Company Quick10K Filing
Acacia Diversified Holdings
Price0.07 EPS-0
Shares42 P/E-2
MCap3 P/FCF-8
Net Debt-0 EBIT-1
TEV3 TEV/EBIT-2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-19
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10-K 2019-12-31 Filed 2020-06-26
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-15
S-1 2019-02-14 Public Filing
10-K 2018-12-31 Filed 2019-04-01
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S-1 2018-04-18 Public Filing
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10-K 2017-12-31 Filed 2018-04-02
10-Q 2017-09-30 Filed 2017-11-13
10-Q 2017-06-30 Filed 2017-08-07
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10-K 2016-12-31 Filed 2017-03-28
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
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10-K 2015-12-31 Filed 2016-02-12
10-Q 2015-09-30 Filed 2015-11-10
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10-K 2013-12-31 Filed 2015-05-20
10-Q 2013-09-30 Filed 2013-11-19
10-Q 2013-06-30 Filed 2013-08-13
10-Q 2013-03-31 Filed 2013-05-10
10-K 2012-12-31 Filed 2013-03-28
10-Q 2012-09-30 Filed 2013-02-22
10-Q 2012-06-30 Filed 2013-02-22
10-Q 2012-03-31 Filed 2013-02-22
10-K 2011-12-31 Filed 2013-02-22
10-Q 2010-03-31 Filed 2010-07-23
10-K 2009-12-31 Filed 2010-05-27
8-K 2020-08-06 Officers
8-K 2020-05-20
8-K 2020-05-20
8-K 2020-05-15
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8-K 2020-03-26
8-K 2020-02-03
8-K 2019-05-29
8-K 2019-02-14
8-K 2018-07-30

ACCA 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - The Company
Note 2 - Going Concern
Note 3 - Summary of Significant Accounting Policies
Note 4 - Related Party Transactions
Note 5 - Accounts Payable and Accrued Expenses
Note 6 - Convertible Notes Payable and Derivative Liability
Note 7 - Stockholders' Deficit
Note 8 - Commitments
Note 10 - Subsequent Events
Note 11 - Recent Accounting Pronouncements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information.
Item 6. Exhibits
EX-31.1 ex_199207.htm
EX-32.1 ex_199208.htm

Acacia Diversified Holdings Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
1.40.90.3-0.2-0.8-1.32012201420172020
Assets, Equity
1.00.60.2-0.1-0.5-0.92012201420172020
Rev, G Profit, Net Income
2.41.81.10.5-0.2-0.82012201420172020
Ops, Inv, Fin

10-Q 1 acaciadiv20200630_10q.htm FORM 10-Q acaciadiv20200630_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

 (Mark One)

 

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended June 30, 2020

 

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

 

 

For the transition period from __________________ to ______________

 

Commission file number: 001-14088

 

Acacia Diversified Holdings, Inc.

(Exact name of small business issuer as specified in its charter)

 

Texas

75-2095676

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

 

 

704 Forest Glen Road, Silver Spring, MD

20901

(Address of principal executive offices)

(Zip Code)

 

(301) 992-2177

(Registrant’s telephone number) 

 

                                                                                                                                            

(Former name, former address and former fiscal year, if changed since last report)

 

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

ACCA

OTCQB

  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes ☒  No ☐   (2) Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  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 definition of “large accelerated filer,” accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act: 

 

Large accelerated filer ☐

 

Accelerated filer ☐

 

 

 

Non-accelerated filer ☐

 

Smaller Reporting Company ☒

 

 

 

Emerging growth company  ☐

 

 

 

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

 

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

 

APPLICABLE ONLY TO CORPORATE ISSUERS 

 

State the number of shares outstanding of each of the issuer's classes of common equity, as of August 14, 2020 is 54,283,309 common shares. 

 

 

 

 

TABLE OF CONTENTS

 

 

 

Page

PART I. Financial Information

 

 

 

 

Item 1.

Financial Statements

F-1

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

5

Item 4.

Controls and Procedures

6

 

 

 

PART II. Other Information

 

 

 

 

Item 1.

Legal Proceedings

7

Item 1A.

Risk Factors

7

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

7

Item 3.

Defaults Upon Senior Securities

7

Item 4.

Mine Safety Disclosures

7

Item 5.

Other Information

7

Item 6.

Exhibits

8

 

 

 

Signatures

9

 

 

 

 

 

PART I.  FINANCIAL INFORMATION

 

Item 1. Financial Statements

ACACIA DIVERSIFIED HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

 

   

June 30,

   

December 31,

 
   

2020

   

2019

 
   

(UNAUDITED)

   

(AUDITED)

 

ASSETS

               
                 

CURRENT ASSETS:

               

Cash

  $ 421     $ 2,616  

Prepaid expenses and other current assets

    4,334       4,335  

Current assets of discontinued operations

    -       129,367  

Total Current Assets

    4,755       136,318  
                 

OTHER ASSETS

               

Deposits

    -       841  

Non-current assets of discontinued operations

    -       517,078  
      -       517,919  
                 

TOTAL ASSETS

  $ 4,755     $ 654,237  
                 

LIABILITIES AND STOCKHOLDERS' DEFICIT

               
                 

CURRENT LIABILITIES:

               

Accounts payable and accrued expenses

  $ 388,778     $ 282,705  

Convertible notes payable

    264,300       264,100  

Notes payable to related parties

    -       752,400  

Accrued interest on notes payable to related parties

    -       116,629  

Payable to related parties

    10,525       35,348  

Current liabilities of discontinued operations

    -       160,347  

Total Current Liabilities

    663,603       1,611,529  
                 

LONG-TERM LIABILITY:

               

Derivative liability

    237,055       381,330  

Long-term liabilities of discontinued operations

    -       175,116  

Total Long-term Liability

    237,055       556,446  
                 

Total Liabilities

    900,658       2,167,975  
                 

Commitments and contingencies

    -       -  
                 

STOCKHOLDERS' DEFICIT

               

Series B Convertible preferred stock, $0.001 par value; 2,000,000 shares authorized; 1,475,000 shares issued and outstanding at June 30, 2020

    1,475       -  

Common stock, $0.001 par value; 150,000,000 shares authorized; 52,481,499 and 39,583,543 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

    52,482       39,584  

Additional paid-in capital

    6,915,499       6,706,657  

Accumulated deficit

    (7,865,359 )     (8,259,979

)

Total Stockholders' Deficit

    (895,903

)

    (1,513,738

)

                 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

  $ 4,755     $ 654,237  

 

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

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(UNAUDITED)

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 
                                 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

                               

Employee compensation expenses

  $ -     $ 144,094     $ 97,304     $ 273,229  

General and administrative expenses

    24,906       30,016       93,766       105,656  
      24,906       174,110       191,070       378,885  
                                 

LOSS FROM OPERATIONS

    (24,906 )     (174,110 )     (191,070 )     (378,885 )
                                 

OTHER INCOME (EXPENSE)

                               

Derivative income (expense)

    (79,894 )     (214,308 )     42,512       (187,128 )

Interest expense

    (19,255 )     (25,544 )     (40,755 )     (46,306 )

TOTAL OTHER INCOME (EXPENSE)

    (99,149 )     (239,852 )     1,757       (233,434 )
                                 

NET LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

    (124,055 )     (413,962 )     (189,313 )     (612,319 )

Income taxes

    -       -       -       -  
                                 

NET LOSS FROM CONTINUING OPERATIONS

    (124,055 )     (413,962 )     (189,313 )     (612,319 )
                                 

DISCONTINUED OPERATIONS

                               

Loss from discontinued operations

    -       (95,952 )     (140,353 )     (95,620 )

