Placement in exchange for the “2015 Note” that he acquired in the Company’s private placement consummated in 2015 (the “2015 Private Placement”), a 2017 Note in the principal amount of $5,000 convertible into 1,087 shares of common stock and a 2017 Warrant exercisable for 543 shares of common stock. On March 30, 2018, the Company completed its Series B Offering, and in accordance with the terms of the 2017 Notes, Mr. Sallwasser’s 2017 Notes converted to 9,264 shares of the Company’s common stock. On August 14, 2019, Mr. Sallwasser acquired 14,673 shares of the Company's common stock, $0.001 par value, upon the exercise at $4.60 per share of his 2014 Warrant held by him. In connection with such exercise, Mr. Sallwasser applied $67,495 of the proceeds of his $75,000 2014 Note due to him from the Company as consideration for the warrant exercise. The warrant exercise proceeds to the Company would have been $67,495. The Company paid the balance owed to him under his 2014 Note of $8,260 in cash, which amount include accrued interest of the 2014 Note.

The outbreak of COVID-1019 and resulting pandemic resulted in significant contraction of economies around the world and interrupted global supply chains as many governments issued stay-at-home orders to combat COVID-19. The outbreak of COVID-19 also impacted the Company’s ability to properly staff and maintain its domestic and international warehousing operations due to stay-at-home orders issued within various locations where the Company operates warehouse and shipping operations. The Company took actions to mitigate the impact but cannot assert that future stay-at-home orders or further restrictive orders will not have an impact on future operations. The Company experienced changes in product mix demand, with demand increasing toward health-oriented products and weakening for non-health related products. Such changes in demand may have a significant impact on revenues, margins and net operating profit in the future. The outbreak also impacted the Company’s ability to obtain some ingredients and packaging as well as ship products in some markets. The Company’s supply chain and logistics incurred some interruptions and cost impacts to date, and the Company could experience more significant interruptions and cost impacts. The Company’s suppliers of raw material and supplies have and could continue to be impacted by geopolitical events, such as the war in Ukraine, thus interrupting the Company’s supply chain. Additionally, the Company’s customers may experience interruptions from other suppliers that could cause a customer to delay or cancel orders. These factors and other events have negatively impacted the Company’s sales and operations and will likely continue to negatively affect the Company’s business and financial results. The Company is unable to predict the possible future effect on the demand for products sold by the Company, and the related revenues, margins and operating profit due to these events.

~~Table~~In addition, the outbreak of ~~Contents~~the COVID-19 coronavirus has disrupted the Company’s operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who elect not to come to work due to the illness affecting others in the Company’s office or other workplace, or due to quarantines. COVID-19 illness could also impact members of the Company’s board of directors resulting in absenteeism from meetings of the directors or committees of directors and making it more difficult to convene the quorums of the full board of directors or its committees needed to conduct meetings for the management of the Company’s affairs.

~~2400~~The ~~Boswell~~Company ~~LLC~~continues to seek and obtain equity or debt financing on terms that are acceptable to the Company. Depending on market conditions, there can be no assurance that additional capital will be available when needed or that, if available, it will be obtained on terms favorable to the Company or to its stockholders.

InThese ~~March~~financial ~~2013,~~statements ~~the~~have ~~Company~~been ~~acquired~~prepared ~~2400~~on ~~Boswell~~a ~~for~~going ~~approximately $4~~concern basis,~~600,000.~~ ~~2400~~which ~~Boswell~~asserts is the ~~owner~~Company ~~and~~has ~~lessor~~the ofability in the ~~building occupied~~near byterm ~~the~~to ~~Company~~continue ~~for~~to realize its ~~corporate~~assets ~~office~~ and ~~warehouse~~discharge ~~in Chula~~its ~~Vista,~~liabilities ~~California.~~and ~~The~~commitments ~~purchase~~in ~~was~~a ~~from~~planned anmanner ~~immediate~~giving ~~family member~~consideration ofto the ~~Company’s~~above ~~Chief~~and ~~Executive~~expected ~~Officer~~possible ~~and~~outcomes. ~~consisted of~~The ~~approximately~~financial ~~$248,000~~statements indo ~~cash,~~not ~~approximately~~include ~~$334,000~~any ofadjustments ~~debt forgiveness~~that ~~and~~might ~~accrued~~be ~~interest,~~necessary ~~and~~from athe ~~promissory~~outcome ~~note~~ of ~~approximately~~ ~~$393,000,~~this ~~payable~~uncertainty. inWithin ~~equal~~the ~~payments~~current ~~over~~operating 5environment ~~years~~due ~~and bears~~to ~~interest at 5.0%. Additionally,~~ the ~~Company assumed~~declared anational ~~long-term~~emergency, ~~mortgage~~related ofto ~~$3,625,000,~~COVID ~~payable~~19 ~~over~~combined ~~25 years~~ with anthe ~~initial~~management ~~interest~~plans ~~rate~~described ofabove ~~5.75%.~~the ~~The~~Company ~~interest~~cannot ~~rate~~assert isthat the ~~prime~~ ~~rate~~doubt ~~plus~~of ~~2.5%.~~the ~~The~~Company’s ~~current~~ability ~~interest~~to ~~rate~~continue as ofa ~~September~~going ~~30, 2019~~concern ~~was~~has ~~8.0%.~~been ~~The~~substantially ~~lender~~alleviated. ~~will~~Conversely, ~~adjust~~if the ~~interest~~going ~~rate~~concern onassumption ~~the first~~is ~~calendar~~not ~~day~~appropriate, ofadjustments ~~each~~to ~~change~~the ~~period~~carrying oramounts ~~calendar~~of ~~quarter.~~the ~~The~~ Company’s ~~and~~assets, ~~its Chief Executive Officer are both co-guarantors of the mortgage. As of September 30~~liabilities, ~~2019~~revenues, ~~the~~expenses and balance onsheet ~~the long-term~~classifications may ~~mortgage~~be ~~is approximately $3~~necessary,~~162,000~~ and ~~the~~these ~~balance~~adjustments oncould ~~the~~be ~~promissory note is zero~~material.

- ~~Accounts Receivable and Other Relationship~~ 11- ~~Transactions~~

~~Hernandez,~~ Table ~~Hernandez,~~of ~~Export Y Company and H&H Coffee Group~~Contents ~~Export Corp.~~

~~The~~Actual ~~Company’s~~results may ~~commercial~~differ ~~coffee~~from ~~segment,~~previously ~~CLR,~~estimated isamounts ~~associated with~~and ~~Hernandez,~~such ~~Hernandez,~~differences may ~~Export~~be Ymaterial ~~Company (“H&H”), a Nicaragua company, through sourcing arrangements~~ to ~~procure Nicaraguan grown green coffee beans. In March 2014, as part of~~ the ~~Siles~~consolidated ~~acquisition,~~financial ~~CLR engaged the owners of H&H as employees to manage Siles~~statements. Estimates ~~H&H~~and isassumptions ~~a sourcing~~are ~~agent~~reviewed ~~acting on behalf of CLR for purchases of coffee from the producers. In consideration for H&H's sourcing of green coffee~~periodically, ~~CLR~~ and ~~H&H share in~~ the ~~green~~effects ~~coffee profit from operations. H&H made purchases for CLR~~ of ~~approximately $1,072,000~~revisions ~~and~~are ~~$1,896,000~~reflected ~~for~~prospectively ~~the~~in ~~three months ended September 30, 2019 and 2018, respectively and approximately $31,233,000 and $8,969,000 for~~ the ~~nine~~period ~~months~~they ~~ended September 30, 2019 and 2018, respectively~~occur.

InCash ~~addition, CLR sold approximately $669,000~~ and ~~$117,000~~Cash for the three months ended September 30, 2019 and 2018, respectively, and approximately $35,610,000 and $3,419,000 for the nine months ended September 30, 2019 and 2018, respectively, of green coffee beans to H&H Coffee Group Export Corp., (“H&H Export”) a Florida based company which is affiliated with H&H.Equivalents

AsThe ~~of September~~Company ~~30,~~considers ~~2019~~only ~~and~~its ~~December~~monetary ~~31,~~liquid ~~2018,~~assets ~~CLR's~~with ~~accounts~~original ~~payable for~~maturities ~~vendor~~of ~~related~~three ~~purchases~~months ~~from~~or ~~green~~less ~~coffee~~as ~~producers,~~cash ~~agented by H&H Export were approximately $23,820,000~~ and ~~$1,633,000, respectively~~cash equivalents.

AsRevenue of September 30, 2019 and December 31, 2018, CLR's accounts receivable for customer related revenue by H&H Export were approximately $31,225,000 and $673,000, respectively, (see the section titled “Concentrations” below). Of the $31,225,000 accounts receivable balance as of September 30, 2019, $23,569,000 is past due. The Company is collaborating with H&H Export, the Company’s green coffee suppliers, and third parties in Nicaragua to develop a sourcing solution to provide the Company with access to a continued supply of green coffee beans and solutions for funding of the continued operations of the Company’s green coffee distribution business. Management has assessed the collectability of accounts receivable from H&H Export and believes collectability is probable due to the Company’s history with H&H Export and the Company’s continual communication about future contractual agreements.Recognition

The Company inrecognizes ~~conjunction~~revenue ~~with~~from ~~the~~product ~~collaborators~~sales ~~has~~when ~~decided~~the ~~that during~~following ~~these~~five ~~negotiations~~steps ~~any~~are ~~repayment~~completed: ori) ~~settlement~~Identify of the ~~accounts~~ ~~receivable~~contract orwith ~~payable~~the ~~balances~~customer; ~~will~~ii) beIdentify ~~stayed. The Company expects this financing arrangement to be finalized by December 31, 2019 at which time~~ the ~~accounts~~performance ~~receivable~~obligations ~~and~~in ~~accounts payable balances are expected to be settled. In~~ the ~~event~~contract; ~~that~~iii) ~~this financing~~Determine ~~arrangement does not materialize, which~~ the ~~Company believes~~transaction isprice; ~~not~~iv) ~~likely~~Allocate ~~based on current negotiations,~~ the ~~Company expects~~transaction ~~the~~price ~~be able~~ to ~~collect~~ the ~~outstanding~~performance ~~accounts~~obligations ~~receivable balance~~ in ~~full~~the ~~shortly~~contract; ~~after~~and ~~this~~v) ~~determination~~Recognize isrevenue ~~made;~~when ~~however, if the facts~~ (or ~~circumstances~~as) ~~change,~~each ~~the~~performance ~~Company~~obligation ~~will~~is ~~continue to reassess the collectability of these amounts and record a reserve as appropriate~~satisfied.

InRevenue ~~May~~is ~~2017,~~recognized ~~the~~upon ~~Company~~transfer ~~entered a settlement agreement with Alain Piedra Hernandez (“Hernandez”), one~~ of ~~the~~control ~~owners~~ of ~~H&H~~ ~~and~~promised ~~the~~products ~~operating~~or ~~manager~~services ofto ~~Siles,~~customers ~~who~~in ~~was~~an ~~issued~~amount ~~a non-qualified~~that ~~stock~~reflects ~~option for~~ the ~~purchase~~consideration ~~of 75,000 shares of~~ the Company’s ~~common~~expects ~~stock~~to atreceive ~~a price of $2.00 with an expiration date of three years,~~ in ~~lieu~~exchange offor anthose ~~obligation~~products ~~due~~or ~~from~~services. ~~the~~The Company to ~~H&H~~enters asinto itcontracts ~~relates~~that tocan ainclude ~~Sourcing~~various ~~and~~combinations ~~Supply~~of ~~Agreement~~products ~~with H&H.~~and ~~During the period ended September 30~~services, ~~2017,~~which ~~the~~are ~~Company replaced~~generally ~~the~~capable ~~non-qualified~~of ~~stock~~being ~~option~~distinct and ~~issued~~accounted afor ~~warrant agreement~~as ~~with~~separate ~~the~~performance ~~same terms~~obligations. ~~There~~Revenue ~~was~~is norecognized ~~financial~~net ~~impact related to the cancellation~~ of ~~the~~allowances ~~option~~for returns and ~~the~~any ~~issuance~~taxes ofcollected ~~the warrant.~~from Ascustomers, ofwhich ~~September~~are ~~30,~~subsequently ~~2019,~~remitted ~~the~~to ~~warrant~~governmental ~~remains outstanding~~authorities.

~~In December~~The ~~2018,~~transaction ~~CLR~~price ~~advanced $5,000,000 to H&H Export to provide services in support of a 5-year contract~~ for ~~the~~all ~~sale~~sales ~~and processing~~is ofbased ~~41 million pounds of green coffee beans~~ on anthe ~~annual basis.~~price ~~The~~reflected ~~services~~in ~~include~~the ~~providing~~individual ~~hedging~~customer's ~~and~~contract ~~financing opportunities~~or topurchase ~~producers and delivering harvested coffee to the Company’s mills~~order. OnVariable ~~March~~consideration ~~31,~~has ~~2019,~~not ~~this~~been ~~advance~~identified ~~was converted to a $5,000,000 loan agreement~~ as a ~~note~~significant ~~receivable~~component ~~and bears~~of ~~interest at 9% per annum and is due and payable by H&H Export at~~ the ~~end~~transaction ofprice ~~each year’s harvest season, but no later than October 31~~ for any ~~harvest year. On October 31, 2019, CLR and H&H Export amended the March 31, 2019 agreement in terms~~ of ~~the maturity~~our date, to all outstanding principal and interest shall be due and payable at the end of the 2020 harvest (or when the 2020 season’s harvest is exported and collected), but never to be later than November 30, 2020transactions. The loan is secured by H&H Export’s hedging account with INTL FC Stone, trade receivables, green coffee inventory in the possession of H&H Export and all green coffee contracts. As of September 30, 2019, the $5,146,000 note receivable remains outstanding which includes accrued interest.

~~Mill~~Independent ~~Construction~~distributors ~~Agreement~~receive compensation which is recognized as distributor compensation in the Company’s consolidated statements of operations. Due to the short-term nature of the contract with the customers, the Company accrues all distributor compensation expense in the month earned and pays the compensation the following month.

~~On January~~The ~~15,~~Company ~~2019,~~also ~~CLR~~charges ~~entered~~fees ~~into~~to ~~the~~become ~~CLR~~a ~~Siles Mill Construction Agreement (the “Mill Construction Agreement”) with H&H and H&H Export~~distributor, ~~Hernandez~~ and ~~Marisol~~earn ~~Del~~a ~~Carmen~~position ~~Siles Orozco~~in ~~(“Orozco”),~~the ~~together~~network ~~with H&H~~genealogy, ~~H&H Export,~~which ~~Hernandez~~are ~~and~~recognized ~~Orozco, collectively referred to~~ as ~~the Nicaraguan~~revenue ~~Partner, pursuant to which the Nicaraguan Partner agreed to transfer a 45 acre tract of land~~ in ~~Matagalpa, Nicaragua (~~the ~~“Property”)~~ toperiod ~~be owned 50% by the Nicaraguan Partner and 50% by CLR~~received. InThe ~~consideration~~Company’s ~~for~~distributors ~~the~~are ~~land~~required ~~acquisition the Company issued~~ to ~~H&H~~pay ~~Export,~~a ~~153,846~~one-time ~~shares~~enrollment offee ~~common stock. In addition, the Nicaraguan Partner~~ and ~~CLR~~receive ~~agreed to contribute $4,700,000 each toward the construction of~~ a ~~processing~~welcome ~~plant, office,~~kit ~~and~~specific ~~storage~~to ~~facilities~~that ~~(“Mill”)~~country onor ~~the~~region ~~property for~~that ~~processing~~consists ~~coffee in Nicaragua. As~~ of ~~September 30~~forms, ~~2019,~~policy ~~the Company~~and ~~paid $3~~procedures,~~510,000~~ ~~towards~~selling ~~construction of a mill~~aids, ~~which~~access ~~is included~~to inour ~~construction~~distributor inwebsite ~~process within property~~ and ~~equipment, net~~a ongenealogy ~~the~~position ~~Company's~~with ~~condensed~~no ~~consolidated~~down ~~balance sheet~~line distributors.

The Company has determined that most contracts will be completed in less than one year. For those transactions where all performance obligations will be satisfied within one year or less, the Company is applying the practical expedient outlined in ASC 606-1110-32-18. The practical expedient allows the Company not to adjust promised consideration for the effects of a significant financing component if the Company expects at contract inception the period between when the Company transfers the promised good or service to a customer and when the customer pays for that good or service will be one year or less. For those transactions that are expected to be completed after one year, the Company has assessed that there are no significant financing components because any difference between the promised consideration and the cash selling price of the good or service is for reasons other than the provision of financing.

~~Table~~Revenue ofrecognition ~~Contents~~by segment is as follows:

~~Amendment~~Direct Selling. Direct distribution sales are made through the Company’s network (direct selling segment), which is a web-based global network of customers and distributors. The Company’s independent sales force markets a variety of products to ~~Operating~~an array of customers, through friend-to-friend marketing and ~~Profit~~social networking. The Company considers itself to be an e-~~Sharing~~commerce ~~Agreement~~company whereby personal interaction is provided to customers by its independent sales network. Sales generated from direct distribution includes; health and wellness, beauty product and skin care, scrap booking and story booking items, packaged food products and other service-based products.

~~On January~~Revenue ~~15,~~is ~~2019,~~recognized ~~CLR~~when ~~entered into an amendment to~~ the ~~March~~Company ~~2014 operating~~satisfies ~~and~~its ~~profit-sharing~~performance ~~agreement~~obligations ~~with~~under the ~~owners~~ ~~of H&H~~contract. ~~CLR~~The ~~previously~~Company ~~engaged Hernandez~~recognizes ~~and~~revenue ~~Orozco,~~by transferring the ~~owners~~promised ofproducts ~~H&H as employees~~ to ~~manage Siles.~~the ~~In addition~~customer, CLR and H&H, Hernandez and Orozco restructured their profit-sharing agreement in regard to profits from green coffee sales and processing that increases CLR’s profit participation by an additional 25%. Under the new terms of the agreement with ~~respect~~revenue torecognized ~~profit~~at ~~generated~~shipping ~~from green coffee sales and processing from La Pita~~point, athe ~~leased~~point ~~mill,~~in ortime the ~~new~~customer ~~mill, now~~obtains ~~will~~control ~~provide for a split~~ of ~~profits of 75% to CLR and 25% to~~ the ~~Nicaraguan Partner, after certain conditions are met~~products. The ~~Company~~ ~~issued~~majority ~~295,910 shares~~ of the Company’s ~~common~~contracts ~~stock to~~have ~~H&H~~a ~~Export~~single toperformance ~~pay~~obligation ~~for~~and ~~certain~~are ~~working~~short ~~capital,~~term ~~construction and~~in ~~other payables~~nature. InSales ~~addition,~~taxes ~~H&H~~in ~~Export~~domestic ~~has~~and ~~sold~~foreign tojurisdictions ~~CLR~~are ~~its espresso~~collected ~~brand~~from ~~Café~~customers ~~Cachita~~and inremitted ~~consideration~~to ofgovernmental ~~the issuance of 100~~authorities,~~000~~ ~~shares~~all ofat the ~~Company’s~~local ~~common~~level, ~~stock. Hernandez~~ and ~~Orozco~~ are ~~employees~~accounted offor ~~CLR.~~on ~~The~~a ~~shares~~net ofbasis ~~common~~and ~~stock~~therefore ~~issued were~~are ~~valued~~excluded atfrom $7revenues.~~50 per share.~~

- 12- ~~Revenue Recognition~~

~~The~~ Table ~~Company~~of ~~recognizes revenue from product sales when the~~Contents following five steps are completed: i) Identify the contract with the customer; ii) Identify the performance obligations in the contract; iii) Determine the transaction price; iv) Allocate the transaction price to the performance obligations in the contract; and v) Recognize revenue when (or as) each performance obligation is satisfied. (See Note 3)

~~Revenue~~Commercial isCoffee ~~recognized~~- ~~upon~~Roasted ~~transfer~~Coffee. ofThe ~~control~~Company ofengages ~~promised~~in ~~products or~~the ~~services~~commercial tosale ~~customers~~of inroasted ancoffee ~~amount~~through ~~that~~CLR, ~~reflects~~which ~~the consideration~~is ~~the~~sold ~~Company~~under ~~expects~~a tovariety ~~receive~~of inprivate ~~exchange~~labels ~~for~~through ~~those products~~major ornational ~~services.~~sales ~~The~~outlets ~~Company~~and ~~enters~~to ~~into~~customers ~~contracts~~including ~~that~~cruise ~~can include~~lines ~~various~~and ~~combinations~~office ofcoffee ~~products~~service ~~and services~~operators, ~~which~~and ~~are generally~~under ~~capable~~its ofown ~~being~~Café ~~distinct~~La ~~and~~Rica ~~accounted~~brand, ~~for~~Josie’s asJava ~~separate performance~~House ~~obligations.~~Brand, ~~Revenue~~Javalution isbrands ~~recognized~~and ~~net~~Café ofCachita ~~allowances for~~as ~~returns~~well ~~and~~as ~~any~~through ~~taxes~~its ~~collected~~distributor ~~from~~network ~~customers,~~within ~~which~~the ~~are subsequently~~direct ~~remitted~~selling ~~to governmental authorities~~segment.

