The statements contained in this report that are not statements of historical
fact, including without limitation, statements containing the words "believes,"
"expects," "anticipates" and similar words, constitute forward-looking
statements that are subject to a number of risks and uncertainties. From time to
time we may make other forward-looking statements. Investors are cautioned that
such forward-looking statements are subject to an inherent risk that actual
results may materially differ as a result of many factors, including the risks
discussed from time to time in this report, including the risks described under
"Risk Factors" in any filings we have made with the SEC.



Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses. On an on-going basis, we evaluate these estimates, including those
related to useful lives of real estate assets, cost reimbursement income, bad
debts, impairment, net lease intangibles, contingencies and litigation. We base
our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. There can be no assurance that
actual results will not differ from those estimates.



Background


History and development of the company



We were incorporated in the State of Utah on October 4, 1985, under the name of
Mormon Mint, Inc., and our business focused on the manufacture and marketing of
commemorative medallions related to the Church of Jesus Christ of Latter-Day
Saints. On January 5, 1999, the Company changed its name to Converge Global,
Inc., and subsequently focused on the development and implementation of Internet
web content and e-commerce applications. In the period from 2009 to 2014, we
operated primarily in the mining exploration business, and in 2015, we left the
mining business and began an internet-based marketing business focused on online
marketing of service items to the hospitality and food service industry, selling
retail product directly to consumers from food distributors via credit card
and
commercial accounts.


On September 4, 2015, Donald Steinberg and Charles Larsen acquired control of
the Company through the purchase of 400,000,000 shares of restricted common
stock and 10,000,000 shares of Preferred Class A stock for $105,000.00, in equal
amounts. On September 9, 2015, Donald Steinberg was appointed Chairman of the
Board, Chief Executive Officer and Secretary of the Company. Mr. Larsen was
appointed to the Board of Directors. The new management changed the Company's
business plans and operations to focus on emerging opportunities in the cannabis
and hemp industries. On December 1, 2015, the Company changed its name to
Marijuana Company of America, Inc. and its stock trading symbol to MCOA. On
December 6, 2019, a change of control occurred, where Donald Steinberg and
Charles Larsen transferred their control shares to directors Robert Coale,
Edward Manolos and Jesus Quintero. Also on December 6, 2019, Jesus Quintero, who
was appointed as Chief Financial Officer in 2018, was appointed as our Chief
Executive Officer. Mr. Quintero is currently our Chief Executive Officer and
Chief Financial Officer, and a member of the Board of Directors.



We are a publicly listed company quoted on OTC Markets OTC Pink Market Tier
under the symbol "MCOA". We are a Smaller Reporting Company based in Los
Angeles, California. Our business includes the research and development of (1)
varieties of various species of hemp; (2) beneficial uses of hemp and hemp
derivatives; (3) indoor and outdoor cultivation methods for hemp; (4) technology
used for cultivation and harvesting of different species of hemp, including but
not limited to lighting, venting, irrigation, hydroponics, nutrients and soil;
(5) different industrial hemp derived cannabinoids ("CBD") and the possible
health benefits thereof; and, (6) new and improved methods of hemp cannabinoid
extraction omitting or eliminating the delta-9 tetrahydrocannabinol "THC"
molecule.



Marijuana Company of America is a Utah company listed on OTC Markets Pink Tier under the symbol “MCOA”. We are based at Los Angeles, California.


33








We are an owner and operator of licensed cannabis cultivation, processing and
dispensary facilities and a developer, producer and distributor of innovative
branded cannabis and cannabidiol ("CBD") products in the United States. We are
committed to creating a national distributorship and retail brand portfolio of
branded cannabis and CBD products, although as of the date of this filing,
marijuana (defined as cannabis containing delta-9 tetrahydrocannabinol
concentration of more than 0.3 percent on a dry weight basis) currently remains
illegal under U.S. federal law.



Through our wholly-owned subsidiary cDistro, Inc., a Nevada corporation, our
wholly-owned CBD product distribution business, we distribute hemp and CBD
products throughout the United States. Through cDistro, we distribute high
quality hemp-derived cannabinoid products, as detailed on our cDistro website,
www.cdistro.com. cDistro offers CBD brands along with smoke and vape shop
related products to wholesalers, c-stores, specialty retailers, and consumers in
North America. Through cDistro, we work exclusively with select manufacturers to
deliver retail service and products at wholesale prices



Through our wholly owned subsidiary HSmart, Inc., a California corporation, we
develop and sell CBD products under the brand name hempSMART™. Our business also
includes making selected investments and entering into joint ventures with
start-up businesses in the legalized cannabis and hemp industries.



Readers are directed to review our detailed disclosures in Item 1, Business;
Principal Products and their Markets; Joint Ventures and Investments above. A
summary of our investment and joint venture activity follows:



Joint Ventures



Bougainville Ventures, Inc. Our joint venture with Bougainville Ventures, Inc.
is currently in litigation (See Legal Proceedings, Item 3). We recorded an
annual impairment in 2017 of $792,500, reflecting the Company's percentage of
ownership of the net book value of the investment. During 2018, the Company
recorded equity losses of $37,673 and $11,043 for the first and second quarters
respectively, and recorded an annual impairment of $285,986 for the year ended
December 31, 2018, at which time we determined the investment to be fully
impaired due to Bougainville's breach of contract and resulting litigation.



Global Hemp Group Scio Oregon Joint Venture. On May 8, 2018, we entered into a
joint venture with Global Hemp Group, Inc., develop a project to commercialize
the cultivation of industrial hemp on a 109 acre parcel of real property owned
by the Company and Global Hemp Group in Scio, Oregon, and operating under the
Oregon corporation Covered Bridges, Ltd. The joint venture agreement commits the
Company to a cash contribution of $600,000 payable on the following funding
schedule: $200,000 upon execution of the joint venture agreement; $238,780 by
July 31, 2018; $126,445 by October 31, 2018; and, $34,775 by January 31, 2019.
The Company has complied with its payments. The 2018 crop of hemp grown on the
joint venture's real property consisted of 33 acres of high yielding CBD hemp
grown in an orchard style cultivation on the property. The 2018 harvest
consisted of approximately 37,000 high yielding CBD hemp plants producing 24
tons of biomass that produced 48,000 pounds of dried biomass. However, there
were delays with Global Hemp Group's management and maintenance of the business
and the biomass that caused degradation to the harvested crop affecting
marketability. Additional issues and disputes arose between the Company and
Global Hemp Group. These disputes led to the parties entering into a settlement
agreement on September 28, 2020, whereby Global Hemp Group agreed to pay the
Company $200,000 and issue common stock to the Company equal in value to
$185,000 as of September 28, 2020, subject to a non-dilutive protection
provision. Additionally, Global Hemp Group agreed to pay the Company $10,000 to
cover the Company's legal fees relating to the Agreement. In exchange for the
settlement consideration, the Company agreed to relinquish its ownership
interest in the joint venture.