Gain on disposal of net assets of discontinued operations

    724,286       -       724,286       -  
      724,286       (95,952 )     583,933       (95,620 )

Income taxes

    -       -       -       -  
                                 

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX

    724,286       (95,952 )     583,933       (95,620 )
                                 

NET INCOME (LOSS)

  $ 600,231     $ (509,914 )   $ 394,620     $ (707,939 )
                                 

NET LOSS PER COMMON SHARE:

                               
                                 

Net loss from continuing operations per common share - basic and diluted

  $ (0.00 )   $ (0.01 )   $ (0.00 )   $ (0.02 )
                                 
Net income from discontinued operations per common share - basic and diluted   $ 0.01     $ (0.00 )   $ 0.01     $ (0.00 )
                                 

NET INCOME (LOSS) PER COMMON SHARE, BASIC AND DILUTED

  $ 0.01     $ (0.02 )   $ 0.01     $ (0.03 )
                                 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED

    48,617,529       28,008,747       44,745,821       25,353,695  

 

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

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

FOR THE SIX MONTHS ENDED JUNE 30, 2019

(UNAUDITED) 

 

   

Common Stock

                         
   

Shares

   

Par Value

   

Additional Paid-in Capital

   

Accumulated Deficit

   

Total

 
                                         

Balance December 31, 2018 (audited)

    21,813,625     $ 21,814     $ 5,692,055     $ (6,666,649 )   $ (952,780 )
                                         

Common stock issued for services

    4,198,825       4,199       166,858       -       171,057  
                                         

Common stock issued for conversion of convertible note

    6,252,940       6,253       167,947       -       174,200  
                                         

Settlement of derivative liability from conversion of convertible note

    -       -       230,939       -       230,939  
                                         

Employee stock plan compensation

    40,000       40       45,378       -       45,418  
                                         

Common stock issued for cash

    760,000       760       90,440       -       91,200  
                                         

Settlement of payable to related party

    200,000       200       7,800       -       8,000  
                                         

Settlement of notes payable and accrued interest with related party

    3,074,592       3,075       119,909       -       122,984  
                                         

Cumulative adjustments from adoption of ASC 842

    -       -       -       (4,402 )     (4,402 )
                                         

Net loss

    -       -       -       (707,939 )     (707,939 )
                                         

Balance June 30, 2019 (unaudited)

    36,339,982     $ 36,341     $ 6,521,326     $ (7,378,990 )   $ (821,323 )

 

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

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

FOR THE SIX MONTHS ENDED JUNE 30, 2020

(UNAUDITED) 

 

   

Series B Convertible Preferred Stock

   

Common Stock

                         
   

Shares

   

Par Value

   

Shares

   

Par Value

   

Additional Paid-in Capital

   

Accumulated Deficit

   

Total

 

Balance December 31, 2019 (audited)

    -     $ -       39,583,543     $ 39,584     $ 6,706,657     $ (8,259,979 )   $ (1,513,738 )
                                                         

Common stock issued for services

    -       -       272,000       272       5,659       -       5,931  
                                                         

Common stock issued for conversion of convertible note

    -       -       12,585,956       12,586       94,464       -       107,050  
                                                         

Settlement of derivative liability from conversion of convertible note

    -       -       -       -       101,763       -       101,763  
                                                         

Employee stock plan compensation

    -       -       40,000       40       6,956       -       6,996  
                                                         

Issuance of preferred stock

    1,475,000       1,475       -       -       -       -       1,475  
                                                         

Net income

    -       -       -       -       -       394,620       394,620  
                                                         

Balance June 30, 2020 (unaudited)

    1,475,000     $ 1,475       52,481,499     $ 52,482     $ 6,915,499     $ (7,865,359 )   $ (895,903 )

 

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

 

ACACIA DIVERSIFIED HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(UNAUDITED)

   

Six Months Ended June 30,

 
   

2020

   

2019

 
                 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss from continuing operations

  $ (189,313 )   $ (612,319 )

Net income (loss) from discontinued operations

    583,933       (95,620 )

Adjustments to reconcile net loss from continuing operations to net cash and cash equivalents

used by operating activities:

               

Common stock issued for services

    5,931       171,057  

Common stock issued from employee stock plan

    6,996       45,418  

Original issue discount on convertible note payable

    -       8,500  

Amortization of debt discount

    -       3,000  

Accrued interest on notes payable to related parties

    (116,629 )     30,187  

Gain on disposition of net assets of discontinued operations

    (724,286 )     -  

Derivative expense (income)

    (42,512 )     187,128  

(Increase) decrease in:

               

Prepaid expenses and other current assets

    841       -  

Increase (decrease) in:

               

Accounts payable and accrued expenses

    366,878       (32,096 )

Payable to related parties

    12,000       8,000  

Net cash used by operating activities from continuing operations

    (96,161 )     (286,745 )
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Proceeds from issuance of common stock

    -       91,200  

Proceeds from issuance of convertible note payable

    -       82,000  

Proceeds from issuance of notes payable to related parties 

    49,928       35,000  

Net cash provided by financing activities from continuing operations

    49,928       208,200  
                 

Net cash used by continuing operations

    (46,233 )     (78,545 )
                 

CASH FLOWS - DISCONTINUED OPERATIONS:

               

Net cash provided by operating activities of discontinued operations

    20,182       144,531  

Net cash used in investing activities of discontinued operations

    -       (32,572 )

Net cash used in financing activities of discontinued operations

    (3,293 )     (6,445 )

Net cash provided by discontinued operations

    16,889       105,514  
                 

Net (decrease) increase in cash and cash equivalents

    (29,344 )     26,969  
                 

Less: net (decrease) increase in cash and cash equivalents from discontinued operations

    27,149       14,914  

Net (decrease) increase in cash and cash equivalents from continuing operations

    (2,195 )     41,883  
                 

Cash and cash equivalents, beginning of the year

    2,616       1,060  
                 

Cash and cash equivalents, end of the year

  $ 421     $ 42,943  
                 

SUPPLEMENTAL CASH FLOW INFORMATION:

               

Continuing operations

               

Cash paid for interest

  $ -     $ -  

Cash paid for income taxes

  $ -     $ -  

Discontinued operations

               

Cash paid for interest

  $ 3,221     $ -  

Cash paid for income taxes

  $ -     $ -  
                 

NON-CASH FINANCING AND INVESTING ACTIVITIES FROM CONTINUING OPERATIONS: 

               

Common issued to related party to settle accrued expense

  $ -     $ 8,000  

Common issued to related party to settle notes payable and accrued interest

  $ -     $ 122,984  

Common stock issued for conversion of convertible notes payable and accrued interest

  $ 107,050     $ 174,200  

Settlement of derivative liability from conversion of convertible notes payable

  $ 101,763     $ 230,939  

Issuance of convertible note payable to settle accounts payable

  $ 103,000     $ -  

Issuance of preferred stock

  $ 1,475     $ -  

NON-CASH FINANCING AND INVESTING ACTIVITIES FROM DISCONTINUED OPERATIONS: 

               

Acquisition of ROU asset - finance lease

  $ -     $ 182,041  

Acquisition of ROU asset - operating lease

  $ -     $ 29,655  

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

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

NOTE 1 – THE COMPANY

 

Acacia Diversified Holdings, Inc. (“Acacia” or the “Company”), a Texas corporation, had four wholly-owned subsidiaries, MariJ Pharmaceuticals, Inc. (“MariJ Pharma”), a Florida corporation, Canna-Cures Research & Development Center, Inc. (“Canna-Cures”), a Florida corporation, Eufloria Medical of Tennessee, Inc. (“EMT”), a company incorporated in the state of Tennessee, and Medahub Operations Group, Inc. and Medahub, Inc., technology companies (collectively “Medahub”) incorporated in the state of Florida.