~~The~~Revenue ~~transaction~~is ~~price~~recognized ~~for~~when ~~all~~the ~~sales~~title and risk of loss is ~~based~~passed onto the ~~price~~customer ~~reflected in~~under the ~~individual~~terms ~~customer's~~of ~~contract~~the orshipping ~~purchase order~~arrangement, typically, FOB shipping point. ~~Variable~~ ~~consideration~~At ~~has~~this ~~not~~point ~~been~~the ~~identified~~customer ashas a ~~significant~~ ~~component~~present obligation to pay, takes physical possession of the ~~transaction~~product, ~~price~~takes ~~for~~legal ~~any~~title to the product, bears the risks and rewards of ~~our transactions~~ownership, and as such, revenue will be recognized at this point in time. Sales taxes in domestic and foreign jurisdictions are collected from customers and remitted to governmental authorities, all at the local level, and are accounted for on a net basis and therefore are excluded from revenues.

~~Independent~~Commercial ~~distributors~~Coffee ~~receive~~- ~~compensation~~Green ~~which~~Coffee. isThe ~~recognized as~~commercial ~~Distributor~~coffee ~~Compensation~~segment inincludes the ~~Company’s~~sale ~~consolidated statements~~ of ~~operations.~~green ~~Due~~coffee ~~to the short-term nature of the contract with the customers~~beans, ~~the Company~~which ~~accrues~~are ~~all distributor~~sourced ~~compensation~~from ~~expense in~~ the ~~month~~Nicaraguan ~~earned and pays the compensation the following month~~rainforest.

~~The~~Revenue ~~Company~~is ~~also~~recognized ~~charges~~when ~~fees~~the title and risk of loss is passed to ~~become~~the acustomer ~~distributor~~under the terms of the shipping arrangement, ~~and~~typically, ~~earn~~FOB shipping point. At this point the customer has a ~~position~~ inpresent obligation to pay, takes physical possession of the ~~network~~product, ~~genealogy~~takes legal title to the product, ~~which~~bears ~~are~~the ~~recognized~~risks and rewards of ownership, and as such, revenue in ~~the~~will ~~period~~be ~~received~~recognized at this point in time. ~~The~~Revenues where the Company’s ~~distributors~~sells ~~are required~~green tocoffee ~~pay~~beans athat ~~one-time~~it ~~enrollment~~has ~~fee~~milled and ~~receive~~where athe ~~welcome~~Company ~~kit specific~~has determined it is the agent with regard to ~~that~~the ~~country~~green coffee beans is recorded at net or ~~region~~recorded ~~that~~to ~~consists~~reflect ofonly ~~forms,~~the ~~policy~~ milling services provided. Sales taxes in domestic and ~~procedures,~~foreign ~~selling~~jurisdictions ~~aids,~~are ~~access~~collected from customers and remitted to governmental authorities, all at the ~~Company’s distributor~~local ~~website~~level, and are accounted for on a ~~genealogy~~net ~~position~~basis ~~with~~and notherefore ~~down~~are ~~line distributors~~excluded from revenues.

~~The Company~~Commercial ~~has~~Hemp. ~~determined~~In ~~that~~the ~~most~~commercial ~~contracts~~hemp ~~will~~segment, bethe ~~completed~~Company ~~in less~~develops, ~~than~~manufactures, ~~one~~and ~~year.~~sells ~~For~~equipment ~~those~~and ~~transactions~~related ~~where~~services ~~all~~to ~~performance obligations~~customers ~~will~~which beenable ~~satisfied~~them ~~within~~to ~~one~~extract ~~year~~CBD oroils ~~less,~~from ~~the~~hemp ~~Company is~~stock. ~~applying~~The ~~the~~Company ~~practical~~provides ~~expedient~~hemp ~~outlined~~growers, infeedstock ~~ASC~~suppliers, ~~606-10-32-18. This~~and ~~practical~~CBD ~~expedient~~crude ~~allows~~oil producers the ~~Company~~use ~~not~~of toequipment, ~~adjust~~intellectual ~~promised consideration~~capital, ~~for~~production ~~the~~consultancy, ~~effects~~tolling ofservices, aand ~~significant~~wholesale ~~financing~~CBD ~~component if~~channel ~~the~~sales capabilities. The Company ~~expects~~is atalso ~~contract~~engaged ~~inception~~in ~~the~~hemp-based ~~period~~CBD ~~between when~~extraction ~~the~~technology ~~Company~~including ~~transfers~~tolling ~~the~~processing ~~promised~~which ~~good~~converts orhemp ~~service~~crude oil to ~~a customer~~hemp ~~and~~extracts ~~when~~such ~~the~~as ~~customer~~full ~~pays~~spectrum ~~for~~distillate, ~~that~~and ~~good~~cannabinoid orisolate ~~service~~(CBD, ~~will be~~cannabigerol ~~one~~or ~~year~~CBG, cannabinol or ~~less~~CBN). ~~For~~The ~~those~~Company ~~transactions~~offers ~~that~~customers ~~are~~turnkey ~~expected~~manufacturing solutions in extraction services and end-to-end ~~be completed~~processing ~~after~~systems. ~~one~~In ~~year~~addition, the Company ~~has~~provides ~~assessed~~a ~~that~~broad ~~there~~range ~~are no~~of ~~significant~~capabilities ~~financing~~in ~~components~~regard ~~because~~to ~~any~~formulation, ~~difference~~quality ~~between the~~control, ~~promised~~and ~~consideration~~testing ~~and~~standards ~~the~~with ~~cash~~our ~~selling~~CBD ~~price~~products, including potency analysis for its supply partners of ~~the~~hemp ~~good or~~derived ~~service~~CBD isproducts. The Company follows all guidelines for ~~reasons~~Current ~~other~~Good ~~than~~Manufacturing Practices ("CGMP") and our hemp extracts are processed, produced, and tested throughout the ~~provision~~manufacturing ~~of financing~~process to confirm that the cannabinoid content meets strict company standards.

~~Deferred~~Revenue ~~Revenues~~is recognized when the title and ~~Costs~~risk of loss is passed to the customer under the terms of the shipping arrangement, typically, FOB shipping point. At this point the customer has a present obligation to pay, takes physical possession of the product, takes legal title to the product, bears the risks and rewards of ownership, and as such, revenue will be recognized at this point in time. Sales taxes in domestic and foreign jurisdictions are collected from customers and remitted to governmental authorities, all at the local level, and are accounted for on a net basis and therefore are excluded from revenues.

AsContract ofBalances. ~~September~~Timing ~~30,~~of ~~2019~~revenue ~~and~~recognition may ~~December~~differ ~~31,~~from ~~2018,~~ the ~~balance~~timing ~~in deferred~~of ~~revenues~~invoicing ~~was~~to ~~approximately $2,005,000 and $2,312,000, respectively~~customers. ~~Deferred~~The ~~revenue related to the~~ Company~~’s direct~~ ~~selling~~records ~~segment~~contract isassets ~~attributable~~when toperformance ~~the~~obligations ~~Heritage~~are ~~Makers product~~satisfied ~~line~~prior ~~and~~to ~~also for future Company convention and distributor events~~invoicing.

~~Deferred~~Contract ~~revenues~~liabilities ~~related~~are toreflected ~~Heritage~~as ~~Makers~~deferred ~~were~~revenues ~~approximately $2,005,000~~ and ~~$2,153,000,~~customer asdeposits ofin ~~September~~accrued 30expenses, ~~2019~~deferred revenue, ~~and~~other ~~December 31,~~current ~~2018,~~liabilities ~~respectively.~~and ~~The~~other ~~deferred~~long-term ~~revenue~~liabilities ~~represents~~on ~~Heritage Maker~~the Company’s ~~obligation~~consolidated ~~for~~balance ~~points~~sheets. ~~purchased~~Contract byliabilities ~~customers~~relate ~~that have~~to ~~not~~payments ~~yet~~invoiced ~~been~~or ~~redeemed~~received ~~for~~in ~~product.~~advance ~~Cash~~of ~~received~~completion ~~for~~of ~~points sold~~performance isobligations ~~recorded~~and asare ~~deferred~~recognized as revenue upon the fulfillment of performance obligations. ~~Revenue~~The isCompany ~~recognized~~recognizes ~~when customers~~deferred ~~redeem~~revenue ~~the~~in ~~points~~its direct selling, commercial coffee and ~~the~~commercial ~~product~~coffee ~~is shipped~~segments.

In January 2020, the Company introduced a rewards program in the direct selling segment where its distributors earn points awards that can be redeemed for the future product purchases. These points awards are earned by the distributors through the purchase of products or through actions and participation in non-12product purchase activities. The Company records the points earned through the purchase of product by reducing revenue and creates the liability at the point of purchase. Award points earned through non-product purchasing activities are recorded as marketing expenses and creates the liability at the time the distributor performs the non-revenue activity.

- ~~Table of Contents~~ 13-

~~Deferred~~ Table ~~costs relate to Heritage Makers prepaid commissions that are recognized in expense at the time the related revenue is recognized. As~~ of ~~September 30, 2019, and December 31, 2018, the~~Contents ~~balance in deferred costs was approximately $257,000 and $364,000, respectively, and is included in prepaid expenses and other current assets.~~

~~Deferred~~The ~~revenues~~deferred revenue related to ~~pre-enrollment~~Heritage inMaker’s ~~upcoming~~product ~~conventions and~~line ~~distributor~~obligation ~~events~~for ofpoints ~~approximately~~purchased ~~zero and~~by ~~$159,000~~customers ~~as of~~represents ~~September~~cash ~~30,~~payments ~~2019~~received ~~and~~that ~~December~~have ~~31,~~not ~~2018,~~yet ~~respectively~~been redeemed for product. Revenue is recognized when customers redeem the points, ~~relate~~ and the product is shipped. Deferred revenues related to pre-enrollment in conventions and distributor events primarily related to the Company’s ~~2019~~2020 ~~and 2018~~ events. The Company does not recognize ~~this~~ revenue until the conventions or distributor events ~~occur~~have occurred.

~~Plantation~~The ~~Costs~~Company also records deferred revenue within its direct selling, commercial coffee and commercial hemp segments related to payments made by customers for unshipped orders.

The Company’s commercial coffee segment includes the results of Siles, which is a 500-acre coffee plantation and a dry-processing facility located on 26 acres located in Matagalpa, Nicaragua. Siles is a wholly-owned subsidiary of CLR, and the results of CLR include the depreciation and amortization of capitalized costs, development and maintenance and harvesting costs of Siles. In accordance with GAAP, plantation maintenance and harvesting costs for commercially producing coffee farms are charged against earnings when sold. Deferred ~~harvest~~ costs ~~accumulate~~ ~~and~~relate ~~are~~to ~~capitalized~~Heritage ~~throughout~~Makers ~~the~~prepaid ~~year~~commissions ~~and~~ are ~~expensed over the remainder of the year as the coffee is sold. The difference between actual harvest costs incurred and the amount of harvest costs recognized as expense is~~ recorded ~~as either an increase or decrease~~ in ~~deferred harvest costs, which is reported as an asset and included with~~ prepaid expenses and other current assets inon the ~~condensed~~Company’s consolidated balance sheets. ~~Once~~and ~~the harvest~~recognized isin ~~complete,~~expense ~~the~~at ~~harvest costs are then recognized as~~ the ~~inventory~~ ~~value.~~time ~~Deferred costs associated with~~ the ~~harvest~~related asrevenue ~~of September~~is ~~30, 2019 and December 31, 2018 are approximately $381,000 and $400,000, respectively, and are included in prepaid expenses and other current assets on the Company’s balance sheets~~recognized.

~~Stock-based~~Plantation ~~Compensation~~Costs

The Company’s ~~accounts~~commercial ~~for~~coffee ~~stock~~segment includes the results of Siles, which is comprised of (i) a 500-~~based~~acre ~~compensation~~coffee inplantation ~~accordance with~~and ~~ASC~~(ii) ~~Topic~~a ~~718,~~dry-processing ~~“Compensation~~facility –located ~~Stock Compensation~~on 26 acres,~~” which establishes~~ ~~accounting~~both ~~for~~of ~~equity~~which ~~instruments~~are ~~exchanged~~located ~~for employee~~in ~~services~~Matagalpa, Nicaragua. ~~Under~~Siles ~~such~~is ~~provisions,~~a ~~stock~~wholly-~~based~~owned ~~compensation cost~~subsidiary isof ~~measured~~CLR, atand the ~~grant~~results ~~date~~of CLR include the depreciation and amortization of capitalized costs, ~~based~~development onand ~~the~~maintenance ~~calculated~~and ~~fair value~~harvesting costs of ~~the~~Siles. In ~~award~~accordance with GAAP, plantation maintenance and harvesting costs for commercially producing coffee farms are charged against earnings when sold. Deferred harvest costs accumulate and are capitalized throughout the year and are expensed over the remainder of the year as the coffee is sold. The difference between actual harvest costs incurred and the amount of harvest costs recognized as expense is recorded as either an ~~expense~~increase or decrease in deferred harvest costs, ~~under~~which is reported as an asset and included with prepaid expenses and other current assets in the ~~straight-line~~ ~~method~~condensed consolidated balance sheets. Once the harvest is complete, ~~over~~the harvest costs are then recognized as the ~~vesting~~inventory ~~period~~value. ofThere were no deferred costs associated with the ~~equity grant~~harvest at September 30, 2020. Deferred costs associated with the harvest at December 31, 2019 were approximately $350,000.

~~The Company accounts for equity instruments issued to non~~Stock-~~employees in accordance with authoritative guidance for equity-~~based payments to non-employees. Stock options issued to non-employees are accounted for at their estimated fair value, determined using the Black-Scholes option-pricing model. The fair value of options granted to non-employees is re-measured as they vest, and the resulting increase in value, if any, is recognized as expense during the period the related services are rendered.Compensation

~~Income~~The ~~Taxes~~Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation,” which establishes accounting for equity instruments exchanged for services from employees and non-employees. Under such provisions, cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense net of forfeitures, under the straight-line method, over the vesting period of the equity grant. Forfeitures are recorded as they occur.

The Company ~~accounts~~uses ~~for~~the ~~income~~Black-Scholes ~~taxes~~to inestimate ~~accordance with ASC Topic 740, "Income Taxes," under~~ the ~~asset and~~fair ~~liability~~value ~~method~~of ~~which~~stock ~~includes~~options. ~~the~~The ~~recognition~~use of ~~deferred~~a ~~tax assets~~valuation ~~and~~model ~~liabilities~~requires ~~for~~ the ~~expected~~Company ~~future~~to ~~tax~~make ~~consequences~~certain ~~of events~~assumptions ~~that~~with ~~have~~respect ~~been~~to ~~included~~selected inmodel ~~the consolidated financial statements~~inputs. ~~Under~~Expected ~~this~~volatility ~~approach,~~is ~~deferred~~calculated ~~taxes~~based ~~are~~on ~~recorded for~~ the ~~future~~historical ~~tax~~volatility ~~consequences~~of ~~expected~~the toCompany’s ~~occur~~stock ~~when~~price over the expected ~~reported amounts~~term of ~~assets~~the ~~and liabilities are recovered or paid~~option. The ~~provision~~ ~~for~~expected ~~income~~life ~~taxes~~is ~~represents~~based ~~income~~on ~~taxes~~the contractual ~~paid~~life orof ~~payable for~~ the ~~current~~option ~~year~~and ~~plus~~expected ~~the~~employee ~~change~~exercise inand ~~deferred~~post-vesting ~~taxes~~employment ~~during~~termination ~~the year~~behavior. ~~Deferred~~The ~~taxes~~risk-free ~~result~~interest ~~from~~rate ~~differences~~is ~~between~~based ~~the~~on ~~financial statement~~U.S. ~~and~~Treasury ~~tax~~zero-coupon ~~basis~~issues ofwith ~~assets~~a ~~and~~remaining ~~liabilities~~term ~~and~~equal ~~are~~to ~~adjusted for~~the ~~changes~~expected inlife ~~tax~~assumed ~~rates~~at ~~and~~the ~~tax~~date ~~laws when changes are enacted. The effects~~ of ~~future~~the ~~changes in income tax laws or rates are not anticipated~~grant.

Income ~~taxes for the interim periods are computed using the effective tax rates estimated to be applicable for the full fiscal year, as adjusted for any discrete taxable events that occur during the period.~~Taxes

The Company ~~files~~accounts for income taxes in accordance with ASC Topic 740, "Income Taxes," under the asset and liability method which includes the recognition of deferred tax ~~returns~~assets and liabilities for the expected future tax consequences of events that have been included in the ~~United~~condensed ~~States (“U~~consolidated financial statements.~~S.”)~~ onUnder athis ~~federal~~approach, ~~basis~~deferred taxes are recorded for the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in ~~many~~deferred Utaxes during the year.S. ~~state~~Deferred taxes result from differences between the financial statement and ~~foreign~~ ~~jurisdictions.~~tax ~~Certain~~basis of assets and liabilities and are adjusted for changes in tax ~~years~~rates ~~remain~~and ~~open~~tax tolaws ~~examination by~~when ~~the~~changes ~~major~~are ~~taxing~~enacted. ~~jurisdictions~~The toeffects ~~which~~of ~~the~~future ~~Company~~changes ~~is subject~~in income tax laws or rates are not anticipated.

~~-13-~~Income taxes for the interim periods are computed using the effective tax rates estimated to be applicable for the full fiscal year, as adjusted for any discrete taxable events that occur during the period.

~~Table~~The ofCompany ~~Contents~~files income tax returns in the U.S. on a federal basis and in many U.S. state and foreign jurisdictions. Certain tax years remain open to examination by the major taxing jurisdictions to which the Company is subject.

- 14- ~~Commitments and Contingencies~~

Table of Contents ~~Litigation~~

~~The~~Commitments ~~Company is from time to time, the subject of claims~~ and suits arising out of matters related to the Company’s business. The Company is party to litigation at the present time and may become party to litigation in the future. In general, litigation claims can be expensive, and time consuming to bring or defend against and could result in settlements or damages that could significantly affect financial results. It is not possible to predict the final resolution of the current litigation to which the Company is party to, and the impact of certain of these matters on the Company’s business, results of operations, and financial condition could be material. Regardless of the outcome, litigation has adversely impacted the Company’s business because of defense costs, diversion of management resources and other factors.Contingencies

~~Concentrations~~The Company is from time to time, the subject of claims and suits arising out of matters related to the Company’s business. The Company is party to litigation at the present time and may become party to litigation in the future. In general, litigation claims can be expensive, and time consuming to bring or defend against and could result in settlements or damages that could significantly affect financial results. It is not possible to predict the final resolution of the current litigation to which the Company is party to, and the impact of certain of these matters on the Company’s business, results of operations, and financial condition could be material. Regardless of the outcome, litigation has adversely impacted the Company’s business because of defense costs, diversion of management resources and other factors.

~~Vendor~~Basic ~~Concentration~~and Diluted Net Loss Per Share

~~The~~Basic ~~Company~~loss ~~purchases~~per ~~its~~share ~~inventory~~is ~~from~~computed ~~multiple~~by ~~third-party suppliers~~dividing atnet ~~competitive~~loss ~~prices.~~attributable ~~For~~to common stockholders by the ~~three~~weighted-average ~~months~~number ~~ended September~~of ~~30,~~common ~~2019,~~shares outstanding during the ~~Company’s~~period. ~~commercial~~Diluted ~~coffee~~loss ~~segment made~~per ~~purchases~~share ~~from~~is ~~three~~computed ~~vendors,~~by ~~H&H~~dividing ~~Export,~~net ~~INTL~~loss ~~FCStone, Inc.,~~attributable ~~and~~to ~~Sixto~~common ~~Packaging,~~stockholders ~~Inc.~~by ~~that~~the ~~individually~~sum ~~comprised~~of ~~more than~~the ~~10%~~weighted-average number of ~~total~~common ~~purchases~~shares ~~and~~outstanding induring ~~aggregate~~the ~~approximated~~period ~~71%~~and the weighted-average number of ~~total~~ ~~purchases~~dilutive ~~made~~common byshare equivalents outstanding during the ~~commercial~~period, ~~coffee~~using ~~segment~~the treasury stock method. ~~For~~Dilutive ~~the~~common ~~nine months~~share ~~ended~~equivalents ~~September~~are 30comprised of stock options, ~~2019~~restricted stock, warrants, convertible preferred stock and common stock associated with the Company’'s ~~commercial coffee~~convertible ~~segment~~notes ~~made~~based ~~purchases~~on ofthe ~~approximately~~average ~~88%~~stock ofprice ~~total coffee~~for ~~segment~~each ~~purchases~~period using the treasury stock method. Potentially dilutive shares are excluded from ~~green~~the ~~coffee~~computation ~~producers,~~of ~~where~~diluted ~~H&H Export~~net ~~serves~~loss asper share when their ~~agent~~effect is anti-dilutive.