34





Natural Plant Extract of California & Subsidiaries Joint Venture; On April 15,
2019, the Company entered into a joint venture agreement with Natural Plant
Extracts of California, Inc. and subsidiaries ("NPE"). The purpose of the joint
venture was to utilize NPE's California and City cannabis licenses to jointly
operate a business named "Viva Buds" to operate a licensed cannabis distribution
service in California. In exchange for acquiring 20% of NPE's common stock, the
Company agree to pay two million dollars and issue NPE one million dollars'
worth of the Company's restricted common stock. As of February 3, 2020, the
Company was in arrears in its payment obligations under the joint venture
agreement, and the parties entered into a settlement and release of all claims
terminating the joint venture. The parties agreed to reduce the Company's
equity ownership in NPE from 20% to 5%. The Company also agreed to pay NPE
$85,000 and the balance of $56,085.15 paid in a convertible promissory note
issued with terms allowing NPE to convert the note into common stock at a 50%
discount to the closing price of MCOA's common stock as of the maturity date. As
of the date of this filing, the Company satisfied its payment obligations under
the settlement agreement. Our continuing 5% equity ownership in NPE involves
related parties, since Edward Manolos, our director, is also a director and
beneficial owner of 18.8% of the common stock in NPE.

Joint Ventures in Brazil and Uruguay; On October 1, 2020, we entered into two
Joint Venture Agreements with Marco Guerrero, a director of the Company, dated
September 30, 2020, to form joint venture operations in Brazil and in Uruguay to
produce, manufacture, market and sell the Company's hempSMART™ products in Latin
America, and will also work to develop and sell hempSMART™ products globally.
The Joint Venture Agreements contain equal terms for the formation of joint
venture entities in Uruguay and Brazil. The Brazilian joint venture will be
headquartered in São Paulo, Brazil, and will be named HempSmart Produtos
Naturais Ltda. ("HempSmart Brazil"). The Uruguayan joint venture will be
headquartered in Montevideo, Uruguay and will be named Hempsmart Uruguay S.A.S.
("HempSmart Uruguay"). Both are in the development stage.

Investments



Share Exchange with Cannabis Global, Inc. On September 30, 2020, the Company
entered into a securities exchange agreement with Cannabis Global, Inc. (OTC:
CBGL), a Nevada corporation. By virtue of the agreement, the Company issued
650,000,000 shares of its unregistered common stock to Cannabis Global in
exchange for 7,222,222 shares of Cannabis Global unregistered common stock. The
Company and Cannabis Global also entered into a lock up leak out agreement,
which prevents either party from sales of the exchanged shares for a period of
12 months. Thereafter the parties may sell not more than the quantity of shares
equaling an aggregate maximum sale value of $20,000 per week, or $80,000 per
month until all Shares and Exchange Shares are sold. Our transaction with
Cannabis Global, Inc. is material and involves related parties, since Edward
Manolos, our director and holder of Preferred Class A stock, is also a director
of Cannabis Global, Inc.

Share Exchange with Eco Innovation Group, Inc.On February 26, 2021, we entered
into a Share Exchange Agreement with Eco Innovation Group, Inc., a Nevada
corporation quoted on OTC Markets Pink ("ECOX") to acquire the number of shares
of ECOX's common stock, equal in value to $650,000 based on the per-share price
of $0.06, in exchange for the number of shares of MCOA common stock equal in
value to $650,000 based on the closing price for the trading day immediately
preceding the effective date (the "Share Exchange Agreement").  For both
parties, the Share Exchange Agreement contains a "true-up" provision requiring
the issuance of additional common stock in the event that a decline in the
market value of either parties' common stock should cause the aggregate value of
the stock acquired pursuant to the Share Exchange Agreement to fall below
$650,000. Complementary to the Share Exchange Agreement, the Company and ECOX
entered into a Lock-Up Agreement dated February 26, 2021 (the "Lock-Up
Agreement"), providing that the shares of common stock acquired pursuant to the
Share Exchange Agreement shall be subject to a lock-up period preventing its
sale for a period of 12 months following issuance and limiting the subsequent
sale to aggregate maximum sale value of $20,000 per week, or $80,000 per month.
On October 1, 2021, we entered into a First Amendment to Lock-Up Agreement
between the Company and Eco Innovation Group, Inc., dated and effective October
1, 2021 (the "Amended Lock-Up Agreement"), which amends that certain Lock-Up
Agreement entered into between the Company and Eco Innovation Group, Inc. on
February 26, 2021 (the "Original Lock-Up Agreement"). The Amended Lock-Up
Agreement amends the Original Lock-Up Agreement in one respect, by amending the
initial lock-up period from 12 months following its effective date to 6 months
following its effective date. All other terms and conditions of the Original
Lock-Up Agreement remain unaffected.



35






Asset Purchase Agreement with VBF Brands, Inc. On October 6, 2021, the Company,
through its wholly owned subsidiary Salinas Diversified Ventures, Inc., a
California corporation, entered into an Asset Purchase Agreement, Management
Services Agreement, Cooperation Agreement and Employment Agreement with VBF
Brands, Inc., a California corporation ("VBF"), a wholly owned subsidiary of
Sunset Island Group, Inc., a Colorado corporation ("SIGO"). VBF and SIGO agreed
to transfer to the Company all of VBF's outstanding stock to the Company, and
appointed our CEO and CFO Jesus Quintero as President of VBF.



VBF owns various fixed assets including machinery and equipment, a lease for a
10,000 square foot facility located at 20420 Spence Road, Salinas, California,
93908, leasehold improvements, good-will, inventory, tradenames including "VBF
Brands," trade secrets, intellectual property, and other tangible and intangible
properties, including licenses issued by the City of Salinas, County of
Monterey, and the State of California to operate a licensed cannabis nursery,
cultivation facility, and operations for the manufacturing and distribution of
cannabis and cannabis products.