 

The Company’s primary source of revenue was from the extraction of medicinal hemp oil, from a non-psychoactive cannabis plant. All extraction services were provided in states where such services were deemed legal. The Company's subsidiary EMT was invited to be part of the hemp pilot program in Tennessee which provided the Company the license to grow, manufacture, and dispense organic hemp oil in Tennessee. The Company also had a retail store in Tennessee selling hemp infused products. Revenue generated from retail sales was not material to the Company based on its operating model.

 

On March 26, 2020, the Company announced in a current report on Form 8-k that its operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic spreading throughout the United States and the world and thus the Company’s business operations have been disrupted and it was unable to timely prepare the Company’s financial statements for the 2019 fiscal year. As such, the Company would be making use of the 45-day grace period provided by the SEC’s Order and available filing extension to delay filing of its Annual Report. Around this time, the Company also suspended its operations, laid off all of its employees and ceased to generate any revenue.

 

As a result of the insufficient cash flows from the operations of our subsidiaries as well as the disruption of our business from the COVID-19 pandemic, as of March 31, 2020, the Company discontinued the operations of all of its wholly-owned subsidiaries. The financial results for these subsidiaries have been presented as discontinued operations in the accompanying consolidated financial statements.

 

On March 31, 2020, Richard K. Pertile resigned his position as Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer for the Company. On the same date, the Company filed a current report on Form 8-k to announce that it issued in escrow 1,475,000 shares of the Company’s Series B Convertible Preferred Stock (the “Preferred Stock”) to ORCIM Financial Holdings, LLC (“OFH”). Each share of the Preferred Stock has fifty (50) votes per share and may be converted into fifty (50) $0.001 par value common shares. As of March 31, 2020, the Company had 43,290,324 shares of its common stock issued and outstanding. There were no other shares of any capital stock outstanding except for the common stock and Preferred Stock. As the result of the issuance of the Preferred Stock and, upon satisfaction of the terms of the Acquisition Agreement, OFH would have voting control over the Company with 73,750,000 votes on all matters submitted to stockholders for a vote. The parties agree that the change in control would not be effective until all conditions of the Acquisition Agreement are satisfied, including, but not limited to, the acquisition of funding by OFH to satisfy certain debts of the Company and the resignation of its existing board of directors. On May 20, 2020, the Company’s existing board of directors resigned. 

 

Pursuant to the terms of the Acquisition Agreement, the parties agree that the Company will transfer to Richard K. Pertile (“Pertile”), our former CEO, all the issued and outstanding shares of each of the Company’s wholly-owned subsidiaries, and Pertile agreed to forgive all amounts due him or his related parties from the Company. The forgiveness of debt was approximately $910,000 and the value of the net assets of the subsidiaries was approximately $267,000 (net of $240,000 of liabilities). The Acquisition Agreement also specified which accounts payable, accrued liabilities and convertible notes would remain as liabilities of the Company. OFH has agreed to the payment of the following liabilities:

 

Professional fees

  $ 110,000  

Accounts payable

    28,050  

Accrued compensation to our former CEO

    187,000  

Accrued compensation to our former COO

    91,000  

Convertible notes

    250,000  
    $ 666,050  

 

As of the date of the issuance of the consolidated financial statements, the Company settled professional fees in the amount of $110,000 and other liabilities remained outstanding.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

OFH is a limited liability company domiciled in Maryland. OFH is controlled by Mr. Jeffery D. Bearden, who owns 100% of the membership interests of OFH. The Preferred Stock was acquired by OFH in exchange for its agreement to assume the debt of the Company in the approximate amount of $666,000. The funds to satisfy the outstanding debt of the Company were acquired by OFH through a loan from a hedge fund entity known as Geneva Capital.

 

On March 31, 2020, Mr. Larnell C. Simpson, Jr., was appointed as a director for Acacia Diversified Holdings, Inc. (the “Company”). Mr. Simpson also was appointed to the position of Vice President.

 

On May 20, 2020, directors Danny Gibbs, Neil B. Gholson and Dr. Richard Paula each resigned their respective positions as a director for Acacia Diversified Holdings, Inc.

 

NOTE 2 – GOING CONCERN

 

Based on operating losses and negative cash from operations and the discontinued operations of the Company’s operations, substantial doubt exists about the Company’s ability to continue as a going concern. Management’s plan in this regard is to find new operations to enter into and focus on building profitable operations. To finance operations while it finds new operations, the Company will continue financing activity such as entering into loan agreements and issuing new shares of the Company’s common stock. Therefore, the Company expects to continue to incur operating losses and to incur professional fees to maintain its reporting company status. Until such time that the Company is able to generate revenue and become profitable or find new sources of capital, the Company will find it difficult to continue to meet its obligations as they come due.  There can be no assurance that the Company will be successful in its efforts to raise capital, or if it were successful in raising capital, that it would be successful in meeting its business plans.  Management’s plans include attempting to raise funds from the public through an equity offering of the Company’s common stock and identifying and developing new opportunities. However, the recent COVID-19 pandemic has presented unprecedented challenges to businesses and the investing landscape around the world. Therefore, there can be no assurance that Management’s plans will be successful.

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses for all periods presented and has a substantial accumulated deficit. As of June 30, 2020, these factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

BASIS OF PRESENTATION

 

The accompanying consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments, which consist solely of normal recurring adjustments, needed to fairly present the financial results for these periods. The consolidated financial statements and notes thereto are presented as prescribed by Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. The accompanying consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended December 31, 2019 and notes thereto in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission on June 26, 2020. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year. In the opinion of management, all adjustments have been made, which consist only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three-month and six-month periods ended June 30, 2020 and 2019, (b) the financial position at June 30, 2020 and (c) cash flows for the three-month and six-month periods ended June 30, 2020 and 2019.

 

As a result of the insufficient cash flows from the operations of our subsidiaries as well as the disruption of our business from the COVID-19 pandemic, as of March 31, 2020, the Company discontinued the operations of all of its wholly-owned subsidiaries. The financial results for these subsidiaries have been presented as discontinued operations in the accompanying consolidated financial statements. For the six months ended June 30, 2020 and 2019, all gains and losses on disposition, impairment charges and disposal costs, along with the sales, costs and expenses and income taxes attributable to discontinued operations, have been aggregated in a single caption entitled “Income (loss) from discontinued operations, net of tax” in our consolidated statements of operations for all periods presented.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

PRINCIPLES OF CONSOLIDATION

 

The consolidated financial statements include the accounts of Acacia Diversified Holdings, Inc. and its wholly-owned subsidiaries, MariJ Pharmaceuticals, Inc, Canna-Cures Research & Development Center, Inc., Eufloria Medical of Tennessee, Inc., Medahub Operations Group, Inc. and Medahub, Inc., as of and for the three months ended March 31, 2020. All significant intercompany accounts and transactions are eliminated in consolidation. As a result of the insufficient cash flows from the operations of our subsidiaries as well as the disruption of our business from the COVID-19 pandemic, as of March 31, 2020, the Company discontinued the operations of all of its wholly-owned subsidiaries. The financial results for these subsidiaries have been presented as discontinued operations in the accompanying consolidated financial statements. For the six months ended June 30, 2020, all gains and losses on disposition, impairment charges and disposal costs, along with the sales, costs and expenses and income taxes attributable to discontinued operations, have been aggregated in a single caption entitled “Income (loss) from discontinued operations, net of tax” in our consolidated statements of operations for all periods presented.

 

USE OF ESTIMATES

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The actual results may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

RECLASSIFICATION

 

Certain accounts in the prior period's financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements.