~~For~~In ~~the~~periods ~~three~~where ~~months~~a ~~ended~~net ~~September~~loss ~~30,~~is ~~2018~~presented, ~~the~~all ~~Company’s commercial~~potentially ~~coffee~~dilutive ~~segment~~securities ~~made~~are ~~purchases~~anti-dilutive ~~from two vendors, H&H Export~~ and ~~Rothfos~~are ~~Corporation~~excluded ~~that~~from ~~individually~~the ~~comprised~~computation ~~more than 10%~~ of ~~total~~diluted ~~purchases~~net ~~and~~loss inper ~~aggregate~~share. ~~approximated~~Potentially ~~63%~~dilutive ~~of total~~securities ~~purchases~~for ~~made by~~ the ~~commercial~~periods ~~coffee segment. For the nine months~~ ended September 30, ~~2018,~~2020 ~~the~~and ~~Company’s~~2019 ~~commercial coffee~~were ~~segment made purchases from two vendors~~10,594,784 ~~H&H Export~~ and ~~Rothfos~~ ~~Corporation~~10,988,108 ~~that~~shares, ~~individually comprised more than 10% of total purchases and in aggregate approximated 86% of total purchases made by the commercial coffee segment~~respectively.

For the three months ended September 30, 2019, the Company’s direct selling segment made purchases from two vendors, Global Health Labs, Inc. and Michael Schaeffer, LLC., that individually comprised more than 10% of total purchases and in aggregate approximated 39% of total purchases made by the direct selling segment. For the nine months ended September 30, 2019, the Company’s direct selling segment made purchases from two vendors, Global Health Labs, Inc. and Michael Schaeffer, LLC., that individually comprised more than 10% of total purchases and in aggregate approximated 41% of total purchases made by the direct selling segment.

	September 30,
	2020		2019
	(unaudited)		(unaudited)
Warrants		5,266,187		6,238,182
Preferred stock conversions		22,786		275,600
Principal conversions on convertible notes		309,000		312,571
Stock options		4,567,368		3,705,644
Restricted stock units		429,443		456,111
Total		10,594,784		10,988,108

~~For~~The ~~the~~calculation ~~three~~of ~~months~~diluted ~~ended~~loss ~~September~~per ~~30,~~share ~~2018~~requires that, to the ~~Company’s direct~~extent ~~selling~~the ~~segment~~average ~~made~~market ~~purchases~~price ~~from~~of ~~two~~the ~~vendors,~~underlying ~~Global Health~~shares ~~Labs,~~for ~~Inc.~~the ~~and~~reporting ~~Purity~~period ~~Supplements,~~exceeds ~~that~~the ~~individually comprised~~exercise ~~more~~price ~~than 10%~~ of ~~total~~the ~~purchases~~warrants and inthe ~~aggregate approximated~~presumed ~~38%~~exercise of ~~total~~such ~~purchases~~securities ~~made~~are bydilutive to loss per share for the ~~direct~~period, ~~selling segment.~~an ~~For~~adjustment to net loss used in the ~~nine~~calculation ~~months~~is ~~ended~~required ~~September~~to 30remove the change in fair value of the warrants, ~~2018~~net of tax from the numerator for the period. Likewise, an adjustment to the ~~Company’s~~ ~~direct~~denominator ~~selling~~is ~~segment~~required ~~made~~to ~~purchases~~reflect ~~from~~the ~~two vendors,~~related ~~Global~~dilutive ~~Health~~shares, ~~Labs~~if any, ~~Inc~~under the treasury stock method. During the three and ~~Purity~~nine ~~Supplements~~months ended September 30, ~~that individually~~2019, ~~comprised~~the ~~more~~Company ~~than~~recorded ~~10%~~net of ~~total~~tax ~~purchases~~gain of $27,000 and ~~in aggregate~~$1,529,000, ~~approximated~~respectively, ~~42%~~on the valuation of ~~total~~the ~~purchases~~warrant ~~made~~derivative byliability ~~the~~which ~~direct selling~~had ~~segment~~a dilutive impact on loss per share.

For the three months ended September 30, 2019, the Company’s commercial hemp segment made purchases from two vendors, Bio Processing Corp., and AMAZON Hose & Rubber Company, that individually comprised more than 10% of total purchases and in aggregate approximated 50% of total purchases made by the commercial hemp segment. For the nine months ended September 30, 2019, the Company’s commercial hemp segment made purchases from one vendor, Bio Processing Corp., that individually comprised more than 10% of total purchases and in aggregate approximated 35% of total purchases made by the commercial hemp segment.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Loss per Share – Basic
Numerator for basic loss per share	$	(5,434,000	)	$	(7,959,000	)	$	(16,507,000	)	$	(20,550,000	)
Denominator for basic loss per share		32,233,622			30,035,182			31,479,884			28,924,305
Loss per common share - basic	$	(0.17	)	$	(0.27	)	$	(0.52	)	$	(0.71	)

Loss per Share - Diluted
Numerator for basic loss per share	$	(5,434,000	)	$	(7,959,000	)	$	(16,507,000	)	$	(20,550,000	)
Adjust: Fair value of dilutive warrants outstanding		-			(27,000	)		-			(1,529,000	)
Numerator for dilutive loss per share	$	(5,434,000	)	$	(7,986,000	)	$	(16,507,000	)	$	(22,079,000	)

Denominator for basic loss per share		32,233,622			30,035,182			31,479,884			28,924,305
Plus: Incremental shares underlying “in the money” warrants outstanding		-			4,494			-			79,026
Denominator for dilutive loss per share		32,233,622			30,039,676			31,479,884			29,003,331
Loss per common share - diluted	$	(0.17	)	$	(0.27	)	$	(0.52	)	$	(0.76	)

- ~~Customer Concentration~~ 15-

~~For~~ Table the three months ended September 30, 2019, the Company’s commercial coffee segment had four customers, H&H Export, Topco Associates, LLC, Carnival Cruise Lines and Super Store Industries that individually comprised more than 10% of ~~revenue and in~~Contents aggregate approximated 64% of total revenue generated by the commercial coffee segment. For the nine months ended September 30, 2019, the Company’s commercial coffee segment had one customer, H&H Export that individually comprised more than 10% of revenue and in aggregate approximated 74% of total revenue generated by the commercial coffee segment.

~~-14-~~Recently Issued and Adopted Accounting Pronouncements

~~Table~~The ofCompany ~~Contents~~does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the Company’s financial statements. During the nine months ended September 30, 2020, the Company did not adopt any accounting pronouncements.

~~For~~Note the three months ended September 30, 2018, the Company’s commercial coffee segment had three customers, H&H Export, Rothfos Corporation and Carnival Cruise Lines that individually comprised more than 10% of revenue and in aggregate approximated 48% of total revenue generated by the commercial coffee segment2. ~~For~~ ~~the~~Acquisitions ~~nine months ended September 30, 2018, the Company’s commercial coffee segment had two customers, H&H Export~~ and ~~Rothfos~~ ~~Corporation~~Business ~~that individually comprised more than 10% of revenue and in aggregate approximated 57% of total revenue generated by the commercial coffee segment.~~Combinations

~~For~~During 2019, the ~~three~~ ~~months~~Company ~~ended~~entered ~~September~~into ~~30,~~two ~~2019,~~acquisitions ~~the~~which ~~Company’s commercial~~are ~~hemp~~detailed ~~segment~~below. ~~had~~The ~~four~~acquisitions ~~customers,~~were ~~Air~~conducted ~~Spec,~~to ~~The~~allow ~~Fishel~~ the Company, ~~Carolina~~to ~~Botanicals~~enter ~~and~~into ~~Xtraction~~the ~~Services,~~hemp ~~that individually~~market ~~comprised~~and ~~more~~expand ~~than~~the ~~10%~~Company’s ofdistributor ~~revenue~~network ~~and~~within inthe ~~aggregate approximated~~direct ~~75%~~selling ofsegment, ~~total~~enhance ~~revenue~~and ~~generated~~expand byits ~~the~~product ~~commercial~~portfolio, ~~hemp segment.~~and ~~For~~diversify ~~the~~its ~~nine~~product ~~months~~mix. ~~ended~~As ~~September~~a ~~30,~~result ~~2019,~~of the Company’s ~~commercial~~business ~~hemp~~combinations, ~~segment~~the ~~had~~Company’s ~~three~~distributors and customers~~, Xtraction~~ ~~Services,~~will ~~Air~~have ~~Spec~~access ~~and~~to ~~David~~the ~~Shin~~acquired ~~that~~company’s ~~individually comprised~~products ~~more~~and ~~than~~acquired ~~10%~~company’s ofdistributors ~~revenue~~ and incustomers ~~aggregate~~will ~~approximated 58%~~gain ofaccess ~~total~~to ~~revenue~~products ~~generated~~offered by the ~~commercial hemp segment~~Company.

~~The direct~~As ~~selling~~such, ~~segment~~the ~~did~~major ~~not~~purpose ~~have~~for ~~any~~the ~~customers~~business ~~during~~combinations ~~the~~was ~~three~~ to increase revenue and ~~nine~~profitability. ~~months~~The ~~ended~~acquisitions ~~September~~were ~~30,~~structured ~~2019~~as ~~that~~asset ~~comprised~~purchases ~~more~~which ~~than 10%~~resulted in the recognition of ~~revenue~~certain intangible assets.

~~The~~During ~~Company has purchase obligations related to minimum future purchase commitments for green coffee to be used in~~ the ~~Company’s~~ ~~commercial~~nine ~~coffee~~months ~~segment. Each individual contract requires the Company to purchase and take delivery of certain quantities at agreed upon prices and delivery dates. The contracts as of~~ ended September 30, ~~2019~~2020, ~~have minimum future purchase commitments of approximately $5,767,000. The contracts contain provisions whereby any delays in taking delivery of~~ the purchased product will result in additional charges related to the extended warehousing of the coffee product. The fees can average approximately $0.01 per pound for every month of delay. To date the Company ~~has~~did not ~~incurred~~have ~~such~~any ~~fees~~acquisitions.

~~Recently~~2019 ~~Issued Accounting Pronouncements~~Acquisitions

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. Subtopic 350-40 clarifies the accounting for implementation costs of a hosting arrangement that is a service contract and aligns that accounting, regardless of whether the arrangement conveys a license to the hosted software. The amendments in this update are effective for reporting periods beginning after December 15, 2019, with early adoption permitted. The Company does not expect this new guidance to have a material impact on its condensed consolidated financial statements. BeneYOU

InOn October ~~August~~31, ~~2018~~2019, the ~~FASB~~Company ~~issued~~entered ~~ASU No. 2018-13, Fair~~into ~~Value~~an ~~Measurement~~asset ~~(Topic 820):~~purchase ~~Disclosure~~agreement ~~Framework-Changes~~with toan ~~the~~effective ~~Disclosure~~date ~~Requirements for~~of November ~~Fair~~1, ~~Value~~2019, ~~Measurement. Topic~~with ~~820 removes~~BeneYOU, orLLC, ~~modifies~~a ~~certain~~Utah ~~current~~limited ~~disclosures~~liability company (“BeneYOU”), and ~~adds~~ ~~additional~~Ryan ~~disclosures.~~Anderson ~~The~~(the ~~changes~~“BeneYOU ~~are~~Representing ~~meant~~Party”), tofor ~~provide~~the ~~more relevant~~Company ~~information~~to ~~regarding~~acquire ~~valuation~~certain ~~techniques~~assets ~~and~~of ~~inputs~~BeneYOU ~~used~~ to ~~arrive~~including atall ~~measures~~ of ~~fair~~the ~~value,~~outstanding ~~uncertainty~~equity inof ~~the~~BeneYOU ~~fair~~Holding, ~~value measurements~~LLC, ~~and~~a ~~how~~Utah ~~changes~~limited inliability ~~fair~~company ~~value~~(“BeneYOU ~~measurements~~Holding”), ~~impact~~collectively ~~an entity's~~“BeneYOU”. ~~performance~~In ~~and~~accordance ~~cash~~with ~~flows. Certain~~the ~~disclosures in Topic~~asset ~~820 will~~purchase ~~need~~agreement, tothe beCompany ~~applied~~also onacquired aBeneYOU’s ~~retrospective basis~~customer and ~~others~~distributor onorganization alists, ~~prospective~~all ~~basis. Topic~~intellectual ~~820~~property, ~~is effective~~product ~~for~~formulations, ~~fiscal years~~products, ~~and~~product ~~interim~~packaging, ~~periods~~product ~~within~~registrations, ~~those~~licenses, ~~years~~marketing materials, ~~beginning~~ ~~after~~sales ~~December~~tools 15and swag, ~~2019. Early~~and ~~adoption~~all issaleable ~~permitted~~inventory. ~~The~~BeneYOU’s ~~Company~~flagship ~~expects to~~brand ~~adopt~~Jamberry ~~the~~has ~~provisions~~an extensive line of ~~this~~nail ~~guidance~~products onwith ~~January~~a 1,core ~~2020~~competency in social selling, and ~~is currently~~two ~~evaluating~~other brands including Avisae which focuses on the ~~impact~~gut ~~that~~health ~~Topic~~and ~~820~~the ~~will~~M.Global ~~have~~brand onof ~~its related~~products ~~disclosures~~that includes hydration products.

~~In January~~The ~~2017,~~Company ~~the~~is ~~FASB issued ASU~~obligated ~~No. 2017-04, Intangibles~~to ~~— Goodwill~~make ~~and~~monthly ~~Other~~payments ~~(Topic~~based ~~350):~~on ~~Simplifying~~a ~~the~~percentage ~~Test~~of ~~for Goodwill Impairment. This ASU simplifies~~ the ~~test~~BeneYOU ~~for~~distributor ~~goodwill impairment~~revenue byderived ~~removing Step 2~~ from ~~the~~sales ~~goodwill~~of ~~impairment test. Companies will now perform~~ the ~~goodwill~~Company’s ~~impairment~~products ~~test~~and ~~by comparing~~a ~~the~~percentage ~~fair value~~ of aroyalty ~~reporting~~revenue ~~unit~~derived ~~with~~from ~~its~~sales ~~carrying amount,~~of ~~recognizing~~BeneYOU anproducts ~~impairment~~until ~~charge~~the ~~for~~earlier of the ~~amount~~date bythat ~~which the~~is ~~carrying~~ten ~~amount~~years ~~exceeds~~from the ~~reporting~~closing ~~unit’s~~date ~~fair~~or ~~value not~~such totime ~~exceed~~as the ~~total~~Company ~~amount~~has ofpaid ~~goodwill allocated~~ to ~~that reporting~~BeneYOU ~~unit.~~aggregate Ancash ~~entity~~payments ~~still~~of ~~has~~ the ~~option~~BeneYOU todistributor ~~perform~~revenue ~~the qualitative~~and ~~assessment~~royalty ~~for~~revenue aequal ~~reporting unit~~ to ~~determine if~~ the ~~quantitative~~ ~~impairment~~maximum ~~test~~aggregate ispurchase ~~necessary.~~price ~~The~~of ~~amendments in this update are effective for goodwill impairment tests in fiscal years beginning after December 15~~$3, ~~2019 for~~500,000. ~~public~~In ~~companies~~addition, ~~with~~ ~~early~~the ~~adoption~~Company ~~permitted~~paid ~~for goodwill~~an ~~impairment~~acquisition ~~tests~~liability ~~performed~~payment ~~after~~of ~~January 1~~$200, ~~2017. The~~000 ~~Company~~on ~~does~~the ~~not~~closing ~~expect this~~date, ~~new~~which ~~guidance~~reduced tothe ~~have~~maximum aaggregate ~~material~~purchase ~~impact~~price onto ~~its condensed consolidated financial statements~~$3,300,000.

~~-15-~~The contingent consideration’s estimated fair value at the date of acquisition was approximately $2,648,000 as determined by management using a discounted cash flow methodology. The acquisition related costs, such as legal costs and other professional fees were minimal and expensed as incurred.

~~Table~~The purchase agreement contains customary representations, warranties and covenants of ~~Contents~~the Company, BeneYOU and the BeneYOU Representing Party. Subject to certain customary limitations the BeneYOU Representing Party have agreed to indemnify the Company and BeneYOU against certain losses related to, among other things, breaches of the BeneYOU Representing Party’s representations and warranties, certain specified liabilities and the failure to perform covenants or obligations under the purchase agreement.

~~Recently~~The ~~Adopted~~Company ~~Accounting~~recorded ~~Pronouncements~~the fair value at the date of acquisition of the acquired tangible and intangible assets and liabilities as follows (in thousands):

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployees Share-Based Payment Accounting. The intention of ASU 2018-07 is to expand the scope of Topic 718 to include share-based payment transactions in exchange for goods and services from nonemployees. These share-based payments will now be measured at grant-date fair value of the equity instrument issued. Upon adoption, only liability-classified awards that have not been settled and equity-classified awards for which a measurement date has not been established should be remeasured through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Topic 718 is effective for fiscal years beginning after December 15, 2018 and is applied retrospectively. The Company adopted the provisions of this guidance on January 1, 2019 and the adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

Contingent consideration		$	2,648
Aggregate purchase price		$	2,648

In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, Topic 220. The ~~amendments~~ infollowing ~~this~~table ~~Update~~summarizes ~~allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from~~ the ~~Tax~~fair ~~Cuts~~values ~~and~~of ~~Jobs Act (H.R.1) (~~the ~~Act). Consequently,~~assets ~~the~~acquired ~~amendments eliminate the stranded tax effects resulting from the Act~~ and ~~will~~liabilities ~~improve~~assumed the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Act, the underlying guidance that requires that the effect of a change in November ~~tax~~2019 ~~laws or rates be included~~ (in income from continuing operations is not affected. The amendments in this Update also require certain disclosures about stranded tax effects. Topic 220 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company adopted the provisions of this guidance on January 1, 2019 and the adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.thousands):

In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Topic 260 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted classified as liabilities. A company will recognize the value of a down round feature only when it is triggered, and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, such as warrants, an entity will treat the value of the effect of the down round, when triggered, as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. The guidance in Topic 260 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, and the guidance is to be applied using a full or modified retrospective approach. The Company adopted Topic 260, Topic 480 and Topic 815 effective January 1, 2019 and determined that it’s 2018 warrants were to no longer be classified as a derivative, as a result of the adoption and subsequent change in classification of the 2018 warrants, the Company reclassed approximately $1,494,000 of warrant derivative liability to equity.

Current assets (excluding inventory)	$	408
Inventory (net of $469 reserve)		441
Trademarks and trade name		343
Distributor organization		1,175
Customer relationships		44
Non-compete agreement		277
Goodwill		669
Current liabilities		(709	)
Net assets acquired	$	2,648

~~In February 2016, FASB~~The ~~established Topic 842, Leases,~~reported byfair ~~issuing~~value ~~ASU No. 2016-02, Leases~~of ~~(Topic 842) which~~intangible ~~required lessees~~assets toacquired ~~recognize~~of ~~leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01~~$1, ~~Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10~~839, ~~Codification~~000 ~~Improvements~~was ~~to Topic 842, Leases;~~determined ~~ASU No. 2018-11, Targeted Improvements;~~through ~~ASU~~the ~~No. 2018-20, Narrow-Scope~~use ~~Improvements~~of ~~for Lessors; and ASU 2019-01, Codification Improvements. The new standard establishes~~ a ~~right~~third-~~of-use~~party ~~model~~valuation ~~(ROU)~~firm ~~that~~using ~~requires~~various aincome ~~lessee to recognize a ROU asset~~ and ~~lease~~cost ~~liability~~approach ~~on the balance sheet for all leases with a term longer than 12 months~~methodologies. ~~Leases are classified as finance or operating~~Specifically, ~~with classification affecting~~ the ~~pattern~~intangibles ~~and classification~~identified ~~of expense recognition~~ in the ~~income~~acquisition ~~statement. The amendments~~ were ~~adopted~~trademarks byand ~~the Company on January~~trade 1name, ~~2019. A~~ ~~modified retrospective~~distributor ~~transition approach is required~~organization, ~~applying~~customer ~~the standard~~relationships toand ~~all~~non-compete ~~leases~~agreement ~~existing~~and atare ~~the~~being ~~date~~amortized ofover ~~initial~~their ~~application. The~~estimated ~~Company~~useful ~~elects~~life ~~to use its effective date as its date~~ of ~~initial application.~~5 ~~Consequently~~years, ~~financial~~9 ~~information will not be updated~~years, ~~and~~5 ~~the~~years ~~disclosures required under the new standard will not be provided for dates~~ and ~~periods~~4 ~~before January 1~~years, ~~2019~~respectively. ~~The~~ ~~new standard provides a number of optional practical expedients in transition.~~ The ~~Company~~straight-line ~~elected~~method ~~the “package~~is ofbeing ~~practical~~used ~~expedients”, which permits the Company not to reassess under the new standard prior conclusions about lease identification, lease classification~~ and ~~initial direction costs. In addition, the Company elected the practical expedient to use hindsight when determining lease terms. The practicable expedient pertaining to land easement~~ is ~~not~~believed ~~applicable~~ to ~~the~~approximate ~~Company. The Company continues to assess all of~~ the ~~effects of~~timeline ~~adoption,~~within ~~with~~which the ~~most~~economic ~~significant~~benefit ~~effect relating to the recognition~~ of ~~new ROU assets and lease liabilities on~~ the ~~Company’s~~ ~~balance~~underlying ~~sheet~~intangible ~~for~~asset ~~real~~will ~~estate~~be ~~operating leases~~realized. The Company adopted the provisions of this guidance on January 1, 2019 and accordingly recognized additional operating liabilities of approximately $5,509,000 with corresponding ROU assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases.