VBF and SIGO agreed to sell and transfer to the Company all of VBF's outstanding
stock, and, by virtue of the Management Services Agreement, appoint Mr. Jesus
Quintero as President of VBF, vesting management and control of VBF's licensed
cannabis operations in the Company. Concurrently, VBF and Livacich entered into
a Cooperation Agreement, whereby VBF and Livacich agreed to cooperate to
facilitate the transfer of ownership of VBF, which includes licenses issued by
the City of Salinas, County of Monterey, and the State of California, to operate
a cannabis nursery, cultivation facility and manufacturing and distribution
operations to the Company. The Company also agreed to retain Livacich as Chief
Executive Officer for a term of two years and agreed to compensate her with a
salary including a signing cash bonus of $250,000, and a $250,000 performance
cash bonus payable after six months after the Effective Date. The bonus is
conditioned upon Livacich meeting an agreed to "Net Revenue" target of one
million dollars ($1,000,000) from VBF's operations during the six-month period
after closing of the Asset Purchase Agreement, and her compliance with the terms
and conditions of this Asset Purchase Agreement, the Management Services
Agreement and the Cooperation Agreement.



As consideration for the transaction, the Company agreed to assume two secured
convertible promissory notes issued by SIGO to St. George Investments, LLC, a
Utah limited liability company ("St. George") (the "SIGO Notes"). The first note
was issued December 8, 2017, in the original face amount of $170,000.00, and the
second was issued February 13, 2018, in the original face amount of
$4,245,000.00. SIGO also issued warrants to St. George to purchase common shares
in SIGO, and fifty (50) shares of SIGO's preferred stock. St. George agreed to
cancel the warrants and preferred shares upon the Company's assumption of the
SIGO Notes.


Under the Asset Purchase Agreement, the closing is conditioned upon certain
conditions precedent, specifically (i) VBF and SIGO's full corporate
authorization, consent and execution of this Agreement; (ii) VBF's sale to MCOA
of 100% of the issued and outstanding shares of VBF; (iii) full corporate
authorization, consent compliance with and execution of the Management Services
Agreement and Cooperation Agreement; (iv) SIGO's disclosure of the Agreement on
Form 8-K with the Securities and Exchange Commission; (v) full cooperation in
MCOA's financial auditing of VBF in accordance with ASC 805, including providing
unrestricted access to all VBF corporate and financial records and providing all
necessary cooperation with VBF financial personnel; (vi) full cooperation in
aiding and assisting Buyer with its change of ownership applications with the
relevant licensing authorities; (vii) the warranty of truthful representations
and execution of and compliance with the terms and conditions of the Executive
Employment Agreement, Management Services Agreement and the Cooperation
Agreement.



As of the date of this filing, the conditions precedent to the closing of the
Asset Purchase Agreement remain in the process of implementation, so that the
Asset Purchase Agreement closing has not yet occurred pursuant to its terms.
Legal counsel for MCOA is currently in the process of working with VBF, Salinas
Diversified Ventures, and the relevant state and local governments to effect the
change of control and license transfers necessary to close the Asset Purchase
Agreement.



36






Results of Operations


Year ended December 31, 2021 compared to the year ended December 31, 2020

The following table presents our operating results for the year ended December 31, 2021 compared to December 31, 2020:



                   MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
                                         AUDITED

                                                          For the Year ended Dec 31,
                                                            2021               2020
REVENUES:
Sales                                                  $     1,030,249     $     267,584
Related party Sales                                                 -             13,069
Total Revenues                                               1,030,249           280,653

Cost of sales                                                  873,371           159,304

Gross Profit                                                   156,878           121,349

OPERATING EXPENSES:
Depreciation and amortization                                  101,334     
       5,933
Selling and marketing                                          456,983           420,511
Payroll and related                                            681,786           411,954
Stock-based compensation                                     1,207,945         3,014,888
General and administrative                                   2,419,963         1,122,954
 Total operating expenses                                    4,868,011         4,976,240

Net loss from operations                                    (4,711,133 )      (4,854,891 )

OTHER INCOME (EXPENSES):
Interest expense, net                                       (4,302,293 )      (2,999,291 )
Impairment gain (Loss) on Joint Ventures                             0           (22,658 )
Income (Loss) on equity investment                            (735,178 )   

106 305

Gain (loss) on change in fair value of derivative
liabilities                                                      3,852        (4,698,072 )
Unrealized Gain (loss) on trading securities                   504,137     

248 204

Realized Gain (loss) on trading securities                    (543,200 )          (2,603 )
(Loss) Gain on settlement of debt                             (407,635 )   
      77,624
Total other income (expense)                                (5,480,317 )      (7,290,491 )

Net loss before income taxes                               (10,191,450 )     (12,145,382 )

Income taxes (benefit)                                              -                 -

NET INCOME (LOSS)                                      $   (10,191,450 )   $ (12,145,382 )

Foreign currency Translation Adjustment                        (11,725 )
Comprehensive Income                                   $   (10,198,883 )  

($12,145,382)

Loss per common share, basic and diluted               $         (0.00 )  

$(0.01)

Weighted average number of common shares
outstanding, basic and diluted (after stock-split)       5,248,075,532     
 962,029,388








37








Revenues



Total revenues for the year end December 31, 2021 and December 31, 2020, were
$1,030,249 and $280,653, respectively, an increase of $749,596. This increase is
attributed to $93,633 of our hempSMART product lines and our new line of
businesses which were $901,535 for cDistro, a distributor of hemp and CBD
products, and equipment lease rental from our new joint venture of $35,081.

The following table identifies our new product offerings in 2021 and the revenue generated from sales of our products in 2021 and 2020 respectively:


                                               2021           2020
Body                                        $     1,400     $   3,901
Brain Capsules                                    3,635        29,135
Drink Mix                                           167         2,966
Drops                                            42,734       152,121
Face Moisturizers                                 2,648        13,951
Pain Capsules                                        -          8,308
Pain Cream                                       37,753        55,938
Pet Drops                                         5,296        14,332
Bottles - Nic                                    41,470            -
Bottles - Salt Nic                               20,804            -
CBD Hempettes                                     3,913            -
Disposables - Tobacco Free Nicotine (TFN)       261,719            -
Kratom                                          338,735            -
Other C-Distro Products                         148,805            -
Vape                                             86,089            -
MCOA Equipment Lease                             35,081            -

TOTAL                                       $ 1,030,249     $ 280,653




Related Party Sales
Related party sales contributed $0 and $13,069 to our revenue for 2021 and 2020,
respectively. Related party sales are comprised of sales of our hempSMART
products to our directors, officers, and sales team members. No related party
sales were for services. All sales were made at listed retail prices and were
for cash consideration.



Costs of Sales

Costs of sales primarily consist of inventory cost and overhead, manufacturing,
packaging, warehousing, shipping and direct labor costs directly attributable to
our hempSMART products. For the year ended December 31, 2021 and December 31,
2020, our total costs of sales were $873,371 and $159,304, respectively. The
increase is attributed to $62,434 for our hempSMART business and our new
business line that we acquired during 2021, which were $810,937 for cDistro, a
distributor of hemp and CBD products.



Gross profit

For the year ended December 31, 2021 and December 31, 2020, gross profit was
$156,878 and $121,349, respectively. This increase was attributed to $66,280
from our hempSMART products and the new business that we acquired during 2021,
which was $90,598 for cDistro, a distributor of hemp and CBD products. Gross
margins were 15.2% and 43.2% for the years ended December 31, 2021 and December
31, 2020, respectively. The Company has incurred net losses from operations of
$4,711,133 and $4,854,891 for the years ended December 31, 2021 and 2020,
respectively.





38






The following is a tabular breakdown of expenses related to Selling and
Marketing, Payroll and Related expenses, Stock-based Compensation and General
and Administrative Expenses:



Expense                           2021            2020
Stock Based Compensation       $ 1,207,945     $ 3,014,888
Legal Expense                      495,117         171,680
Admin Compensation                 424,537         163,091
Consulting Fees                    408,047         236,343
Investor Relation                  366,590         123,399
Travel and Related                 299,014          74,244
Marketing / Media                  280,749         136,703
Officer's Compensation             269,350         223,356
Marketing Compensation             157,050         154,430
Independent Contractor             137,885          47,800
Insurance Expense                  111,327          56,762
Board of Director Fees              95,000          91,010
Accounting                          92,743         111,810
Rent Expense                        66,582          51,526
Advertising Promotion               60,296           4,012
Audit Fee                           59,500          74,475
Office Supplies                     26,308           6,741
Intangible amortization             40,000              -
Bad Debt Expense                    34,359              -
Website Development Cost            32,320          56,260
SEC Filing Fees                     28,057          16,668
Security                            12,560              -
Bank Service Charges                10,928           2,120
Web Sales Commission                 6,765          30,632
UK Contract Compensation             4,274          26,704
Fees / Licensing                     3,617           1,252
All other expenses, net*           137,091         100,334
Total Payroll & G&A Expenses   $ 4,868,011     $ 4,976,240



*This represents other individually insignificant general and administrative expenses in the normal course of business that did not constitute compensation for third-party vendors.



Stock-based Compensation decreased by $1,806,943 primarily due to less
stock-based compensation issued to officers and employees during the year ended
December 31, 2021. Stock compensation was $1,207,945 for the year ended December
31, 2021 as compared to $3,014,888 for the year ended December 31, 2020. Stock
based compensation during the year ended December 31, 2021 included $251,008
related to additional shares issued to the former owners of cDistro as part of
the merger and share exchange agreement amendment entered into on November 24,
2021, and an additional $234,633 related to additional shares owed under that
agreement as of December 31, 2021. Administrative compensation increased to
$424,537 in 2021 from $163,091 in 2020, the $261,446 increase was due to new
hires during 2021 resulting from the expansion of our business. Overall, selling
and marketing increased by $36,472, attributed mainly to marketing and media
costs that increased by the amount of $36,472 in 2021, from $420,511 in 2020 to
a total of $456,983 in 2021, due to an increase in social media advertising
costs that resulted in an increase in sales for the year ended December 31,
2021. Legal expenses increased to $495,117 for the year ended December 31, 2021,
from $171,680 in 2020, due primarily to increased compliance and regulatory
filing activity associated with our public offerings and corporate governance.
Investor relation costs increased by $243,191 during 2021 due to increase in
investor and shareholder outreach events and hiring of additional investment
firms to increase interactions with the investment community. This also resulted
in an increase in travel and related expenses by $144,046 for 2021 over 2020.
Director and officer insurance increased to $111,327 during the year ended
December 31, 2021 from $56,762 for the year ended December 31, 2020 due to an
increase in rates from insurance carriers affiliated with the cannabis industry.



Overall, our total operating expenses in 2021 decreased by 2.2% compared to 2020, from
$4,976,240 for $4,868,011for the year ended 2021, respectively.




39







Stock-based compensation of officers and directors, 2021 and 2020.


 Officer and Director       2021           2020
Edward Manolos           $  20,526     $    15,600
Marco Guerrero           $  25,526     $        -
Themistocles Psomiadis   $      -      $    19,010
Jesus Quintero           $ 501,264     $ 2,502,140
Tad Milander             $      -      $    49,350




The 2021 stock compensation bonuses were issued by the Board of Directors
pursuant to our Equity Incentive Plan and executive contracts with our directors
and officers. Pursuant to our Equity Incentive Plan, the Company has discretion
to make stock awards to its affiliates for past services, in lieu of bonuses or
other cash compensation, for directors' compensation or for any other valid
purpose. At December 31, 2021, we reviewed the performance of our staff and
affiliates, and in making the 2021 awards, determined the awards justified
because our staff and affiliates accomplished the following:



Our Equity Plan issuances to affiliates as of December 31, 2021 increased by
$508,644. This was due to the Company's performance during 2021 and additional
shares issued as there were issues with liquidity to pay cash compensation at
times. The balance was in stock-based compensation in 2021 as it was for 2020.
This was primarily for shares issued for consulting services as follows:



The balance of our stock-based compensation in 2021, compared to 2020, related to the following consulting services:


                       2021 Stock-Based       2020 Stock-Based
                                                                                       Nature of Consultant
     Consultant          Compensation           Compensation          Variance          Services Provided
Paula Vetter                      10,900                 19,065           16,467      Consulting Services -
                                                                                         Medical Advisory
                                                                                     Specialist for hempSMART
                                                                                       during 2021 and 2020
Gloria Lynch                          -                  70,350          

(70,350 ) Bonus as part of equity

Incentive plan during

                                                                                               2020
Lauren Regier                     37,766                 41,975           (4,209 )    Consulting Services -
                                                                                      Web and graphic design
                                                                                       during 2021 and 2020
Danny Rodriguez                   15,395                     -            15,395     Accounting Services 2021
Eddie Bonet                       18,474                     -            18,474     Accounting Services 2021
Mario Greco MD                    25,011                     -            25,011      Medical Advisory 2021
Herlin Soto                       18,474                     -            

18,474 Marketing searches in 2021

Alan T. Hawkins                  100,000                     -           

100,000 legal advisory services

                                                                                               2021
John Grosso                       34,800                     -            34,800        Investor Relation
                                                                                          services 2021
Cory Battan                       34,800                     -            34,800        Investor Relation
                                                                                          services 2021
Ian Harvey                         8,726                     -            

8,726 Consulting and Marketing

                                                                                          Services 2021
Tad Mailander                         -                  43,950          

(43,950) Consulting services –

Legal services during

                                                                                               2020
Otto Creative Studio              31,140                 31,140            
  -      Consulting Services - IT
                                                                                     services during 2021 and
                                                                                               2020







40





The objective results resulting from the consulting services are summarized as follows:

• The Company reduced its expense ratio by becoming more efficient, reducing

count headcount and make efficient and effective cash flow decisions.


   •  The Company paid off most variable priced convertible notes prior to
      conversion over the last quarter with funds raised from its Form S-1
      registration statement.



• The Company successfully negotiated a full settlement of its largest senior

fixed-price convertible note holders, preserving shareholder value and

      minimizing the impact of the dilutive nature of the notes.



• Leadership team helped pivot from old Affiliate Marketing

(MLM) for hempSMART to new direct-to-consumer e-commerce

marketing model. This required significant changes in culture, business

      plan and branding of the products.



• The company has successfully drawn on its Form S-1 record equity line

with White Lion and was able to secure a second primary Form S-1 offer

      registration statement effective to obtain funds for operations and
      expansion.



• The company has managed to not only survive during the COVID pandemic, but

actually grew and thrived through key management decisions along the way and

the personal sacrifice of our CEO Jesus Quinterowho paid for the business

spending for several months on his personal business card to help float the

      Company during periods where funds were depleted.




   •  The executive management team has overseen significant efforts to expand
      into South America and move key parts of its supply chain to Uruguay to
      reduce the cost of goods sold and increase gross margins and overall
      profitability.




   •  The Company has successfully negotiated acquisitions and deals that

resulted in a substantial increase in the market capitalization of the Company

      during the year to enhance shareholder value.



• The company successfully withdrew more than three billion shares that were on

booking with transfer agent in 2021 due to success

convertible debt settlement, resulting in less dilution and more equity

      available for financing and acquisitions.




We anticipate continuing to reduce our dependence on stock-based compensation in
the future. However, given our present cash position, and because of possible
increased operational costs including overhead, product manufacturing and
development, and related costs, we may, to the extent necessary, utilize
stock-based compensation in the future to compensate key product development,
operations and sales and marketing personnel.

Operating losses

For the year ended December 31, 2021, operating losses were $4,711,133 or 457%
of total revenues, as compared to $4,854,891 or 1,730% of total revenues for the
year ended December 31, 2020. This increase of $143,758 was due to continued
restructuring and expansion of the Company's operations. We believe the reduced
operating losses incurred in 2021, as compared to 2020, reflect the
effectiveness of the Company's management team in 2021. We expect to continue to
reduce our losses as we continue to implement our plan for new sales strategies
and cost-cutting measures in the near future until profitability is achieved,
which is not certain. Our operations are subject to numerous risks associated
with establishing any new business, including unforeseen expenses, delays and
complications. There can be no assurance that we will achieve or sustain
profitable operations. This increase is attributed to the company's expansion
into Latin America and operations attributed to our acquisitions in 2021, one of
which is not yet integrated financially.

41






Other Income (Expense)

Other income (expense) for the years ended December 31, 2021 and December 31,
2020 included other expenses of $5,480,317 and $7,290,491, respectively. The
decrease of $1,810,174 was primarily due to an increase of $1,303,002 in
interest expense. This was offset by an increase of $4,701,924 in gain on
changes in fair value of derivative liabilities from a loss of $4,698,072 for
the year ended December 31, 2020 to a gain of $3,852 for year ended December 31,
2021 and a decrease of $841,484 in losses on equity investment from a gain of
$106,305 for the year ended December 31, 2020 as compared to a loss of $735,178
for the year ended December 31, 2021. Also, we reflect a decrease in realized
loss on trading securities of $540,597 from a loss of $2,603 for the period
ended December 31, 2020 compared to a loss of $543,200 for the year ended
December 31, 2021.

Income tax expense (benefit)

We have had no income tax expense or benefit for the years ended December 31, 2021 and December 31, 2020respectively.

Net profit (net loss)

Due to the above factors, net losses for the year ended
December 31, 2021 and December 31, 2020 have been $10,191,450 and $12,145,382, respectively. For December 31, 2021 and December 31, 2020these net losses represented 989.2% and 4,328% of total revenues for the respective periods.

Segment information

Accounting Standards Codification subtopic Segment Reporting 280-10 ("ASC
280-10") establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. ASC 280-10 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision-making group, in making decisions how to allocate
resources and assess performance. The following table represents the Company's
hempSMART business.



                            hempSMART
                     STATEMENT OF OPERATIONS
         FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

                                     For the Years ended
                               Dec 31, 2021       Dec 31, 2020

Revenues                       $      93,575     $      280,653

Cost of Goods Sold                    61,267            159,304

Gross Profit                          32,308            121,349

Expense
Depreciation Expense                  10,103              5,933
Stock-based Compensation             104,685            207,955
Selling and Marketing                443,569            393,799
Payroll and Related expenses         252,123            165,491
General and Admin Expenses           456,322            217,288
Total Expense                      1,266,802            990,466

Net Loss from Operations       $  (1,234,494 )   $     (869,117 )



The following table represents the Company’s cDistro business segment for the years ended December 31, 2021 and 2020 since its acquisition:


                                               For the Years ended
                                          Dec 31, 2021      Dec 31, 2020


Revenues                                $      901,535     $       -

Cost of Goods Sold                             810,937             -

Gross Profit                                    90,598             -

Expense
Depreciation and amortization expense           91,358             -
Stock-based Compensation                            -              -
Selling and Marketing                            4,549             -
Payroll and Related expenses                   110,000             -
General and Admin Expenses                     163,355             -
Total Expense                                  369,262             -

Net Loss from Operations                $     (278,664 )   $       -




42





Cash and capital resources

As of December 31, 2021, and December 31, 2020, our operating activities
produced cash used in operations of $3,984,108 and $1,723,950,  respectively.
Our primary internal sources of liquidity were provided by an increase in
proceeds from the issuance of note payables of $3,295,863 for the year ended
December 31, 2021 as compared to $1,017,664 for the year ended December 31,
2020, and a decrease in proceeds from the sale of note payables to a related
party of $20,000 in 2021 as compared to $75,000 in repayments to a related party
for the year ended December 31, 2020. We saw an increase in proceeds from sales
of our common stock to $2,201,601 at December 31, 2021, as compared to $478,685
at December 31, 2020. During the period ended December 31, 2021, we relied upon
external financing arrangements to fund our operations. During the year ended
December 31, 2020, we entered into several separate financing arrangements with
St. George Investments, LLC, a Utah limited liability company, in which we
borrowed an aggregate of $2,541,470, the principal of which is convertible into
shares of our common stock (see Note 4, Convertible Notes Payable). Our ability
to rely upon external financing arrangements to fund operations is not certain,
and this may limit our ability to secure future funding from external sources
without changes in terms requested by counterparties, changes in the valuation
of collateral, and associated risk, each of which is reasonably likely to result
in our liquidity decreasing in a material way. We intend to utilize cash on
hand, loans and other forms of financing such as the sale of additional equity
and debt securities and other credit facilities to conduct our ongoing business,
and to also conduct strategic business development and implementation of our
business plans generally.

Operating Activities

For the year ended December 31, 2021 and 2020, the Company used cash for
operating activities of $3,984,108 and $1,723,950, respectively. Operating
activities consist of corporate overhead, product development of our hempSMART™
products, and development of our distribution business. Increases are due
primarily to increases in executive compensation, professional fees, and product
development costs.

Investing Activities
For the years ended December 31, 2021 and December 31, 2020, net cash used in
and provided by investing activities was $216,810 and $118,984, respectively.
For the year ended December 31, 2021, the Company used $126,305 and $6,016 for
the purchase of equipment, while receiving $125,000 in proceeds from the
disposition of an investment during the year ended December 31, 2020, compared
to the receipt of $190,401 for the sales of investments during the year ended
December 31, 2021.

Financing Activities
For the years ended December 31, 2021 and 2020, financing activities were a
source of cash of $4,242,164 and $1,467,704, respectively. For the years ended
December 31, 2021 and 2020, this was primarily from proceeds of $3,295,863 and
$1,017,664 derived from the issuance of notes payable, and repayment to related
parties of $20,000 and $75,000 for the year ended December 31, 2021 and 2020,
respectively. The Company received income from the sale of common stock of
$2,201,601 and $478,685 for the years ended December 31, 2021 and 2020,
respectively. For the year ended December 31, 2020, the Company received
proceeds of $35,500 from a Payroll Payment Protection loan from the Small
Business Administration and also received proceeds of $10,855 from the sale of
trading securities.

We currently do not have sufficient cash and liquidity to meet our anticipated
working capital for the next twelve months. Historically, we have financed our
operations primarily through private sales of our common stock. If our sales
goals for our hempSMART™ products and our distribution business, cDistro, do not
materialize as planned, and we are not able to achieve profitable operations at
some point in the future, we may have insufficient working capital to maintain
our operations as we presently intend to conduct them or to fund our expansion,
marketing, and product development plans. There can be no assurance that we will
be able to obtain such financing on acceptable terms, or at all.

Off-balance sheet arrangements



As of December 31, 2021 and December 31, 2020, we did not have any off-balance
sheet arrangements that have or are reasonably likely to have a current or
future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources.



43





CRITICAL ACCOUNTING POLICIES AND ESTIMATES



Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with U.S. GAAP. The preparation of these consolidated financial
statements requires us to make estimates and judgments that affect amounts
reported in those statements. We have made our best estimates of certain amounts
contained in our consolidated financial statements. We base our estimates on
historical experience and on various other assumptions that we believe are
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities. However,
application of our accounting policies involves the exercise of judgment and use
of assumptions as to future uncertainties, and, as a result, actual results
could differ materially from these estimates. Management believes that the
estimates, assumptions, and judgments involved in the accounting policies
described below have the most significant impact on our consolidated financial
statements.



We cannot predict what future laws and regulations might be passed that could
have a material effect on our results of operations. We assess the impact of
significant changes in laws and regulations on a regular basis and update the
assumptions and estimates used to prepare our financial statements when we
deem
it necessary.



Cash and Cash Equivalents

We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution.

Inventory

Inventory is primarily comprised of products and equipment to be sold to
end-customers. Inventory is valued at cost, based on the specific identification
method, unless and until the market value for the inventory is lower than cost,
in which case an allowance is established to reduce the valuation to market
value. As of December 31, 2021, and December 31, 2020, market values of all of
our inventory were greater than cost, and accordingly, no such valuation
allowance was recognized. The value of inventory on December 31, 2021 and
December 31, 2020 was $252,199 and $103,483, respectively.



Deposits

Deposits is comprised of advance payments made to third parties, primarily for
inventory for which we have not yet taken title. When we take title to inventory
for which deposits are made, the related amount is classified as inventory, then
recognized as a cost of revenues upon sale (see "Costs of Revenues" below).

Prepaid expenses and other current assets

Prepaid expenses and other current assets is primarily comprised of advance
payments made to third parties for independent contractors' services or other
general expenses. Prepaid services and general expenses are amortized over the
applicable periods which approximate the life of the contract or service period.
The balance of prepaid insurance at December 31, 2021 and December 31, 2020 was
$61,705 and $55,783. The balance of prepaid insurance at December 31, 2021 and
December 31, 2020 was $61,705 and $55,783.



Accounts Receivable

Accounts receivable are recorded at the net value of face amount less any
allowance for doubtful accounts. On a periodic basis, we evaluate our accounts
receivable and, based on a method of specific identification of any accounts
receivable for which we deem the net realizable value to be less than the gross
amounts of accounts receivable recorded, we establish an allowance for doubtful
accounts for those balances. In determining our need for an allowance for
doubtful accounts, we consider historical experience, analysis of past due
amounts, client creditworthiness and any other relevant available information.
However, our actual experience may vary from our estimates. If the financial
condition of our clients were to deteriorate, resulting in their inability or
unwillingness to pay our fees, we may need to record additional allowances or
write-offs in future periods. This risk is mitigated to the extent that we
collect retainers from our clients prior to performing significant services.



The allowance for doubtful accounts, if any, is recorded as a reduction in
revenue to the extent the provision relates to fee adjustments and other
discretionary pricing adjustments. To the extent the provision relates to a
client's inability to make required payments on accounts receivables, the
provision is recorded in operating expenses. As of December 31, 2021, and 2020,
allowance for doubtful accounts was $3,267 and $0, respectively. For December
31, 2021 and December 31, 2020, we recorded bad debt expense of $34,359 and
$9,249, respectively. Net accounts receivable for year end December 31, 2021 and
December 31, 2020 were $121,588 and $6,542, respectively. Net accounts
receivable for year end December 31, 2021 and December 31, 2020 were $121,588
and $6,542, respectively.



44






Property and Equipment, net
Property and Equipment is stated at net book value, cost less depreciation.
Maintenance and repairs are expensed as incurred. Depreciation of owned
equipment is provided using the straight-line method over the estimated useful
lives of the assets, ranging from two to seven years. Depreciation of
capitalized construction in progress costs, a component of property and
equipment, net, begins once the underlying asset is placed into service and is
recognized over the estimated useful life. Property and equipment is reviewed
for impairment as discussed below under "Accounting for the Impairment of
Long-Lived Assets." We did not capitalize any interest as of December 31, 2021
and as of December 31, 2020.



Accounting for impairment of long-lived assets

We evaluate long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Upon such an occurrence, recoverability of assets to be held and
used is measured by comparing the carrying amount of an asset to forecasted
undiscounted net cash flows expected to be generated by the asset. If the
carrying amount of the asset exceeds its estimated future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of
the asset exceeds the fair value of the asset. For long-lived assets held for
sale, assets are written down to fair value, less cost to sell. Fair value is
determined based on discounted cash flows, appraised values or management's
estimates, depending upon the nature of the assets. We have recorded $0 and
$22,658 in impairment charges related to our JV investments during the years
ended December 31, 2021 and 2020, respectively.



Beneficial conversion feature

If the conversion features of conventional convertible debt provide for a rate
of conversion that is below market value at issuance, this feature is
characterized as a beneficial conversion feature ("BCF").  We record a BCF as a
debt discount pursuant to Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ACF") Topic 470-20 Debt with Conversion and
Other Options. In those circumstances, the convertible debt is recorded net of
the discount related to the BCF, and we amortize the discount to interest
expense over the life of the debt using the effective interest method.



Revenue recognition

For annual reporting periods after December 15, 2017, the Financial Accounting
Standards Board ("FASB") made effective ASU 2014-09 "Revenue from Contracts with
Customers," to supersede previous revenue recognition guidance under current
U.S. GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606,
Revenue Recognition. The objective of the guidance is to establish the
principles that an entity shall apply to report useful information to users of
financial statements about the nature, amount, timing, and uncertainty of
revenue and cash flows arising from a contract with a customer. The core
principle is to 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. Two
options were made available for implementation of the standard: the full
retrospective approach or modified retrospective approach. The guidance became
effective for annual reporting periods beginning after December 15, 2017,
including interim periods within that reporting period, with early adoption
permitted. We adopted FASB ASC Topic 606 for our reporting period as of the year
ended December 31, 2017, which made our implementation of FASB ASC Topic 606
effective in the first quarter of 2018. We decided to implement the modified
retrospective transition method to implement FASB ASC Topic 606, with no
restatement of the comparative periods presented. Using this transition method,
we applied the new standards to all new contracts initiated on/after the
effective date. We also decided to apply this method to any incomplete contracts
we determine are subject to FASB ASC Topic 606 prospectively. For the years
ended December 31, 2021 and 2020, there were no incomplete contracts. As is more
fully discussed below, we are of the opinion that none of our contracts for
services or products contain significant financing components that require
revenue adjustment under FASB ASC Topic 606.



45







Identification of our contracts with our customers.

Contracts included in our application of FASB ASC Topic 606, consist completely
of sales contracts between us and our customers that create enforceable rights
and obligations. For the years ended December 31, 2020, and 2019, our sales
contracts included the following parties: us, our sales associates and our
customers. Our sales contracts were offered by us and our sales associates to
our customers directly through our web site. Our sales contracts, and those
formalized by our sales associates, are represented by an electronic order form,
which contains the contractual elements of offer for sale, acceptance and the
provision of consideration consisting of the buyer's payment, which is
concurrent with our delivery of hempSMART™ product. Since our hempSMART™ product
sales contracts are consummated upon receipt of the customer's acceptance of our
offer; our concurrent receipt of our customers payment; and, our delivery of the
agreed to hempSMART™ product, all parties are equally committed to fulfilling
their respective obligations under the sales contracts. Further, the sales
contracts specifically identify (1) parties; (2) quantity of hempSMART™ product
ordered; (3) price; and, (4) subject, and so each respective party's rights are
identifiable and the payment terms are defined. Since the sales contracts are
consummated concurrent with offer, acceptance, payment and delivery of the
hempSMART™ product ordered, we recognize revenue and cash flows as the principal
from the respective sales contract transactions as they complete. Further,
because our sales contracts are offered, accepted and consummated concurrently,
our ability to collect revenue is immediate. We receive no payments for
agreements that do not qualify as a contract. If customers agree to multiple
sales contracts when they are entered into at or near the same time, our policy
is to combine those contracts if: (1) the sales contracts are negotiated as a
single package; (2) the payment amount of one sales contract is dependent upon
another sales contract; (3) our performance obligations of delivering multiple
hempSMART™ products can be determined to be part of a single transaction. Since
the nature of the entry into and consummation of our sales contracts occur
concurrently, there are no changes or modifications to the terms of the sales
contracts that would modify the enforceable rights and performance obligations
of the parties and that would materially alter the timing of our receipt of
revenue from our sales contracts.

Identify performance obligations in our sales contracts.

In analyzing our sales contracts, our policy is to identify the distinct
performance obligations in a sales contract arrangement. In determining our
performance obligations under our sales contracts, we consider that the terms
and conditions of sales are explicitly outlined in our sales contracts and are
so distinct and identifiable within the context of each sales contract, and so
are not integrated with other goods, or constitute a modification or
customization of other goods in our contracts, or are highly dependent or highly
integrated with other goods in our sales contracts. Thus, our performance
obligations are singularly related to our promise to provide the hempSMART™
products upon receipt of payment. We offer an assurance warranty on our
hempSMART™ products that allows a customer to return any hempSMART™ products
within thirty days if not satisfied for any reason. Assurance warranties are not
identifiable performance obligations, since they are electable at the whim of
the customer for any reason. However, we do account for returns of purchase
prices if made.

Determination of the price in our sales contracts.

The transaction prices in our sales contract is the amount of consideration we
expect to be entitled to for transferring promised hempSMART™ products. The
consideration amount is fixed and not variable. The transaction price is
allocated to the identified performance obligations in the contract. These
allocated amounts are recognized as revenue when or as the performance
obligations are fulfilled, which is concurrently upon receipt of payment. There
are no future options for a contract when considering and determining the
transaction price. We exclude amounts third parties will eventually collect,
such as sales tax, when determining the transaction price. Since the timing
between receiving consideration and transferring goods or services is immediate,
our sales contract do not have a significant financing component, i.e.,
recognizing revenue at the amount that reflects the cash payment that the
customer would have made at the time the goods or services were transferred to
them (cash selling price), rather than significantly before or after the goods
or services are provided.



46





Allocation of the Transaction Price of Our Sales Contracts.

Our sales contracts are not considered multi-element arrangements which require
the fulfillment of multiple performance obligations. Rather, our sales contracts
include one performance obligation in each contract. As such, from the outset,
we allocate the total consideration to each performance obligation based on the
fixed and determinable standalone selling price, which we believe is an accurate
representation of what the price is in each transaction.

Revenue recognition when the performance obligation is satisfied.

A performance obligation is satisfied when or as control of the good or service
is transferred to the customer. The standard defines control as "the ability to
direct the use of, and obtain substantially all of the remaining benefits from,
the asset." (ASC 606-10-20). For performance obligations that are fulfilled at a
point in time, revenue is recognized at the fulfillment of the performance
obligation. As noted above, our single performance obligation sales contracts
are singularly related to our promise to provide the hempSMART™ products to the
customer upon receipt of payment, which occurs concurrently and when, upon
completion, allows us under our revenue recognition policy to realize revenue.

Regarding our offered financial accounting, bookkeeping and/or real property
management consulting services, to date no contracts have been entered into, and
thus no reportable revenues have resulted for the fiscal years ended 2021 and
2020.

Product Sales
Revenue from product sales, including delivery fees, FOB shipping point, is
recognized when (1) an order is placed by the customer; (2) the price is fixed
and determinable when the order is placed; (3) the customer is required to and
concurrently pays for the product upon order; and, (4) the product is shipped.
The evaluation of our recognition of revenue after the adoption of FASB ASC 606
did not include any judgments or changes to judgments that affected our
reporting of revenues, since our product sales, both pre and post adoption of
FASB ASC 606, were evaluated using the same standards as noted above, reflecting
revenue recognition upon order, payment and shipment, which all occurs
concurrently when the order is placed and paid for by the customer, and the
product is shipped. Further, given the facts that (1) our customers exercise
discretion in determining the timing of when they place their product order;
and, (2) the price negotiated in our product sales is fixed and determinable at
the time the customer places the order, and there is no delay in shipment, we
are of the opinion that our product sales do not indicate or involve any
significant customer financing that would materially change the amount of
revenue recognized under the sales transaction, or would otherwise contain a
significant financing component for us or the customer under FASB ASC Topic 606.

Revenue costs

Our policy is to recognize costs of revenue in the same manner in conjunction
with revenue recognition. Cost of revenues include the costs directly
attributable to revenue recognition and includes compensation and fees for
services, travel and other expenses for services and costs of products and
equipment. Selling, general and administrative expenses are charged to expense
as incurred.


Advertising and promotion costs

Advertising and promotion costs are included as a component of sales and marketing costs and are expensed as incurred. Over the years ended December 31, 2021 and December 31, 2020these costs were $236,563 and $129,504respectively.



Shipping and Handling Costs

For product and equipment sales, shipping and handling charges are included in the cost of the products.

Stock-based compensation

Restricted shares are awarded to employees and entitle the grantee to receive
shares of restricted common stock at the end of the established vesting period.
The fair value of the grant is based on the stock price on the date of grant. We
recognize related compensation costs on a straight-line basis over the requisite
vesting period of the award, which to date has been one year from the grant
date. During the years ended December 31, 2021 and December 31, 2020,
stock-based compensation expense for restricted shares was $1,207,945 and
$3,014,888, respectively. Compensation expense for warrants and options is based
on the fair value of the instruments on the grant date, which is determined
using the Black-Scholes valuation model and are expensed over the expected
term
of the awards.



Income Taxes

We recognize deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns in accordance with applicable accounting guidance for accounting for
income taxes, using currently enacted tax rates in effect for the year in which
the differences are expected to reverse. We record a valuation allowance when
necessary to reduce deferred tax assets to the amount expected to be realized.
For the year ended December 31, 2021 and December 31, 2020, due to cumulative
losses, we recorded a valuation allowance against our deferred tax asset that
reduced our income tax benefit for the period to zero. As of December 31, 2021,
and December 31, 2020, we had no liabilities related to federal or state income
taxes and the carrying value of our deferred tax asset was zero.



47






Loss Contingencies

From time to time the Company is subject to various legal proceedings and claims
that arise in the ordinary course of business. On at least a quarterly basis,
consistent with ASC 450-20-50-1C, if the Company determines that there is a
reasonable possibility that a material loss may have been incurred, or is
reasonably estimable, regardless of whether the Company accrued for such a loss
(or any portion of that loss), the Company will confer with its legal counsel,
consistent with ASC 450. If the material loss is determinable or reasonably
estimable, the Company will record it in its accounts and as a liability on the
balance sheet. If the Company determines that such an estimate cannot be made,
the Company's policy is to disclose a demonstration of its attempt to estimate
the loss or range of losses before concluding that an estimate cannot be made,
and to disclose it in the notes to the financial statements under Contingent
Liabilities.


Net earnings (loss) per common share

We report net income (loss) per common share in accordance with FASB ASC 260,
"Earnings per Share." This statement requires dual presentation of basic and
diluted earnings with a reconciliation of the numerator and denominator of the
earnings per share computations. Basic net income (loss) per share is computed
by dividing net income attributable to common stockholders by the weighted
average number of shares of common stock outstanding during the period and
excludes the effects of any potentially dilutive securities. Diluted net income
(loss) per share gives effect to any dilutive potential common stock outstanding
during the period. The computation does not assume conversion, exercise or
contingent exercise of securities that would have an anti-dilutive effect on
earnings.



Related Party Transactions

We follow the FASB ASC 850-10 subtopic, “Related Party Transactions,” for the identification of related parties and the disclosure of related party transactions.



Pursuant to ASC 850-10-20, related parties include: a) affiliates of the
Company; b) entities for which investments in their equity securities would be
required, absent the election of the fair value option under the Fair Value
Option Subsection of Section 825-10-15, to be accounted for by the equity method
by the investing entity; c) trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of
management; d) principal owners of the Company; e) management of the Company; f)
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g) other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.



Material related party transactions are required to be disclosed in the
consolidated financial statements, other than compensation arrangements, expense
allowances, and other similar items in the ordinary course of business. However,
disclosure of transactions that are eliminated in the preparation of
consolidated or combined financial statements is not required in those
statements. The disclosures shall include: a) the nature of the relationship(s)
involved; b) a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which
statements of operation are presented, and such other information deemed
necessary to an understanding of the effects of the transactions on the
financial statements; c) the dollar amounts of transactions for each of the
periods for which statements of operations are presented and the effects of any
change in the method of establishing the terms from that used in the preceding
period; and d) amounts due from or to related parties as of the date of each
balance sheet presented and, if not otherwise apparent, the terms and manner of
settlement.

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