 

LEASES

 

In February 2016, the FASB issued ASU 2016-02, Leases, which aims to make leasing activities more transparent and comparable and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. The new guidelines are contained in Accounting Standards Codification ASC Topic 842 - Leases ("ASC 842"). This ASU is effective for all interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company applied this standard retrospectively on January 1, 2019 through a cumulative effect adjustment recognized as of January 1, 2019. In applying this standard, the Company elects to apply all practical expedients to not reassess the followings:

 

 

1.

Whether a pre-existing contract is or contain a lease

 

2.

Whether a pre-existing lease should be classified as an operating or finance lease, and

 

3.

Whether the initial direct costs capitalized for a pre-existing lease under the previously lease accounting standard ASC Topic 840 qualify for capitalization

 

In addition, in the applying ASC 842, the Company does not elect the hindsight practical expedient.

 

As a result, the Company recorded its right-of-use assets and corresponding lease liabilities on its balance sheet beginning January 1, 2019. As of March 31, 2020, the Company discontinued the operations of its subsidiaries and presented the right-of-use assets and related liabilities and results of operations as part of discontinued operations in the consolidated financial statements.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

Short term lease

 

The Company recognizes its office lease in Florida with an initial term of 12 months or less as a short-term lease. Lease payments associated with short-term lease are expensed as incurred in operating lease expense and are not included in our calculation of right-of-use assets or lease liabilities. Operating lease expense related to short-term lease was $0 and $2,899 for the three months ended June 30, 2020 and 2019, respectively, and $4,199 and $5,794 for the six months ended June 30, 2020 and 2019. This short-term lease was terminated in July 2020.

 

REVENUE RECOGNITION

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces numerous requirements in U.S. GAAP, including industry specific requirements, and provides a single revenue recognition model for recognizing revenue from contracts with customers. The Company adopted this standard effective January 1, 2018.

 

The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenues from extraction activities and from retail sales are recognized at a point in time.

 

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenues.

 

The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application to accumulated deficit. Additionally, incremental footnote disclosures are required to present the 2018 revenues under the prior standard. Under the modified retrospective method, an entity may also elect to apply the standard to either (i) all contracts as of January 1, 2018, or (ii) only to contracts that are not completed as of January 1, 2018. The Company elected to adopt this guidance using the modified retrospective method at January 1, 2018 which did not result in an adjustment to accumulated deficit. Additionally, upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition.

 

As of March 31, 2020, the Company discontinued the operations of its subsidiaries and presented the results of operations of the subsidiaries as part of discontinued operations in the consolidated financial statements.

 

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

 

The Company’s accounts receivable represents amounts due from customers for extraction services performed. Allowance for uncollectible accounts receivable is estimated based on the aging of the accounts receivable and management estimate of uncollectible amounts.  At June 30, 2020 and December 31, 2019, the Company did not provide for an allowance for doubtful accounts. As of March 31, 2020, the Company discontinued the operations of its subsidiaries and presented its accounts receivable as asset of discontinued operations in the consolidated financial statements.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

INVENTORIES

 

Inventories are stated at the lower of cost or market.  Cost is determined using the average cost method. The Company’s inventory consists of raw materials and finished goods. Cost of inventory includes cost of ingredients, labor, quality control and all other costs incurred to bring our inventories to condition ready to be sold. As of March 31, 2020, the Company discontinued the operations of its subsidiaries and presented its inventories as assets of discontinued operations in the consolidated financial statements.

 

DEFERRED FARM EXPENSE

 

The Company's subsidiary EMT grows hemp plants in both its indoor and outdoor facility. In accordance with Accounting Standards Codification 905 - Agriculture, all direct and indirect costs of growing the plants are accumulated until the time of harvest. These deferred cost cannot exceed the realizable value of the oil processed from the hemp plants. Crop costs such as soil preparation incurred before planting are deferred and allocated to the growing crop. Deferred farm expense is included as inventory costs. As of March 31, 2020, the Company discontinued the operations of its subsidiaries and presented its deferred farm expense as asset of discontinued operations in the consolidated financial statements.

 

DEBT DISCOUNT

 

The Company incurred debt discount related to the issuance of convertible promissory notes, as described in Note 6. The discount was recognized in its entirety as interest expense rather than amortized over the life of the convertible promissory note. The immediate recognition did not yield materially different result.

 

DEBT ISSUANCE COSTS

 

The Company incurred direct costs associated with the issuance of convertible promissory notes, as described in Note 6. The Company recognized these costs as interest expense.

 

STOCK BASED COMPENSATION

 

The Company accounts for stock-based compensation under Accounting Standards Codification 718 - Compensation-Stock Compensation (“ASC 718”). ASC 718 requires that all stock-based compensation be recognized as expense in the financial statements and that such cost be measured at the fair value of the award at the grant date and recognized over the period during which an employee is required to provide services (requisite service period). An additional requirement of ASC 718 is that estimated forfeitures be considered in determining compensation expense. Estimating forfeitures did not have a material impact on the determination of compensation expense during the six months ended June 30, 2020 and 2019.  

 

The Company accounts for stock based awards based on the fair market value of the instrument using a 10-day volume weighted adjusted price (VWAP) and accounts for stock options issued using the Black-Scholes option pricing model and utilizing certain assumptions including the followings:

 

Risk-free interest rate – This is the yield on U.S. Treasury Securities posted at the date of grant (or date of modification) having a term equal to the expected life of the option. An increase in the risk-free interest rate will increase compensation expense.

 

Expected life—years – This is the period of time over which the options granted are expected to remain outstanding. Options granted by the Company had a maximum term of ten years. An increase in the expected life will increase compensation expense.

 

Expected volatility – Actual changes in the market value of stock are used to calculate the volatility assumption.  An increase in the expected volatility will increase compensation expense.

 

Dividend yield – This is the annual rate of dividends per share over the exercise price of the option. An increase in the dividend yield will decrease compensation expense.  The Company does not currently pay dividends and has no immediate plans to do so in the near future.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of Accounting Standards Codification 505-50, Equity – Based Payments to Non-Employees.  Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued.  The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete. 

 

During the six months ended June 30, 2020, the board of directors approved the following issuances of the Company’s restricted common stock to consultants, employees, and directors for services rendered:

 

 

1.

2,000 shares to a consultant for services rendered, valued at $44.

 

2.

250,000 shares to the Company's board of directors for services rendered, valued at $5,451.

 

3.

40,000 shares issued to employees from the employee stock plan, valued at $6,996.

 

4.

20,000 shares issued to an employee for services rendered, valued at $436.

 

FAIR VALUE ESTIMATES – The Company measures assets and liabilities it acquires at fair value in accordance with Accounting Standards Codification 820 – Fair Value Measurement (“ASC 820”). The objective of ASC 820 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 specifies a valuation hierarchy based on whether the inputs to those valuation techniques are observable or unobservable.

 

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions. These two types of inputs have created the following fair value hierarchy:

 

Level 1 – Quoted prices for identical instruments in active markets;

 

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and 

 

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when estimating fair value. The Company has liability measured at fair value on a recurring basis due to the issuance of convertible note payable as described in Note 6.

 

NET INCOME (LOSS) PER SHARE - In accordance with ASC 260 - Earnings Per Share, the basic income per common share is computed by dividing the net income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if diluted potential common stock had been converted to common stock. No dilutive potential common shares were included in the computation of diluted net income per share for all periods presented because their impact was anti-dilutive. As of June 30, 2020, the Company had 20,000 options outstanding, 1,475,000 shares of Series B convertible preferred stock and $264,300 of outstanding convertible notes payable which were excluded from the computation of net income per share because they are anti-dilutive for the three and six months ended June 30, 2020. As of June 30, 2019, the Company had 50,000 options outstanding and $124,800 of outstanding convertible notes payable which were excluded from the computation of net income per share because they are anti-dilutive for the three and six months ended June 30, 2019.