Goodwill of $669,000 was recognized as the excess purchase price over the acquisition-~~16-~~date fair value of net assets acquired. Goodwill is estimated to represent the synergistic values expected to be realized from the combination of the two businesses. The goodwill is expected to be deductible for tax purposes.

~~Table~~The pro-forma effect assuming the business combination with BeneYOU discussed above had occurred at the beginning of ~~Contents~~2019 is not presented as the information was not available.

- ~~Following the expiration of the Company’s Emerging Growth~~ 16- ~~Company filing status (“EGC”) on December 31, 2018 the Company adopted the following accounting pronouncements effective January 1, 2018.~~

In Table May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), to supersede nearly all existing revenue recognition guidance under GAAP. Topic 606 also requires new qualitative and quantitative disclosures, including disaggregation of ~~revenues and~~Contents descriptions of performance obligations. The Company adopted the provision of this guidance using the modified retrospective approach. The Company has performed an assessment of its revenue contracts as well as worked with industry participants on matters of interpretation and application and has not identified any material changes to the timing or amount of its revenue recognition under Topic 606. The Company’s accounting policies did not change materially as a result of applying the principles of revenue recognition from Topic 606 and are largely consistent with existing guidance and current practices applied by the Company. (See Note 3)

~~Reclassification~~Khrysos Global, Inc.

~~Certain account~~On February ~~balances~~12, ~~from~~2019, ~~prior~~the ~~periods~~Company ~~have~~and ~~been~~KII ~~reclassified~~entered ininto ~~these condensed~~an ~~consolidated~~asset ~~statements~~and toequity ~~conform~~purchase toagreement ~~current~~(the ~~period classifications. Such~~“AEPA”) ~~reclassifications~~with ~~include~~Khrysos ~~a presentation~~Global, ~~adjustment~~and toLeigh ~~increase~~Dundore ~~the~~and ~~change~~Dwayne inDundore (collectively, the ~~inventory reserve~~“Khrysos ~~and~~Representing toParty”), ~~decrease~~for ~~the~~KII ~~change~~to inacquire ~~inventory~~substantially inall ~~operating activities on~~ the ~~condensed~~assets ~~consolidated~~of ~~statement~~Khrysos ~~cash~~Global ~~flows~~and ~~for nine~~all ~~months~~the ~~ended~~outstanding ~~September~~equity ~~30,~~of ~~2018~~INXL byand ~~$1,530,000~~INXH. ~~This reclassification~~The ~~did~~collective ~~not~~business ~~affect~~manufactures ~~net~~proprietary ~~cash~~systems ~~used~~to inprovide ~~operating activities~~end-to-end ~~for~~extraction ~~the~~and ~~nine~~processing ~~months~~that ~~ended~~allow ~~September~~for ~~30,~~the ~~2018~~conversion orof ~~any changes~~hemp tofeed ~~the~~stock ~~financial~~into ~~statements~~hemp oroil ~~disclosures herein~~and hemp extracts.

~~Note~~The 2.aggregate ~~Basic~~consideration payable for the assets of Khrysos Global and ~~Diluted~~the ~~Net~~equity ~~Loss~~of ~~Per~~INXL ~~Share~~and INXH of $16,000,000 is to be paid as set forth under the terms of the AEPA and allocated between Khrysos Global and Leigh Dundore in such manner as they determine at their discretion.

~~Basic~~At ~~loss~~closing, ~~per~~Khrysos ~~share~~Global isand ~~computed~~the byKhrysos ~~dividing~~Representing ~~net~~Party ~~loss~~received ~~attributable to~~an ~~common~~aggregate ~~stockholders~~of by1,794,972 ~~the~~shares ~~weighted-average~~of ~~number~~the ofCompany’s common ~~shares~~ ~~outstanding~~stock ~~during~~which ~~the~~had ~~period.~~a ~~Diluted~~value ~~loss~~of ~~per~~$14,000,000 ~~share~~for ~~is computed~~the bypurposes ~~dividing~~of ~~net~~the ~~loss~~AEPA ~~attributable~~and to$500,000 ~~common~~in ~~stockholders by~~cash. ~~the~~The ~~sum~~fair value of the ~~weighted-average~~common ~~number~~stock ofcalculated ~~common~~as ~~shares outstanding~~part ~~during~~of the ~~period~~acquisition ~~and~~valuation ~~the~~was ~~weighted-average~~approximately ~~number~~$14,000,000. ~~of dilutive~~In ~~common~~addition, ~~share~~the ~~equivalents~~Company ~~outstanding~~agreed ~~during~~to ~~the~~pay ~~period, using~~ the ~~treasury~~sellers ~~stock~~$1,500,000 ~~method.~~in ~~Dilutive~~cash ~~common~~towards ~~share~~the ~~equivalents are~~AEPA ~~comprised~~ of ~~stock~~which ~~options~~$1,000,000 ~~restricted~~was ~~stock,~~paid ~~warrants, convertible~~to ~~preferred~~Khrysos ~~stock~~Global and ~~common~~the ~~stock~~Khrysos ~~associated~~Representing ~~with~~Party ~~the Company's~~during ~~convertible~~2019. ~~notes~~The ~~based~~remaining oncash ~~the~~payment ~~average~~of ~~stock~~$500,000 ~~price~~was ~~for each~~not ~~period~~paid ~~using~~as of the ~~treasury~~filing ~~stock~~date ~~method.~~herewith ~~Potentially~~as ~~dilutive shares~~the ~~are~~Company ~~excluded~~continues ~~from~~to evaluate the ~~computation~~terms of ~~diluted~~the ~~net~~acquisition ~~loss~~agreement ~~per share~~in ~~when~~conjunction ~~their~~with ~~effect~~the istermination ~~anti-dilutive.~~of Inthe ~~periods~~KII ~~where~~President, anoted ~~net loss~~below. isAt September ~~presented~~30, ~~all~~2020 ~~potentially~~and December ~~dilutive~~31, ~~securities~~2019, ~~are anti-dilutive~~the Company’s remaining liability of $500,000, was outstanding and ~~are~~recorded ~~excluded~~as ~~from~~accrued ~~the~~expenses ~~computation~~on ofthe ~~diluted~~condensed ~~net loss~~consolidated ~~per~~balance ~~share~~sheet.

~~Potentially~~The ~~dilutive~~AEPA ~~securities~~contains ~~for~~customary ~~the~~representations, ~~three~~warranties and ~~nine~~covenants ~~months~~of ~~ended September~~the 30Company, ~~2019~~Khrysos ~~were~~Global ~~10,988,108~~and the Khrysos Representing Party. ~~Potentially~~Subject ~~dilutive~~to ~~securities~~certain ~~were~~customary 8limitations Khrysos Global and the Khrysos Representing Party have agreed to indemnify the Company and KII against certain losses related to,~~053~~ among other things,~~426~~ ~~for~~ breaches of the ~~three~~Khrysos Representing Party’s representations and ~~nine~~warranties, ~~months~~certain ~~ended~~specified ~~September~~liabilities ~~30, 2018~~and the failure to perform covenants or obligations under the AEPA.

~~The calculation~~In ofconjunction ~~diluted~~with ~~loss per share requires that, to~~ the ~~extent the~~acquisition ~~average~~and ~~market~~organization ~~price~~ of ~~the~~KII, ~~underlying shares for~~ the ~~reporting period~~Company ~~exceeds~~retained ~~the~~Dwayne ~~exercise~~Dundore ~~price~~as ofPresident ~~the warrants and the presumed exercise~~ of ~~such~~KII. ~~securities~~Previously ~~are~~agreed-upon ~~dilutive~~equity tocompensation ~~loss per share for the period, an adjustment to net loss used~~ in the ~~calculation~~form ~~is required to remove the change in fair value~~ of ~~the~~ warrants, ~~net~~that ~~of tax~~was ~~from~~to ~~the~~be ~~numerator~~provided ~~for~~as ~~the~~part ~~period.~~of ~~Likewise, an adjustment to~~ the ~~denominator~~closing ~~is required~~ to ~~reflect~~Dwayne ~~the~~Dundore ~~related~~by ~~dilutive shares, if any, under~~ the ~~treasury~~Company ~~stock~~were ~~method~~mutually terminated. ~~During the three and nine months ended~~ Effective September 3017, ~~2019~~2020, ~~the~~Dwayne ~~Company~~Dundore ~~recorded~~was ~~net~~no oflonger ~~tax gain~~employed ofwith ~~approximately~~KII ~~$27,000~~or ~~and $1,529,000, on~~ the ~~valuation of the Warrant Derivative Liability which has a dilutive impact on loss per share, respectively~~Company.

	Three Months Ended September 30, (unaudited)		Nine Months Ended September 30, (unaudited)
	2019	2018	2019	2018
Loss per Share – Basic
Numerator for basic loss per share	$(7,959,000)	$(9,888,000)	$(20,308,000)	$(12,855,000)
Denominator for basic loss per share	30,035,182	21,686,085	28,924,305	20,986,151
Loss per common share - basic	$(0.27)	$(0.46)	$(0.70)	$(0.61)
Loss per Share - Diluted
Numerator for basic loss per share	$(7,959,000)	$(9,888,000)	$(20,308,000)	$(12,855,000)
Adjust: Fair value of dilutive warrants outstanding	(27,000)	-	(1,529,000)	-
Numerator for dilutive loss per share	$(7,986,000)	$(9,888,000)	$(21,837,000)	$(12,855,000)
Denominator for basic loss per share	30,035,182	21,686,085	28,924,305	20,986,151
Adjust: Incremental shares underlying “in the money” warrants outstanding	4,494	-	79,026	-
Denominator for dilutive loss per share	30,039,676	21,686,085	29,003,331	20,986,151
Loss per common share - diluted	$(0.27)	$(0.46)	$(0.75)	$(0.61)

The Company has estimated fair value at the date of acquisition of the acquired tangible and intangible assets and liabilities as follows (in thousands):

-17-

Present value of cash consideration	$	1,894
Estimated fair value of common stock issued		14,000
Aggregate purchase price	$	15,894

~~Table~~The following table summarizes the estimated and as adjusted fair values of ~~Contents~~the assets acquired and liabilities assumed in February 2019 (in thousands):

Note 3. Balance Sheet Account Detail

Current assets	$	636
Inventory		1,264
Property, plant and equipment		1,133
Trademarks and trade name		1,876
Customer-related intangible		5,629
Non-compete intangible		956
Goodwill		6,831
Current liabilities		(1,904	)
Notes payable		(527	)
Net assets acquired	$	15,894

~~Inventory~~The reported fair value of intangible assets acquired in the amount of $8,461,000 was determined through the use of a third-party valuation firm using various income and ~~Cost~~cost approach methodologies. Specifically, the intangibles identified in the acquisition were trademarks and trade name, customer relationships and non-compete agreement. The trademarks and trade name, customer relationships and non-compete agreement are being amortized over their estimated useful life of ~~Revenues~~8 years, 4 years and 6 years, respectively. The straight-line method is being used and is believed to approximate the timeline within which the economic benefit of the underlying intangible asset will be realized. In connection with the Company’s annual impairment test in 2019, the net book value of intangible assets of $8,461,000 was determined to be impaired. (See Note 5)

~~Inventory~~Goodwill ~~is stated at the lower~~ of ~~cost or net realizable value~~$6, ~~net~~831,000 ofwas arecognized ~~valuation~~as ~~allowance.~~the ~~Cost~~excess ispurchase ~~determined~~price ~~using~~over the ~~first-in,~~ ~~first~~acquisition-~~out~~date ~~method.~~fair ~~The~~value ~~Company~~of ~~records~~net anassets ~~inventory reserve~~acquired. ~~for~~In ~~estimated~~connection ~~excess~~with ~~and~~the ~~obsolete~~Company’s ~~inventory~~annual ~~based~~impairment ~~upon historical~~test ~~turnover,~~in ~~market conditions and assumptions about future demand for its products. When applicable~~2019, ~~expiration~~the ~~dates~~full amount of ~~certain~~ ~~inventory~~goodwill ~~items~~recognized ~~with~~was adetermined ~~definite~~to ~~life~~be ~~are~~impaired. ~~taken~~(See ~~into consideration.~~Note 5)

~~Inventories~~The ~~consist~~costs ofrelated to the ~~following~~acquisition (are included in ~~thousands):~~legal and accounting fees and were expensed as incurred.

	As of
	September 30, 2019	December 31, 2018
	(unaudited)
Finished goods	$14,124	$11,300
Raw materials	12,142	12,744
Total inventory	26,266	24,044
Reserve for excess and obsolete	(3,157)	(2,268)
Inventory, net	$23,109	$21,776

The pro-forma effect assuming the business combination with KII discussed above had occurred at the beginning of 2019 is not presented as the information was not available.

- ~~Cost of revenues includes the cost of inventory, shipping and~~ 17- ~~handling costs, royalties associated with certain products, transaction banking costs, warehouse labor costs and depreciation on certain assets.~~

Table of Contents ~~Leases~~

~~Generally,~~Note ~~the Company leases certain office space, warehouses, distribution centers, manufacturing centers, and equipment~~3. Related ~~A contract~~Party ~~is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.~~Transactions

~~In general~~Hernandez, ~~the Company’s leases include one or more options to renew~~Hernandez, ~~with~~Export ~~renewal~~Y ~~terms that generally vary from one to ten years. The exercise of lease renewal options is generally at the~~ Company’s ~~sole discretion. The depreciable life of assets~~ and ~~leasehold~~ ~~improvements~~H&H ~~are~~Coffee ~~limited~~Group byExport ~~the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise~~Corp.

The Company’s ~~lease~~wholly-owned ~~agreements~~subsidiary, doCLR, ~~not~~is ~~contain~~associated ~~any~~with ~~material residual~~Hernandez, ~~value~~Hernandez, ~~guarantees~~Export orY ~~material~~Company ~~restrictive covenants~~(“H&H”), a Nicaragua company, through sourcing arrangements to procure Nicaraguan grown green coffee beans. As part of the 2014 Siles acquisition, CLR engaged the owners of H&H, Alain Piedra Hernandez (“Mr. Hernandez”) and Marisol Del Carmen Siles Orozco (“Ms. Orozco”), as employees to manage Siles.

~~Leases~~H&H is a sourcing agent that purchases raw green coffee beans from the local producers in Nicaragua and supplies CLR’s mill with anunprocessed ~~initial~~green ~~term~~coffee ~~of twelve months~~for orprocessing. ~~less~~CLR ~~are~~ does not ~~recorded~~have a direct relationship with the local producers and is dependent on H&H to negotiate agreements with local producers for the ~~Company~~ supply and provide to CLR’s ~~condensed consolidated balance~~mill ~~sheets,~~raw unprocessed green coffee to CLR’s mill in a timely and efficient manner. Substantially all the ~~Company~~green ~~does~~coffee ~~not~~processed ~~separate nonlease~~through ~~components~~the ~~from~~Siles ~~lease~~mill ~~components~~was coffee assigned to CLR for processing. ~~The~~During ~~Company~~the three and nine months ended September 30, 2019, CLR’s ~~lease~~ ~~assets~~largest ~~and~~customer ~~liabilities~~for ~~recognized~~green ~~within~~coffee ~~its~~beans ~~condensed consolidated~~was ~~balance~~H&H ~~sheets~~Coffee ~~were~~Group asExport ~~follows~~Corp. (~~in thousands~~“H&H Export”):, a company related to H&H. In consideration for H&H's sourcing of green coffee for processing within CLR’s mill, CLR and H&H share in the green coffee profit from milling operations.

Leases	Classification	September 30, 2019
		(unaudited)
Assets
Operating lease right-of-use assets	Operating lease right-of-use assets	$7,443
Finance lease right-of-use assets	Property and equipment, net at cost, net of accumulated depreciation (1)	1,929
Total leased assets		$9,372
Liabilities
Current
Operating	Operating lease liabilities, current portion	$1,484
Finance	Finance lease liabilities, current portion	921
Noncurrent
Operating	Operating lease liabilities, net of current portion	5,959
Finance	Finance lease liabilities, net of current portion	593
Total lease liabilities		$8,957

During the three and nine months ended September 30, 2020, CLR had purchases from H&H of approximately $1,072,000 and $2,847,000, respectively, and had purchases from H&H Export of $229,000 and $700,000, respectively. CLR made purchases from H&H of approximately $2,828,000 during the nine months ended September 30, 2019.

~~(1)~~During ~~Finance~~the ~~lease~~three ~~right-of-use~~months ~~assets~~ended September ~~are~~30, 2020 and 2019, CLR recorded net ofrevenues ~~accumulated~~from ~~amortization~~H&H Export of approximately $~~710~~211,000 asand of$29,000, ~~September~~respectively, 30and $535,000 ~~2019~~and $6,416,000, respectively, for the nine months then ended.

~~-18-~~At September 30, 2020 and December 31, 2019, CLR's accounts receivable balances for customer related revenue from H&H Export were approximately $7,871,000 and $8,707,000 of which the full amounts were past due at the corresponding periods. As a result, the Company reserved $7,871,000 as bad debt related to the accounts receivable balances for both periods, which was net of collections through December 31, 2020.

~~Table~~At September of30, ~~Contents~~2020, the following balances were recorded from transactions with H&H:

~~Lease~~● ~~cost~~Prepaid isexpenses ~~recognized~~and onother acurrent ~~straight-line~~assets ~~basis~~of ~~over~~approximately ~~the~~$1,017,000 ~~lease term~~related ~~(in~~to ~~thousands):~~green coffee acquisition,

		Three Months Ended		Nine Months Ended
Lease Cost	Classification	September 30, 2019 (unaudited)	September 30, 2018 (unaudited)	September 30, 2019 (unaudited)	September 30, 2018 (unaudited)
Operating lease cost	SG&A expenses	$420	$-	$962	$-
Finance lease cost
Amortization of leased assets	Depreciation and amortization	84	-	274	-
Interest on lease liabilities	Net interest expense	30	-	101	-
Net lease cost		$534	$-	$1,337	$-

●

accounts payable of $230,000 related to billings for freight and other charges by H&H,

As● ofaccrued ~~September~~expenses ~~30,~~of ~~2019~~$544,000 ~~scheduled~~primarily ~~annual~~related ~~lease~~to ~~payments~~mill ~~were~~operation ~~as follows~~costs, ~~(unaudited) (in thousands):~~and

	Operating Leases	Finance Leases
Year ending December 31:
October 1 through December 31, 2019	$474	$402
2020	1,780	860
2021	1,520	332
2022	1,086	18
2023	628	13
Thereafter	3,557	9
Total lease payments	9,045	1,634
Less imputed interest	(1,602)	(120)
Present value of lease liabilities	$7,443	$1,514

●

accrued expenses offset of $994,000 related to overpaid cost of green coffee.

H&H Finance lease right-of-use assets are amortized over their estimated useful life, as the Company does believe that it is reasonably certain that options which transfer ownership will be exercised. In general, for the majority of the Company’s material leases, the renewal options are not included in the calculation of its right-of-use assets and lease liabilities, as the Company does not believe that it is reasonably certain that these renewal options will be exercised. Periodically, the Company assesses its leases to determine whether it is reasonably certain that these options and any renewal options could be reasonably expected to be exercised.Agreement

~~The~~In March ~~majority~~2020, ofCLR entered into a Finance, Security and ARAP Monetization Agreement (the ~~Company’s~~“H&H ~~leases~~Finance ~~are~~Agreement”) ~~for~~with H&H ~~real~~Export ~~estate~~Y ~~and equipment~~CIA. InLTDA ~~general~~and H&H Export (collectively, the ~~individual~~“H&H ~~lease~~Export ~~contracts~~Group”). doThe ~~not~~ H&H Finance Agreement was designed to provide ~~information~~the ~~about~~Company with access to a continued supply of unprocessed green coffee beans for the ~~rate~~2020 ~~implicit~~growing inseason and a solution for funding of the ~~lease.~~continued ~~Because~~ operations of the Company’s isgreen ~~not~~coffee ~~able~~distribution business. Pursuant to ~~determine~~the Agreement, the ~~rate~~H&H ~~implicit~~Export inGroup ~~its leases,~~had itagreed ~~instead~~to ~~generally~~allow ~~uses~~a ~~its~~Nicaraguan ~~incremental~~agency ~~borrowing~~(the ~~rate~~“Nicaraguan Agency”) to ~~determine~~ advance on behalf of the ~~present~~H&H ~~value~~Export Group, approximately $22,000,000 of ~~lease~~the ~~liabilities.~~$30,100,000 Inof ~~determining~~ accounts receivable owed by H&H Export to CLR for its ~~incremental~~purchase ~~borrowing~~of ~~rate~~processed green coffee during the 2019 season. The Nicaraguan Agency also entered into a $46,500,000 credit facility with the ~~Company~~H&H ~~reviewed~~Export Group to provide funding for the ~~terms~~H&H Export Group’s future coffee purchases of ~~its~~ ~~leases,~~unprocessed ~~its~~green ~~senior~~coffee ~~secured~~from ~~credit~~independent ~~facility~~producers. Of the 2020 sales amounts to be billed by CLR for future coffee purchases of processed coffee, ~~swap~~CLR ~~rates~~was to be paid an additional amount, ~~and other~~at ~~factors~~a rate of $0.225 ~~The~~per ~~weighted-average~~pound of processed green coffee shipped to customers, to be applied to the remaining ~~lease~~outstanding ~~term~~2019 accounts receivable balance owed by H&H Export to CLR. Until such time as the entire accounts receivable balance is paid in full, H&H Export has agreed not take any profit interest. However, given the COVID crisis’ impact on the 2020 growing season and ~~weighted-average~~ ~~discount~~the ~~rate~~continued ~~used~~delay in full payment of the 2020 receivable balances, management considered H&H Export accounts receivable impaired at September 30, 2020. Subsequent to ~~calculate~~the H&H Finance Agreement, CLR adopted the ~~present~~recognition ~~value~~ of ~~lease~~recording ~~liabilities~~revenues ~~are~~at asnet ~~follows:~~for sales between CLR and H&H Export.

Lease Term and Discount Rate	September 30, 2019 (unaudited)
Weighted-average remaining lease term (years)
Operating leases	7.5
Finance leases	1.9
Weighted-average discount rate
Operating leases	5.5%
Finance leases	4.6%

In March 2021, CLR entered into a master relationship agreement with the owners of H&H in order to memorialize the various agreements and modifications to those agreements. (See Note 13)

~~Revenue~~H&H ~~Recognition~~Export Note Receivable

~~Direct~~In December ~~Selling~~2018, CLR advanced $5,000,000 to H&H Export to provide services in support of a five-year contract for the sale and processing of 41 million pounds of green coffee beans on an annual basis. The services include providing hedging and financing opportunities to producers and delivering harvested coffee to the Company’s mills. In March 2019, this advance was converted to a $5,000,000 loan agreement as a note receivable and bears interest at 9.00% per annum and is due and payable by H&H Export at the end of each year’s harvest season, but no later than October 31 for any harvest year. In October 2019, CLR and H&H Export amended the March 2019 agreement in terms of the maturity date such that all outstanding principal and interest was due and payable at the end of the 2020 harvest (or when the 2020 season’s harvest was exported and collected), but never to be later than November 30, 2020.

~~Direct~~Management ~~distribution~~reviewed ~~sales~~the ~~are~~security ~~made~~against ~~through~~ the ~~Company’s network~~loan ~~(direct~~and ~~selling~~the ~~segment),~~impact ~~which~~of isthe aunderlying ~~web-based~~COVID ~~global network~~crisis ~~of customers~~ and ~~distributors.~~determined ~~The~~that ~~Company’s independent~~the ~~sales~~full ~~force~~amount ~~markets~~of athe ~~variety~~note ofreceivable ~~products~~including tointerest ~~an array~~ of ~~customers~~approximately $5,677,000 ~~through friend-to-friend marketing~~ and ~~social networking.~~$5,340,000 ~~The~~was ~~Company~~not ~~considers~~collected ~~itself~~at September to30, be2020 anand December ~~e-commerce company~~31, ~~whereby~~2019, ~~personal~~respectively, ~~interaction is provided to customers by its independent sales network. Sales generated from direct distribution includes; health~~ and ~~wellness,~~therefore ~~beauty~~the ~~product~~full ~~and~~amounts ~~skin care,~~were ~~scrap~~recognized ~~booking~~as ~~and~~an ~~story~~allowance ~~booking~~for ~~items,~~collectability ~~packaged~~at ~~food~~the ~~products and~~end ~~other~~of ~~service-based~~each ~~products~~respective period.

- ~~Revenue is recognized when the Company satisfies its performance~~ 18- obligations under the contract. The Company recognizes revenue by transferring the promised products to the customer, with revenue recognized at shipping point, the point in time the customer obtains control of the products. The majority of the Company’s contracts have a single performance obligation and are short term in nature. Sales taxes in domestic and foreign jurisdictions are collected from customers and remitted to governmental authorities, all at the local level, and are accounted for on a net basis and therefore are excluded from revenues.

~~-19-~~ Table of Contents

~~Table~~Mill ofConstruction ~~Contents~~Agreement between CLR and H&H

~~Commercial~~In January ~~Coffee~~2019, to accommodate CLR’s green coffee purchase contract, CLR entered into a mill construction agreement with H&H and H&H Export, Mr. Hernandez and Ms. Orozco (together with H&H, collectively referred to as the “Nicaraguan Partner”), pursuant to which the Nicaraguan Partner agreed to transfer a 45-acre ~~Roasted~~tract ~~Coffee~~of land in Matagalpa, Nicaragua (the “Matagalpa Property”) to be owned 50% by the Nicaraguan Partner and 50% by CLR. In consideration for the land acquisition the Company issued to H&H Export, 153,846 shares of common stock. The fair value of the shares issued was $1,200,000 and was based on the stock price on the date of issuance of the shares. In addition, the Nicaraguan Partner and CLR agreed to contribute $4,700,000 each toward construction of a processing plant, office, and storage facilities on the Matagalpa Property (collectively the “Matagalpa Mill”) for processing coffee in Nicaragua. The addition of the mill will accommodate CLR’s green coffee contract commitments.

~~The~~For ~~Company engages in~~ the ~~commercial~~three ~~sale~~and ofnine ~~roasted~~months ~~coffee through~~ended September ~~its~~30, ~~subsidiary~~2020, CLR, ~~which~~made ispayments ~~sold under a variety~~ of ~~private~~ ~~labels~~approximately ~~through~~$706,000 ~~major national sales outlets~~ and ~~to customers~~$1,506,000, ~~including~~respectively, ~~cruise~~towards ~~lines~~the ~~and~~Matagalpa ~~office~~mill ~~coffee~~project. ~~service operators,~~For ~~and~~the ~~under~~nine ~~its~~months ~~own~~ended September ~~Café La Rica brand~~30, ~~Josie’s Java House Brand~~2019, ~~Javalution~~CRL ~~brands~~made ~~and~~payments ~~Café~~toward ~~Cachita~~the asMatagalpa ~~well as~~mill ~~through~~project ~~its~~of ~~distributor network within the direct selling segment~~$2,150,000.

~~Revenue~~At September is30, ~~recognized~~2020, ~~when~~CLR ~~the~~contributed ~~title~~a ~~and~~total ~~risk~~ of ~~loss~~$4,556,000 istowards ~~passed to~~ the ~~customer~~construction ~~under the terms~~ of the ~~shipping~~Matagalpa ~~arrangement~~mill project, ~~typically,~~ ~~FOB~~which ~~shipping~~is ~~point.~~included Atin ~~this~~construction ~~point~~in ~~the~~process ~~customer~~within ~~has~~property ~~a present~~and ~~obligation to pay~~equipment, ~~takes~~net ~~physical~~on ~~possession of~~ the ~~product,~~ ~~takes~~Company's ~~legal~~consolidated ~~title~~balance ~~to the product~~sheets, ~~bears~~and ~~the~~paid ~~risks~~a ~~and rewards~~total of ~~ownership~~$1,304,000 ~~and~~for asoperating ~~such,~~equipment. ~~revenue~~At September ~~will~~30, be2020, ~~recognized~~the ~~at this~~Nicaraguan ~~point~~Partner incontributed ~~time.~~a ~~Sales~~total ~~taxes~~of in$2,528,000 ~~domestic~~towards ~~and~~the ~~foreign jurisdictions~~Matagalpa ~~are~~Mill ~~collected~~project. ~~from~~At ~~customers~~the ~~and~~filing ~~remitted~~date ~~to governmental~~of ~~authorities,~~this ~~all~~Quarterly atReport ~~the~~on ~~local~~Form ~~level~~10-Q, ~~and~~the ~~are~~Matagalpa ~~accounted for~~Mill onwas astill ~~net~~incomplete ~~basis~~for ~~and~~total ~~therefore are excluded from revenues~~operations.

~~Commercial~~In January ~~Coffee~~2019, -the ~~Green~~Company ~~Coffee~~issued 295,910 shares of common stock to H&H Export to pay for certain working capital, construction and other payables. In connection with the issuance, the Company over issued 121,649 shares of common stock, resulting in the net issuance of common stock to settle payables of 174,261 shares. H&H Export agreed to reimburse CLR for the over issuance of the 121,649 shares of common stock in cash. At September 30, 2020 and December 31, 2019, the value of the shares was approximately $73,000 and $397,000, respectively, based on the stock price at the respective periods. Management reviewed the amount due in conjunction with the impact of the underlying COVID crisis and has determined that the full receivable balances were more than likely to be uncollected at September 30, 2020 and December 31, 2019, and therefore the full amount was recognized as an allowance for collectability at the respective periods.

~~The~~Amended ~~commercial~~Operating ~~coffee~~and ~~segment~~Profit-Sharing ~~includes~~Agreement ~~the~~between ~~sale~~CLR ofand ~~green coffee beans, which are sourced from the Nicaraguan rainforest.~~H&H

~~Revenue~~In January is2019, ~~recognized~~CLR ~~when~~entered ~~the~~into ~~title~~an ~~and~~amendment ~~risk~~to ofthe March ~~loss~~2014 isoperating ~~passed~~and ~~to the~~profit-sharing ~~customer~~agreement ~~under~~with the ~~terms~~owners of ~~the~~H&H. ~~shipping~~In ~~arrangement~~addition, ~~typically,~~ ~~FOB~~CLR ~~shipping~~and ~~point~~H&H, Mr. AtHernandez ~~this~~and ~~point~~Ms. ~~the~~Orozco ~~customer~~restructured ~~has~~their ~~a present~~profit-sharing ~~obligation~~agreement in regard to ~~pay,~~profits ~~takes~~from ~~physical~~green ~~possession~~coffee sales and processing that increased CLR’s profit participation by an additional 25%. Under the new terms of the ~~product,~~ ~~takes~~agreement ~~legal~~with ~~title~~respect to ~~the~~profit ~~product,~~generated ~~bears~~from ~~the~~green ~~risks~~coffee sales and ~~rewards~~ ofprocessed ~~ownership,~~from ~~and~~La asPita ~~such~~or the Matagalpa Mill, ~~revenue~~now will beprovide ~~recognized~~for ~~at this~~a ~~point~~split inof ~~time.~~profits ~~Sales~~of ~~taxes~~75% into ~~domestic~~CLR and ~~foreign jurisdictions~~25% to the Nicaraguan Partner, after certain conditions are ~~collected~~met. Profit-sharing ~~from~~income ~~customers~~for the three and ~~remitted~~nine ~~to governmental~~months ~~authorities~~ended September 30, ~~all~~2020 atwas ~~the~~approximately ~~local level~~$424,000 and ~~are~~$635,000, ~~accounted for~~respectively. onThe aprofit-sharing ~~net~~expense ~~basis~~for the three and ~~therefore~~nine ~~are~~months ~~excluded~~ended September ~~from revenues~~30, 2019 was approximately $863,000 and $1,331,000, respectively.

~~Commercial~~Joint Venture Agreement in Nicaragua for Hemp Processing Center between the CLR and KII and Nicaraguan partner

~~The~~In April ~~commercial~~and July ~~hemp~~2020, ~~segment~~CLR ~~provides end to end extraction~~ and ~~processing~~ ~~via~~KII (the ~~Company’s~~U.S. ~~proprietary~~Partners) ~~systems~~entered ~~that~~into ~~allow for~~agreements (the ~~conversion~~“Hemp ofJoint ~~hemp~~Venture ~~feedstock~~Agreements”) ~~into~~with ~~hemp~~H&H ~~oil~~Export and ~~hemp extracts~~Fitracomex, Inc. ~~The~~ ~~primary~~(“Fitracomex”) ~~focus~~(collectively of“The ~~the~~Nicaraguan ~~segment~~JV isPartners”) toand ~~generate revenue~~established ~~through~~the ~~sales~~Nicaraguan ofHemp ~~extraction~~Grow ~~services~~ and ~~end~~Extractions toGroup ~~end processing~~joint ~~services~~venture ~~for~~ (the ~~conversion~~“Hemp ofJoint ~~hemp~~Venture”). ~~feedstock~~Fitracomex ~~and~~is ~~hemp oil~~indirectly ~~into~~related ~~sellable ingredients. Additionally,~~ the Company ~~offers~~ ~~various~~due ~~rental,~~to ~~sales,~~its ~~and~~relationship ~~service~~with ~~programs~~H&H ofand ~~the Company’s~~is ~~extraction~~being ~~and~~treated ~~processing~~as ~~systems~~a related party.

~~Segment~~In ~~Revenue~~accordance with the terms of the Hemp Joint Venture Agreements, H&H Export will contribute the 2,200-acre Chaguitillo Farms in Sebaco-Matagalpa, Nicaragua which will be owned by H&H Export and the U.S. Partners on a 50/50 basis separate from the Hemp Joint Venture should the Hemp Joint Venture determine to sell the land in the future.

The ~~Company~~Nicaraguan ~~operates~~JV inPartners ~~three~~will ~~primary~~contribute ~~segments:~~ the ~~direct~~excavation ~~selling segment~~and ~~where~~preparation ~~products~~for ~~are~~hemp ~~offered~~growth ~~through~~of athe ~~global~~2,200 ~~distribution network~~acres, installation of ~~preferred~~electrical ~~customers~~service, and ~~distributors,~~ the ~~commercial coffee~~construction ~~segment~~of ~~where~~45,000 ~~products~~square ~~are~~feet ~~sold~~of ~~directly~~buildings to ~~businesses~~be used for office, processing, storage, drying and ~~the~~ ~~commercial~~green ~~hemp~~house ~~segment~~space.

- ~~The following table summarizes revenue disaggregated by segment (in~~ 19- ~~thousands):~~

	Three Months Ended September 30, (unaudited)		Nine Months Ended September 30, (unaudited)
	2019	2018	2019	2018
Direct Selling Segment	$30,256	$34,280	$95,800	$106,437
Commercial Coffee - roasted coffee	2,934	3,017	9,003	8,597
Commercial Coffee - green coffee	643	1,785	38,676	11,297
Commercial Hemp	184	-	525	-
Total revenue	$34,017	$39,082	$144,004	$126,331

Table of Contents

~~-20-~~The U.S. Partners will contribute all the necessary extraction equipment to convert hemp to crude oil and will also provide the feminized hemp seeds for the pilot grow program, along with their expertise in the hemp business. The U.S. Partners will also provide all necessary working capital as required.

~~Table~~In April 2020, the Company issued 1,500,000 shares of ~~Contents~~restricted common stock to Fitracomex in accordance with the Hemp Joint Venture Agreements. The fair value of the shares at issuance was approximately $2,490,000. The Company also agreed to issue warrants to Fitracomex for the purchase 5,000,000 shares of the Company’s common stock at an exercise price of $1.50, exercisable for a term of five years after completion of the construction and upon the approval of the Company’s stockholders. At December 31, 2020, the Company reserved the full amount of the investment issued to Fitracomex.

~~Contract~~The ~~Balances~~ U.S. Partners and H&H Export will serve as the managing partners and all business decisions will require prior consent and agreement of both parties. The net profits and net losses for each fiscal period shall be allocated twenty five percent to the Nicaraguan JV Partners and seventy five percent to the U.S. Partners. At the filing date of this Quarterly Report on Form 10-Q, the Hemp Joint Venture is currently being assessed for changing market conditions related to the hemp industry, and as a result of the fluctuating indicators the Company is considering the timing of entering the market space in regard to the launch of this project.

~~Timing~~Other ofAgreements ~~revenue~~between ~~recognition~~CLR, ~~may~~H&H ~~differ~~and ~~from~~H&H ~~the timing of invoicing to customers. The Company records contract assets when performance obligations are satisfied prior to invoicing.~~Export

~~Contract~~In January ~~liabilities~~2019, ~~are~~H&H ~~reflected~~Export assold ~~deferred~~to ~~revenues~~CLR inits ~~current liabilities~~espresso onbrand ~~the~~Café ~~Company’s~~Cachita ~~condensed consolidated balance sheets and include deferred revenue and customer deposits. Contract liabilities relate to payments invoiced or received~~ in ~~advance~~consideration of ~~completion~~ ofthe ~~performance~~issuance ~~obligations~~of ~~and~~100,000 ~~are~~shares ~~recognized~~of ~~as revenue upon~~ the ~~fulfillment~~Company’s ofcommon ~~performance obligations~~stock. ~~Contract liabilities~~The ~~are~~shares ~~classified~~of ascommon ~~short-term~~stock asissued ~~all~~were ~~performance obligations~~valued ~~are~~at ~~expected~~$7.50 toper ~~be satisfied within the next 12 months~~share.

AsIn May ~~of September 30~~2017, ~~2019~~CLR ~~and~~entered ~~December~~a 31settlement agreement, ~~2018~~as amended, ~~the~~with ~~balance~~Mr. ~~in deferred~~Hernandez ~~revenues~~who was ~~approximately~~issued ~~$2,005,000~~a ~~and~~warrant $2for the purchase of 75,~~312,~~000~~, respectively.~~ ~~The~~shares ~~Company~~of ~~records~~the ~~deferred~~Company’s ~~revenue~~common ~~related~~stock toat ~~its direct~~a ~~selling~~price ~~segment~~of ~~which~~$2.00 iswith ~~primarily~~an ~~attributable~~expiration todate ~~the Heritage~~of ~~Makers~~three ~~product~~years, ~~line~~in ~~and~~lieu ~~represents~~of ~~Heritage~~an ~~Maker’s~~ obligation ~~for~~due ~~points~~from ~~purchased~~CLR byto ~~customers~~H&H ~~that~~as ~~have~~relates ~~not~~to ~~yet~~a ~~been redeemed~~sourcing ~~for~~and ~~product~~supply agreement with H&H and H&H Export. InThe ~~addition,~~warrants ~~deferred~~were ~~revenues~~outstanding ~~include~~at December ~~future Company~~31, ~~convention~~2019 and ~~distributor~~expired ~~events~~in May 2020.

~~Deferred~~Other ~~revenue~~Related ~~related~~Party to the commercial coffee segment represents deposits on customer orders that have not yet been completed and shipped. Revenue is recognized when the title and risk of loss is passed to the customer under the terms of the shipping arrangement FOB shipping point. (See Note 1)Transactions

OfRichard the deferred revenue balance as of the year ended December 31, 2018, the Company recognized revenue of approximately $338,000 and $1,070,000 from the Heritage Makers product line during the three and nine months ended September 30. 2019, respectively. The company recognized approximately $228,000 of deferred revenue from the direct selling segment for the three and nine months ended September 30, 2019.Renton

~~There were~~Richard noRenton ~~deferred~~was ~~revenues~~a ~~recognized~~member ~~with~~of the ~~commercial~~board ~~coffee~~of or directors until February 11, 2020 and owned WVNP, Inc., a supplier of certain inventory items sold by the ~~commercial~~Company. The ~~hemp~~Company ~~segments~~made purchases from WVNP Inc. of approximately $56,000 during the three months ended March 31, 2020. The Company made purchases from WVNP Inc. of approximately $8,000 and $120,000 for the three and nine months ended September 30, 2019, respectively. In addition, Mr. Renton is a distributor of the Company and was paid distributor commissions of $81,000 for the three months ended March 31, 2020.

~~Note~~Carl 4.Grover ~~Acquisitions~~(Estate ~~and~~of ~~Business~~Carl ~~Combinations~~Wilford Grover)

~~The~~Mr. ~~Company~~Grover ~~accounts~~was ~~for business combinations under~~ the ~~acquisition~~ ~~method~~sole ~~and~~beneficial ~~allocates~~owner the total purchase price for acquired businesses to the tangible and identified intangible assets acquired and liabilities assumed, based on their estimated fair values. When a business combination includes the exchange of ~~the~~ ~~Company’s~~in ~~common~~excess ~~stock, the value~~ of ~~the~~5% ~~common stock is determined using the closing market price as~~ of the date such shares were tendered to the selling parties. The fair values assigned to tangible and identified intangible assets acquired and liabilities assumed are based on management or third-party estimates and assumptions that utilize established valuation techniques appropriate for the Company’s ~~industry~~outstanding ~~and~~common ~~each acquired~~shares ~~business.~~at September ~~Goodwill is recorded as the excess~~30, if2020 ~~any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible~~ and December ~~identified intangible assets acquired. A liability for contingent consideration~~31, ~~if applicable, is recorded at fair value as of the acquisition date~~2019. InAt September ~~determining the fair value of such contingent consideration~~30, ~~management~~2020 ~~estimates the amount to be paid based on probable outcomes~~ and December ~~expectations~~31, ~~on financial performance of the related acquired business. The fair value of contingent consideration is reassessed quarterly~~2019, ~~with any change in~~ the ~~estimated~~balance ~~value charged to operations in the period~~ of the ~~change.~~borrowing ~~Increases~~from ~~or decreases in~~ the ~~fair~~credit ~~value~~agreement of the ~~contingent~~ ~~consideration~~Company ~~obligations~~entered ~~can~~into ~~result~~with ~~from~~Mr. ~~changes~~Grover in ~~actual~~ December or2018 ~~estimated~~was ~~revenue~~approximately ~~streams~~$4,763,000 ~~discount~~and ~~periods~~$4,085,000, ~~discount rates~~respectively, ~~and~~net ~~probabilities~~of ~~that~~debt ~~contingencies~~discounts. ~~will~~(See ~~be met.~~Note 6)

~~During~~In July 2019, Mr. Grover acquired 600,242 shares of the ~~nine~~Company's ~~months~~common ~~ended~~stock ~~September~~upon 30the partial exercise at $4.60 per share of a 2014 warrant to purchase 782,608 ~~2019~~shares of common stock held by him. In connection with such exercise, the Company ~~entered~~ ~~into~~received ~~one~~approximately ~~acquisition~~$2,761,000 ~~which~~from isMr. ~~detailed~~Grover, ~~below~~issued to Mr. ~~The acquisition~~Grover ~~was~~50,000 ~~conducted~~shares inof restricted common stock as an ~~effort~~inducement fee and agreed to ~~expand~~extend the ~~Company’s~~ ~~operations~~expiration ~~into~~date of the July ~~field~~2014 warrant held by him to December 15, 2020, and the exercise price of ~~commercial~~the ~~hemp business~~warrant was adjusted to $4.75 with respect to 182,366 shares of common stock remaining for exercise thereunder.

~~2019~~Paul ~~Acquisitions~~Sallwasser

~~Khrysos~~Mr. ~~Global~~Paul Sallwasser is a member of the board directors, ~~Inc~~and prior to joining the Company’s board of directors he acquired in the Company’s 2014 private placement a note in the principal amount of $75,000 convertible into 10,714 shares of common stock and a warrant exercisable for 14,673 shares of common stock. Mr. Sallwasser additionally acquired in the Company’s 2017 private placement a note in the principal amount of $38,000 convertible into 8,177 shares of common stock and a warrant issued to purchase 5,719 shares of common stock. Mr. Sallwasser also acquired, as part of the 2017 private placement in exchange for the 2015 note that he acquired in the Company’s 2015 private placement, an additional 2017 note in the principal amount of $5,000 convertible into 1,087 shares of common stock and a 2017 warrant exercisable for 543 shares of common stock.

OnIn March ~~February 12~~2018, ~~2019,~~ the Company ~~and~~completed ~~Khrysos~~its ~~Industries,~~Series ~~Inc.,~~B ~~a Delaware~~offering ~~corporation~~ and ~~wholly-owned~~in ~~subsidiary~~accordance ofwith the ~~Company (“KII”)~~terms ~~entered~~of ~~into an Asset and Equity Purchase Agreement (~~the ~~“AEPA”)~~2017 ~~with~~notes, ~~Khrysos Global, Inc~~Mr., ~~a Florida~~Sallwasser’s ~~corporation~~2017 ~~(“Seller”),~~notes ~~Leigh~~converted ~~Dundore (“LD”), and Dwayne Dundore (the “Representing Party”) for KII~~ to ~~acquire~~9,264 ~~substantially~~shares ~~all the assets~~ of ~~Seller~~ ~~and all~~ the ~~outstanding~~Company’s ~~equity~~common ~~of INXL Laboratories, Inc~~stock., ~~a Florida corporation (“INXL”) and INX Holdings, Inc~~Mr., ~~a Florida~~Sallwasser’s ~~corporation~~2017 ~~(“INXH”).~~warrants ~~The business~~ of ~~the Seller,~~to ~~INXL~~purchase ~~and~~an ~~INXH~~aggregate ~~collectively~~6,262 ~~acquired~~shares ~~by the Company provides end to end extraction and processing via proprietary systems that allow for the conversion~~ of ~~hemp~~common ~~feedstock~~stock ~~into~~expired ~~hemp oil~~in July and August ~~hemp extracts~~2020. ~~Additionally, KII offers various rental, sales, and service programs of KII’s extraction and processing systems.~~

~~-21-~~In August 2019, Mr. Sallwasser acquired 14,673 shares of the Company's common stock upon the exercise of his 2014 warrant. In connection with the exercise, Mr. Sallwasser applied approximately $67,000 of the proceeds of his 2014 note due to him from the Company as consideration for the warrant exercise. The warrant exercise proceeds to the Company would have been approximately $67,000. The Company paid the balance owed to him under his 2014 note including accrued interest of approximately $8,000.

~~Table~~At September 30, 2020 and 2019, Mr. Sallwasser owned 76,924 shares of ~~Contents~~common stock and options to purchase an aggregate of 116,655 shares of common stock, which are exercisable.

- ~~The consideration payable for the assets of the Seller and the~~ 20- equity of INXL and INXH is an aggregate of $16,000,000, to be paid as set forth under the terms of the AEPA and allocated between the Seller and LD in such manner as they determine at their discretion.

At Table ~~closing, Seller, LD and the Representing Party received an aggregate~~ of ~~1,794,972 shares of the Company’s common stock~~Contents which have a value of $14,000,000 for the purposes of the AEPA or $12,649,000 fair value for the acquisition valuation and $500,000 in cash. Thereafter, the Company agreed to pay the Seller, LD and the Representing Party an aggregate of: $500,000 in cash thirty (30) days following the date of closing; $250,000 in cash ninety (90) days following the date of closing; $250,000 in cash one hundred and eighty (180) days following the date of closing; $250,000 in cash two hundred and seventy (270) days following the date of closing; and $250,000 in cash one (1) year following the date of closing.

InDaniel addition, the Company agreed to issue to Representing Party, subject to the approval of the holders of at least a majority of the issued and outstanding shares of the Company’s common stock and the approval of The Nasdaq Stock Market (collectively, the “Contingent Consideration Warrants”) consisting of six (6) six-year warrants, to purchase 500,000 shares of common stock each, for an aggregate of 3,000,000 shares of common stock at an exercise price of $10 per share exercisable upon reaching certain levels of cumulative revenue or cumulative net income before taxes by the business during any of the years ending December 31, 2019, 2020, 2021, 2022, 2023 or 2024.Mangless

~~The~~Daniel ~~AEPA~~Mangless ~~contains~~became ~~customary~~a ~~representations,~~beneficial ~~warranties~~owner ~~and covenants~~ of ~~the~~in ~~Company,~~excess ~~KII,~~of ~~the~~5% ~~Seller,~~of ~~LD and~~ the ~~Representing Party. Subject to certain customary limitations, the Seller, LD and the Representing Party have agreed to indemnify the~~ Company ~~and KII against certain losses related to, among other things, breaches of the Seller~~’s, ~~LD’s~~outstanding ~~and~~common ~~the~~stock ~~Representing~~upon ~~Party’s representations~~consummation ~~and~~of ~~warranties,~~a ~~certain~~securities ~~specified~~purchase ~~liabilities~~agreement ~~and the~~transaction ~~failure~~in March ~~to perform covenants or obligations under the AEPA~~2020.

On In February ~~28,~~ 2019, ~~KII~~the ~~purchased~~Company entered into a ~~45-acre~~securities ~~tract~~purchase ofagreement ~~land~~with ~~in Groveland,~~Mr. ~~Florida,~~Mangless ~~upon~~pursuant to which ~~KII~~the ~~intends~~Company sold 250,000 shares of common stock at an offering price of $7.00 per share. Pursuant to ~~build~~the apurchase ~~R&D facility~~agreement, ~~greenhouse~~the ~~and~~Company ~~allocate~~also issued Mr. Mangless a ~~portion~~three-year ~~for farming~~warrant to purchase 250,000 shares of common stock at an exercise price of $7.00. The Company received proceeds of $1,750,000 from the stock offering. (See Note 10)

~~The~~In June 2019, the Company ~~has~~entered ~~estimated~~into ~~fair~~a ~~value~~second ~~(in~~securities ~~thousands)~~purchase atagreement with Mr. Mangless pursuant to which the ~~date~~Company sold 250,000 shares of ~~acquisition~~ common stock at an offering price of ~~the~~$5.50 ~~acquired~~per ~~tangible~~share. ~~and~~The ~~intangible~~Company ~~assets~~received ~~and liabilities~~proceeds asof ~~follows~~$1,375,000 from the stock offering. (~~unaudited~~See Note 10):

Present value of cash consideration	$1,894
Estimated fair value of common stock issued	12,649
Aggregate purchase price	$14,543

In March 2020, the Company entered into a securities purchase agreement with Mr. Mangless, pursuant to which the Company issued a senior secured promissory note in the principal amount of $1,000,000 which matured in December 2020. In addition, the Company issued 50,000 shares of common stock in connection with this senior secured promissory note. (See Note 6 and 10)

The following table summarizes the estimated preliminary fair values of the assets acquired and liabilities assumed in February 2019 (in thousands):
Current assets	$211
Inventory	1,264
Property, plant and equipment	2,260
Trademarks and trade name	1,876
Customer-related intangible	5,629
Non-compete intangible	956
Goodwill	4,353
Current liabilities	(1,913)
Notes payable	(518)
Net assets acquired	$14,118

In February 2021, Mr. Mangless liquated some of his Youngevity common stock and is no longer a beneficial owner of in excess of 5% of the outstanding shares of common stock. (See Note 13)

~~The~~In April ~~preliminary estimated fair value of intangible assets acquired in the amount of $8~~2021,~~461,000~~ ~~was determined through~~ the ~~use~~Company ofentered into a ~~third-party~~ ~~valuation~~settlement ~~firm~~agreement ~~using~~with ~~various~~Mr. ~~income~~Mangless ~~and~~related ~~cost~~to ~~approach methodologies. Specifically,~~ the ~~intangibles~~payment ~~identified~~schedule inof the ~~acquisition~~ ~~were~~senior ~~trademarks~~secured ~~and~~promissory ~~trade~~note ~~name,~~issued ~~customer-related intangible~~in March ~~and non-compete agreement~~2020. ~~The~~In ~~trademarks and trade name~~addition, ~~customer-related~~as ~~intangible~~part ~~and~~of ~~non-compete~~the ~~are~~settlement ~~being amortized~~agreement ~~over~~the ~~their~~Company ~~estimated~~issued ~~useful~~Mr. ~~life~~Mangless ~~of 8 years~~1, ~~7 years and 6 years~~000,000 ~~respectively.~~shares ~~The straight-line method is being used and is believed to approximate the time-line within which the economic benefit~~ of ~~the~~common ~~underlying~~stock. ~~intangible~~(See ~~asset~~Note ~~will be realized.~~13)

~~Goodwill~~2400 ofBoswell $4,353,000 was recognized as the excess purchase price over the acquisition-date fair value of net assets acquired. Goodwill is estimated to represent the synergistic values expected to be realized from the combination of the two businesses. The goodwill is expected to be deductible for tax purposes.LLC

~~-22-~~2400 Boswell LLC (“Boswell”) is the owner and lessor of the building occupied by the Company for its corporate office and warehouse in Chula Vista, California. The Company acquired Boswell from an immediate member of the Company’s Chief Executive Officer in 2013. (See Note 6)

~~Table~~JJL ofEquipment ~~Contents~~Holding, LLC

~~The~~In ~~Contingent~~connection ~~Consideration~~with ~~Warrants~~the ~~discussed~~acquisition ~~above~~of ~~are~~Khrysos ~~subject to~~Global, ~~vesting~~the ~~based~~Company ~~upon~~held ~~the~~a ~~achievement~~deposit from JJL Equipment Holding, LLC (“JJL Equipment”) for an equipment purchase of ~~various~~approximately ~~sales~~$230,000 ~~milestones~~ and ~~only~~$233,000 ifon September ~~the~~30, ~~sellers~~2020 doand December ~~not~~31, ~~terminate~~2019, ~~their services~~respectively. ~~As such,~~ ~~the~~Leigh ~~Contingent~~Dundore ~~Consideration~~is ~~Warrants~~a ~~were~~member ~~considered equity-based~~and ~~compensation~~part ~~for~~owner of JJL Equipment. The deposit is to be applied to future ~~services~~machinery and ~~not~~equipment ~~considered contingent~~orders ~~consideration~~from JJL Equipment and was recorded in ~~the~~other ~~calculation~~current ofliabilities in the ~~purchase price~~consolidated balance sheet.

~~The~~Youngevity ~~costs~~Be ~~related to~~ the ~~acquisition~~Change ~~are included in legal and accounting fees and were expensed as incurred.~~Foundation

~~Revenues~~Youngevity ~~from~~Be the ~~commercial~~Change ~~hemp~~Foundation ~~segment~~(the ~~included~~“Youngevity Foundation”) was formed in 2013 as a 501 c 3 charitable organization. The Company’s Chief Executive Officer and its President and Chief Investment Officer both serve officers and directors of the ~~condensed consolidated~~Youngevity ~~statement~~Foundation, as well as the Company’s Chief Operating Officer and the wife of ~~operations~~the ~~for~~Chief Investment Officer who both serve as a director of the Youngevity Foundation. During the three months ended September 30, 2020 and 2019, the Company contributed approximately $22,000 and $24,000, respectively, and $92,000 and $82,000, respectively, for the nine months then ended. At September 30, 2020 and December 31, 2019, ~~were~~the ~~approximately~~liability representing future contributions to be made to the Youngevity Foundation by the Company was $~~184~~444,000 and $~~525~~357,000, respectively, and was included in current liabilities on the Company’s consolidated balance sheets.

~~Note~~Daniel 5.Briskie ~~Intangible Assets~~ and ~~Goodwill~~Maida Briskie

~~Intangible~~Daniel ~~Assets~~Briskie and Maida Briskie, the father and mother of the Company’s Chief Investment Officer, entered into note purchase agreements in the principal amount of $25,000 in September 2014 related to the Company’s private placement offering in 2014. In September 2019, the Company entered into an agreement with Daniel Briskie and Maida Briskie to extend the maturity date of their 2014 PIPE Note for one year. At December 31, 2019, the balance of the loan was $25,000 which was paid off in September 2020. (See Note 7).

~~Intangible~~Douglas assets are comprised of distributor organizations, trademarks and tradenames, customer relationships, internally developed software and non-compete agreement. The Company's acquired intangible assets, which are subject to amortization over their estimated useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. An impairment loss is recognized when the carrying amount of an intangible asset exceeds its fair value.Briskie

~~Intangible~~Douglas ~~assets~~Briskie, ~~consist~~the brother of the ~~following~~Company’s (Chief Investment Officer, entered into note purchase agreements in ~~thousands~~ the principal amount of $50,000 in August 2014 related to the Company’s private placement offering in 2014. The note was paid in full in August 2019. (See Note 7):.

	September 30, 2019 (unaudited)			December 31, 2018
	Cost	Accumulated Amortization	Net	Cost	Accumulated Amortization	Net
Distributor organizations	$14,559	$10,202	$4,357	$14,559	$9,575	$4,984
Trademarks and trade names	9,964	2,507	7,457	7,337	1,781	5,556
Customer relationships	16,027	6,708	9,319	10,398	5,723	4,675
Internally developed software	720	633	87	720	558	162
Non-compete agreement	956	93	863	-	-	-
Intangible assets	$42,226	$20,143	$22,083	$33,014	$17,637	$15,377

-21-

~~Amortization~~ Table ~~expense~~of ~~related to intangible assets was approximately~~Contents $1,249,000 and $724,000 for the three months ended September 30, 2019 and 2018, respectively. Amortization expense related to intangible assets was approximately $2,505,000 and $2,416,000 for the nine months ended September 30, 2019 and 2018, respectively.

~~During~~Note ~~the three months ended September 30, 2018, the Company recorded an impairment of intangible assets of $2,200,000 in conjunction with our 2017 acquisition of BeautiControl~~4. In determining the fair value of the assets acquired and the purchase price, initially it was based on a number of products to be made available to the Company through collaboration with the seller, and ensuring active participation by BeautiControl’s distributor organization. Delays in the Company’s ability to access many key products substantially reduced the potential to deliver the revenues initially anticipated. ~~As a~~Revenue result of this, when the Company re-assessed the contingent liability as of September 30, 2018 the Company recorded an adjustment to reduce the contingent liability by approximately $2,200,000 and recorded a corresponding reduction to the contingent liability revaluation expense included in general and administrative expense. The Company also determined that the underlying intangible assets were impaired and recorded an adjustment to reduce the related intangible assets of approximately $2,200,000 resulting in a corresponding loss on impairment on the Company’s condensed statements of operations for the three and nine months ended September 30, 2018.Recognition

~~Trademarks~~The ~~and~~following ~~trade~~table ~~names,~~summarizes ~~which~~disaggregated dorevenue ~~not~~by ~~have~~segment legal, regulatory, contractual, competitive, economic, or other factors that limit the useful lives are considered indefinite lived assets and are not amortized but are tested for impairment on an annual basis or whenever events or changes (in circumstances indicate that the carrying amount of these assets may not be recoverable. As of September 30, 2019 and December 31, 2018, approximately $1,649,000 in trademarks and trade names from business combinations have been identified as having indefinite lives.thousands):

-23-

	Three Months Ended September 30,					Nine Months Ended September 30,
	2020		2019			2020		2019
	(unaudited)		(unaudited)			(unaudited)		(unaudited)
Direct selling	$	31,319	$	30,256		$	92,750	$	95,800
Processed green coffee		254		(22	)		773		1,046
Milling and processing services		211		29			535		6,416
Roasted coffee and other		2,017		2,933			7,467		9,002
Commercial coffee		2,482		2,940			8,775		16,464
Commercial hemp		201		184			1,000		525
Total revenue	$	34,002	$	33,380		$	102,525	$	112,789

~~Table~~Contract ~~of Contents~~Balances

~~Goodwill~~As of September 30, 2020 and December 31, 2019, deferred revenues were approximately $10,954,000 and $3,569,000, respectively. Deferred revenues in the direct selling segment related to customer deposits were $1,800,000 and $1,626,000 on September 30, 2020 and December 31, 2019, respectively. Deferred revenues related to the rewards program in the direct selling segment that began at the beginning of 2020 were $2,624,000 at September 30, 2020. Deferred revenues in the direct selling segment related to Heritage Makers were $1,598,000 and $1,795,000 at September 30, 2020, and December 31, 2019, respectively. Deferred revenues related to pre-enrollment in upcoming conventions were $148,000 at December 31, 2019. The Company did not have a deferred revenue balance related to pre-enrollment in upcoming conventions at September 30, 2020.

~~Goodwill~~Deferred isrevenues ~~recorded~~in as the ~~excess,~~commercial ifcoffee ~~any,~~segment ofrelated ~~the~~to ~~aggregate~~customer ~~fair value~~deposits ofwere consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible and identified intangible assets acquired. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350$4, ~~“Intangibles~~305,000 ~~— Goodwill~~at September ~~and Other”~~30, ~~goodwill~~ ~~and~~2020. ~~other~~The ~~intangible~~commercial ~~assets~~coffee ~~with indefinite~~segment ~~lives~~did ~~are~~ not ~~amortized~~have ~~but~~a ~~are~~deferred ~~tested~~revenue ~~for~~balance ~~impairment~~ on an December ~~annual~~31, ~~basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable~~2019. The Company conducts annual reviews for goodwill and indefinite-lived intangible assets in the fourth quarter or whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable.

~~The~~Deferred ~~Company~~revenues ~~first~~in ~~assesses qualitative factors to determine whether it is more likely than not (a likelihood of more than 50%) that goodwill is impaired. After considering~~ the ~~totality~~commercial ofhemp ~~events~~segment ~~and circumstances,~~related the Company determines whether it is more likely than not that goodwill is not impaired. If impairment is indicated, then the Company conducts the two-step impairment testing process. The first step compares the Company’s fair value to ~~its~~customer ~~net~~deposits ~~book~~were ~~value. If the fair value is less than the net book value~~$627,000 ~~the~~on September ~~second step of the test compares the implied fair value of the Company’s goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value~~30, ~~the Company would recognize an impairment loss equal to that excess amount~~2020. The ~~testing~~commercial ishemp ~~generally performed at the “reporting unit” level. A reporting unit is the operating~~ segment, ordid ~~a business~~not ~~one~~have ~~level below that operating segment (referred to as~~ a ~~component)~~ ifdeferred ~~discrete~~revenue financial information is prepared and regularly reviewed by management at the component level. The Company has determined that its reporting units for goodwill impairment testing are the Company’s reportable segments. As such, the Company analyzes its goodwill balances separately for the commercial coffee reporting unit, the direct selling reporting unit and the commercial hemp reporting unit. The goodwill balance ~~as of September 30, 2019 and~~ on December 31, ~~2018 is approximately $10,676,000 and $6,323,000, respectively. There were no triggering events indicating impairment of goodwill or intangible assets during the nine months ended September 30,~~ 2019 ~~and 2018~~.

~~Goodwill~~The ~~consists~~following table summarizes the classification of deferred revenues balances on the ~~following~~balance sheets (in thousands):

	September 30, 2019 (unaudited)	December 31, 2018
		September 30, 2020		December 31, 2019
Goodwill, commercial coffee	$3,314	$3,314
		(unaudited)
Goodwill, direct selling	3,009	3,009
Accrued expenses		$	627	$	-
Goodwill, commercial hemp	4,353	-
Deferred revenue			8,527		1,943
Total goodwill	$10,676	$6,323
Other current liabilities			1,800		1,626
Deferred revenue, total		$	10,954	$	3,569

Note 65. ~~Notes~~Selected ~~Payable~~Consolidated ~~and~~Balance ~~Other~~Sheet ~~Debt~~Information

~~Short-term~~Accounts ~~Debt~~Receivable, net

OnNet ~~July~~accounts ~~18,~~receivable ~~2018,~~consists ~~the~~of ~~Company entered into lending agreements (~~the ~~“Lending~~ ~~Agreements”)~~following ~~with three~~ (~~3) separate entities and received loans~~ in the total amount of $1,907,000, net of loan fees to be paid back over an eight-month period on a monthly basis. Payments were comprised of principal and accrued interest with an effective interest rate between 15% and 20%. The Company’s outstanding balance related to the Lending Agreements was approximately $504,000 as of December 31, 2018 and was included in other current liabilities on the Company’s balance sheet as of December 31, 2018. In March 2019 the loans were paid in full.thousands):

Notes Payable

	September 30, 2020			December 31, 2019
	(unaudited)
Accounts receivable	$	11,253		$	11,142
Allowance for doubtful accounts		(8,210	)		(8,240	)
Accounts receivable, net	$	3,043		$	2,902

~~Promissory Notes~~On September 30, 2020 and December 31, 2019, CLR's accounts receivable balance for customer related revenue by H&H Export was approximately $8,707,000 of which the full amount was past due at the respective periods. As a result, the Company reserved $7,871,000 as bad debt related to the accounts receivable balances for both periods, which was net of collections through December 31, 2020.

~~On March 18, 2019, the Company entered into a two~~-~~year Secured~~ ~~Promissory Note (the “8% Note” or “Notes”) with two (2) accredited investors that had a substantial pre~~ 22-~~existing relationship with the Company pursuant to which the~~ Company raised cash proceeds of $2,000,000. The Company also issued 20,000 shares of the Company’s common stock par value $0.001 for each $1,000,000 invested and a five-year warrant to purchase 20,000 shares of the Company’s common stock at a price per share of $6.00. The 8% Notes pay interest at a rate of eight percent (8%) per annum and interest is paid quarterly in arrears with all principal and unpaid interest due at maturity on March 18, 2021.

~~-24-~~ Table of Contents

~~Table~~Inventory, ~~of Contents~~net

~~The~~Inventories ~~Company~~consist ~~recorded debt discounts~~ of ~~approximately $139,000 related to~~ the ~~fair~~following ~~value of warrants issued~~ (in the transaction and $212,000 of transaction issuance costs to be amortized to interest expense over the life of the Notes. The Company recorded approximately $41,000 and $83,000 amortization of the debt discounts during the three and nine months ended September 30, 2019, respectively and is recorded as interest expense in the condensed consolidated statements of operations. As of September 30, 2019, the remaining balance of the debt discount is approximately $269,000.thousands):

Credit Note

	September 30, 2020			December 31, 2019
	(unaudited)
Finished goods	$	12,448		$	14,890
Raw materials		13,382			11,694
Total inventory		25,830			26,584
Reserve for excess and obsolete		(3,794	)		(3,878	)
Inventory, net	$	22,036		$	22,706

~~On December~~Property ~~13, 2018, the Company’s wholly-owned subsidiary, CLR, entered into a credit agreement with Mr. Carl Grover pursuant to which CLR borrowed $5,000,000 from Mr. Grover~~ and ~~in exchange issued to him a $5~~Equipment,~~000,000~~ ~~credit note (the “Credit Note”) secured by its green coffee inventory under a security agreement, dated December 13, 2018, with Mr. Grover and CLR’s subsidiary, Siles.~~ net

~~The Credit~~Property ~~Note accrues interest at eight percent (8%) per annum. All principal~~ and ~~accrued~~equipment ~~interest~~consist ~~under the Credit Note is due and payable on December 12, 2020. The Credit Note contains customary events~~ of ~~default including~~ the ~~Company~~following or Siles failure to pay its obligations, commencing bankruptcy or liquidation proceedings, and breach of representations and warranties. Upon the occurrence of an event of default, the unpaid balance of the principal amount of the Credit Note together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable by Mr. Grover and shall bear interest from the due date until such amounts are paid at the rate of ten percent (~~10%)~~in ~~per annum. In connection with the Credit Agreement, the Company issued to Mr. Grover a four-year warrant to purchase 250,000 shares of its common stock, exercisable at $6.82 per share (“Warrant 1”~~thousands)~~, and a four-year warrant to purchase 250,000 shares of its common stock, exercisable at $7.82 per share (“Warrant 2”).~~:

Also in connection with the Credit Note, the Company also entered into an advisory agreement with a third party not affiliated with Mr. Grover, pursuant to which the Company agreed to pay to the advisor a 3% fee on the transaction with Mr. Grover and issued to the advisor (or it’s designees) a four-year warrant to purchase 50,000 shares of the Company’s common stock, exercisable at $6.33 per share.

	September 30, 2020			December 31, 2019
	(unaudited)
Buildings	$	4,117		$	4,789
Leasehold improvements		3,148			2,948
Land		2,544			3,307
Land improvements		606			606
Producing coffee trees		553			553
Manufacturing equipment		10,464			9,568
Furniture and other equipment		2,062			2,050
Computer software		1,442			1,420
Computer equipment		2,714			2,648
Vehicles		326			326
Assets held for sale ⁽¹⁾		1,496			-
Construction in process		9,133			6,562
Total property and equipment, gross		38,605			34,777
Accumulated depreciation		(13,416	)		(11,461	)
Total property and equipment, net	$	25,189		$	23,316

~~All fees,~~(1) ~~warrants~~Assets ~~and~~held ~~costs~~for ~~paid~~sale toat ~~Mr.~~September ~~Grover~~30, ~~and~~2020 ~~the~~consisted ~~advisor and all direct costs incurred by the Company are recognized as a debt discount to the funded Credit Note and are amortized to interest expense using the effective interest method over the term~~ of ~~the Credit Note. The Company recognized an initial debt discount of~~ approximately $1,~~469~~053,000 ~~related to the initial fair value of warrants issued~~ in ~~the~~land ~~transaction~~ and $~~175~~443,000 of transaction issuance costs. The Company recognized approximately $182,000 and $503,000 amortization of the debt discount during the three and nine months ended September 30, 2019, respectively, which was included in ~~interest~~buildings ~~expense~~related into the ~~condensed~~commercial ~~consolidated statements~~hemp ~~of operations~~segment. As(See ofNote ~~September 30, 2019, the remaining unamortized debt discount is approximately $1,111,000.~~13)

~~2400~~Depreciation ~~Boswell~~expense ~~Mortgage~~totaled approximately $635,000 and $617,000 for the three months ended September 30, 2020 and 2019, respectively, and $1,968,000 and $1,694,000 for the respective nine month periods.

InOperating ~~March 2013, the Company acquired 2400 Boswell for approximately $4,600,000. 2400 Boswell is the owner~~ and ~~lessor~~Financing of the building occupied by the Company for its corporate office and warehouse in Chula Vista, California. The purchase was from an immediate family member of our Chief Executive Officer and consisted of approximately $248,000 in cash, $334,000 of debt forgiveness and accrued interest, and a promissory note of approximately $393,000, payable in equal payments over 5 years with interest at 5.0%. Additionally, the Company assumed a long-term mortgage of $3,625,000, payable over 25 years with an initial interest rate of 5.75%. The interest rate is the prime rate plus 2.5%. As of September 30, 2019, the interest rate was 8.0%. The lender will adjust the interest rate on the first calendar day of each change period. The Company and its Chief Executive Officer are both co-guarantors of the mortgage. As of September 30, 2019, the balance on the long-term mortgage is approximately $3,162,000 and the balance on the promissory note is zero. Leases

~~M2C~~The ~~Purchase~~Company’s ~~Agreement~~operating and financing lease assets and liabilities recognized within its consolidated balance sheets were classified as follows (in thousands):

In March 2007, the Company entered into an agreement to purchase certain assets of M2C Global, Inc., a Nevada corporation, for $4,500,000. The agreement required payments totaling $500,000 in three installments during 2007, followed by monthly payments in the amount of 10% of the sales related to the acquired assets until the entire note balance is paid. As of September 30, 2019 and December 31, 2018, the carrying value of the liability was approximately $1,037,000 and $1,071,000, respectively. The interest associated with the note for the three and nine months ended September 30, 2019 and 2018 was minimal.

	September 30, 2020		December 31, 2019
	(unaudited)
Assets
Operating lease right-of-use assets	$	6,467	$	8,386
Finance lease right-of-use assets (1)		882		1,052
Total leased assets		7,349	$	9,438
Liabilities
Operating lease liabilities, current portion	$	1,290	$	1,740
Finance lease liabilities, current portion		1,703		736
Total leased liabilities, current portion		2,993		2,476
Operating lease liabilities, net of current portion		5,497		6,646
Finance lease liabilities, net of current portion		1,081		408
Total lease liabilities	$	9,571	$	9,530

(1) Finance lease right-25of-use assets are recorded within property and equipment, net of accumulated amortization of approximately $2,070,000 and $1,367,000 at September 30, 2020 and December 31, 2019, respectively.

~~Table~~In August 2020, the Company entered into a lease for assorted CBD oil extraction equipment that included processing equipment, modular buildings, assorted laboratory equipment, refrigeration equipment with Varilease Finance, Inc. (“VFI”). The value of ~~Contents~~the equipment at the lease date was approximately $2,006,000. The monthly lease payments are $79,000 over a period of 24 months, with an advance payment of $79,000 to be applied to the last rental payment date. At the filing date of this Quarterly Report on Form 10-Q, the VFI lease was in default.

- ~~Khrysos Mortgage Notes~~ 23-

In Table ~~conjunction with the Company’s acquisition~~ of ~~Khrysos, the~~Contents Company assumed an interest only mortgage in the amount of $350,000, due in September 2021, and bears an interest rate of 8.0%. In addition, the Company assumed a mortgage of approximately $177,000, due in June 2023, and bears an interest rate of 7.0% per annum. As of September 30, 2019, the remaining aggregate mortgage balance is approximately $525,000.

InThe ~~February~~weighted-average ~~2019,~~remaining ~~Khrysos~~lease ~~purchased~~term aand 45weighted-~~acre~~average ~~tract~~discount ofrate ~~land~~used ~~in Groveland, Florida, for $750,000, upon which Khrysos intends~~ to ~~build~~ acalculate ~~R&D~~the ~~facility,~~present ~~greenhouse~~value ~~and~~of ~~allocate~~lease aliabilities ~~portion~~are ~~for farming. Khrysos paid approximately $303,000~~ as a down payment and assumed a mortgage of $450,000. The entire balance is due in February 2024 and bears interest at 6.0% per annum. As of September 30, 2019, the remaining mortgage balance is approximately $443,000.follows:

Khrysos Acquisition Liability Payable

	September 30, 2020			December 31, 2019
	(unaudited)
Weighted-average remaining lease term (in years)
Operating leases		6.7			6.8
Finance leases		1.7			1.6
Weighted-average discount rate
Operating leases		5.41	%		5.47	%
Finance leases		17.63	%		4.57	%

InOperating conjunction with the Company’s acquisition of Khrysos, the Company agreed to pay the sellers in cash $2,000,000 towards the AEPA with an initial payment of $500,000 which was paid at closing in February 2019. Thereafter, the sellers are to receive an aggregate of: $500,000 in cash thirty (30) days following the date of closing; $250,000 in cash ninety (90) days following the date of closing; $250,000 in cash one hundred and ~~eighty~~finance ~~(180)~~lease ~~days following~~costs ~~the~~were ~~Date~~as offollows ~~closing; $250,000 in cash two hundred and seventy~~ (~~270) days following the date of closing; and $250,000~~ in ~~cash~~ ~~one (1~~thousands) ~~year following the date of closing. As of September 30, 2019, the Company’s remaining liability of $1,000,000 is outstanding and is recorded on the balance sheet in accrued expenses. (See Note 4)~~:

Other Notes

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Operating lease cost (1)	$	495	$	420	$	1,591	$	962
Finance lease cost:
Amortization of leased assets (2)		311		84		703		274
Interest on lease liabilities (3)		18		30		66		101
Total operating and finance lease cost	$	824	$	534	$	2,360	$	1,337

The Company’s other notes relate to loans for commercial vans at CLR in the amount of approximately $79,000 as of September 30, 2019, which mature at various dates through 2023.

(1)	Operating lease costs are classified within selling and marketing and general and administrative expenses.
(2)	Amortization of leased assets are classified as a component of depreciation and amortization.
(3)	Interest on lease liabilities are classified within interest expense, net.

~~Line~~Intangible ~~of Credit - Loan and Security Agreement~~Assets

OnIntangible ~~November~~assets ~~16,~~consist ~~2017, CLR entered into a Loan and Security Agreement (“Agreement”) with Crestmark Bank (“Crestmark”) providing for a line~~ of credit related to accounts receivables resulting from sales of certain products that includes borrowings to be advanced against acceptable eligible inventory related to CLR. Effective December 29, 2017, CLR entered into a First Amendment to the ~~Agreement,~~following ~~to include an increase~~ (in ~~the~~ ~~maximum overall borrowing to $6,250,000. The loan amount may not exceed an amount which is the lesser of (a~~thousands) $6,250,000 or (b) the sum of up (i) to 85% of the value of the eligible accounts; plus, (ii) the lesser of $1,000,000 or 50% of eligible inventory or 50% of (i) above, plus (iii) the lesser of $250,000 or eligible inventory or 75% of certain specific inventory identified within the Agreement.:

The Agreement contains certain financial and nonfinancial covenants with which the Company must comply to maintain its borrowing availability and avoid penalties. As of September 30, 2019, the Company is in compliance with all financial and nonfinancial covenants.

	September 30, 2020 (unaudited)						December 31, 2019
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Distributor organizations	$	15,735	$	11,090	$	4,645	$	15,735	$	10,418	$	5,317
Trademarks and trade names		8,430		3,070		5,360		8,430		2,539		5,891
Customer relationships		10,442		6,934		3,508		10,442		6,413		4,029
Internally developed software		720		720		-		720		657		63
Non-compete agreement		277		64		213		277		11		266
Intangible assets	$	35,604	$	21,878	$	13,726	$	35,604	$	20,038	$	15,566

~~The~~Amortization ~~outstanding~~expense ~~principal~~related ~~balance~~to ofintangible ~~the~~assets ~~Agreement~~was ~~will~~approximately ~~bear interest~~$600,000 ~~based~~and ~~upon~~$1,249,000 ~~a year of 360 days with interest being charged~~ for ~~each day~~ the ~~principal~~three ~~amount~~months ~~is outstanding including the date of actual payment. The interest rate is a rate equal to the prime rate plus 2.50% with a floor of 6.75%. As of~~ ended September 30, ~~2019,~~ ~~the~~2020 ~~interest~~and ~~rate was 7.5%. In addition~~2019, ~~other fees are incurred for the maintenance of the loan in accordance with the Agreement~~respectively. ~~Other~~Amortization ~~fees~~expense ~~may~~related beto ~~incurred~~intangible inassets ~~the~~was ~~event~~approximately ~~the~~$1,840,000 ~~minimum~~and ~~loan balance of~~ $2,~~000~~505,000 isfor ~~not~~the ~~maintained.~~nine ~~The~~months ~~Agreement~~ended September is30, ~~effective until~~2020 ~~November~~and 162019, ~~2020~~respectively.

~~The~~At September ~~Company and the Company’s CEO~~30, ~~Stephan~~2020 ~~Wallach, have entered into a Corporate Guaranty~~ and December ~~Personal Guaranty~~31, ~~respectively,~~ ~~with Crestmark guaranteeing payments in the event that the Company’s commercial coffee segment CLR were to default. In addition~~2019, ~~the~~approximately ~~Company’s President and Chief Financial Officer~~$1, ~~David Briskie~~649,000 ~~personally~~in ~~entered~~trademarks ~~into~~from ~~a Guaranty~~business ofcombinations ~~Validity~~have ~~representing~~been ~~the~~identified ~~Company’s financial statements so long~~ as ~~the~~having ~~indebtedness~~indefinite ~~is owing to Crestmark, maintaining certain covenants and guarantees~~lives.

~~The Company’s outstanding line of credit liability related to the Agreement was approximately $1,981,000 as of September 30, 2019 and $2,256,000 as of December 31, 2018.~~Goodwill

~~Contingent~~Goodwill ~~Acquisition~~by ~~Debt~~segment consists of the following (in thousands):

The Company has contingent acquisition debt associated with its business combinations. The Company accounts for business combinations under the acquisition method and allocates the total purchase price for acquired businesses to the tangible and identified intangible assets acquired and liabilities assumed, based on their estimated fair values as of the acquisition date. A liability for contingent consideration, if applicable, is recorded at fair value as of the acquisition date and evaluated each period for changes in the fair value and adjusted as appropriate.

	September 30, 2020		December 31, 2019
	(unaudited)
Direct selling	$	3,678	$	3,678
Commercial coffee		3,314		3,314
Commercial hemp		-		-
Total goodwill	$	6,992	$	6,992

- ~~The Company’s contingent acquisition debt as of September 30,~~ 24- ~~2019 and December 31, 2018 is approximately $7,017,000 and $8,261,000, respectively, and is attributable to debt associated with the Company’s direct selling segment. (See Note 9)~~

~~-26-~~ Table of Contents

~~Table~~Note of6. Notes ~~Contents~~Payable and Other Debt

~~Note~~Credit ~~7. Convertible Notes Payable~~Note

~~Total~~In December ~~convertible~~2018, ~~notes~~CLR ~~payable~~entered asinto ofa ~~September~~credit 30agreement with Mr. Grover pursuant to which CLR borrowed $5,000,000 ~~2019~~from Mr. Grover and ~~December~~ 31in exchange issued to him a $5,000,000 ~~2018~~credit note (the “Credit Note”). In addition, ~~net~~Siles, ofas guarantor, executed a separate guaranty agreement. The Credit Note is secured by CLR’s green coffee inventory, subordinate to certain debt ~~discount~~owed ~~outstanding~~to ~~consisted~~Crestmark Bank and pari passu with certain holders of notes issued by the ~~amount~~borrowers ~~set~~of ~~forth~~the company in 2014. At both September 30, 2020 and December 31, 2019, the ~~following~~outstanding ~~table~~principal ~~(in thousands):~~balance of the Credit Note was $5,000,000.

	September 30, 2019 (unaudited)	December 31, 2018
8% Convertible Notes (2014 Notes), principal	$25	$750
Debt discounts	-	(103)
Carrying value of 2014 Notes	25	647
6% Convertible Notes (2019 PIPE Notes), principal	3,090	-
Debt discounts	(498)	-
Carrying value of 2019 PIPE Notes	2,592	-
Total carrying value of convertible notes payable	$2,617	$647

The Credit Note accrues interest at a rate of 8.00% per annum and is paid quarterly. The Credit Note contains customary events of default including the Company or Siles failure to pay its obligations, commencing bankruptcy or liquidation proceedings, and breach of representations and warranties. Upon the occurrence of an event of default, the unpaid balance of the principal amount of the Credit Note together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable by Mr. Grover and shall bear interest from the due date until such amounts are paid at the rate of 10.00% per annum. In connection with the credit agreement, the Company issued to Mr. Grover a four-year warrant to purchase 250,000 shares of its common stock, exercisable at $6.82 per share, and a four-year warrant to purchase 250,000 shares of its common stock, exercisable at $7.82 per share.

~~Unamortized~~In ~~debt~~connection ~~discounts~~with ~~and~~the ~~issuance~~Credit ~~costs~~Note, ~~are~~the ~~included~~Company also entered into an advisory agreement with ~~convertible~~ ~~notes~~a ~~payable~~third party not affiliated with Mr. Grover, ~~net~~pursuant ofto ~~debt~~which ~~discount~~the Company agreed to pay to the advisor a 3.00% fee on the ~~condensed consolidated~~transaction ~~balance~~with ~~sheets~~Mr. Grover and issued to the advisor’s designee a four-year warrant to purchase 50,000 shares of the Company’s common stock, exercisable at $6.33 per share.

~~July~~The ~~2014~~Company ~~Private~~recorded ~~Placement~~debt discounts of approximately $1,469,000 related to the fair value of warrants issued in the transaction and $175,000 of transaction issuance costs both of which are amortized to interest expense over the life of the Credit Note. The Company recorded amortization of approximately $245,000 and $182,000 related to the debt discount and issuance cost during the three months ended September 30, 2020 and 2019, respectively, and $678,000 and $503,000 during the nine months ended September 30, 2020 and 2019, respectively. At September 30, 2020 and December 31, 2019, the combined remaining balance of the debt discounts and issuance cost was approximately $237,000 and $915,000, respectively.

~~Between~~In December ~~July 31~~2020, ~~2014 and September 10, 2014~~ the ~~Company~~Credit ~~entered into~~ Note ~~Purchase~~became ~~Agreements~~payable ~~(the~~and ~~“2014~~due ~~Note”~~in ~~or “2014~~accordance ~~Notes”)~~with ~~related to~~ its ~~private~~terms. ~~placement~~CLR ~~offering (“2014~~did ~~Private~~not ~~Placement”)~~make ~~with~~the ~~seven~~payment ~~accredited investors~~due ~~pursuant~~upon ~~to which~~ the ~~Company~~maturity ~~raised~~date ~~aggregate gross proceeds~~ of ~~$4,750,000~~the ~~and~~Credit ~~sold~~Note. ~~units~~At ~~consisting of five (5) year senior secured convertible note in~~ the ~~aggregate~~filing ~~principal~~date ~~amount~~ of ~~$4,750,000~~this ~~that~~Quarterly ~~are~~Report ~~convertible~~on ~~into~~Form ~~678~~10-Q,~~568~~ ~~shares~~the ofCompany ~~our common~~was ~~stock,~~in atdefault ~~a conversion price~~ of ~~$7.00~~the ~~per~~terms ~~share, and warrants to purchase 929,346 shares~~ of ~~common~~settlement ~~stock at an exercise price~~ of ~~$4.60~~the ~~per~~Credit ~~share.~~Note ~~The 2014 Notes bore interest at a rate of eight percent (8%) per annum~~ and ~~interest~~the isCredit ~~paid~~Note ~~quarterly~~remains ~~in arrears~~outstanding; ~~with~~however ~~all~~no ~~principal~~formal ~~and~~demand ~~unpaid~~for ~~interest~~repayment ~~due~~has ~~between~~been ~~July and September 2019~~made.

~~The~~2019 ~~Company~~Promissory ~~had the right to prepay the 2014~~ Notes at any time after the one-year anniversary date of the issuance of the 2014 Notes at a rate equal to 110% of the then outstanding principal balance and any unpaid accrued interest. The 2014 Notes are secured by Company pledged assets and rank senior to all debt of the Company other than certain senior debt that has been previously identified as senior to the convertible notes. Additionally, Stephan Wallach, the Company’s Chief Executive Officer, has also personally guaranteed the repayment of the 2014 Notes, subject to the terms of a Guaranty Agreement executed by him with the investors. In addition, Mr. Wallach has agreed not to sell, transfer or pledge 1.5 million shares of the common stock that he owns so long as his personal guaranty is in effect.

OnIn March ~~October 23~~2019, ~~2018,~~ the Company entered into ana ~~agreement~~two-year ~~with Carl~~secured ~~Grover~~promissory tonote ~~exchange~~ (the “~~Debt~~2019 ~~Exchange~~Promissory Notes”), ~~subject to~~with ~~stockholder~~two ~~approval~~accredited ~~which~~investors ~~was~~that ~~received~~had ona ~~December~~substantial 6,pre-existing ~~2018,~~relationship ~~all amounts~~with ~~owed~~the ~~under~~Company ~~the~~pursuant ~~2014~~to ~~Note~~which ~~held~~the byCompany ~~him~~raised cash proceeds in the ~~principal amount~~aggregate of $42,000,000. ~~which~~The ~~matures on July 30,~~ 2019, ~~for~~Promissory ~~747,664 shares~~Notes ofbear ~~the~~interest ~~Company’s common stock,~~ at a ~~conversion~~rate ~~price~~ of $58.3500% per ~~share~~annum and ainterest ~~four-year~~is ~~warrant~~paid toquarterly ~~purchase~~in ~~631,579 shares~~arrears ofwith ~~common~~all ~~stock~~principal atand anunpaid ~~exercise~~interest ~~price~~due ofat ~~$4.75~~maturity ~~per share. Upon~~on March ~~the closing the Company issued Ascendant Alternative Strategies~~18, ~~LLC,~~2021. aThe ~~FINRA~~2019 ~~broker~~Promissory ~~dealer~~Notes ~~(or~~are ~~its designees),~~secured ~~which~~by ~~acted~~all asequity ~~the Company’s advisor~~ in ~~connection~~ ~~with~~KII. aAt ~~Debt~~both September ~~Exchange transaction,~~ 30,~~000~~ ~~shares~~2020 ~~of common stock in accordance with an advisory agreement~~ and December ~~four-year warrants~~31, ~~to purchase 80~~2019,~~000~~ ~~shares~~the ofoutstanding ~~common~~principal ~~stock~~balance ~~at an exercise price~~ of ~~$5.35~~the ~~per~~2019 ~~share~~Promissory ~~and~~Notes ~~four-year~~was ~~warrants to purchase 70~~$2,000 ~~shares of common stock at an exercise price of $4~~,000.~~75 per share.~~

~~The~~In ~~Company~~conjunction ~~considered~~with the ~~guidance~~2019 ofPromissory ~~ASC 470-20~~Notes, ~~Debt: Debt~~ ~~with~~the ~~Conversion~~Company ~~and~~also ~~Other Options and~~issued ~~ASC 470-60~~40, ~~Debt: Debt~~000 ~~Troubled~~shares ~~Debt Restructuring by Debtors and concluded that the 2014 Note held by Mr. Grover should be recognized as a debt modification for an induced conversion~~ of ~~convertible debt under~~ the ~~guidance of ASC 470-20. The~~ Company’s ~~recognized~~common ~~all~~stock ~~remaining~~and ~~unamortized~~five-year ~~discounts~~warrants ~~of approximately $679,000 immediately subsequent~~ to ~~October~~purchase 2340,000 ~~2018 as interest expense, and the fair value of the warrants and additional~~ shares ~~issued as discussed above were recorded as a loss on the Debt Exchange in the amount~~ of ~~$4,706,000 during~~ the ~~year ended~~Company’s ~~December~~common ~~31,~~stock. ~~2018~~(See ~~with~~Note ~~the corresponding entry recorded to equity.~~10)

~~-27-~~The Company recorded debt discounts of approximately $212,000 related to transaction issuance costs and $139,000 related to the fair value of warrants issued in the transaction both of which are amortized to interest expense over the life of the 2019 Promissory Notes. The Company recorded amortization of approximately $47,000 and $41,000 related to the debt discount and issuance cost related to the promissory notes during the three months ended September 30, 2020 and 2019, respectively and $135,000 and $83,000 during the nine months ended September 30, 2020 and 2019, respectively. At September 30, 2020 and December 31, 2019, the combined remaining balance of the debt discount and issuance costs was approximately $93,000 and $228,000, respectively.

~~Table~~In February 2021, the Company entered into amendment agreements extending the 2019 Promissory Notes and increasing the interest rate. At the filing date, the Company was in default of ~~Contents~~the terms of the amended agreements. (See Note 13)

- 25- In 2014, the Company initially recorded debt discounts of $4,750,000 related to the beneficial conversion feature and related detachable warrants. The beneficial conversion feature discount and the detachable warrants discount are amortized to interest expense over the life of the Notes. The unamortized debt discounts recognized with the Debt Exchange was approximately $679,000. As of September 30, 2019 and December 31, 2018 the remaining balance of the debt discounts was approximately zero and $94,000, respectively. The Company recorded approximately $94,000 and $713,000 amortization of the debt discounts during the nine months ended September 30, 2019 and 2018, respectively, and is recorded as interest expense.

~~With~~ Table ~~respect to the 2014 Private Placement, the Company paid approximately $490,000 in expenses including placement agent fees. The issuance costs are amortized to interest expense over the term~~ of ~~the 2014 Notes. The unamortized issuance~~Contents costs recognized with the Debt Exchange was approximately $63,000. As of September 30, 2019 and December 31, 2018 the remaining balance of the issuance costs is approximately zero and $10,000, respectively. The Company recorded approximately $10,000 and $73,000 of the debt discounts amortization during the nine months ended September 30, 2019 and 2018, respectively, and is recorded as interest expense.

~~During~~Mangless ~~the three months ended September 30, 2019, the Company extended the maturity date of one of the 2014 Notes for one year, with interest being paid under the original terms of the 2014~~ Note~~. All other 2014 Notes have been settled. As of September 30, 2019 and December 31, 2018 the principal amount of $25,000 and $750,000 remains outstanding. (See Note 10)~~

~~January~~In March ~~2019~~2020, ~~Private~~the ~~Placement~~Company entered into a securities purchase agreement with Daniel Mangless pursuant to which the Company issued a senior secured promissory note in the principal amount of $1,000,000 (the “Mangless Note”) which matured in December 2020, bearing interest at 18.00% per annum. In December 2020, the Company defaulted on the settlement of the Mangless Note.

~~Between February~~The ~~15,~~Mangless ~~2019~~Note ~~and~~provided ~~July 12, 2019,~~ the Company ~~closed~~with ~~five tranches~~an ~~related~~option to ~~the~~prepay ~~January~~at ~~2019~~any ~~Private~~time ~~Placement~~without ~~debt offering,~~permission ~~pursuant~~or topenalty. ~~which~~The ~~the~~Mangless ~~Company~~Note ~~offered~~is ~~for~~secured ~~sale~~pursuant up to ~~$10,000,000~~ inthe ~~principal~~terms ~~amount~~ of ~~notes~~a ~~(the~~pledge ~~“2019~~and ~~PIPE Notes”),~~security ~~with each investor receiving 2~~agreement,~~000~~ ~~shares of common stock for each $100,000 invested. The Company~~ entered into ~~subscription~~ ~~agreements~~by ~~with thirty-one (31) accredited investors that had a substantial pre-existing relationship with~~ the Company ~~pursuant~~ ~~to which the Company received aggregate gross proceeds of $3,090,000~~ and ~~issued~~CLR ~~2019~~with ~~PIPE Notes in the aggregate principal amount of $3,090,000 and an aggregate of 61,800 shares of common stock~~Mr. ~~The placement agent received 15~~Mangless,~~450~~ ~~shares~~whereby ~~of common stock for~~ the ~~closed~~Mangless ~~tranches. Each 2019 PIPE~~ Note ~~matures~~is 24secured ~~months after~~by ~~issuance, bears interest at~~ a ~~rate~~first ofpriority ~~six~~lien ~~percent~~granted ~~(6%)~~by ~~per annum,~~CLR ~~and~~in ~~the~~its ~~outstanding~~rights ~~principal~~under ~~is convertible into shares of common stock at any time after~~ the ~~180th~~pledge ~~day~~and ~~anniversary~~security ofagreement, ~~the issuance~~by ofand ~~the~~between ~~2019 PIPE Notes~~H&H, atH&H aExport ~~conversion~~and ~~price~~CLR ~~of $10 per share (subject~~ to ~~adjustment~~receive ~~for~~certain ~~stock~~payments ~~splits,~~(the ~~stock~~“Mangless ~~dividends~~Pledge and ~~reclassification~~ ofSecurity ~~the common stock~~Agreement”).

~~Upon~~In ~~issuance of the 2019 PIPE Notes~~addition, the Company ~~recognized~~issued ~~debt discounts of approximately $671~~50,000, ~~resulting~~shares ~~from the allocated portion~~ of ~~offering proceeds to the separable~~ common stock ~~issuance.~~ ~~The~~in ~~debt~~connection ~~discount~~with isMangless ~~being amortized to interest expense over the term of the 2019 PIPE Notes~~Note. ~~During~~ ~~the~~(See ~~nine months~~Note ~~ended September 30, 2019 the Company recorded approximately $172,000 of amortization related to the debt discounts.~~ 10)

The Company recognized debt discounts of approximately $65,000 resulting from the allocated portion of offering proceeds to the separable common stock issuance. The debt discount was amortized to interest expense over the term of the Mangless Note. 8The Company recorded amortization of approximately $16,000 and $34,000 related to the debt discount during the three and nine months ended September 30, 2020, respectively. ~~Derivative~~ ~~Liability~~At September 30, 2020, the remaining balance of the debt discounts was approximately $31,000.

~~The~~In April ~~Company recognizes and measures warrants in accordance with ASC Topic 815~~2021, ~~Derivatives~~ ~~and Hedging.~~the ~~The~~Company ~~accounting guidance~~entered ~~sets~~into ~~forth~~ a ~~two-step~~settlement ~~model~~agreement towith beMr. ~~applied~~Mangless inrelated ~~determining whether a financial instrument is indexed~~ to anthe ~~entity’s~~payment ~~own stock,~~schedule ~~which~~of ~~would~~the ~~qualify~~Mangless ~~such~~Note ~~financial~~issued ~~instruments~~in March ~~for a scope exception~~2020. ~~This~~In ~~scope~~addition, ~~exception~~as ~~specifies~~part ~~that a contract that would otherwise meet the definition~~ of ~~a derivative financial instrument would not be considered as such if~~ the ~~contract~~settlement isagreement ~~both (i) indexed to~~ the ~~entity’s~~Company ~~own~~issued ~~stock~~Mr. ~~and (ii) classified~~Mangless in1,000,000 ~~the~~shares ~~stockholders’ equity section~~ of ~~the~~ ~~entity’s~~common ~~balance sheet~~stock. ~~The~~ ~~Company determined that~~(See ~~certain~~Note ~~warrants and embedded conversion features issued in the Company’s private placements are ineligible for equity classification due to anti-dilution provisions set forth therein.~~13)

~~Derivative~~2400 ~~liabilities~~Boswell ~~are~~Mortgage ~~recorded at their estimated fair value (see~~ Note 9) at the issuance date and are revalued at each subsequent reporting date. The Company will continue to revalue the derivative liability on each subsequent balance sheet date until the securities to which the derivative liabilities relate to are exercised or expire.

~~Various~~In ~~factors~~connection ~~are~~with ~~considered~~the inacquisition ~~the~~of ~~pricing~~2400 ~~models~~Boswell, LLC in 2013, the Company ~~uses~~ toassumed ~~value~~a ~~the~~mortgage ~~derivative~~of ~~liabilities~~$3,625,000, ~~including~~payable ~~its~~over ~~current stock~~25 ~~price,~~years. ~~the~~The ~~remaining~~Company ~~life,~~and ~~the~~its ~~volatility~~Chief ofExecutive ~~its~~Officer ~~stock~~and ~~price,~~ Chairman and ~~the~~Chief ~~risk-free~~Operating ~~interest~~Officer ~~rate.~~are ~~Future~~guarantors ~~changes~~of inthe ~~these~~mortgage. ~~factors may~~Interest ~~have~~is apaid ~~significant~~monthly ~~impact~~at on the ~~computed~~prime ~~fair~~rate ~~value~~plus ~~of the liability~~2.50% Asand ~~such,~~is adjusted by the ~~Company~~lender ~~expects~~on ~~future~~the ~~changes~~first incalendar ~~the~~day ~~fair values~~of tomonth. ~~continue~~At September 30, 2020 and December ~~may~~31, ~~vary~~2019, ~~significantly~~the ~~from~~interest ~~period~~rate ~~to period~~was 5. ~~The~~75% ~~warrant~~ and ~~embedded~~7.50%, ~~liability~~respectively. At September 30, 2020 and December ~~revaluations have~~31, ~~not~~2019, ~~had~~the aoutstanding ~~cash~~principal ~~impact~~balance on ~~working~~the ~~capital~~mortgage was approximately $3,082,000 ~~liquidity~~and ~~or business~~$3,143,000, ~~operations~~respectively.

~~-28-~~The Company’s corporate office’s mortgage qualified for the mortgage payment program for a period of six months under the Small Business Administration (“SBA”) lenders program which is discussed further below.

~~Table~~Khrysos ofMortgage ~~Contents~~Notes

~~Warrants~~In conjunction with the Company’s acquisition of Khrysos Global, the Company assumed an interest only mortgage for properties located in Mascotte, Florida in the amount of $350,000 and interest paid monthly at a rate of 8.00% per annum. In September 2021, the mortgage was amended to extend the maturity date by one year to the earlier of September 2022 or the date of the sale of the property.

~~Effective~~In ~~January 1~~addition, ~~2019,~~ the Company ~~adopted~~assumed ~~ASU No. 2017-11 (see above, Recently Adopted Accounting Pronouncements). The new guidance requires companies to exclude any down round feature when determining whether~~ a ~~freestanding equity-linked~~mortgage ~~financial~~of ~~instrument~~approximately ~~(or~~$177,000 ~~embedded~~for ~~conversion~~properties ~~option) is~~located ~~considered indexed to the entity’s own stock when applying the classification guidance~~ in ~~ASC 815-40. Upon adoption of the new guidance~~Clermont, ~~existing~~Florida ~~equity-linked financial instruments (or embedded conversion options)~~ with ~~down~~all ~~round~~unpaid ~~features~~principal ~~must~~due bein June ~~reassessed~~2023 ~~as liability~~and ~~classification~~interest ~~may~~paid nomonthly ~~longer~~at ~~be required. As~~ a ~~result, the~~rate ~~Company determined in regard to its 2018 warrants the appropriate treatment~~ of ~~these~~7.00% ~~warrants~~per ~~that were initially classified as derivative liabilities should now be classified as equity instruments~~annum.

~~The~~At September ~~Company~~30, ~~determined~~2020 ~~that the liability associated with the 2018 warrants should be remeasured~~ and December ~~adjusted~~31, to2019, ~~fair value on~~ the ~~date~~ ofaggregate ~~the~~outstanding ~~change~~principal inbalance classification with the offset to be recorded through earnings and then the fair value of the warrants should be reclassified to equity. The Company recorded the change in the fair value of the 2018 warrants as of the date of change in classification on ~~March 11, 2019 to earnings. The fair value of~~ the ~~2018~~ ~~warrants~~mortgages aswas ofapproximately ~~the date of change in classification~~$517,000 inand ~~the amount of~~ $1528,~~494,~~000, ~~was reclassified from warrant derivative liability to additional paid in capital as a result of the change in classification of the warrants~~respectively.

~~Increases or~~In February ~~decreases~~2019, inKII ~~the~~purchased ~~fair~~a ~~value~~45-acre tract of ~~the~~land ~~derivative~~in ~~liability~~Groveland, ~~are included~~Florida asfor a$750,000. ~~component~~The ofCompany ~~total~~paid ~~other~~$300,000 ~~expense~~as ina ~~the~~down ~~accompanying condensed~~payment ~~consolidated~~and ~~statements~~assumed ofa ~~operations~~mortgage ~~for~~of ~~the respective period~~$450,000. ~~The~~All ~~changes~~unpaid toprincipal ~~the~~was ~~derivative~~due ~~liability~~in February ~~for~~2024 ~~warrants resulted~~and ininterest awas ~~decrease~~paid ofmonthly ~~$2,457,000~~at ~~and~~a anrate ~~increase~~ of ~~$5,538,000 for~~6.00% ~~the~~per ~~three~~annum. ~~months ended~~ At September 30, ~~2019~~2020 and December ~~2018~~31, ~~respectively.~~ ~~The~~2019, ~~changes to~~ the ~~derivative~~remaining ~~liability~~mortgage ~~for~~balance ~~warrants resulted~~was inapproximately ~~a decrease of~~ $4432,~~344,~~000 and ~~an increase of~~ $4440,~~634,~~000 ~~for the nine months ended September 30~~, ~~2019 and 2018,~~ respectively.

~~The~~In February ~~estimated~~2021, ~~fair~~the ~~value~~Company determined that KII’s original plan for use of ~~the~~certain ~~outstanding~~properties ~~warrant~~was ~~liabilities~~not ~~is $2,699,000~~viable ~~and~~for ~~$9,216,000~~its future as KII had shifted its focus back to its primary core business of ~~September~~extraction ~~30,~~of ~~2019~~cannabinoids and ~~December~~the 31production of products for sale with the cannabinoids. As a result, ~~2018,~~ ~~respectively~~the Khrysos Mortgage Notes were subsequently sold. (See Note 13)

- ~~The estimated fair value of the warrants was computed as of~~ 26- ~~September 30, 2019 and December 31, 2018 using the Monte Carlo option pricing model with the following assumptions:~~

	September 30, 2019 (unaudited)	December 31, 2018
Stock price volatility	101%-106.3%	83.78%-136.76%
Risk-free interest rates	1.72%-1.78%	2.465%-2.577%
Annual dividend yield	0%	0%
Expected life	0.83-1.21 years	0.58-2.76

Table of Contents

InM2C ~~addition,~~Purchase ~~management assessed the probabilities of future financing assumptions in the valuation models.~~Agreement

~~Note~~In

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