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

Notes Payable to Related Parties

 

The Company entered into the following promissory notes payable to its former CEO during the year ended December 31, 2019 and during the six months ended June 30, 2020: 

 

Note Date

     

Note Balance 12/31/18

   

New Loan

   

Note Conversion

   

Note Balance 12/31/19

   

New Loan

   

Note Conversion

   

Amounts Settled (See NOTE 9)

   

Note Balance 6/30/2020

 
                                                                     

September 2017

      $ 558,400     $ -     $ -     $ 558,400     $ -     $ -     $ (558,400 )   $ -  

March 2018

        72,000       -       (72,000 )     -       -       -               -  

April 2018

        42,000       -       (42,000 )     -       -       -               -  

August 2018

        70,000       -       -       70,000       -       -       (70,000 )     -  

November 2018

        20,000       -       -       20,000       -       -       (20,000 )     -  

December 2018

        50,000       -       -       50,000       -       -       (50,000 )     -  

May 2019

  (1)     -       10,000       -       10,000       -       -       (10,000 )     -  

June 2019

  (2)     -       25,000       -       25,000       -       -       (25,000 )     -  

December 2019

  (3)     -       19,000       -       19,000       -       -       (19,000 )     -  

February 2020

  (4)     -       -       -       -       40,000       -       (40,000 )     -  

March 2020

  (5)     -       -       -       -       9,928       -       (9,928 )     -  
                                                                     
        $ 812,400     $ 54,000     $ (114,000 )   $ 752,400     $ 49,928     $ -     $ (802,328 )   $ -  

 

Note Date

     

Accrued Interest 12/31/18

   

Interest Expense

   

Interest Conversion

   

Accrued Interest 12/31/19

   

Interest Expense

   

Interest Conversion

   

Amounts Settled (See NOTE 9)

   

Accrued Interest 6/30/2020

 
                                                                     

September 2017

      $ 56,544     $ 44,672     $ -     $ 101,216     $ 22,274     $ -     $ (123,490 )   $ -  

March 2018

        4,402       8,632       (13,034 )     -       -       -       -       -  

April 2018

        2,333       5,035       (7,368 )     -       -       -       -       -  

August 2018

        2,169       5,600       -       7,769       2,792       -       (10,561 )     0  

November 2018

        184       1,600       -       1,784       798       -       (2,582 )     (0 )

December 2018

        142       4,000       -       4,142       1,995       -       (6,137 )     (0 )

May 2019

  (1)     -       508       -       508       399       -       (907 )     0  

June 2019

  (2)     -       1,134       -       1,134       997       -       (2,132 )     (0 )

December 2019

  (3)     -       75       -       75       758       -       (833 )     (0 )

February 2020

  (4)     -       -       -       -       1,201       -       (1,201 )     0  

March 2020

  (5)     -       -       -       -       237       -       (237 )     (0 )
                                                                     
        $ 65,774     $ 71,257     $ (20,402 )   $ 116,629     $ 31,451     $ -     $ (148,080 )   $ (0 )

 

(1) In May 2019, the Company entered into an unsecured promissory note agreement with its former CEO and his spouse, in the amount of $10,000. The promissory note bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 90 days from the date of the note. The Company accrued interest on these notes in the amount of $907 through June 30, 2020.

 

(2) In June 2019, the Company entered into an unsecured promissory note agreement with its former CEO and his spouse, in the amount of $25,000. The promissory note bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 90 days from the date of the note. The Company accrued interest on these notes in the amount of $2,132 through June 30, 2020.

 

(3) In December 2019, the Company entered into an unsecured promissory note agreement with its former CEO and his spouse, in the amount of $19,000. The promissory note bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 90 days from the date of the note. The Company accrued interest on these notes in the amount of $833 through June 30, 2020.

 

(4) In February 2020, the Company entered into an unsecured promissory note agreement with one of its former director, in the amount of $40,000. The promissory note bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 30 days from the date of the note. The Company accrued interest on these notes in the amount of $1,201 through June 30, 2020.

 

(5) In March 2020, the Company entered into two unsecured promissory notes agreements with its former CEO and his spouse, in the amounts of $2,500 and $7,428. The promissory notes bear interest at a rate of 8% per annum. The principle balance and accrued interest is due 30 days from the dates of the notes. The Company accrued interest on these notes in the amount of $237 through June 30, 2020.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

As a result, the total principle amount of notes payable to related parties from continuing operations was $802,328 and $752,400, at June 30, 2020 and December 31, 2019, respectively. Accrued interest on these notes payable to related parties from continuing operations was $148,080 and $116,629, at June 30, 2020 and December 31, 2019, respectively. The note balances and accrued interest on June 30, 2020 were settled when the Company disposed of its discontinued operations as described in Note 9.

 

Payable to Related Parties

 

Payable to related parties from continuing operations consisted of the followings at June 30, 2020 and December 31, 2019:

 

   

June 30, 2020

   

December 31, 2019

 

Short term loan from related entity (1)

  $ -     $ 35,348  

Receivable from related party for issuance of Series B Convertible Preferred Stock

    (1,475 )     -  

Auto allowances owed to former CEO (2)

    12,000       -  

Payable to Related Parties from continuing operations 

  $ 10,525     $ 35,348  

 

(1) In 2017, the Company received a working capital advance of $74,348 from a related entity. These advances are non-interest bearing and were intended as short term capital advances. The remaining balances have been included in payable to related parties as current liabilities on the consolidated balance sheets at June 30, 2020 and December 31, 2019. 

 

(2) On May 1, 2016, the Company entered into an employment agreement with its former CEO. The term of the employment was through December 31, 2019. The agreement provided for a monthly automobile allowance of $1,000 to the former CEO.

 

In May 2019, the board of directors approved issuance of 200,000 shares of the Company's restricted common stock to the Company's former CEO to settle the accrued automobile allowance expense in the amount of $8,000. The Company assumed the liability of the automobile allowance that was previously a subsidiary’s liability.

 

During the three months ended June 30, 2020 and 2019, expenses from continuing operations related to the automobile allowances totaled $0 and $3,000, respectively. During the six months ended June 30, 2020 and 2019, expenses from continuing operations related to the automobile allowances totaled $3,000 and $6,000, respectively.

 

NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses of continuing operations consisted of the followings at June 30, 2020 and December 31, 2019:

 

   

June 30, 2020

   

December 31, 2019

 

Accounts payable to vendors

  $ 58,843     $ 965  

Payroll taxes payable

    65,414       63,206  

Accrued salaries and bonuses

    247,992       207,062  

Accrued interest on notes payable

    16,529       11,472  

Accounts payable and accrued expenses of continuing operations 

  $ 388,778     $ 282,705  

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

NOTE 6 – CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITY

 

On June 13, 2019, the Company issued a convertible promissory note ("Note 3") for $93,500. Note 3 was discounted at $85,000 and the Company received net proceeds of $82,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 10% per annum, and principal and accrued interest is due on the maturity date of June 13, 2020. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $151,264. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The Company recognized $33 and $35,039 as derivative income for the three and six months ended June 30, 2020, respectively. The Company recognized $120,573 as derivative expense for the three and six months ended June 30, 2019. The derivative liability was valued at $7,652 at March 31, 2020. As of June 30, 2020, the entire note principle balance of $93,500 was converted into 5,468,310 shares of the Company’s common stock. The note holder also converted $4,250 of accrued interest into 1,102,941 shares of the Company’s common stock. As a result of the conversion, the derivative liability was extinguished at June 30, 2020.

 

On July 12, 2019, the Company issued a convertible promissory note ("Note 4") for $91,300. Note 4 was discounted at $83,000 and the Company received net proceeds of $80,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 10% per annum, and principal and accrued interest is due on the maturity date of July 12, 2020. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $117,886. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The Company recognized $29,042 and $75,717 as derivative income for the three and six months ended June 30, 2020, respectively. The derivative liability was valued at $29,244 and $129,833 at June 30, 2020 and December 31, 2019, respectively. 

 

On October 10, 2019, the Company issued a convertible promissory note ("Note 5") for $91,300. Note 5 was discounted at $83,000 and the Company received net proceeds of $80,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 10% per annum, and principal and accrued interest is due on the maturity date of October 10, 2020. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $128,642. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The Company recognized $29,668 and $70,393 as derivative income for the three and six months ended June 30, 2020, respectively. The derivative liability was valued at $69,175 and $139,568 at June 30, 2020 and December 31, 2019, respectively. 

 

On May 21, 2020, the Company issued a convertible promissory note ("Note 6") for $103,000. The note holder disbursed the net proceeds of $103,000 to pay various professional fees on behalf of the Company. The note bears an interest rate at 12% per annum, and principal and accrued interest is due on the maturity date of May 21, 2021. The conversion option price associated with the note has a 39% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $480,598. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The Company recognized $138,637 as derivative expense for the three and six months ended June 30, 2020, respectively. The derivative liability was valued at $138,686 at June 30, 2020. 

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

Liability measured at fair value on a recurring basis by level within the fair value hierarchy as of June 30, 2020 and December 31, 2019 is as follows:  

 

   

Fair Value Measurement at June 30, 2020 (1) Using Level 2

         
   

Note 4

   

Note 5

   

Note 6

   

Total

 

Liability:

                               

Derivative liability

  $ 29,244     $ 69,175     $ 138,636     $ 237,055  

Total liability

  $ 29,244     $ 69,175     $ 138,636     $ 237,055  

 

   

Fair Value Measurement at December 31, 2019 (1) Using Level 2

 
   

Note 3

   

Note 4

   

Note 5

   

Total

 

Liability:

                               

Derivative liability

  $ 111,928     $ 129,833     $ 139,569     $ 381,330  

Total liability

  $ 111,928     $ 129,833     $ 139,569     $ 381,330  

 

(1) The Company did not have any assets or liabilities measured at fair value using Level 1 or 3 of the fair value hierarchy as of June 30, 2020 and December 31, 2019.

 

The Company’s derivative liabilities are classified within Level 2 of the fair value hierarchy. The Company utilizes the Black-Scholes valuation model to value the derivative liabilities utilizing observable inputs such as the Company’s common stock price, the conversion price of the conversion option, and expected volatility, which is based on historical volatility. The Black-Scholes valuation model employs the market approach in determining fair value.

 

The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis during the six months ended June 30, 2020 and the year ended December 31, 2019: 

 

Balance at December 31, 2018

  $ 138,218     $ 58,300     $ -     $ -     $ -     $ -     $ 196,518  

Variable conversion feature in convertible notes payable

    -       -       151,264       117,886       128,643       -       397,793  

Change in fair value

    58,502       14,250       (25,489 )     11,947       10,926       -       70,136  

Conversion of derivative liability to equity from note conversion

    (196,719 )     (72,550 )     (13,847 )     -       -       -       (283,117 )

Balance at December 31, 2019

  $ -     $ (0 )   $ 111,928     $ 129,833     $ 139,569     $ -     $ 381,330  

Variable conversion feature in convertible notes payable

    -       -       -       -       -       480,598       480,598  

Change in fair value

    -       -       (35,038 )     (75,716 )     (70,392 )     (341,961 )     (523,108 )

Conversion of derivative liability to equity from note conversion

    -       -       (76,890 )     (24,873 )     -       -       (101,763 )

Balance at June 30, 2020

  $ -     $ (0 )   $ -     $ 29,244     $ 69,175     $ 138,636     $ 237,055  

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

Since the issuance of Note 3, the note holder elected to convert the entire note principle and accrued interest into the Company's common stock on the following dates, at the respective conversion prices, resulting in the following number of shares issued to the note holder: 

 

Date of Conversion of Note 3

 

Amounts Converted

   

Conversion Price

   

Number of Shares Issued

 

Principle conversion

                       

December 23, 2019

  $ 12,000     $ 0.0480       250,000  

January 6, 2020

  $ 15,000     $ 0.0465       322,581  

January 27, 2020

  $ 15,000     $ 0.0338       443,787  

February 4, 2020

  $ 20,000     $ 0.0338       591,716  

March 6, 2020

  $ 22,200     $ 0.0109       2,036,697  

April 1, 2020

  $ 9,300     $ 0.0051       1,823,529  
                         
    $ 93,500               5,468,310  

Accrued interest conversion

                       

April 1, 2020

  $ 1,500     $ 0.0051       294,118  

May 7, 2020

  $ 2,750     $ 0.0034       808,824  
                         

Total amount converted

  $ 97,750               6,571,251  

 

Since the issuance of Note 4, the note holder elected to convert $21,300 of principle balance into the Company's common stock on the following dates, at the respective conversion prices, resulting in the following number of shares issued to the note holder: 

 

Date of Conversion of Note 4

 

Amounts Converted

   

Conversion Price

   

Number of Shares Issued

 

Principle conversion

                       

May 7, 2020

  $ 4,900     $ 0.0034       1,441,176  

May 13, 2020

  $ 8,000     $ 0.0034       2,352,941  

May 14, 2020

  $ 8,400     $ 0.0034       2,470,588  
                         

Total amount converted

  $ 21,300               6,264,706  

 

NOTE 7 – STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

The Company's board of directors is authorized by the Article of Incorporation to issue 2,000,000 shares of preferred stock at $0.001 par value, in one or more series. In August 2019, the Company's board of directors designated and authorized the issuance of 1,475,000 shares of Series B Convertible Preferred Stock (the “Preferred Stock”). Each share of Preferred Stock will have 50 votes per share and may be converted into 50 $0.001 par value common stock. The holders of the Preferred Stock are entitled to receive, when and if as declared by the board of directors, cumulative dividends payable in cash. The board of directors set the dividend rate on each share of Preferred Stock at 0%. The holders of Preferred Stock are also given preference over common stock holders in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and subject and subordinate to the rights of secured creditors of the Company.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

As a result of a change in control, on March 31, 2020, the Company issued in escrow 1,475,000 shares of the Company’s Series B Convertible Preferred Stock (the “Preferred Stock”) to ORCIM Financial Holdings, LLC (“OFH”). Each share of the Preferred Stock has fifty (50) votes per share and may be converted into fifty (50) $0.001 par value common shares. As of June 30, 2020, the Company had 52,481,499 shares of its common stock issued and outstanding. There were no other shares of any capital stock outstanding except for the common stock and Preferred Stock. As the result of the issuance of the Preferred Stock and, upon satisfaction of the terms of the Acquisition Agreement, OFH would have voting control over the Company with 73,750,000 votes on all matters submitted to stockholders for a vote. The parties agree that the change in control would not be effective until all conditions of the Acquisition Agreement are satisfied, including, but not limited to, the acquisition of funding by OFH to satisfy certain debts of the Company and the resignation of its existing board of directors. On May 20, 2020, the Company’s existing board of directors resigned.

 

OFH is a limited liability company domiciled in Maryland. OFH is controlled by Mr. Jeffery D. Bearden, who owns 100% of the membership interests of OFH. The Preferred Stock was acquired by OFH in exchange for its agreement to assume the debt of the Company in the approximate amount of $666,000. The funds to satisfy the outstanding debt of the Company were acquired by OFH through a loan from a hedge fund entity known as Geneva Capital.

 

On March 31, 2020, Mr. Larnell C. Simpson, Jr., was appointed as a director for Acacia Diversified Holdings, Inc. (the “Company”). Mr. Simpson also was appointed to the position of Vice President.

 

Common Stock

 

The Company has been authorized to issue 150,000,000 shares of common stock, $.001 par value.  Each share of issued and outstanding common stock shall entitle the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to common stock, as well as in the net assets of the corporation upon liquidation or dissolution.

 

During the six months ended June 30, 2020, the Company issue 12,897,956 shares of its restricted common stock as follows:

 

 

1.

2,000 shares to a consultant for services rendered, valued at $44.

 

2.

250,000 shares to the Company's board of directors for services rendered, valued at $5,451.

 

3.

40,000 shares issued to employees from the employee stock plan, valued at $6,996.

 

4.

20,000 shares issued to an employee for services rendered, valued at $436.

 

5.

12,585,956 shares issued to the convertible notes holder who elected to convert principle and accrued interest of $107,050 and extinguish $101,763 of derivative liability, into the Company's common stock.

 

Warrants and Options

 

At June 30, 2020, 20,000 options were outstanding and there were no warrants outstanding. The Company did not issue any common stock purchase warrants or options during the six months ended June 30, 2020 and 2019.

 

Restricted Stock Awards to Key Employees

 

In March 2017, the board of directors approved issuance of 100,000 shares of the Company’s restricted common stock to its key employees. The award is subject to a four or five-year vesting requirements, i.e. the requisite service period. The shares are issued as the vesting restriction lapses. The Company valued these shares at fair value on commitment date which is the date on which the employee accepted the award and recorded stock based compensation expense over the requisite service period. As a result of winding down its operations, the Company laid off all its employees as of March 31, 2020. As such, stock based compensation expense for these awards for the three months ended June 30, 2020 and 2019 was $0 and $8,116, respectively, and $6,996 and $20,402 for the six months ended June 30, 2020 and 2019, respectively.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

NOTE 8 – COMMITMENTS

 

At June 30, 2020, the Company owed its former CEO $103,845 of unpaid salary, $52,500 of accrued bonus and $12,000 of unpaid automobile allowance. The employment agreement was renewed through June 30, 2020 at an annual salary of $150,000 and continued to provide for a monthly automobile allowance of $1,000. The employment agreement was effectively terminated as a result of the change in control but these amounts remained outstanding as part of the Company’s continuing operations.

 

At June 30, 2020, the Company owed its former COO $12,085 of unpaid salary and $79,562 of accrued bonus. The employment agreement was renewed through June 30, 2020 at an annual salary of $96,000. The employment agreement was effectively terminated as a result of the change in control but these amounts remained outstanding as part of the Company’s continuing operations.

 

In August 2016, the Company entered into a licensing agreement to use exclusively a brand name for one of its discontinued subsidiary’s products for five years. Pursuant to the terms of the agreement, the Company issued 2,000 shares of its restricted common stock to the brand owner at the beginning of the agreement and 2,000 shares at the end of each of the next four years. At June 30, 2020, there remains 2,000 shares to be issued to the brand owner.

 

NOTE 9 – DISCONTINUED OPERATIONS

 

As a result of the insufficient cash flows from the operations of our subsidiaries as well as the disruption of our business from the COVID-19 pandemic, as of March 31, 2020, the Company discontinued the operations of all of its wholly-owned subsidiaries. The financial results for these subsidiaries have been presented as discontinued operations in the accompanying consolidated financial statements.

 

On March 31, 2020, Richard K. Pertile resigned his position as Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer for the Company. On the same date, the Company filed a current report on Form 8-k to announce that it issued in escrow 1,475,000 shares of the Company’s Series B Convertible Preferred Stock (the “Preferred Stock”) to ORCIM Financial Holdings, LLC (“OFH”). Each share of the Preferred Stock has fifty (50) votes per share and may be converted into fifty (50) $0.001 par value common shares. As of March 31, 2020, the Company had 43,290,331 shares of its common stock issued and outstanding. There were no other shares of any capital stock outstanding except for the common stock and Preferred Stock. As the result of the issuance of the Preferred Stock and, upon satisfaction of the terms of the Acquisition Agreement, OFH would have voting control over the Company with 73,750,000 votes on all matters submitted to stockholders for a vote. The parties agree that the change in control would not be effective until all conditions of the Acquisition Agreement are satisfied, including, but not limited to, the acquisition of funding by OFH to satisfy certain debts of the Company and the resignation of its existing board of directors. On May 20, 2020, the Company’s existing board of directors resigned. 

 

Pursuant to the terms of the Acquisition Agreement, the parties agree that the Company will transfer to Richard K. Pertile (“Pertile”), our former CEO, all the issued and outstanding shares of each of the Company’s wholly-owned subsidiaries and Pertile agreed to forgive all amounts due him or his related parties from the Company. The forgiveness of debt was approximately $910,000 and the value of the net assets of the subsidiaries was approximately $267,000 (net of $240,000 of liabilities). The Acquisition Agreement also specified which accounts payable, accrued liabilities and convertible notes would remain as liabilities of the Company. OFH has agreed to the payment of the followings:

 

Professional fees

  $ 110,000  

Accounts payable

    28,050  

Accrued compensation to our former CEO

    187,000  

Accrued compensation to our former COO

    91,000  

Convertible notes

    250,000  
    $ 666,050  

 

As of the date of the issuance of the consolidated financial statements, the Company settled professional fees in the amount of $110,000 and other liabilities remained outstanding.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the consolidated balance sheets. The assets and liabilities were presented as assets and liabilities of discontinued operations in the consolidated balance sheets as of March 31, 2020 and December 31, 2019. These assets and liabilities were disposed of during the three months ended June 30, 2020 and resulted in a gain on disposition of $724,286.

 

Liabilities forgiven pursuant to the Acquisition Agreement

               

Accounts payable

  $ 5,476          

Payable to related party

    35,348          

Notes payable to related parties

    802,328          

Accrued interest on notes payable to related parties

    148,079          

Total liabilities forgiven

            991,231  
                 

Net assets of discontinued operations

               

Cash

    574          

Inventories

    30,686          

Prepaid expense and other current assets

    558          

Property & equipment, net of accumulated depreciation of $454,548

    313,105          

Deposits

    3,810          

ROU asset - finance lease, net of accumulated amortization of $18,598

    159,040          

Accounts payable and accrued expenses

    (31,218 )        

Long-term debt

    (14,130 )        

Lease liability - finance lease

    (171,060 )        

Payable to related parties

    (24,420 )        

Total net assets of discontinued operations

            (266,945 )
                 

Gain on disposition of net assets of discontinued operations

          $ 724,286  

 

Assets and liabilities of discontinued operations as of December 31, 2019 consisted of the following:

 

CURRENT ASSETS OF DISCONTINUED OPERATIONS:

       

Cash

  $ 27,149  

Accounts receivable

    52,461  

Inventories (1)

    46,197  

Prepaid expenses and other current assets

    3,560  

Total Current Assets of Discontinued Operations

    129,367  
         

NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS:

       

Property and equipment, net of accumulated depreciation of $417,144 in 2019 (2)

    350,509  

Deposits

    3,810  

ROU asset - finance lease, net of accumulated amortization of $14,879 in 2019 (3)

    162,759  

Total Non-Current Assets of Discontinued Operations

    517,078  
         

TOTAL ASSETS OF DISCONTINUED OPERATIONS

  $ 646,445  
         

CURRENT LIABILITIES OF DISCONTINUED OPERATIONS:

       

Accounts payable and accrued expenses (4)

  $ 113,560  

Current portion of long-term debt (5)

    4,359  

Current portion of lease liability - finance lease (3)

    9,008  

Payable to related parties (6)

    33,420  

Total Current Liabilities of Discontinued Operations

    160,347  
         

LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS:

       

Long-term debt (5)

    10,861  

Lease liability - finance lease (3)

    164,255  

Total Long-term Liabilities of Discontinued Operations

    175,116  
         

TOTAL LIABILITIES OF DISCONTINUED OPERATIONS

  $ 335,463  

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

(1) Inventories

 

The Company’s inventories of the discontinued operations consisted of the followings at June 30, 2020 and December 31, 2019:

 

   

June 30, 2020

   

December 31, 2019

 

Raw materials

  $ 32,294     $ 32,294  

Finished goods (isolates, tinctures, capsules, etc.)

    13,392       13,903  

Inventory valuation allowance

    (15,000

)

    -  
      30,686       46,197  

Inventory disposed of during the three months ended June 30, 2020

    (30,686 )     -  

Inventory of discontinued operations 

  $ -     $ 46,197  

 

As a result of suspending its operations and the increasingly competitive market for its products, the Company provided a valuation allowance of $15,000 to reduce the cost of its inventory to its estimated net realizable value.

 

(2) Property and equipment

 

Property and equipment of the discontinued operations consisted of the followings at June 30, 2020 and December 31, 2019:

 

   

June 30, 2020

   

December 31, 2019

 

Computer equipment

  $ 7,582     $ 7,582  

Website

    7,000       7,000  

Furniture & equipment

    557,273       557,273  

Farm equipment

    52,295       52,295  

Farm improvement

    61,495       61,495  

Leasehold improvement

    82,008       82,008  

Total property and equipment

    767,653       767,653  

Less accumulated depreciation

    (454,548

)

    (417,144

)

      313,105       350,509  

Property and equipment disposed of during the three months ended June 30, 2020

    (313,105 )     -  

Net property and equipment of discontinued operations

  $ -     $ 350,509  

 

Depreciation expense from discontinued operations for the three months ended June 30, 2020 and 2019 were $0 and $4792, respectively, and $37,404 and $41,693 for the six months ended June 30, 2020 and 2019, respectively.

 

(3) Right-of-use assets and lease liabilities

 

Operating lease

 

The Company entered into a lease agreement to lease its retail space in Tennessee in October 2017 with a lease term of 24 months. The lease contains a renewal option to extend the term for two additional years. The lease expired on November 30, 2019 and the Company notified the landlord that it would not renew the lease. Rent for the discontinued operations for the first twelve months was $2,500 per month and $2,550 for the next twelve months. In applying ASC 842, the Company uses a lease term of 24 months and an incremental borrowing rate of 5.99% which was the borrowing rate on a finance lease (discussed below).

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

Right of use (ROU) asset - operating lease obtained in exchange for lease liability - operating lease

       
    $ 29,355  

Amortization of ROU asset - operating lease

    (29,355

)

ROU asset - operating lease at December 31, 2019

  $ 0  
         

Lease liability - operating lease on adoption date

  $ 29,655  

Payments on lease liability - operating lease

    (29,655

)

Lease liability - operating lease on December 31, 2019

  $ 0  
         

This entire lease liability matured on November 30, 2019

       
         

Operating lease expense for the year ended December 31, 2019

  $ 28,125  

Weighted average remaining lease term

    -  

Weighted average discount rate

    5.99

%

 

Finance lease

 

The board of directors approved for the Company to enter into a lease to lease this property from the Company's former CEO, effective June 1, 2018. The term of the lease was for one year with an automatic renewal term of one year. The lease also contained an option for the Company to purchase the property from the Company's former CEO. The lease required the Company to pay all expenses related to the acquisition and operation of the property, including but not limited to the Company's former CEO's personal incremental borrowing costs, repairs and maintenance, real estate taxes, licenses and permits, utilities, etc.

 

In applying ASC 842 on adoption date, the Company considered the followings:

 

 

1.

The lease is with a related party of the Company.

 

2.

Although the initial lease term is for one year, the Company is reasonably certain to acquire the property from the related party.

 

3.

Contrary to leases with fixed lease payments, this lease requires the Company to pay all expenses related to the acquisition and operations of the property which are variable. Although the Company can exclude variable lease payments in applying ASC 842, the lease provides the necessary cash flows for the related party to service his debt. Therefore, the Company estimates future incremental borrowing costs to be incurred by the related party when measuring the initial finance lease liability. This amounts to approximately $1,600 per month.

 

4.

The related party's debt term was 15 years at a borrowing rate of 5.99%

 

5.

The Company considered the most objective measure of the right-of-use asset to be the purchase price paid by the related party for the property. The purchase price is then allocated among land and improvement and the Company amortizes the improvement over the estimated useful life of 10 years.

 

ROU asset - finance lease - land

  $ 37,530  

ROU asset - finance lease - improvement

    148,787  

ROU asset - finance lease obtained in exchange for lease liability - finance lease

    186,317  

Cumulative effect adjustment to ROU asset - finance lease on adoption date

    (8,679

)

Amortization of ROU asset - finance lease

    (18,598

)

      159,040  

ROU asset – finance lease disposed of during the three months ended June 30, 2020

    (159,040 )

ROU asset – finance lease of discontinued operations

  $ -  
         

Lease liability - finance lease on adoption date

  $ 186,318  

Cumulative effect adjustment to ROU lease liability - finance lease on adoption date

    (4,277

)

Payments on lease liability - finance lease

    (10,981

)

      171,060  

Lease liability – finance lease disposed of during the three months ended June 30, 2020

    (171,060 )

Lease liability – finance lease of discontinued operations

  $ -  

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

Interest expense related to lease liability - finance lease was $0 and $2,633 for the three months ended June 30, 2020 and 2019, respectively, and $2,515 and $5,256 for the six months ended June 30, 2020 and 2019, respectively.

 

Variable lease expense was $0 and $11,513 for the three months ended June 30, 2020 and 2019, respectively, and $9,671 and $19,233 for the six months ended June 20, 2020 and 2019, respectively. 

 

(4) Accounts payable and accrued expenses

 

Accounts payable and accrued expense of discontinued operations consisted of the followings at June 30, 2020 and December 31, 2019:

 

   

June 30, 2020

   

December 31, 2019

 

Accounts payable to vendors

  $ 113,560     $ 31,218  
      113,560       31,218  

Accounts payable and accrued expenses disposed of during the three months ended June 30, 2020

    (113,560 )     -  

Accounts payable and accrued expenses of discontinued operations

  $ -     $ 31,218  

 

(5) Long-term debt

 

In June 2018, the Company entered into a financing agreement to finance the purchase of a farm tractor for its discontinued operations. The financing agreement was secured by the tractor. The total amount financed was $21,794 at 0% interest per annum. The first monthly payment of $363 began in July 2018 and continued for 60 months. The following is the total payment amounts for the next four years:

 

Twelve Months ending

 

June 30,

   

December 31,

 

2020

  $ -     $ 4,359  

2021

    4,359       4,359  

2022

    4,359       4,359  

2023

    4,359       2,143  

2024

    1,053       -  
      14,130       15,220  

Long-term debt disposed of during the three months ended June 30, 2020

    (14,130 )     -  

Long-term debt of discontinued operations

  $ -     $ 15,220  

 

 

The current and long-term portions of principle amounts due are as follow: