UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~FORM 10-Q~~

xFORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December~~March 31, ~~2017~~

or2020

¨or

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

For the transition period from ~~___________________~~_________ to ~~___________________ .~~__________.

Commission File Number:000-12350

EVIO, INC.

(Exact name of registrant as specified in its charter)

~~EVIO, INC.~~Colorado

~~(Exact name of registrant as specified in its charter)~~

~~Colorado~~		47-1890509
(State of Incorporation)		(I.R.S. Employer Identification No.)

2654 W. Horizon Ridge Pkwy, Suite B5-208 Henderson, NV
~~62930 O. B. Riley Rd, Suite 300, Bend, OR~~		~~97703~~89052
(Address of principal executive offices)		(Zip Code)

~~(541) 633-4568~~(702) 748-9944

(Registrant’s telephone number, including area code)

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate ~~Web site,~~website if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x [X] No ¨[ ]

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

Large accelerated filer	¨ [ ]	Non-accelerated filer	¨ [ ]
Accelerated filer	¨ [ ]	Smaller reporting company	x [X]
		Emerging growth company	x	[X]

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

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 ~~number of shares outstanding of each~~registrant is a shell company (as defined in Rule 12b-2 of the ~~issuer’s classes~~Exchange Act). Yes [ ] No [X]

As of September 3, 2020 there were 89,142,473 shares of common stock ~~as of the latest practicable date.~~outstanding.

EVIO, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED MARCH 31, 2020

TABLE OF CONTENTS

~~Class~~ PART I — FINANCIAL INFORMATION			~~Outstanding as of February 13, 2018~~
~~Common stock, par value $0.0001 per share~~		~~13,957,528~~

Item 1. Consolidated Financial Statements (Unaudited)

~~EVIO, INC.~~

~~FORM 10-Q~~

~~December 31, 2017~~

~~TABLE OF CONTENTS~~Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and September 30, 2019

~~PART I -- FINANCIAL INFORMATION~~				3
	Consolidated Statements of Operations for the Three Months Ended March 31, 2020, and 2019 (Unaudited)			4
~~Item 1.~~	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020, and 2019 (Unaudited)	5
	Consolidated Statements of Stockholders Equity for the Three Months March 31, 2020, and 2019 (Unaudited)	6
	Notes to Unaudited Consolidated Financial Statements ~~(Unaudited)~~		3	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27	32
	Critical Accounting Policies and Estimates	33
	Results of Operations	33
	Liquidity and Capital Resources	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33	35
Item 4.	Control and Procedures		33	35

PART II --— OTHER INFORMATION

Item 1.	Legal Proceedings		34	35
Item 1A.	Risk Factors		34	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		34	36
Item 3.	Defaults Upon Senior Securities		34	36
Item 4.	Mine Safety Disclosures		34	36
Item 5.	Other Information		34	36
Item 6.	Exhibits		35	36

2
~~Table of Contents~~
PART I — FINANCIAL INFORMATION

~~PART I -- FINANCIAL INFORMATION~~EVIO, INC.

Consolidated Balance Sheets

	March 31,			September 30,
	2020			2019

ASSETS
Current assets:
Cash and cash equivalents	$	16,457		$	110,325
Accounts receivable, net		172,389			133,022
Prepaid expenses		141,602			190,460
Other current assets		43,764			9,689
Note receivable, current portion		538,904			538,904
Total current assets		913,116			982,400
Right of use assets		2,069,538			2,543,976
Capital assets, net		1,206,745			1,383,828
Land		212,550			212,550
Property and equipment, net		2,834,587			3,080,426
Security deposits		175,981			178,918
Prepaid expenses, net		-			4,061
Total assets	$	7,412,517		$	8,386,159

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	4,644,361		$	3,811,237
Client deposits		53,009			108,418
Interest payable		1,517,386			1,387,642
Capital lease obligation, current		875,946			957,673
Derivative liability		2,319,938			2,545,735
Convertible notes payable, net of discounts		3,584,043			3,695,484
Loans payable, net of discounts, current		787,960			762,476
Total current liabilities		13,782,643			13,268,665
Convertible debentures, net of loan discounts		3,049,007			1,734,890
Lease liabilities		2,117,338			2,594,726
Capital lease obligation, net		241,268			381,786
Loans payable, net		708,550			657,603
Loans payable, related party, net		1,406,162			1,560,849
Total liabilities		21,304,968			20,198,519

Commitments and contingencies		-			-

Stockholders’ Equity:
Series B convertible preferred stock, $0.0001 par value. 5,000,000 authorized; 5,000,000 shares issued and outstanding at March 31, 2020 and September 30, 2019, respectively		500			500
Series C convertible preferred stock, $0.0001 par value. 500,000 authorized; 500,000 shares issued and outstanding at March 31, 2020 and September 30, 2019, respectively		50			50
Series D convertible preferred stock, $0.0001 par value. 1,000,000 authorized; 349,500 and 349,500 shares issued and outstanding at March 31, 2020 and September 30, 2019, respectively		34			34
Common stock, $0.0001 par value. 1,000,000,000 authorized; 78,717,471 and 29,314,419 shares issued and outstanding at March 31, 2020 and September 30, 2019, respectively		7,872			2,931
Stock subscriptions receivable		-			-
Additional paid-in capital		29,695,137			26,498,076
Retained earnings (accumulated deficit)		(43,042,535	)		(37,775,183	)
Accumulated other comprehensive income		(348,167	)		(353,090	)
Total stockholders’ equity		(13,687,109	)		(11,626,682	)
Noncontrolling interest		(205,342	)		(185,678	)
Total equity		(13,892,451	)		(11,812,360	)
Total liabilities and equity	$	7,412,517		$	8,386,159

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

~~ITEM 1 –FINANCIAL STATEMENTS~~EVIO, INC.

Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

~~EVIO, INC.~~

~~CONSOLIDATED BALANCE SHEETS~~

December 31,
2017

September 30,
2017

(unaudited)

ASSETS

Current assets

Cash

$ 221,820

$ 121,013

Accounts receivable, net of allowance of $77,850 and $74,782

202,643

229,564

Prepaid expenses

149,685

169,557

Other current assets

33,952

7,438

Note receivable, current portion

100,000

100,000

Subscription receivable

148,000

-

Total current assets

856,100

627,572

Property and equipment, net of accumulated depreciation of $260,983 and $213,447, respectively

506,489

547,073

Security deposits

92,892

92,892

Note receivable, net of current portion

1,200,000

1,200,000

Intangible assets, net of accumulated amortization, net of accumulated amortization of $228,439 and $189,475

553,296

592,260

Goodwill

2,958,137

2,958,137

Total assets

$ 6,166,914

$ 6,017,934

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable and accrued liabilities

$ 835,985

$ 773,053

Client deposits

78,577

119,281

Deferred revenue

33,300

40,800

Interest payable

184,845

133,697

Capital lease obligation, current

40,526

37,990

Derivative liability

-

294,637

Convertible notes payable, net of discounts of $33,998 and $208,680, respectively

1,068,402

1,212,720

Loans payable, current, net of discounts of $73,568 and $127,662

1,438,450

1,503,545

Loans payable, related party, current

243,355

312,855

Total current liabilities

3,923,440

4,428,578

Capital lease obligation, net of current portion

40,850

52,777

Loans payable, net of current portion

56,385

59,832

Loans payable, related party, net of current portion, net of discounts of $35,471 and $42,044, respectively

1,235,523

1,251,306

Total liabilities

5,256,198

5,792,493

Stockholders’ equity

Series A Convertible Preferred Stock, Par Value $0.0001; 1,850,000 authorized; 0 shares issued and outstanding at December 31, 2017 and September 30, 2017, respectively

-

-

Series B Convertible Preferred Stock, Par Value $0.0001; 5,000,000 authorized; 5,000,000 shares issued and outstanding at December 31, 2017 and September 30, 2017, respectively

500

500

Series C Convertible Preferred Stock, Par Value $0.0001; 500,000 authorized; 500,000 shares issued and outstanding at December 31, 2017 and September 30, 2017, respectively

50

50

Series D Convertible Preferred Stock, Par Value $.0001; 1,000,000 authorized; 744,772 and 832,500 shares issued and outstanding at December 31, 2017 and September 30, 2017, respectively

74

83

Common Stock, Par Value $.0001, 1,000,000,000 authorized; 13,890,028 and 10,732,922 issued and outstanding at December 31, 2017 and September 30, 2017, respectively

1,389

1,073

Additional paid in capital

9,337,432

7,657,982

Accumulated deficit

(8,578,963 )

(7,592,371 )
Total stockholders’ equity

760,482

67,317

Non-controlling interest

150,234

158,124

Total equity

910,716

225,441

Total liabilities and stockholders’ equity

$ 6,166,914

$ 6,017,934

	Three Months Ended March 31,			Three Months Ended March 31,			Six Months Ended March 31,			Six Months Ended March 31,
	2020			2019			2020			2019

Revenues
Testing revenue	$	867,814		$	735,179		$	2,200,770		$	1,922,417
Consulting revenue		-			-			-			-
Total revenues		867,814			735,179			2,200,770			1,922,417

Cost of revenue
Testing services		820,080			835,186			1,766,840			1,849,166
Consulting services		-			-			-			-
Depreciation and amortization		200,366			321,856			455,920			612,304
Total cost of revenue		1,020,446			1,157,042			2,222,760			2,461,470

Gross margin		(152,632	)		(421,863	)		(21,990	)		(539,053	)

Operating expenses:
Selling, general and administrative		1,419,188			1,205,662			2,687,112			2,702,302
Depreciation and amortization		27,277			57,116			55,507			115,982
Total operating expenses		1,446,465			1,262,778			2,742,619			2,836,284

Income (loss) from operations		(1,599,097	)		(1,684,641	)		(2,764,609	)		(3,375,337	)

Other income (expense)
Interest income (expense), net		(1,203,227	)		(692,419	)		(2,766,098	)		(2,457,297	)
Other income (expense)		13,874			(33,422	)		17,895			(97,517	)
Gain (loss) on settlement of debt		-			-			-			-
Impairment charge		-			-			-			-
Gain (loss) on change in fair market value of derivative liabilities		(194,236	)		(1,409,275	)		225,797			(556,647	)
Total other income (expense)		(1,383,589	)		(2,135,116	)		(2,522,406	)		(3,111,461	)
Income (loss) before income taxes		(2,982,686	)		(3,819,757	)		(5,287,015	)		(6,486,798	)

Provision for income taxes (benefit)		-			613			-			2,969

Net income (loss)		(2,982,686	)		(3,820,370	)		(5,287,015	)		(6,489,767	)
Net income (loss) attributable to noncontrolling interest		(30,143	)		(106,645	)		(19,664	)		(161,383	)
Net income (loss) attributable to EVIO, Inc. shareholders	$	(2,952,543	)	$	(3,713,725	)	$	(5,267,351	)	$	(6,328,384	)

Basic and diluted earnings (loss) per common share	$	(0.06	)	$	(0.15	)	$	(0.10	)	$	(0.25	)

Weighted-average number of common shares outstanding:
Basic and diluted		49,561,707			25,366,021			51,581,428			25,366,021

Comprehensive loss:
Net income (loss)	$	(2,982,686	)	$	(3,820,370	)	$	(5,287,015	)	$	(6,489,767	)
Foreign curreny translation adjustment		6,151			64,261			4,923			(115,561	)
Comprehensive income (loss)	$	(2,976,535	)	$	(3,756,109	)	$	(5,282,092	)	$	(6,605,328	)

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

EVIO, INC.

Consolidated Statements of Cash Flows (Unaudited)

~~Table of Contents~~

~~EVIO, INC.~~

~~UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS~~

Three months ended
December 31,

2017

2016

Revenues

Testing services

$ 887,349

$ 568,578

Consulting services

59,516

99,878

Total revenue

946,865

668,456

Cost of revenue

Testing services

696,658

559,277

Consulting services

10,492

12,500

Depreciation and amortization

29,113

18,302

Total cost of revenue

736,263

590,079

Gross margin

210,602

78,377

Operating expenses

Selling, general and administrative

820,275

435,158

Depreciation and amortization

57,387

34,535

Total operating expenses

877,662

469,693

Loss from operations

(667,060 )

(391,316 )

Other income (expense)

Interest expense, net of interest income

(284,651 )

(323,422 )
Loss on settlement of debt and account payable

(56,093 )

-

Gain (loss) on change in fair market value of derivative liabilities

13,322

(106,243 )
Total other income (expense)

(327,422 )

(429,665 )

Net loss

$ (994,482 )

$ (820,981 )
Income (loss) attributable to non-controlling interest

(7,890 )

4,736

Net loss attributable to EVIO, Inc.

$ (986,592 )

$ (825,717 )

Basic and diluted loss per common share

$ (0.08 )

$ (0.09 )

Weighted average common shares outstanding

11,713,103

8,833,481

	Six Months Ended March 31,			Six Months Ended March 31,
	2020			2019
Cash flows from operating activities of continuing operations:
Net income (loss)	$	(5,287,015	)	$	(6,489,767	)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization of debt discount		2,077,153			1,951,983
Common stock issued in exchange for fees and services		328,830			240,501
Default penalties and other covenant adjustments on convertible debentures		62,500			-
Depreciation and amortization		511,597			720,739
Loss on disposal of assets		2,979			64,095
Provision for doubtful accounts		25,253			35,333
Stock based compensation		890,510			395,850
Unrealized (gain) loss on derivative liability		(225,797	)		556,647
Changes in operating assets and liabilities:
Accounts receivable		(71,177	)		74,625
Prepaid expenses		52,919			(142,911	)
Other current assets		(34,075	)		33,122
Security deposits		1,775			(722	)
Operating lease right of use assets		(2,950	)		48,332
Accounts payable and accrued liabilities		675,496			1,179,775
Customer deposits and deferred revenues		(55,409	)		(156,363	)
Interest payable		339,380			410,712
Net cash provided by (used in) operating activities		(698,031	)		(1,078,049	)

Cash flows from investing activities:
Purchase of fixed assets		(44,674	)		(580,075	)
Net cash provided by (used in) financing activities		(44,674	)		(580,075	)

Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs		-			186,000
Proceeds from issuance of convertible debentures		-			414,183
Proceeds from issuance of convertible notes, net of issuance costs		846,791			971,014
Proceeds from related party advances		64,069			199,040
Repayments of capital leases		(181,931	)		(93,050	)
Repayments of convertible debentures		-			-
Repayments of loans payable		(28,993	)		(18,617	)
Repayments of related party loans payable		(51,459	)		(27,151	)
Net cash provided by (used in) financing activities		648,477			1,631,419

Effect of exchange rates on cash and cash equivalents		360			(7,769	)
Net increase (decrease) in cash and cash equivalents		(93,868	)		(34,474	)
Cash and cash equivalents at beginning of period		110,325			81,735
Cash and cash equivalents at end of period	$	16,457		$	47,261

Supplemental disclosure of cash flow information:
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	-

Supplemental disclosure of non-cash investing and financing activities:
Conversion of convertible note and accrued interest into common stock	$	1,728,842		$	708,089
Settlement of account payable for common stock	$	6,000		$	-
Debt discount recorded on convertible notes and debentures payable upon initial measurement of derivative liability	$	-		$	350,039
Debt discounts recorded for beneficial conversion features on convertible debentures and notes payable	$	175,320		$	-
Debt discounts recorded for original issue discounts on convertible debentures	$	-		$	280,144
Vehicles financed through notes payable	$	105,424		$	-
Equipment financed through capital leases	$	-		$	308,613

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

EVIO, INC.

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

4
~~Table of Contents~~

~~EVIO, INC.~~

~~UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

Three months ended
December 31,

2017

2016

Cash flows from operating activities

Net loss

$ (994,482 )

$ (820,981 )
Adjustments to reconcile net loss to net cash used in operating activities:

Stock based compensation

79,151

166,924

Common stock issued for services

179,552

-

Loss on settlement of debt

52,343

-

Loss on settlement of account payable

3,750

-

(Gain) loss on derivative liability

(13,322 )

106,243

Amortization of debt discount

231,321

293,316

Depreciation and amortization expense

86,500

52,837

Allowance for doubtful accounts

3,067

-

Reduction of security deposit for rent expense

-

2,095

Changes in operating assets and liabilities:

Accounts receivable

23,854

(210,271 )
Prepaid expenses

81,477

(11,876 )
Other current asset

(26,514 )

40,000

Security deposits

-

(4,190 )
Accounts payable and accrued liabilities

77,932

221,243

Interest payable

71,189

28,420

Deferred revenue

(7,500 )

-

Customer deposits

(40,704 )

128,549

Net cash used in operating activities

(192,386 )

(7,691 )

Cash flows from investing activities

Net cash paid in acquisitions of subsidiaries

-

(6,930 )
Purchase of equipment

(6,952 )

(26,314 )
Net cash used in investing activities

(6,952 )

(33,244 )

Cash flows from financing activities

Repayments of capital leases

(9,391 )

-

Proceeds from issuance of common stock

350,000

-

Proceeds from the issuance of series D preferred stock

-

114,500

Proceeds from convertible notes, net of original issue discounts and fees

-

70,000

Payment on loan payable

(2,636 )

(31,687 )
Proceeds from notes payable - related party

-

80,000

Payments on notes payable - related party

(37,828 )

(97,481 )
Net cash provided by financing activities

300,145

135,332

Net cash increase for period

100,807

94,397

Cash balance, beginning of period

121,013

57,486

Cash balance, end of period

$ 221,820

$ 151,883

Supplemental disclosure of cash flow information:

Cash paid for interest

$ 30,553

$ -

Cash paid for income tax

$ -

$ -

Supplemental disclosure of non-cash investing and financing activities:

Conversion of convertible note and accrued interest into common stock

$ 336,884

$ 316,457

Reclassification of derivative liability to additional paid in capital

$ 281,315

$ 889,509

Settlement of account payable for common stock

$ 18,750

$ -

Common stock issued for settlement of note payable

$ 162,000

$ -

Common stock issued for settlement of related party note payable

$ 62,500

$ -

Common stock issued for subscription receivable

$ 148,000

$ -

Equipment financed through capital leases

$ -

$ 105,120

Debt discount from derivative liability

$ -

$ 198,300

Conversion of Series A Preferred stock to common stock

$ -

$ 4,388

Acquisition of Greenstyle Consulting assets through issuance of preferred shares, cash and note payable

$ -

$ 260,000

Acquisition of GreehHaus through issuance of preferred shares and note payable

$ -

$ 800,000

	Series B Preferred Stock				Series C Preferred Stock				Series D Preferred Stock						Common Stock				Stock Subscriptions			Additional Paid-in			Retained			Accumulated Other Comprehensive			Total Stockholders’			Noncontrolling			Total
	Shares		Value		Shares		Value		Shares			Value			Shares		Value		Receivable			Capital			Earnings			Income			Equity			Interest			Equity

Balance, September 30, 2018		5,000,000	$	500		500,000	$	50		552,500		$	55			23,255,411	$	2,326	$	-		$	21,495,621		$	(19,226,462	)	$	(263,985	)	$	2,008,105		$	1,934,634		$	3,942,739

Net income (loss)		-		-		-		-		-			-			-		-		-			-			(2,596,659	)		-			(2,596,659	)		(54,738	)		(2,651,397	)
Change in foreign currency translation		-		-		-		-		-			-			-		-		-			-			-			(179,822	)		(179,822	)		-			(179,822	)
Issuance of common stock in connection with the conversion of Series D preferred stock		-		-		-		-		(38,000	)		(4	)		95,000		10		-			(6	)		-			-			-			-			-
Issuance of common stock in connection with sales made under private offerings		-		-		-		-		-			-			200,000		20		-			105,980			-			-			106,000			-			106,000
Issuance of common stock as compensation to employees, officers and/or directors		-		-		-		-		-			-			50,000		5		-			35,870			-			-			35,875			-			35,875
Issuance of common stock in exchange for consulting, professional and other services provided		-		-		-		-		-			-			250,000		25		-			128,375			-			-			128,400			-			128,400
Issuance of common stock in connection with the conversion of loans payable		-		-		-		-		-			-			779,808		78		-			317,022			-			-			317,100			-			317,100
Issuance of common stock in connection with the conversion of debentures		-		-		-		-		-			-			669,362		66		-			387,934			-			-			388,000			-			388,000
Issuance of common stock in connection with the conversion of interest payable		-		-		-		-		-			-			10,163		1		-			2,987			-			-			2,988			-			2,988
Issuance of common stock in connection with the conversion of interest payable		-		-		-		-		-			-			-		-		-			12,423			-			-			12,423			-			12,423
Common stock options issued under employee equity incentive plan		-		-		-		-		-			-			-		-		-			169,922			-			-			169,922			-			169,922
Recognition of beneficial conversion features related to convertible debt instruments		-		-		-		-		-			-			-		-		-			280,144			-			-			280,144			-			280,144
Acquisition of equity interests in subsidiaries		-		-		-		-		-			-			-		-		-			-			-			-			-			-			-

Balance, December 31, 2018		5,000,000	$	500		500,000	$	50		514,500		$	51			25,309,744	$	2,531	$	-		$	22,936,272		$	(21,823,121	)	$	(443,807	)	$	672,476		$	1,879,896		$	2,552,372

Net income (loss)		-		-		-		-		-			-			-		-		-			-			(3,731,725	)		-			(3,731,725	)		(106,645	)		(3,838,370	)
Change in foreign currency translation		-		-		-		-		-			-			-		-		-			-			-			64,261			64,261			-			64,261
Issuance of common stock in connection with the conversion of Series D preferred stock		-		-		-		-		(165,000	)		(16	)		412,500		41		-			(24	)		-			-			1			-			1
Issuance of common stock in connection with sales made under private offerings		-		-		-		-		-			-			200,000		20		-			79,980			-			-			80,000			-			80,000
Issuance of common stock in connection with stock subscriptions received under private offerings		-		-		-		-		-			-			1,015,000		101		(406,000	)		405,899			-			-			-			-			-
Issuance of common stock as compensation to employees, officers and/or directors		-		-		-		-		-			-			37,500		4		-			19,496			-			-			19,500			-			19,500
Issuance of common stock in exchange for consulting, professional and other services provided		-		-		-		-		-			-			100,000		10		-			52,990			-			-			53,000			-			53,000
Issuance of common stock and common stock purchase warrants in satisfaction of debt issuances costs		-		-		-		-		-			-			20,000		2		-			46,675			-			-			46,677			-			46,677
Recognition of beneficial conversion features related to convertible debt instruments		-		-		-		-		-			-			-		-		-			566,841			-			-			566,841			-			566,841
Stock based compensation related to employee stock options		-		-		-		-		-			-			-		-		-			170,553			-			-			170,553			-			170,553

Balance, March 31, 2019		5,000,000	$	500		500,000	$	50		349,500		$	35			27,094,744	$	2,709	$	(406,000	)	$	24,278,682		$	(25,554,846	)	$	(379,546	)	$	(2,058,416	)	$	1,773,251		$	(285,165	)

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

5
~~Table of Contents~~
EVIO, INC.

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

	Preferred Stock				Preferred Stock				Preferred Stock				Common Stock				Additional Paid-in		Additional Paid-in		Retained			Accumulated Other Comprehensive			Total Stockholders’			Noncontrolling			Total
	Shares		Value		Shares		Value		Shares		Value		Shares		Value		Capital		Capital		Earnings			Income			Equity			Interest			Equity

Balance, September 30, 2019		5,000,000	$	500		500,000	$	50		339,500	$	34		29,314,419	$	2,931	$	-	$	26,498,076	$	(37,775,183	)	$	(353,090	)	$	(11,626,682	)	$	(185,678	)	$	(11,812,360	)

Net income (loss)		-		-		-		-		-		-		-		-		-		-		(2,314,808	)		-			(2,314,808	)		10,479			(2,304,329	)
Change in foreign currency translation		-		-		-		-		-		-		-		-		-		-		-			(1,230	)		(1,230	)		-			(1,230	)
Issuance of common stock as compensation to employees, officers and/or directors		-		-		-		-		-		-		422,500		42		-		234,335		-			-			234,377			-			234,377
Issuance of common stock in exchange for consulting, professional and other services provided		-		-		-		-		-		-		359,212		36		-		16,694		-			-			16,730			-			16,730
Issuance of common stock in satisfaction of debt issuances costs		-		-		-		-		-		-		2,285,449		229		-		62,271		-			-			62,500			-			62,500
Issuance of common stock in connection with the settlement of accounts payable		-		-		-		-		-		-		26,666		3		-		5,997		-			-			6,000			-			6,000
Issuance of common stock in connection with the conversion of debentures		-		-		-		-		-		-		18,317,481		1,832		-		1,239,950		-			-			1,241,782			-			1,241,782
Issuance of common stock in connection with the conversion of interest payable		-		-		-		-		-		-		3,466,353		346		-		171,876		-			-			172,222			-			172,222
Recognition of beneficial conversion features related to convertible debt instruments		-		-		-		-		-		-		-		-		-		175,320		-			-			175,320			-			175,320
Stock based compensation related to employee stock options		-		-		-		-		-		-		-		-		-		126,581		-			-			126,581			-			126,581

Balance, December 31, 2019		5,000,000	$	500		500,000	$	50		339,500	$	34		54,192,080	$	5,419	$	-	$	28,531,100	$	(40,089,991	)	$	(354,320	)	$	(11,907,208	)	$	(175,199	)	$	(12,082,407	)

Net income (loss)		-		-		-		-		-		-		-		-		-		-		(2,952,543	)		-			(2,952,543	)		(30,143	)		(2,982,686	)
Change in foreign currency translation		-		-		-		-		-		-		-		-		-		-		-			6,153			6,153			-			6,153
Issuance of common stock as compensation to employees, officers and/or directors		-		-		-		-		-		-		7,031,038		703		-		508,032		-			-			508,735			-			508,735
Issuance of common stock in exchange for consulting, professional and other services provided		-		-		-		-		-		-		4,916,458		492		-		311,608		-			-			312,100			-			312,100
Issuance of common stock in connection with the settlement of a legal matter		-		-		-		-		-		-		144,928		14		-		9,986		-			-			10,000			-			10,000
Issuance of common stock in connection with the conversion of debentures		-		-		-		-		-		-		11,288,957		1,129		-		276,474		-			-			277,603			-			277,603
Issuance of common stock in connection with the conversion of interest payable		-		-		-		-		-		-		1,144,012		115		-		37,120		-			-			37,235			-			37,235
Stock based compensation related to employee stock options		-		-		-		-		-		-		-		-		-		20,817		-			-			20,817			-			20,817

Balance, March 31, 2020		5,000,000	$	500		500,000	$	50		339,500	$	34		78,717,473	$	7,872	$	-	$	29,695,137	$	(43,042,534	)	$	(348,167	)	$	(13,687,108	)	$	(205,342	)	$	(13,892,450	)

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

EVIO, INC.

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

	Series B Preferred Stock				Series C Preferred Stock				Series D Preferred Stock						Common Stock				Additional Paid-in			Retained			Accumulated Other Comprehensive			Total Stockholders’			Noncontrolling			Total
	Shares		Value		Shares		Value		Shares			Value			Shares		Value		Capital			Earnings			Income			Equity			Interest			Equity

Balance, September 30, 2018		5,000,000	$	500		500,000	$	50		552,500		$	55			23,255,411	$	2,326	$	21,495,621		$	(19,226,462	)	$	(263,985	)	$	2,008,105		$	1,934,634		$	3,942,739

Net income (loss)		-		-		-		-		-			-			-		-		-			(18,548,721	)		-			(18,548,721	)		(2,120,312	)		(20,669,033	)
Change in foreign currency translation		-		-		-		-		-			-			-		-		-			-			(89,105	)		(89,105	)		-			(89,105	)
Issuance of common stock in connection with the conversion of Series D preferred stock		-		-		-		-		(213,000	)		(21	)		532,500		53		(32	)		-			-			-			-			-
Issuance of common stock in connection with sales made under private offerings		-		-		-		-		-			-			1,415,000		141		591,859			-			-			592,000			-			592,000
Issuance of common stock in connection with stock subscriptions received under private offerings		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock in connection with the exercise of common stock purchase warrants		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock as compensation to employees, officers and/or directors		-		-		-		-		-			-			287,500		29		397,691			-			-			397,720			-			397,720
Issuance of common stock in exchange for consulting, professional and other services provided		-		-		-		-		-			-			1,038,017		104		331,047			-			-			331,151			-			331,151
Issuance of common stock in satisfaction of debt issuances costs		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock in connection with the settlement of accounts payable		-		-		-		-		-			-			31,579		3		14,997			-			-			15,000			-			15,000
Issuance of common stock in connection with the settlement
of notes payable		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock in connection with the conversion of loans payable		-		-		-		-		-			-			2,054,887		205		686,995			-			-			687,200			-			687,200
Issuance of common stock in connection with the conversion of debentures		-		-		-		-		-			-			669,362		67		387,933			-			-			388,000			-			388,000
Issuance of common stock in connection with the conversion of related party notes payable		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock in connection with the conversion of interest payable		-		-		-		-		-			-			10,163		1		25,109			-			-			25,110			-			25,110
Issuance of common stock purchase warrants in satisfaction of debt issuances costs		-		-		-		-		-			-			20,000		2		11,758			-			-			11,760			-			11,760
Reclassification of derivative liability to additional paid-in capital		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Recognition of beneficial conversion features related to convertible debt instruments		-		-		-		-		-			-			-		-		1,844,834			-			-			1,844,834			-			1,844,834
Stock based compensation related to employee stock options		-		-		-		-		-			-			-		-		710,264			-			-			710,264			-			710,264
Acquisition of equity interests in subsidiaries		-		-		-		-		-			-			-		-		-			-			-			-			-			-

Balance, September 30, 2019		5,000,000	$	500		500,000	$	50		339,500		$	34			29,314,419	$	2,931	$	26,498,076		$	(37,775,183	)	$	(353,090	)	$	(11,626,682	)	$	(185,678	)	$	(11,812,360	)

Net income (loss)		-		-		-		-		-			-			-		-		-			(5,267,351	)		-			(5,267,351	)		(19,664	)		(5,287,015	)
Change in foreign currency translation		-		-		-		-		-			-			-		-		-			-			4,923			4,923			-			4,923
Issuance of common stock in connection with the conversion of Series D preferred stock		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock in connection with sales made under private offerings		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock in connection with stock subscriptions received under private offerings		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock in connection with the exercise of common stock purchase warrants		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock as compensation to employees, officers and/or directors		-		-		-		-		-			-			7,453,538		745		742,367			-			-			743,112			-			743,112
Issuance of common stock in exchange for consulting, professional and other services provided		-		-		-		-		-			-			5,275,670		528		328,302			-			-			328,830			-			328,830
Issuance of common stock in satisfaction of debt default penalties		-		-		-		-		-			-			2,285,449		229		62,271			-			-			62,500			-			62,500
Issuance of common stock in connection with the settlement of accounts payable		-		-		-		-		-			-			26,666		3		5,997			-			-			6,000			-			6,000
Issuance of common stock in connection with the settlement of a legal matter		-		-		-		-		-			-			144,928		14		9,986			-			-			10,000			-			10,000
Issuance of common stock in connection with the settlement of notes payable		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock in connection with the conversion of loans payable		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock in connection with the conversion of debentures		-		-		-		-		-			-			29,606,438		2,961		1,516,424			-			-			1,519,385			-			1,519,385
Issuance of common stock in connection with the conversion of related party notes payable		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Issuance of common stock in connection with the conversion of interest payable		-		-		-		-		-			-			4,610,365		461		208,996			-			-			209,457			-			209,457
Issuance of common stock purchase warrants in satisfaction of debt issuances costs		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Reclassification of derivative liability to additional paid-in capital		-		-		-		-		-			-			-		-		-			-			-			-			-			-
Recognition of beneficial conversion features related to convertible debt instruments		-		-		-		-		-			-			-		-		175,320			-			-			175,320			-			175,320
Stock based compensation related to employee stock options		-		-		-		-		-			-			-		-		147,398			-			-			147,398			-			147,398
Acquisition of equity interests in subsidiaries		-		-		-		-		-			-			-		-		-			-			-			-			-			-

Balance, March 31, 2020		5,000,000	$	500		500,000	$	50		339,500		$	34			78,717,473	$	7,872	$	29,695,137		$	(43,042,534	)	$	(348,167	)	$	(13,687,108	)	$	(205,342	)	$	(13,892,450	)

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

EVIO, INC.

Notes To Unaudited Consolidated Financial Statements

For The Three Month Periods Ended March 31, 2020, and 2019

NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

EVIO, ~~INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~DECEMBER 31, 2017~~

~~Note 1 – NATURE OF ACTIVITIES AND CONTINUANCE OF BUSINESS~~

~~EVIO, INC.~~Inc., a Colorado corporation and its subsidiaries ~~(“the Company”)~~ provide analytical testing and advisory services to the emerging legalized cannabis industry. EVIO, Inc. was originally incorporated in the State of New York, December 12, 1977, under the name 3171 Holding Corporation. On February 22, 1979, the name was changed to Electronomic Industries Corp. and on February 23, 1983, the name was changed to Quantech Electronics Corp. The Company was reincorporated in the State of Colorado on December 15, 2003. On August 29, 2014, the Company completed a reverse merger with Signal Bay Research, Inc., a Nevada Corporation, and assumed its operations. In September 2014, the Company changed its name from Quantech Electronics Corp. to Signal Bay, Inc. then to EVIO, INC. in ~~September 2017.~~August 2018. The Company has selected September 30 as its fiscal ~~year end.~~year-end. The Company is domiciled in the State of Colorado, and its corporate headquarters are located in ~~Bend, Oregon.~~Henderson, Nevada.

As a part of and prior to the consummation of the reverse merger, William Waldrop and Lori Glauser, principals of Signal Bay Research, Inc., purchased 80% of the issued and outstanding common stock from WB Partners. The merger between the Company and Signal Bay Research was finalized and closed contemporaneously with the share purchase. As part of this share purchase, Mr. Waldrop and Ms. Glauser became the officers and directors of the Company. Immediately after the reverse, WB Partners owned less than 5% of the common stock. The company filed a Form 10-12G on November 25, 2014, and was determined to be a shell company by the SEC as per the Form 10-12G/A which went effective on January 24, 2015. On January 29, 2015, the company filed an 8-K stating it entered into a material agreement and was no longer a shell company.

After the reverse merger, Signal Bay Research, Inc. continues to operate as a ~~wholly owned~~wholly-owned subsidiary providing compliance, research, and advisory services for ~~EVIO,~~Signal Bay, Inc.

Signal Bay Services was formed on January 25, 2015, as the management services division of EVIO.

On September 17, 2015, ~~the Company~~EVIO entered into a share exchange agreement with CR Labs, Inc., an Oregon Corporation, pursuant to which the Company acquired 80% of the outstanding common stock of CR Labs, Inc.

EVIO ~~Labs OR~~ Inc. was formed on April 4, 2016, to become the holding company for all laboratory ~~operations in Oregon.~~ operations.

EVIO Labs Eugene ~~LLC~~ was formed on May 23, 2016, as a ~~wholly owned~~wholly-owned subsidiary of EVIO Inc. Subsequently, on May 24, 2016, EVIO Labs Eugene acquired all of the assets of Oregon Analytical Services, LLC, inclusive of client lists, equipment, trade names, and personnel.

On June 1, 2016, ~~the Company~~EVIO Inc. entered into a share purchase agreement to purchase 80% of the outstanding common stock of Smith Scientific Industries, Inc. d/b/a Kenevir Research in Medford, OR.

On October 19, 2016, the Company entered into a Membership Interest Purchase Agreement to purchase 100% of the ownership of GreenHaus Analytical Labs, ~~LLC (“GreenHaus”). GreenHaus is a full-service cannabis testing laboratory.~~LLC.

On October 26, 2016, the Company entered ~~in to~~into an Asset Purchase Agreement with Green Style Consulting, LLC which was closed on November 1, ~~2016 (“GreenStyle”). GreenStyle is a full-service cannabis testing laboratory.~~2016.

The Company entered ~~in to an~~into a Membership Interest Purchase Agreement with Viridis Analytics MA, LLC ~~(“Viridis”)~~ which was closed on August 1, ~~2017. Viridis is~~2018.

On December 29, 2018, the Company entered into a ~~full-service cannabis testing laboratory.~~Membership Purchase Agreement to purchase 60% of the outstanding shares of C3 Labs, LLC which closed On January 1, 2019.

6
~~Table of Contents~~
On June 27, 2018, Greenhaus Analytical Labs LLC, a wholly-owned subsidiary of EVIO, Inc. entered into a Purchase and Sale Agreement with Michael G. Myers for the property located at 14775 SW 74^th Ave., Tigard, OR 97224.

~~Going Concern~~On June 27, 2018, Greenhaus Analytical Labs, LLC, a wholly-owned subsidiary of EVIO, Inc., entered into an Asset Purchase Agreement with MRX Labs LLC which closed on July 5, 2019.

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However,On April 29, 2018, the Company ~~has negative working capital, recurring losses, and does not have~~entered into an ~~established source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about~~Asset Purchase Agreement with Leaf Detective, LLC which was closed on the ~~Company’s ability to continue as a going concern.~~same date.

~~The ability~~On May 2, 2018, the Company entered into a Stock Purchase Agreement with Keystone, Labs, Inc. to purchase 50% of the ~~Company to continue as a going concern is dependent upon its ability to successfully accomplish~~outstanding shares of Keystone Labs which was closed on the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.same date.

~~In the coming year, the Company’s foreseeable cash requirements will relate to continual development~~Management’s Representation of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital.

Historically, it has mostly relied upon internally generated funds such as shareholder loans and advances to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future public or private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.

~~Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~Interim Financial Statements

~~Basis of Presentation:~~

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited consolidated financial statements for the most recent fiscal period, as reported in the Form 10-K, have been ~~omitted~~omitted.

~~Principles~~Basis of ~~Consolidation~~Presentation

The ~~Company prepares its~~consolidated financial statements onof the ~~accrual basis of accounting. The accompanying~~Company have been prepared in accordance with GAAP and are expressed in United States dollars. For the three months ended March 31, 2020, and 2019, and the year ended September 30, 2019, the consolidated financial statements include the accounts of the Company and its ~~wholly and partially owned~~wholly-owned subsidiaries.

The subsidiaries ~~all~~ of ~~which have a fiscal year end of September 30. All significant intercompany accounts, balances and transactions have been eliminated in the consolidation.~~EVIO, Inc. are as follows:

Trade Name (dba)

Company Name

State of
Incorporation

Ownership %

Acquisition Month

EVIO Labs Medford

Smith Scientific Industries, LLC

Oregon

June 2016

EVIO Labs Portland

Greenhaus Analytical Labs

Oregon

100

October 2016

EVIO Labs MA

Viridis Analytics

Massachusetts

100

August 2017

EVIO Labs Berkeley

C3 Labs, LLC

California

January 2018

Keystone Labs

Keystone Labs, Inc.

Ontario, Canada

May 2018

Revenue Recognition

The Company ~~consolidates its subsidiaries~~recognizes revenue in accordance with ASC 810, and specifically ASC 810-10-15-8 which states, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, or over 50%606, Revenue from Contracts with Customers. The core principle of the ~~outstanding voting shares~~new revenue standard is that a company should recognize revenue to depict the transfer of ~~another entity is a condition pointing toward consolidation.~~ 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. The following five steps are applied to achieve that core principle:

	●	Step 1: Identify the contract with the customer
	●	Step 2: Identify the performance obligations in the contract
	●	Step 3: Determine the transaction price
	●	Step 4: Allocate the transaction price to the performance obligations in the contract
	●	Step 5: Recognize revenue when the company satisfies a performance obligation

~~Use~~

The Company generates revenue from consulting services, licensing agreements, and testing of ~~Estimates~~cannabis and hemp products for medicinal and adult-use consumption.

The Company accounts for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.

The Company evaluates the services promised in each contract at inception to determine whether the contract should be accounted for as having one or more performance obligations. The Company’s services included in its contracts are distinct from one another.

The Company determines the transaction price for each contract based on the consideration it expects to receive for the distinct services being provided under the contract.

The Company recognizes revenue as performance obligations are satisfied and the customer obtains control of the services provided. In determining when performance obligations are satisfied, the Company considers factors such as contract terms, payment terms, and whether there is an alternative future use of the service.

The Company recognizes revenue from testing services upon delivery of its testing results to the client. Customer orders for testing services are generally completed within two weeks of receiving the order.

Consulting engagements may vary in length and scope, but will generally include the review and/or preparation of regulatory filings, business plans, and financial models, operating plans, and technology support to customers within the same industry. Revenue from consulting services is recognized upon completion of deliverables as outlined in the consulting agreement.

The Company recognizes revenue from the right of use license agreements upon transfer of control of the functional intellectual property. In certain licensing agreements, the Company may receive royalty revenues based upon performance metrics which are recognized as earned over time.

Stock-Based Compensation

In accordance with ASC No. 718, Compensation-Stock Compensation (“ASC 718”), the Company measures the cost of stock-based compensation arrangements based on the grant date fair value and recognizes the cost in the financial statements over the period during which employees are required to provide services. Stock-based compensation arrangements may include stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee stock purchase plans.

The Company utilizes the Black Scholes option pricing model, which was developed for use in ~~accounting principles generally accepted in~~estimating the ~~United States~~fair value of ~~America requires management~~options. Option pricing models require the input of highly complex and subjective variables including the expected life of options granted and the expected volatility of the Company’s stock price over a period equal to ~~make estimates~~or greater than the expected life of the options.

Accounts Receivable and ~~assumptions that affect the reported~~Allowance for Doubtful Accounts

Accounts receivable are recorded at their original invoice amounts. We regularly review collectability and establish an allowance for uncollectible amounts as necessary based on our experience with historical collectability. Management recognized an allowance for uncollectible amounts, of $171,443 and $215,593 for the periods ended March 31, 2020, and September 30, 2019, respectively.

Foreign Currency Translation

The functional currency of the Company’s subsidiary in Canada is the Canadian Dollar. The subsidiary’s assets and liabilities ~~and disclosure of contingent assets and liabilities~~have been translated to U.S. Dollars using the exchange rates in effect at the ~~date~~balance sheet dates. Statements of operations amounts have been translated using the average exchange rate for each period. Resulting gains or losses from translating foreign currency financial statements and the reported amounts of revenues and expenses during the reporting period. A change in managements’ estimates or assumptions could have a material impact on the Company’s financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates. The Company’s financial statements reflect all adjustments that management believes are ~~necessary for the fair presentation of their financial condition and results of operations for the periods presented.~~recorded as other comprehensive income (loss).

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~~Table of Contents~~
Fair Value of Financial Instruments

~~Financial Instruments~~

~~Level 1 - applies~~The Company has adopted the guidance under ASC Topic 820 for financial instruments measured on fair value on a recurring basis. Fair value is defined as the exchange price that would be received for an asset or paid to ~~assets~~transfer a liability (an exit price) in the principal or ~~liabilities for which there are quoted prices in active markets for identical assets or liabilities.~~

~~Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable~~most advantageous market for the asset or liability, ~~such as quoted prices for similar assets or liabilities~~ in ~~active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant~~an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs ~~are observable or can be derived principally from, or corroborated by, observable market data.~~and minimize the use of unobservable inputs.

~~Level 3 - applies to assets~~Net Income (Loss) Per Share

Basic loss per share is computed by dividing net income, or ~~liabilities~~loss, by the weighted average number of shares of common stock outstanding for ~~which there are unobservable inputs to~~ the ~~valuation methodology that are significant to~~period. Diluted earnings (loss) per share is computed by dividing net income, or loss, by the ~~measurement~~weighted average number of shares of common stock outstanding for the period. There were 49,561,707 and 26,160,911 potentially dilutive common shares outstanding as of March 31, 2020 and 2019, respectively. Because of the ~~fair value~~net losses incurred during the three months ended March 31, 2020, and 2019, the impacts of dilutive instruments would have been anti-dilutive for the ~~assets or liabilities.~~period presented and have been excluded from the diluted loss per share calculations.

The Company’s financial instruments consist principally of cash, accounts payable, and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

~~The following table sets forth by level with the fair value hierarchy the Company’s financial assets and liabilities measured at fair value on December 31, 2017:~~

~~Level 1~~

~~Level 2~~

~~Level 3~~

~~Total~~

~~Liabilities~~

~~Derivative financial instruments~~

~~The following table sets forth by level with the fair value hierarchy the Company’s financial assets and liabilities measured at fair value on September 30, 2017:~~

Level 1

Level 2

Level 3

Total

Liabilities

Derivative financial instruments

$ -

$ -

$ 294,637

$ 294,637

Recently Issued Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment”. The amendments in this update simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. This update is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 31, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing after January 1, 2017. The Company notes that this guidance applies to its reporting requirements and will implement the new guidance accordingly in performing goodwill impairment testing; however, the Company does not believe this update will have a material impact on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which revises the definition of a business. This update is effective for annual periods beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted. The Company notes that this guidance will impact its acquisitions beginning ~~October~~January 1, 2018. Management believes recently issued accounting pronouncements will have no impact on the financial statements of the Company.

In ~~April 2016,~~June 2018, the FASB issued ASU ~~2016-10, “Revenue~~2018-07, Compensation-Stock Compensation (Topic 718) which simplifies certain aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Certain areas of the simplification apply only to nonpublic entities. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers ~~(Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-1O”)~~. The amendments of the ASU are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

In August 2018, the SEC issued Final Rule Release No. 33-10532, Disclosure Update, and Simplification. Under the final rule Company’s must now analyze changes in this update clarify the following two aspects to Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The entity first identifies the promised goods or servicesstockholders’ equity in the ~~contract~~form of a reconciliation, for the current and reduces the cost and complexity. An entity evaluates whether promised goods and services are distinct. Topic 606 includes implementation guidance on determining whether an entity’s promise to grant a license provides a customercomparative year-to-date, with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The Company evaluated the impacts of ASU 2016-10 and determined it did not have an impact on the Company’s revenue recognition practices.subtotals for each interim period.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon ~~adoption~~adoption.

~~Net Income (Loss) Per Share~~Note 2 – Going concern

~~Basic loss per share is computed by dividing net income, or loss, by~~The Company’s financial statements are prepared using accounting principles generally accepted in the ~~weighted average number~~United States of ~~shares~~America applicable to a going concern, which contemplates the realization of ~~common stock outstanding for~~assets and liquidation of liabilities in the ~~period. Diluted earnings (loss) per share is computed by dividing net income, or loss, by~~normal course of business. However, the ~~weighted average number~~Company has negative working capital, recurring losses, and does not have an established source of ~~shares of common stock outstanding for~~revenues sufficient to cover its operating costs. These factors raise substantial doubt about the ~~period. There were 9,519,430 and 9,675,627 potentially dilutive common shares outstanding~~Company’s ability to continue as ~~of December 31, 2017 and 2016. Because~~a going concern.

The ability of the ~~net losses incurred during~~Company to continue as a going concern is dependent upon its ability to successfully accomplish the ~~three months ended December 31, 2017~~plan described in the preceding paragraph and ~~2016,~~eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the ~~impacts of dilutive instruments would have been anti-dilutive for the period presented and have been excluded from the diluted loss per share calculations.~~Company is unable to continue as a going concern.

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~~Table of Contents~~
In the coming year, the Company’s foreseeable cash requirements will relate to the continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital.

~~Accounts Receivable~~Historically, it has mostly relied upon convertible debentures, convertible promissory notes, internally generated funds such as shareholder loans and ~~Allowance for Doubtful Accounts~~advances to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future public or private offerings of the Company’s stock or loans from private investors, although there can be no assurance that it will be able to obtain such financing. Additionally, due to the onset of COVID-19 obtaining financing may be more difficult to obtain currently compared to historic levels. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.

Accounts receivable are recorded at their original invoice amounts. We regularly review collectability and establish an allowance for uncollectible amounts as necessary based on our experience with historical collectability. There was an allowance for uncollectible accounts receivable of $77,850 and $74,782 as of December 31, 2017 and September 30, 2017, respectively.

~~Notes Receivable~~Note 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company ~~accounts investments~~has adopted the guidance under ASC Topic 820 for ~~notes receivable~~financial instruments measured on a fair value on a recurring basis. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in ~~accordance with ASC 320. On September 6, 2017,~~ the ~~Company entered~~principal or most advantageous market for the asset or liability, in ~~a note receivable with~~ an ~~unrelated entity for $1,300,000. The note is due~~orderly transaction between market participants on ~~September 6, 2024~~the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and ~~carries interest at a rate~~minimize the use of 8% per annum. The note requires minimum principal payments of $100,000 plus accrued interest on each anniversary date with the unpaid principal and interest being due on September 6, 2024. The Company evaluated the collectability of the note receivable as of December 31, 2017 and September 30, 2017 and determined the full balance is collectible and no reserve for write off was recorded. As of December 31, 2017 and September 30, 2017, there was $1,300,000 of principal, of which $100,000 was current and $1,200,000 was long term. Additionally, there was $33,052 and $6,838 of interest due as of December 31, 2017 and September 30, 2017 which is included in other current assets.unobservable inputs.

~~Goodwill~~ASC Topic 820 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and ~~Other Intangible Assets~~the lowest priority to unobservable data and requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

●	Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

●	Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

●	Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally cash, accounts payable, and accrued liabilities. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of the Company’s debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to the Company.

~~Goodwill~~The Company analyzes all financial instruments with features of both liabilities and ~~indefinite-lived intangible assets~~equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. Derivative liabilities are ~~not amortized but~~adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are ~~evaluated~~calculated and accounted for ~~impairment annually or more often if indicators of a potential impairment are present. Our annual impairment tests are conducted~~in arriving at the ~~beginning~~overall fair value of the ~~fourth quarter. We use a two-step process to quantitatively evaluate goodwill for impairment. In the first step, we compare~~financial instruments. Also, the fair value of freestanding derivative instruments such as warrant and option derivatives are valued using the Black-Scholes simulation model.

The Company’s derivative liabilities were adjusted to fair market value at the end of each reporting ~~unit~~period, using Level 3 inputs.

The following table sets forth by level with the ~~carrying amount of the reporting unit, including goodwill. If the estimated~~ fair value ofhierarchy the reporting unit is less than the carrying amount of the reporting unit, we complete a second step to determine the amount of the goodwill impairment that we should record. In the second step, we determine an implied fair value of the reporting unit’s goodwill by allocating the reporting unit’s fair value to all of itsCompany’s financial assets and liabilities ~~other than goodwill (including any unrecognized intangible assets). We compare the resulting implied~~measured at fair value ofon March 31, 2020:

	Level 1		Level 2		Level 3		Total
Liabilities
Derivative financial instruments	$	-	$	-	$	2,319,938	$	2,319,938

The following table sets forth by level with the ~~goodwill to the carrying amount and record an impairment charge for the difference. We test individual indefinite-lived intangible assets by comparing the estimated~~ fair value ~~with~~hierarchy the ~~book values of each asset.~~Company’s financial assets and liabilities measured at fair value on September 30, 2019:

	Level 1		Level 2		Level 3		Total
Liabilities
Derivative financial instruments	$	-	$	-	$	2,545,735	$	2,545,735

Note 4 –leases

The Company ~~recognizes~~determines if an ~~acquired intangible apart~~arrangement is a lease at inception and has lease agreements for warehouses, office facilities, and equipment. These commitments have remaining non-cancelable lease terms, with lease expirations that range from ~~goodwill whenever~~2020 to 2024.

As a result of the ~~intangible arises from contractual or other legal rights, or whenever it can be separated or divided from~~adoption of ASC 842, certain real estate and equipment operating leases have been recorded on the ~~acquired entity and sold, transferred, licensed, rented or exchanged, either individually or in combination~~balance sheet with a ~~related contract,~~lease liability and right-of-use asset ~~or liability. Such intangibles~~(“ROU”). Application of this standard resulted in the recognition of ROU assets of $2,069,538, net of accumulated amortization, and a corresponding lease liability of $2,117,338. Accounting for finance leases is substantially unchanged.

Operating leases are ~~amortized~~included in operating lease ROU assets, operating lease obligations, current, and operating lease obligations, long term on ~~a straight-line basis~~the condensed consolidated balance sheets. Finance leases are included in property and equipment, finance lease obligations, short term, and finance lease obligations, long term, on the condensed consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. ROU assets and liabilities are recognized on the lease commencement date based on the present value of lease payments over ~~their estimated useful lives unless~~ the ~~estimated useful life~~lease term. The present value of lease payments is ~~determined to be indefinite.~~ calculated using the incremental borrowing rate at lease commencement, which takes into consideration recent debt issuances as well as other applicable market data available.

Amortization of lease assets is included in general and administrative expenses. The future minimum lease payments of lease liabilities as of March 31, 2020, are as follows:

For the years ended September 30,	Operating Leases			Financing Leases
2020		972,244			430,591
2021		697,436			514,152
2022		549,390			183,020
2023		347,745			206,674
2024 and thereafter		27,911			5,022
Total lease payments		2,594,726			1,339,450
Less: Payments Made		(477,388	)		(222,236	)
Total Lease Liabilities	$	2,117,338			1,117,214

Note 5 – INTANGIBLE ASSETS

The Company’s intangible assets consist of ~~client~~customer lists, ~~(amortized over five years), websites and domain names (amortized over 15 years) and~~ testing licenses, ~~(amortized over 5 years).~~favorable leases, and websites. The components of intangible assets as of March 31, 2020, and September 30, 2019 consist of:

~~Stock-Based Compensation~~

	March 31, 2020		September 30, 2019
Customer list	$	-	$	854,014
License		-		503,000
Favorable lease		-		3,100
Domains & Websites		-		49,516
Non-compete agreements		-		182,388
Assembled Workforce		-		50,750
Intellectual Property		-		342,610
Total		-		1,977,661
Accumulated amortization		-		(1,977,661	)
Net value	$	-	$	-

The Company ~~applies Topic 718 “Share-Based Payments” (“Topic 718”) to share-based compensation, which requires~~had fully amortized all intangible assets during the measurement of the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Compensation cost is recognized when the event occurs. The Black-Scholes option-pricing model is used to estimate the fair value of options granted.

The Company accounts for equity-based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

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~~Table of Contents~~

~~Non-Controlling Interest~~

The Company reports the non-controlling interest in its majority owned subsidiaries in the consolidated balance sheets within the stockholders’ deficit section, separately from the Company’s stockholders’ deficit. Non-controlling interest represents the non-controlling interest holders’ proportionate share of the equity of the Company’s majority-owned subsidiaries. Non-controlling interest is adjusted for the non-controlling interest holders’ proportionate share of the earnings or losses and other comprehensive income (loss) and the non-controlling interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance.

~~Related Parties~~

~~The registrant follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.~~

Pursuant to Section 850-10-20 the Related parties include (a) affiliates of the registrant; (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 registrant; (e) management of the registrant; (f) other parties with which the registrant 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.

The financial statements shall include disclosures of material related party transactions, 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) description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements 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 income statements 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.

~~Capital Leases~~

~~The Company accounts for capital leases in accordance with ACS 840-30. During the~~fiscal year ended September 30, 2017, the Company entered into three separate long-term leases for equipment that contain a $1 buyout option upon lease termination. The Company determined these were capital leases based on the minimum buy out price and capitalized the net present value of the leases with totaled $116,800 as equipment.2019.

As of September 30, 2017, there was a total of $111,501 of future payments due through December 2019 of which $20,734 are financing charges leaving a total principal balance of $90,967 as of September 30, 2017. Of this amount, $37,990 was current and $52,777 was long term as of September 30, 2017.

As of December 31, 2017, there was a total of $97,427 of future payments due through December 2019 of which $16,051 are financing charges leaving a total principal balance of $81,376 as of December 31, 2017. Of this amount, $40,526 was current and $40,850 was long term as of December 31, 2017.

~~Future annual payments required under the capital leases through termination are as follows:~~

Year ended September 30,

Principal

Interest

Total

2018

$ 31,307

$ 10,399

$ 41,706

2019

39,214

5,354

44,568

2020

10,855

298

11,153

Total

$ 81,376

$ 16,051

$ 97,427

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Note 6 – Concentration of Credit Risk

Instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits, notes receivable and accounts receivable. As of ~~December~~March 31, ~~2017 and September 30, 2017,~~2020, the Company did not hold cash at any financial institution in excess of the amount insured by the Federal Deposit Insurance Corporation (“FDIC”) of up to $250,000. ~~As of December 31, 2017 and September 30, 2017, the Company had a note receivable totaling $1,300,000 due from a single entity.~~

As of ~~September 30, 2017,~~March 31, 2020, the Company had total accounts receivable net of allowances of ~~$229,564. Three~~$153,383. Five clients comprised a total of 29% of this balance as follows:

	Balance			Percent of Total
Customer 1	$	26,181			8	%
Customer 2		20,336			6	%
Customer 3		18,065			6	%
Customer 4		14,651			5	%
Customer 5		14,330			4	%
All others		231,263			71	%
Total		324,826			100	%
Allowance for doubtful accounts		(171,443	)
Net accounts receivable	$	153,383

As of September 30, 2019, the Company had total accounts receivable, net of allowances, of $133,022. Five separate clients comprised a total of 41% of this balance as follows:

	Balance			Percent of Total			Balance			Percent of Total
Customer 1	$	42,878			14	%	$	48,606			14	%
Customer 2		45,635			15	%		33,572			10	%
Customer 3		37,540			12	%		20,336			6	%
Customer 4								20,321			6	%
Customer 5								20,208			6	%
All others		178,294			59	%		246,456			59	%
Total		304,347			100	%		348,955			100	%
Allowance for doubtful accounts		(74,783	)					(215,933	)
Net accounts receivable	$	229,564					$	133,022

~~As of December 31, 2017, the Company had total accounts receivable net of allowances of $202,643. Two separate clients comprised a total of 28% of this balance as follows:~~

Balance

Percent
of Total

Customer 1

$ 34,248

12 %
Customer 2

45,635

16 %
All others

200,610

72 %
Total

280,493

Allowance for doubtful accounts

(77,850 )

Net accounts receivable

$ 202,643

Note 7 – Property and Equipment

Property and equipment are carried at cost. Expenditures for maintenance and repairs are expensed in the period incurred. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.

Depreciation is computed for financial statement purposes on a straight-line basis over estimated useful lives of the related assets and the modified accelerated cost recovery system for federal income tax purposes. The estimated useful lives of depreciable assets are:

		Estimated
		Useful Lives
Building		39 years
Laboratory and Computer Equipment		5 years
Furniture and Fixtures		7 years
Software		3 years
Domains		15 years

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~~Table of Contents~~

The Company’s property and equipment consisted of the following as of ~~December~~March 31, ~~2017~~2020, and September 30, ~~2017:~~2019:

	December 31, 2017			September 30, 2017			March 31, 2020			September 30, 2019
Assets Not-In-Service							$			$	-
Capital Assets								1,850,093			1,800,347
Land								212,550			212,550
Buildings & Real Estate								941,857			941,857
Furniture and Equipment	$	147,022		$	146,870			157,614			152,933
Laboratory Equipment		445,871			439,071			2,054,901			2,188,828
Software		58,333			58,333			77,865			78,996
Computers								27,597
Leasehold Improvements		41,081			41,081			696,756			697,333
Vehicles		75,165			75,165			129,790			83,915
Total		767,472			760,520			6,149,825			6,188,777
Accumulated depreciation		(260,983	)		(213,447	)		(1,553,052	)		(1,511,973	)
Net value	$	506,489		$	547,073		$	4,596,772		$	4,676,804

~~The Company capitalized a total of $116,800 of equipment purchased through capital leases as disclosed in~~ Note 28 – ~~Summary of Significant Accounting Policies~~ ~~and recorded depreciation expense of $9,733 and $3,244 on that equipment during the three months ended December 31, 2017 and 2016, respectively.~~Related Party Transactions

~~Note 3 – INTANGIBLE ASSETS~~

~~The Company’s intangible assets consist of customer lists, testing licenses, favorable leases and websites. The components of intangible assets as of December~~During the periods ended March 31, ~~2017~~2020 and September 30, ~~2017 consist of:~~

December 31,
2017

September 30,
2017

Customer list

$ 480,670

$ 480,670

License

256,000

256,000

Favorable lease

3,100

3,100

Website

41,965

41,965

Total

781,735

781,735

Accumulated amortization

(228,439 )

(189,475 )
Net value

$ 553,296

$ 592,260

~~The Company estimates amortization to be recorded on existing intangible assets through the year ended September 30, 2022 to be:~~

For the years ended September 30,

Amortization

2018

$ 122,755

2019

149,651

2020

149,651

2021

107,476

2022

9,722

Thereafter

24,041

Total

$ 533,296

12
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~~Note 4 – RELATED PARTY TRANSACTIONS~~

~~Through September 30, 2017,~~2019 the Company received loans from its Chief Operating Officer totaling ~~$106,000~~$17,014 and $194,820, respectively, and made repayments totaling ~~$21,795 leaving a balance~~$0 and $1,040, respectively. There was $158,676 and $143,780 due as of March 31, 2020, and September 30, ~~2017~~2019, respectively, and are included in the accompanying consolidated balance sheets as a current portion of ~~$84,205.~~notes payable to related parties. The loans carry a 0% interest rate and are due on demand.

During the periods ended March 31, 2020 and September 30, 2019 the Company received loans from its Chief Executive Officer totaling $14,000 and $75,000, respectively, and made repayments totaling $0 and $19,200, respectively. There was $69,800 and $55,800 due as of March 31, 2020, and September 30 2019, respectively, and are included in the accompanying consolidated balance sheets as a current portion of notes payable to related parties. The loans carry a 0% interest rate and are due on demand.

During the periods ended March 31, 2020, and September 30, 2019, the Company made payments to Sara Lausmann, associated with the asset purchase of Oregon Analytical Services, LLC, totaling $2,000 and $0, respectively. There was $566,289 and $568,299 of principal due as of March 31, 2020 and September 30, 2019, respectively. The note carries interest at a rate of 5% per annum and had accrued interest totaling $122,095 and $107,899 due as of March 31, 2020, and September 30, 2019, respectively.

During the periods ended March 31, 2020, and September 30, 2019, the Company made payments to Anthony Smith, our Chief Science Officer, associated with the purchase of 80% of Smith Scientific Industries, totaling $44,059 and $55,090, respectively. There was $136,851 and $180,910 of principal due as of March 31, 2020 and September 31, 2019, respectively. The note carries interest at a rate of 5% per annum and had accrued interest totaling $41,828 and $41,600 due as of March 31, 2020, and September 30, 2019, respectively.

During the periods ended March 31, 2020, and September 30, 2019, the Company made repayments to Henry Grimmett, prior Company Director (retired April 2018), on an outstanding loan from member assumed by the Company, totaling a note payable of Greenhaus Analytical Services, LLC, totaling $0 and $3,859, respectively. There was $113,554 and $113,554 of principal due as of March 31, 2020 and September 30, 2019, respectively. The note bears interest at 0% per annum and requires repayments of $25,000 quarterly.

During the periods ended March 31, 2020, and September 30, 2019, the Company made no payments to Henry Grimmett, prior Company Director (retired April 2018), associated with the acquisition of Greenhaus Analytical Services, LLC. The Company entered into a $340,000 note payable as part of its acquisition of Greenhaus Analytical Services, LLC. The note carries interest at a rate of 6% per annum and matures on October 16, 2020. During the quarter ended March 31, 2020, a third party purchased the remaining balance of the $170,000 note. During the year ended September 30, 2019, a third party purchased $170,000 of the note from Henry Grimmett, refer to Note 10, Convertible Notes; Noteholder 14. There was $0 and $170,000 of principal due as of March 31, 2020 and September 30, 2019, respectively. Unamortized debt discount of $0 and $25,563 as of March 31, 2020 and September 30, 2019, respectively and $0 and $59,412 of accrued interest due as of March 31, 2020 and September 30, 2019, respectively.

During the periods ended March 31, 2020 and September 30, 2019, the Company received loans from a related party associate with Keystone Labs totaling $30,796 and $191,515, respectively, and made repayments totaling $19,248 and $9,034, respectively. There was $372,538 and $354,050 due as of March 31, 2020 and September 30, 2019, respectively. Amounts have been adjusted for USD. The advances are non-interest bearing and due on ~~demand. There was $84,205 due as of December 31, 2017 and September 30, 2017,~~demand and is included in the accompanying consolidated balance sheets as a current portion of notes payable to related parties.

During the three months ended December 31, 2017 and 2016, the Company incurred total expenses of $12,317 and $14,548, respectively, for management consulting services performed by Newport Commercial Advisors, an entity fully owned and controlled by our Chief Executive Officer. There was not a balance payable to Newport Commercial Advisors as of December 31, 2017 or September 30, 2017.

During the year ended September 30, 2017, the Company received loans from its Chief Executive Officer totaling $80,100 and made repayments totaling $75,650. There were no additional advances or repayments made during the three months ended December 31, 2017. The loans are non-interest bearing and due on demand. There was $4,450 due as of December 31, 2017 and September 30, 2017.

During the year ended September 30, 2017 the Company made repayments to Eric Ezrine, a shareholder of CR Labs, on an outstanding note payable totaling $13,139. The loans carry an interest rate of 0% per annum. There was $130 due as of December 31, 2017 and September 30, 2017. Additionally, the Company entered into a severance agreement with Mr. Ezrine whereby it agreed to make payments totaling $44,500 through August 2018. The Company made repayments of $22,050 during the year ended September 30, 2017 and $4,000 during the three months ended December 31, 2017. There was $18,450 and $22,450 accrued as of December 31, 2017 and September 30, 2017, respectively.

On May 24, 2016, the Company executed an asset purchase agreement with Sara Lausmann, managing member owner of Oregon Analytical Services, LLC, for $972,500. The terms of the purchase required the issuance of 200,000 shares of Series C Preferred Stock, valued at $80,000, $72,500 in a short-term loan and $700,000 in a long-term note. Through the year ended September 30, 2017, the Company repaid a total of $82,630 to Sara Lausmann, Vice President Client Services. The Company made additional repayments of $15,500 during the three months ended December 31, 2017. The total amount outstanding is $674,370 and $689,870 as of December 31, 2017 and September 30, 2017, respectively. As of December 31, 2017 and September 30, 2017, $74,370 and $89,870 and $600,000 and $600,000 are included in the accompanying consolidated balance sheets as current and long-term portions of notes payable to related party, respectively. The notes carry interest at a rate of 5% per annum and had accrued interest totaling $55,908 and $47,409 due as of December 31, 2017 and September 30, 2017, respectively.

On June 1, 2016, the Company executed a share purchase agreement with Anthony Smith, for the purchase of 80% of Smith Scientific Industries for $636,000. The terms of the purchase required the issuance of 300,000 shares of Series C Preferred Stock, valued at $135,000 and $336,000 in a promissory note. During the year ended September 30, 2017, the Company repaid $50,000 to Anthony Smith, our Chief Science Officer. There were no repayments made during the three months ended December 31, 2017. The note carries interest at a rate of 5% per annum. There was $261,000 of principal due as of December 31, 2017 and September 30, 2017 and $22,135 and $18,846 of accrued interest due as of December 31, 2017 and September 30, 2017, respectively.

On October 19, 2016, the Company assumed a $194,512 payable due to Henry Grimmett, and officer of Greenhaus and current Director of the Company, with its acquisition of Greenhaus Analytical Services, LLC. The note bears interest at 0% per annum and requires repayments of $25,000 quarterly. During the year ended September 30, 2017, the Company made repayments totaling $25,100. Additionally, during the three months ended December 31, 2017, the Company agreed to issue 125,000 shares of common stock valued at $62,500 for the settlement of $50,000 of principal resulting in a loss on the settlement of debt of $15,000. There was a total of $119,412 and $169,412 due as of December 31, 2017 and September 30, 2017 of which $50,000 is current and $69,412 is long term.

On October 19, 2016, the Company entered into a $340,000 note payable as part of its acquisition of Greenhaus Analytical Services, LLC. At the time of issuance, the note carried a debt discount of $55,277. The note carries interest at a rate of 6% per annum and matures on October 16, 2020. There was $340,000 of principal, an unamortized debt discount of $38,563 and $42,044 and $24,648 and $19,506 of accrued interest due as of December 31, 2017 and September 30, 2017, respectively.

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On November 1, 2016, the Company entered into a $50,000 note payable, that contained a premium of $7,416 based on fair value, to Green Style Consulting, LLC. The Green Style Consulting, LLC Managing Member is our General Manager Northern California, who was hired by the Company concurrent to the asset purchase. The note carries interest at a rate of 5% per annum and matures on October 31, 2018. During the year ended September 30, 2017 and the three months ended December 31, 2017, the Company made repayments of $6,090 and $18,328. There was $25,582 and $43,910 of principal, $3,093 and $4,028 of unamortized note premium and $2,452 and $2,055 of accrued interest due as of December 31, 2017 and September 30, 2017, respectively.

On October 19, 2016, the Company entered into an asset purchase agreement with Green Style Consulting LLC requiring a future share of net profits generated by Green Style Consulting. The fair value of these future net profits were estimated to be $15,809. There have been no monthly net profits to distribute from the time of acquisition to December 31, 2017 and as such no repayments have been made. There was $15,809 accrued and included in accounts payable and accrued liabilities for future payments related to this earn out as of December 31, 2017 and September 30, 2017.

Through September 30, 2016, the Company borrowed a total of $16,200 from our Chief Science Officer to fund operations. The loans are non-interest bearing, due on demand and as such are included in current liabilities. During the year ended September 30, 2017 and the three months ended December 31, 2017, the Company made repayments totaling $7,000 and $4,000, respectively. There was $5,200 and $9,200 due as of December 31, 2017 and September 30, 2017, respectively.

Note 59 – STOCKHOLDERS’ EQUITY

Series A Convertible Preferred Stock

The Company designated 1,850,000 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) with a par value of $0.0001 per share. Initially, there will be no dividends due or payable on the Series A Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.

All shares of the Series A Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series of capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series A Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series A Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

~~The Series A Preferred shall have no liquidation preference over any other class of stock.~~

Except as otherwise required by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock or any other class or series of preferred stock) for the taking of any corporate action.

Conversion at the Option of the Holder. From 12 months from the date of issuance, each holder of shares of Series A Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series A Preferred Stock into fully paid and nonassessable shares of Common Stock at a rate equal to 4.9% of the Common Stock.

For a period of 18 months after the Preferred is convertible, the conversion price of the Series A Preferred will be subject to adjustment to prevent dilution in the event that the Company issues additional shares at a purchase price less than the applicable conversion price. The conversion price will be subject to adjustment on a weighted basis that takes into account issuances of additional shares. At the expiration of the antidilution period, the conversion rate in Section VI (A) above shall be equal to a conversion rate equal to 4.9% on the Common Stock. For example, if on the date of expiration of the antidilution clause there are 500,000,000 shares of Common Stock issued and outstanding then each Series A Preferred Stock shall convert at a rate of 13.24 common shares for each 1 Series Preferred Share.

The Company has ~~evaluated the Series A Preferred Stock in accordance with ASC 815 and has determined their conversion options were for equity and ASC 815 does not apply.~~

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~~Table of Contents~~

~~The Company has evaluated the Series A Preferred Stock in accordance with FASB ASC Subtopic 470-20, and has determined that there is no beneficial conversion feature that must be accounted.~~

~~All 1,840,000 outstanding Series A Convertible Stock was converted into 438,753 shares of common stock during the year ended September 30, 2017.~~

~~The Company has 0~~-0- shares of Series A Convertible Stock issued and outstanding as of ~~December~~March 31, ~~2017~~2020, and September 30, ~~2017.~~2019.

Series B Convertible Preferred Stock

The Company designated 5,000,000 shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”) with a par value of $0.0001 per share.

Initially, there will be no dividends due or payable on the Series B Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.

All shares of the Series B Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series of capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series B Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series B Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

~~The Series B Preferred shall have no liquidation preference over any other class of stock.~~

Each holder of outstanding shares of Series B Preferred Stock shall be entitled to the number of votes equal to one Common Share. Except as provided by law, or by the provisions establishing any other series of Preferred Stock, holders of Series B Preferred Stock and of any other outstanding series of Preferred Stock shall vote together with the holders of Common Stock as a single class.

Each holder of shares of Series B Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series B Preferred Stock into one (1) fully paid and nonassessable shares of Common Stock.

~~The Company has evaluated the Series B Preferred Stock in accordance with ASC 815 and has determined their conversion options were for equity and ASC 815 does not apply.~~

~~The Company has evaluated the Series B Preferred Stock in accordance with FASB ASC Subtopic 470-20, and has determined that there is no beneficial conversion feature that must be accounted.~~

The Company has 5,000,000 shares of Series B Convertible Stock issued and outstanding as of ~~December~~March 31, ~~2017~~2020, and September 30, ~~2017.~~2019. These shares converted to common stock at a rate of 1 common share per each share of Series B Convertible Preferred Stock.

Series C Convertible Preferred Stock

The Company designated 500,000 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”) with a par value of $0.0001 per share.

Initially, there will be no dividends due or payable on the Series C Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.

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~~Table of Contents~~

All shares of the Series C Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series of capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series B Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series B Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

In any liquidation, dissolution, or winding up of the Corporation, the holders of the Series C Preferred Stock shall be entitled to receive (a) in preference to the holders of the Common Stock (b) on a pari passu basis to any sum that the holders of the Series B Preferred Stock shall be entitled to receive, but (c) subordinate in preference to any sum that the holders of any shares of any other series of the Corporation’s Preferred Stock shall be entitled, an amount equal to $1 per share (subject to appropriate adjustment in the event of any stock dividend, forward stock split, or other similar recapitalization). After payment of such sums, (i) the holders of the Series A Preferred Stock and (ii) the holders of the Common Stock, shall be entitled to receive any remaining assets of the Corporation on a pro rata, as-converted basis assuming conversion of the Series A Preferred Stock into Common Stock at the then- current Conversion Rate.

Each holder of outstanding shares of Series C Preferred Stock shall be entitled to the number of votes equal to five (5) Common Shares. Except as provided by law, or by the provisions establishing any other series of Preferred Stock, holders of Series B Preferred Stock and of any other outstanding series of Preferred Stock shall vote together with the holders of Common Stock as a single class.

Each holder of shares of Series C Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series C Preferred Stock into five (5) fully paid and nonassessable shares of Common Stock; provided, however, that any Optional Conversion must involve the issuance of at least 100 shares of Common Stock.

~~In the event of a forward or reverse split, the conversion ratio shall be modified on a pro rata basis to align with the forward or reverse split.~~

~~The Company has evaluated the Series C Preferred Stock in accordance with ASC 815 and has determined their conversion options were for equity and ASC 815 does not apply.~~

~~The Company has evaluated the Series C Preferred Stock in accordance with FASB ASC Subtopic 470-20, and has determined that there is no beneficial conversion feature that must be accounted.~~

During the year ended September 30, 2016, the Company issued 300,000 shares of Series C Preferred Stock for the acquisition of Smith Scientific Industries, Inc. and 200,000 shares of Series C Preferred Stock for the acquisition of the assets of Oregon Analytical Services.

There were 500,000 shares of Series C Convertible Stock issued and outstanding as of ~~December~~March 31, ~~2017~~2020, and September 30, ~~2017.~~2019. These shares converted to common stock at a rate of 5 common shares per each share of Series C Convertible Preferred Stock.

Series D Convertible Preferred Stock

The Company designated 1,000,000 shares of Series D Convertible Preferred Stock (“Series D Preferred Stock”) with a par value of $0.0001 per share.

~~Initially, there will be no dividends due or payable on the Series D Preferred Stock. Any future terms with respect~~ These shares converted to ~~dividends shall be determined by the Board consistent with the Corporation’s Certificate~~common stock at a rate of ~~Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.~~

~~All~~2.5 common shares of the Series D Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series of capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series B Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series B Preferred Stock, inper each ~~case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.~~

As originally issued, in any liquidation, dissolution, or winding up of the Corporation, the holders of the Series D Preferred Stock shall be entitled to receive (a) in preference to the holders of the Common Stock (b) on a pari passu basis to any sum that the holders of the Series B Preferred Stock shall be entitled to receive, but (c) subordinate in preference to any sum that the holders of any shares of any other series of the Corporation’s Preferred Stock shall be entitled, an amount equal to $1 per share (subject to appropriate adjustment in the event of any stock dividend, forward stock split, or other similar recapitalization). After payment of such sums, (i) the holders of the Series A Preferred Stock and (ii) the holders of the Common Stock, shall be entitled to receive any remaining assets of the Corporation on a pro rata, as-converted basis assuming conversion of the Series A Preferred Stock into Common Stock at the then- current Conversion Rate. On July 31, 2017, the Company amended its articles of incorporation such that the Series D Preferred Stock shall have no liquidation preference over any other class of stock.

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~~Table of Contents~~

~~Each holder of outstanding shares~~ of Series D Convertible Preferred Stock shall be entitled to the number of votes equal to two hundred fifty (250) Common Shares. Except as provided by law, or by the provisions establishing any other series of Preferred Stock, holders of Series B Preferred Stock and of any other outstanding series of Preferred Stock shall vote together with the holders of Common Stock as a single class.

Each holder of shares of Series D Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series D Preferred Stock into 2.5 fully paid and nonassessable shares of Common Stock; provided, however, that any Optional Conversion must involve the issuance of at least 500 shares of Common Stock.

~~In the event of a forward or reverse split, the conversion ratio shall be modified on a pro rata basis to align with the forward or reverse split.~~

~~The Company has evaluated the Series D Preferred Stock in accordance with ASC 815 and has determined their conversion options were for equity and ASC 815 does not apply.~~

~~The Company has evaluated the Series D Preferred Stock in accordance with FASB ASC Subtopic 470-20, and has determined that there is no beneficial conversion feature that must be accounted.~~

During the ~~year ended~~Year Ended September 30, ~~2016,~~2019, the Company issued 48,000 shares of Series D Preferred Stock for cash proceeds of $48,000. During the year ended September 30, 2017, the Company issued 114,500 shares of Series D Preferred Stock for cash proceeds of $114,500 and 670,000 shares of Series D Preferred Stock, valued at $670,000, in conjunction with certain acquisitions.

~~During the three months ended December 31, 2017, the Company accepted three separate~~received conversion notices from Series D Preferred Stockholders resulting in a total of ~~219,320~~532,500 shares of common stock being issued for the conversion of ~~87,728~~213,000 shares of Series D Preferred Stock.

There were ~~744,772 and 832,500~~349,500 shares of Series D Convertible Stock issued and outstanding as of December ~~31, 2017~~30, 2019, and September 30, ~~2017,~~2019, respectively.

Common Stock

During the three months ended March 31, 2020, the Company issued the following common shares:

Number of Shares issued	Description	$ Value
7,353,538	Issuance of shares as compensation to employees, officers/directors		525,778
3,750,000	Issuance of shares in exchange for consulting, professional and services		262,500
501,972	Shares issued in satisfaction of debt issuance costs		15,500
144,928	Shares issued in settlement of litigation		10,000
7,209,271	Issuance of shares in connection with the conversion of debentures		207,603
1,144,012	Issuance of shares in connection with the conversion of interest payable		37,121

Total 20,103,721		$	1,056,106

During the year ended September 30, ~~2017, the Company effected a 1:100 reverse stock split. The effects of the split have been reflected retroactively in the financial statements for all periods presented.~~

~~On September 5, 2017, the Company amended its articles of incorporation to reduce the number of authorized common shares from 3,000,000,000 to 1,000,000,000.~~

~~During the year ended September 30, 2017,~~2019, the Company issued ~~333,949~~1,038,017 common shares valued at ~~$537,515~~$336,891 for services; ~~438,753~~1,415,000 common shares for cash proceeds of $586,000; 287,500 common shares valued at $397,980 as compensation to employees; 31,579 common shares for the settlement of $15,000 of accounts payable; 2,054,887 common shares for the settlement of $687,200 of convertible notes payable; 10,163 for the conversion of $25,110 of convertible accrued interest; 20,000 common shares for issuance of a stock purchase agreement valued at $11,760; 669,362 common shares for the settlement of $388,000 debenture conversions, and 532,500 common shares for the conversion of ~~1,840,000 shares of~~Preferred Series A Preferred Stock; 112,000 common shares for cash proceeds of $112,000; 93,691 common shares valued at $211,071 under its employee equity incentive plan; 10,000 common shares for the settlement of $11,400 of accounts payable; 1,755 common share due to the rounding impacts of the 1:100 reverse stock split; 1,142,892 common shares for the conversion of $765,050 of outstanding principal on convertible notes payable; 53,304 for the conversion of $30,975 of convertible accrued interest; 40,935 common shares for the settlement of non-convertible debt totaling $46,666 and 5,000 common shares valued at $7,651 as a settlement.D stock. All conversions of outstanding principal and accrued interest on convertible notes payable were done so at contractual terms.

During the three months ended December 31, 2017, the Company issued 239,750 common shares valued at $241,157 for services; 219,320 common shares for the conversion of 87,728 shares of Series D Preferred Stock; 875,000 common shares for cash proceeds of $350,000; 370,000 common shares in exchange for a subscription receivable totaling $148,000; 15,000 common shares valued at $16,165 under its employee equity incentive plan under which a total expense of $6,562 was recorded; 37,500 common shares for the settlement of $15,000 of accounts payable; 900,793 common shares for the conversion of $319,000 of outstanding principal on convertible notes payable; 50,743 for the conversion of $17,884 of convertible accrued interest; 324,000 common shares for the settlement of non-convertible debt and interest totaling $122,157 and 125,000 common shares for the settlement of non-convertible related party debt totaling $50,000. All conversions of outstanding principal and accrued interest on convertible notes payable were done so at contractual terms. The $148,000 of subscriptions receivable were collected in January 2018 and are included in current assets as of December 31, 2017 as a result.

There were ~~13,890,028~~78,642,473 and ~~10,732,927~~29,314,419 shares of common stock issued and outstanding at ~~December~~March 31, ~~2017~~2020, and September 30, ~~2017, respectively.~~

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2019

Note 610 – LOANS PAYABLE

The Company had the following loans payable outstanding as of ~~December~~March 31, ~~2017~~2020, and September 30, ~~2017:~~2019:

December 31,
2017

September 30,
2017

On March 16, 2017, the Company executed notes payable for the purchase of three vehicles. The notes carry interest at 6.637% annually and mature on March 31, 2023.

$ 68,403

$ 71,039

On August 1, 2017, the Company entered into a note payable totaling $500,000 for the acquisition of Viridis (see note 3). The note carries interest at 8% annually and is due on July 1, 2018.

500,000

500,000

On September 6, 2017, the Company entered into a note payable totaling $1,000,000 for the purchase of an outstanding note receivable. The note carries interest at 8% annually and is due on July 6, 2018.

1,000,000

1,000,000

On August 31, 2017, the Company executed a note payable for $120,000 of which $20,000 was an original issue discount resulting in cash proceeds of $100,000. The note carries interest at 8% annually and is due on March 3, 2018.

-

120,000

1,568,403

1,691,039

Less: unamortized original issue discounts

(73,568 )

(127,662 )
Total loans payable

1,494,835

1,563,377

Less: current portion of loans payable

1,438,450

1,503,545

Long-term portion of loans payable

$ 56,385

$ 59,832

	March 31, 2020		September 30, 2019

On March 16, 2018, the Company executed notes payable for the purchase of three vehicles. The notes carry interest at 6.637% annually and mature on March 31, 2023.		43,575		47,551

On June 28, 2018, the Company executed a note payable for $650,000 for the purchase of the building at 14775 SW 74^th Ave, Tigard, OR. The note carries interest at 8% annually and is due on June 28, 2021.		609,907		622,523

On July 5, 2018, the Company executed a note payable for $750,000 for the asset purchase of MRX Labs. The note carries interest at 8% annually and is due on January 5, 2019. (This note is in default as of 7/5/2019, which resulted in a 5% penalty on outstanding amount.)		750,000		750,000

On October 20, 2019, the Company executed notes payable for the purchase of four vehicles. The notes carry interest at 5.990% annually and mature on December 31, 2023.		93,028		-
Total loans payable		1,496,510		1,420,079
Less: current portion of loans payable		785,960		762,476

Long-term portion of loans payable	$	708,550	$	657,603

As of ~~December~~March 31, ~~2017~~2020 and September 30, ~~2017,~~2019, the Company accrued interest of ~~$42,453~~$104,384 and ~~$12,625, respectively.~~$74,301 respectively

Note 711 – ~~CONVERTIBLE DEBT~~Convertible NOTES PAYABLE

The Company has entered into convertible notes payable that convert to common stock of the Company at variable conversion prices. As further discussed in Note 813 – Derivative ~~Liabilities~~Liability, the Company analyzed the conversion features of the agreements for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

The following table summarizes all convertible notes outstanding as of March 31, 2020:

Holder	Issue Date	Due Date	Principal		Unamortized Debt Discount			Carrying Value		Accrued Interest

31Noteholder #1	04/24/18	04/24/19		500,000		-			500,000		-
Noteholder #2	07/01/19	09/30/19		675,930		-			675,930		47,672
Noteholder #3	08/01/18	01/01/19		396,000		-			396,000		92,355
Noteholder #3	10/02/18	01/01/19		264,000		-			264,000		49,458
Noteholder #5	09/17/18	09/17/19		-		-			-		10,260
Noteholder #6	11/15/18	11/15/19		-		-			-		15,564
Noteholder #6	02/04/19	02/04/20		230,000		-			230,000		23,048
Noteholder #6	08/08/19	08/08/20		33,092		(4,274	)		28,818		1,712
Noteholder #6	11/04/19	11/04/20		33,516		(11,301	)		22,215		1,087
Noteholder #6	12/23/19	12/23/20		137,375		(100,216	)		37,159		2,981
Noteholder #6	01/21/20	02/21/21		52,500					52,500		805
Noteholder #6	02/04/20	02/04/20		265,637		-			265,637		4,076
Noteholder #7	12/27/18	12/27/19		20,000		-			20,000		3,297
Noteholder #7	02/05/19	02/05/20		131,250		-			131,250		11,995
Noteholder #7	02/11/19	02/11/20		131,250		-			131,250		11,708
Noteholder #7	03/15/19	03/15/20		70,913		-			70,913		5,937
Noteholder #7	08/08/19	08/08/20		33,092		(4,274	)		28,818		1,712
Noteholder #7	11/04/19	11/04/20		33,516		(11,301	)		22,215		1,087
Noteholder #7	01/03/20	01/03/21		137,375					137,375		2,740
Noteholder #7	01/21/20	02/22/21		52,500		-			52,500		805
Noteholder #7	02/04/20	02/04/20		265,637		-			265,637		4,076
Noteholder #10	03/15/19	03/15/20		70,913		-			70,913		5,937
Noteholder #11	08/30/19	05/30/20		110,000		(24,088	)		85,912		5,159
Noteholder #11	08/29/19	08/29/20		100,000		0			100,000		-

			$	3,744,496	$	(155,453	)	$	3,589,042	$	303,472

The following table summarizes all convertible notes outstanding as of September 30, ~~2017:~~2019:

Holder

Issue Date

Due Date

Principal

Unamortized Debt Discount

Carrying
Value

Accrued
Interest

Noteholder 1

3/2/2017

3/2/2018

$ 125,000

$ (38,112 )

$ 86,888

$ 5,671

Noteholder 1

7/14/2017

7/14/2018

275,600

(11,795 )

263,805

4,712

Noteholder 1

8/14/2017

8/14/2018

275,600

(13,068 )

262,532

2,839

Noteholder 4

3/2/2017

3/2/2018

69,000

(50,009 )

18,991

7,187

Noteholder 4

6/5/2017

3/2/2018

125,000

(70,833 )

54,167

3,205

Noteholder 4

7/14/2017

7/14/2018

275,600

(11,795 )

263,805

4,470

Noteholder 4

8/14/2017

8/14/2018

275,600

(13,068 )

262,532

2,597

$ 1,421,400

$ (208,680 )

$ 1,212,720

$ 30,681

Holder	Issue Date	Due Date	Principal		Unamortized Debt Discount			Carrying Value			Accrued Interest

Noteholder #1	04/24/18	04/24/19		500,000		-			500,000			-
Noteholder #2	07/01/19	09/30/19		825,930		-			825,930			18,983
Noteholder #3	08/01/18	01/01/19		396,000		-			396,000			76,471
Noteholder #3	10/02/18	01/01/19		264,000		-			264,000			40,634
Noteholder #4	09/06/18	09/06/19		145,000		-			145,000			15,575
Noteholder #5	09/17/18	09/17/19		82,500		-			82,500			8,586
Noteholder #6	11/15/18	11/15/19		222,600		(28,054	)		194,546			15,564
Noteholder #6	01/14/19	01/14/20		131,250		(46,027	)		85,223			7,364
Noteholder #6	02/04/19	02/04/20		265,000		(92,205	)		172,795			13,824
Noteholder #6	03/15/19	03/15/20		70,913		-			70,913			3,093
Noteholder #6	08/08/19	08/08/20		33,092		(10,291	)		22,801			384
Noteholder #7	12/27/18	12/27/19		105,000		(25,603	)		79,397			18,204
Noteholder #7	02/05/19	02/05/20		131,250		(48,185	)		83,065			6,616
Noteholder #7	03/15/19	03/15/20		70,913		-			70,913			3,093
Noteholder #7	08/08/19	08/08/20		33,092		(10,291	)		22,801			384
Noteholder #8	02/08/19	02/08/20		783,724		(208,357	)		575,367			89,627
Noteholder #9	03/15/19	03/15/20		70,913		-			70,913			3,093
Noteholder #10	03/15/19	03/15/20		70,913		-			70,913			3,093
Noteholder #11	08/29/19	05/29/20		100,000		(150,146	)		(50,146	)		964
Noteholder #11	08/30/19	05/30/20		110,000		(97,555	)		12,445			747

			$	4,412,090	$	(716,714	)	$	3,695,376		$	326,145

18
~~Table of Contents~~

~~The following table summarizes all convertible notes outstanding as of December 31, 2017:~~

Holder

Issue Date

Due Date

Principal

Unamortized Debt Discount

Carrying
Value

Accrued
Interest

Noteholder 1

7/14/2017

7/14/2018

$ 275,600

$ (7,862 )

$ 267,738

$ 10,247

Noteholder 1

8/14/2017

8/14/2018

275,600

(9,137 )

266,463

8,378

Noteholder 4

7/14/2017

7/14/2018

275,600

(7,862 )

267,738

10,247

Noteholder 4

8/14/2017

8/14/2018

275,600

(9,137 )

266,463

8,378

$ 1,102,400

$ (33,998 )

$ 1,068,402

$ 37,250

Noteholder 1#1

On ~~March~~April 24, 2018, the Company entered into a convertible note payable totaling $500,000 in exchange for 100% of the assets of Leaf Detective LLC. The note bears no interest, matures on April 24, 2019, and automatically converted to common stock at $1.25 per share on the maturity date. In the event the average lowest trading price of the Company’s common stock during the five days prior to maturity is less than $1.25 per share, the Company will pay the noteholder the difference between $1.25 and the average lowest trading price during the preceding five days per share converted in cash. On or about April 30, 2020, Michele Malaret and Gordon Griswold filed, filed a breach of contract in the original principal amount of $500,000, with the Superior Court of California, County of Humboldt. The Company currently recognizes the full liability on its balance sheet. There is no interest due associated with the note.

Noteholder #2

On July 2, ~~2017,~~2018, the Company sold and issued a ~~Convertible Promissory Note~~convertible promissory note to an unrelated party for the principal amount of $220,000 of which $20,000 was an original issue discount resulting in cash proceeds to the Company of $200,000 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 8%, was due on October 1, 2018. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at a conversion price of $0.60 per share. This note was replaced on July 1, 2019.

On September 13, 2018, the Company entered into an exchange agreement with an unrelated party for the principal amount $585,000, of which the loan payable to Palliatech, dated August 1, 2017, outstanding and principal of $549,652 would be assumed by the new note holder, with the difference of $35,348 to be treated as an original issue discount. The new convertible note payable carries an interest rate of 0% per annum is convertible into common stock of the Company at the option of the noteholder immediately at 80% of the lowest volume-weighted average price of the Company’s common stock in the preceding 20 trading days. This note was replaced on July 1, 2019.

On July 1, 2019, the two previous notes were replaced for the aggregate principal amount of $825,890. This included a default penalty of $150,000 for non-payment of the prior two notes. The note, together with accrued interest at the annual rate of 8%, is due on September 30, 2019. The note is convertible into common stock of the Company at the option of the noteholder at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $675,930 of principal and $47,672 of accrued interest on March 31, 2020.

Noteholder #3

On August 1, 2018, the Company sold and issued a convertible promissory note to an unrelated party for the principal amount of $330,000 of which $30,000 was an original issue discount resulting in cash proceeds to the Company of $300,000 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 8%, was due on October 1, 2018. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time the lower of a conversion price of $0.50 per share or at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. On September 30, 2019, a fee for payment default of $66,000 was added to the principal. There was $396,000 of principal and $92,355 of accrued interest due on March 31, 2020.

On October 2, 2018, the Company sold and issued a convertible promissory note to an unrelated party for the principal amount of $220,000 of which $20,000 was an original issue discount resulting in cash proceeds to the Company of $200,000 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 8%, is due on January 1, 2019. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at a conversion price of $0.50 per share or a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. On September 30, 2019, a fee for payment default of $44,000 was added to the principal. There was $264,000 of principal and $49,458 of accrued interest on March 31, 2020.

Noteholder #4

On September 6, 2018, the Company sold and issued a convertible promissory note to an unrelated party for the principal amount of $125,000 of which $15,000 was an original issue discount resulting in cash proceeds to the Company of ~~$125,000~~$110,000 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 10%, was due on September 6, 2019. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at the lower of a conversion price of $0.50 per share or at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. On July 5, 2019, a fee for payment default of $20,000 was added to the principal. There was no note principal or accrued interest due on March 31, 2020.

Noteholder #5

On September 6, 2018, the Company sold and issued a convertible promissory note to an unrelated party for the principal amount of $62,500 of which $6,250 was an original issue discount resulting in cash proceeds to the Company of $56,250 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 10%, is due on September 6, 2019. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at the lower of a conversion price of $0.50 per share or at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. On July 5, 2019, a fee for payment default of $20,000 was added to the principal. There was $0 of principal and $10,260 of accrued interest due on March 31, 2020.

Noteholder #6

On November 15, 2018, the Company sold and issued a convertible promissory note to an unrelated party for the principal amount of $222,600 of which $12,600 was an original issue discount resulting in cash proceeds to the Company of $210,000 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 8%, is due on November 15, 2019. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at the lower of a conversion price of $0.50 per share or at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $0 of principal and $15,564 of accrued interest due on March 31, 2020.

On February 4, 2019, the Company entered into a convertible note payable with an unrelated party for $265,000 of which $15,000 was an original issue discount and $10,000 in third party fees resulting in net cash proceeds to the Company of $240,000. The convertible note payable carries interest at a rate of 8% per annum, is due on February 4, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $230,000 of principal and $23,048 accrued interest due on March 31, 2020.

On August 8, 2019, the Company entered into a convertible note agreement with an unrelated party for $33,092 of which $1,576 in third party fees resulting in net cash proceeds to the Company of $31,516. The convertible note payable carries interest at a rate of 8% per annum, is due on August 8, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $33,092 of principal and $1,712 of accrued interest due on March 31, 2020.

On November 4, 2019, the Company entered into a convertible note agreement with an unrelated party for $33,516 of which $2,000 in third party fees resulting in net cash proceeds to the Company of $31,516. The convertible note payable carries interest at a rate of 8% per annum, is due on November 4, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $33,092 of principal and $1,087 of accrued interest due on March 31, 2020.

On December 23, 2019, the Company entered into a convertible note agreement with an unrelated party for $137,375 of which $16,375 in third party fees resulting in net cash proceeds to the Company of $121,000. The convertible note payable carries interest at a rate of 8% per annum, is due on December 23, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $137,375 of principal and $2,981 of accrued interest due on March 31, 2020.

On January 21, 2020, the Company entered into a convertible note agreement with an unrelated party for $52,500 of which $2,500 in third party fees resulting in net cash proceeds to the Company of $50,000. The convertible note payable carries interest at a rate of 8% per annum, is due on January 21, 2021, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $52,500 of principal and $805 of accrued interest due on March 31, 2020.

On February 4, 2020, the Company entered into an exchange agreement with an unrelated party for $265,637, of which the loan payable to Noteholder 8, dated February 8, 2019, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 8% per annum is due on February 8, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $265,637 of principal and $4,076 of accrued interest due on March 31, 2020.

Noteholder #7

On December 27, 2018, the Company sold and issued a Convertible Promissory to an unrelated party for the principal amount of $105,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on ~~March 2, 2018. The Note~~December 27, 2019, and is convertible into ~~the Company’s~~ common stock ~~commencing 180 days from the date of issuance at a conversion price equal to 65%~~ of the ~~lowest trade price~~Company at the option of the Company’s common stock for the twenty prior trading days including the date of conversion. During the three months ended December 31, 2017, the holder elected to convert a total of $125,000 of principal in exchange for 325,562 common shares. There was $0 and $125,000 of principal and $0 and $7,397 of accrued interest due at December 31, 2017 and September 30, 2017, respectively.

On July 14, 2017, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $275,600 of which $15,600 was an original issue discount and $10,000 was paid directly to third parties resulting in cash proceeds to the Company of $250,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on July 14, 2018. The Note is convertible into the Company’s common stock commencing 180 days from the date of issuance at a conversion price equal to 75% of the lowest trade price of the Company’s common stock for the fifteen prior trading days including the date of conversion. There was $275,600 of principal and $10,247 and $4,712 of accrued interest due at December 31, 2017 and September 30, 2017, respectively.

On August 14, 2017, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $275,600 of which $15,600 was an original issue discount and $10,000 was paid directly to third parties resulting in cash proceeds to the Company of $250,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on August 14, 2018. The Note is convertible into the Company’s common stock commencing 180 days from the date of issuance at a conversion price equal to 75% of the lowest trade price of the Company’s common stock for the fifteen prior trading days including the date of conversion. There was $275,600 of principal and $8,378 and $2,839 of accrued interest due at December 31, 2017 and September 30, 2017, respectively.

~~Noteholder 4~~

On March 2, 2017, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $125,000 resulting in cash proceeds to the Company of $125,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on March 2, 2018. The Note is convertible into the Company’s common stock commencing 180 days from the date of issuance at a conversion price equal to 65% of the lowest trade price of the Company’s common stock for the twenty prior trading days including the date of conversion. During the year ended September 30, 2017, the holder elected to convert a total of $56,000 of principal in exchange for 111,538 shares of common stock. Additionally, during the three months ended December 31, 2017, the holder elected to convert a total of $69,000 of principal in exchange for 219,258 shares of common stock. There was $0 and $69,000 of principal and $0 and $7,187 of accrued interest due at December 31, 2017 and September 30, 2017, respectively.

19
~~Table of Contents~~

On March 2, 2017, the Company sold a Convertible Promissory Note to an unrelated party, for the principal amount of $125,000 resulting in cash proceeds to the Company of $125,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith which was funded on June 5, 2017. The Note, together with accrued interest at the annual rate of 8%, is due on March 2, 2018. The Note is convertible into the Company’s common stock upon funding at a conversion price equal to 65% of the lowest trade price of the Company’s common stock for the fifteen prior trading days including the date of conversion. During the three months ended December 31, 2017, the holder elected to convert a total of $125,000 or principal in exchange for 355,973 shares of common stock. There was $0 and $125,000 of principal and $0 and $3,205 of accrued interest due at December 31, 2017 and September 30, 2017, respectively.

On August 14, 2017, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $275,600 of which $15,600 was an original issue discount and $10,000 was paid directly to third parties resulting in cash proceeds to the Company of $250,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on August 14, 2018. The Note is convertible into the Company’s common stock commencing 180 days from the date of issuance at a conversion price equal to 75% of the lowest trade price of the Company’s common stock for the fifteen prior trading days including the date of conversion. There was $275,600 of principal and $8,378 and $2,896 of accrued interest due at December 31, 2017 and September 30, 2017 respectively.

~~Note 8 – DERIVATIVE LIABILITY~~

As of December 31, 2017 and September 30, 2017, Company had a derivative liability balance of $0 and $294,637 on the balance sheets and recorded a gain of $13,322 and loss of $106,243 from derivative liability fair value adjustments during the three months ended December 31, 2017. The derivative liability activity comes from convertible notes payable as follows:

~~As discussed in~~ ~~Note 7 – Convertible Notes Payable~~, the Company issued a $125,000 Convertible Promissory Notes to an unrelated party that matures on March 2, 2018. The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common sharesnoteholder six months after issuance at ~~the holder’s option, at the conversion~~a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the ~~fifteen~~preceding 15 trading ~~days prior~~days. There was $20,000 of principal and $3,297 of accrued interest due on March 31, 2020.

On February 5, 2019, the Company entered into a convertible note payable with an unrelated party for $131,250 of which included $6,250 in third party fees resulting in net cash proceeds to the Company of $125,000. The convertible note payable carries interest at a rate of 8% per annum, is due on February 5, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $131,250 of principal and $11,995 of accrued interest due on March 31, 2020.

On February 11, 2019, the Company entered into a convertible note payable with an unrelated party for $131,250 of which included $6,250 in third party fees resulting in net cash proceeds to the Company of $125,000. The convertible note payable carries interest at a rate of 8% per annum, is due on January 14, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $131,250 of principal and $11,708 of accrued interest due on March 31, 2020.

On March 15, 2019, the Company entered into an exchange agreement with an unrelated party for $70,913, of which the loan payable to Noteholder 2, dated July 2, 2018, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 8% per annum is due on March 15, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $70,913 of principal and $5,937 of accrued interest due on March 31, 2020.

On January 3, 2020, the Company entered into a convertible note agreement with an unrelated party for $137,375 of which $16,375 in third party fees resulting in net cash proceeds to the Company of $121,000. The convertible note payable carries interest at a rate of 8% per annum, is due on December 23, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $137,375 of principal and $2,740 of accrued interest due on March 31, 2020.

Noteholder #8

On February 8, 2019, the Company entered into an exchange agreement with an unrelated party for $580,537, of which the loan payable to Palliatech, dated September 1, 2017, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 10% per annum, with one-year interest guaranteed, is due on February 8, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 30% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. A principal non-pay default was applied in the amount of $203,188. This remaining balance of this note was purchased by Noteholder 6 & 7, on February 4, 2020. There was no note principal or accrued interest due on March 31, 2020.

Noteholder #9

On March 15, 2019, the Company entered into an exchange agreement with an unrelated party for $70,913, of which the loan payable to Noteholder 2, dated July 2, 2018, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 8% per annum is due on March 15, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was no note principal or accrued interest due on March 31, 2020.

Noteholder #10

Noteholder #11

On August 30, 2019, the Company entered into a convertible note payable with an unrelated party for $110,000 which included $10,000 original issue discount resulting in net cash proceeds to the Company of $100,000. The convertible note payable carries interest at a rate of 8% per annum, is due on May 30, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $110,000 of principal and $5,159 of accrued interest due on March 31, 2020.

On August 29, 2019, the Company entered into an exchange agreement with an unrelated party for $170,000, of which the loan payable to Henry Grimmett, dated October 16, 2016, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 8% per annum, is due on May 29, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $100,000 principal and $0 of accrued interest due on March 31, 2020.

NOTE 12 – CONVERTIBLE DEBENTURES

On January 29, 2018, the Company issued a total of 5,973 units of 8% unsecured convertible debentures. Each unit consists of one convertible debenture with a principal face value of $1,000 and 250 warrants. The gross proceeds were $5,973,000. Each warrant entitles the holder thereof to purchase one additional common share of the Company at an exercise price of $0.80 per warrant for 24 months. The convertible debentures have a maturity date of 36 months from issuance. Simple interest will be paid at a rate of 8% per annum in arrears until maturity or until conversion. The principal amount of the debentures and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at a conversion price of $0.60 per share.

In addition to the warrants associated with the convertible debentures, the Company issued an additional 597,300 warrants to purchase common stock of the Company as offering costs representing an equivalent of 6% of the fully converted debentures. The warrants are exercisable at $0.60 per share for two years.

The Company also issued three separate debentures under the same terms for additional cash proceeds of $610,000. The additional debentures carry an additional 152,500 warrants to purchase additional common shares of the Company at $0.80 per share. Additionally, the outstanding principal and interest may be converted to common stock of the Company at $0.60 per share.

Note 13 – Derivative Liability

As of March 31, 2020 and September 30, 2019, Company had a derivative liability balance of $2,319,937 and $2,545,735 on the balance sheets and recorded an unrealized gain of $225,797 and an unrealized loss of $556,647 from derivative liability fair value adjustments during the six months ended March 31, 2020 and 2019, respectively.

On November 15, 2018, the Company issued a $222,600 convertible promissory note to an unrelated party that matures on November 15, 2019. Refer to Noteholder 8 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15, ~~“Derivatives~~Derivatives and ~~Hedging”~~Hedging and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the issuance date of the note was ~~$107,768~~$220,463 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of ~~$107,768~~$184,957 which was up to the face value of the convertible ~~note.~~note with the excess fair value at an initial measurement of $35,506 being recognized as a loss on derivative fair value measurement.

~~During the year ended September 30, 2017 and three months ended~~On December 31, 2017, the noteholder elected to convert a total of $56,000 and $69,000 of principal. At December 31, 2017, the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $0 and recorded a $3,312 gain from change in fair value and $63,225 due to conversion for the three months ended December 31, 2017. The fair value of the embedded derivatives for the notes was determined using a Monte Carlo simulation model based on the following assumptions: (1) expected volatility of 110%, (2) risk-free interest rate of 1.3%, and (3) expected life of 0.26 of a year.

20
~~Table of Contents~~

~~As discussed in~~ ~~Note 7 – Convertible Notes Payable~~,27, 2018, the Company issued a ~~$125,000 Convertible Promissory Notes~~$105,000 convertible promissory note to an unrelated party that matures on March 2, 2018. The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares six months after issuance, at the holder’s option, at the conversion rate equalDecember 27, 2019. Refer to ~~a 35% discount from the lowest trading price in the fifteen trading days prior to conversion.~~Noteholder 9 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes is subject to a variable conversion rate.

The aggregate fair value of the derivative at the issuance date of the note was $98,091 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $38,365 which was up to the face value of the convertible note with the excess fair value at an initial measurement of $59,725 being recognized as a loss on derivative fair value measurement.

On January 14, 2019, the Company issued a $131,250 convertible promissory note to an unrelated party that matures on February 5, 2020. Refer to Noteholder 8 under ~~ASC 815-15 “Derivatives and Hedging”~~“Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.

The aggregate fair value of the derivative at the issuance date of the note was $144,752 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $14,423 which was up to the face value of the convertible note with the excess fair value at an initial measurement of $130,329 being recognized as a loss on derivative fair value measurement

On February 4, 2019, the Company issued a $265,000 convertible promissory note to an unrelated party that matures on February 4, 2020. Refer to Noteholder 8 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.

The aggregate fair value of the derivative at the issuance date of the note was $322,521 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $322,521 on derivative fair value measurement.

On February 5, 2019, the Company issued a $131,250 convertible promissory note to an unrelated party that matures on February 11, 2020. Refer to Noteholder 9 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.

The aggregate fair value of the derivative at the issuance date of the note was $228,916 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $228,916 on derivative fair value measurement.

On July 1, 2019, the Company issued a $825,930 convertible promissory note to an unrelated party that matures on September 30, 2019. Refer to Noteholder 3 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.

The aggregate fair value of the derivative at the issuance date of the note was $1,807,875 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $1,807,875 on derivative fair value measurement.

On August 8, 2019, the Company issued a $33,092 convertible promissory note to an unrelated party that matures on August 8, 2020. Refer to Noteholder 6 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.

The aggregate fair value of the derivative at the issuance date of the note was $34,341 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $34,341 on derivative fair value measurement.

On August 8, 2019, the Company issued a $33,092 convertible promissory note to an unrelated party that matures on August 8, 2020. Refer to Noteholder 7 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.

On August 29, 2019, the Company issued a $170,000 convertible promissory note to an unrelated party that matures on May 29, 2020. Refer to Noteholder 14 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.

The aggregate fair value of the derivative at the issuance date of the note was $143,951 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $65,965 on derivative fair value measurement.

On August 30, 2019, the Company issued a $110,000 convertible promissory note to an unrelated party that matures on May 30, 2020. Refer to Noteholder 14 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.

The aggregate fair value of the derivative at the issuance date of the note was $109,936 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $79,183 on derivative fair value measurement.

At March 31, 2020, the Company marked-to-market the fair value of the derivative liabilities related to conversion features and determined an aggregate fair value of $2,319,894 and recorded a $112,707 gain from change in fair value for the six months ended March 31, 2020. The fair value of the embedded derivatives was determined using a Black-Scholes option pricing model based on the following assumptions: (1) expected volatility of 160%, (2) risk-free interest rate of 0.17%, (3) exercise prices of $0.014 - $0.018, and (4) expected lives of 0.16 – 0.73 of a year.

On October 2, 2018, the Company issued a total of $220,000 convertible debenture to an unrelated party that matures on January 1, 2019. The Company issued a total of 100,000 warrants to purchase additional shares of common stock of the Company in connection with the convertible debenture. The Company analyzed the issued warrants for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the warrants should be classified as a derivative because the Company is unable to ascertain there will be adequate unissued authorized shares of common stock to fulfill its obligations should the warrants be exercised. In accordance with AC 815, the Company has ~~bifurcated the conversion feature of the note and~~ recorded a derivative ~~liability.~~liability related to the warrants.

The ~~embedded~~ derivative for the ~~note~~warrants is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the ~~embedded~~ derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the issuance date of the ~~note~~warrants was ~~$107,785~~$57,014 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of ~~$107,785~~$53,333 which was up to the face value of the convertible ~~note.~~

~~During~~debentures with the ~~three months ended December 31, 2017, the noteholder elected to convert a total of $125,000 of principal. At December 31, 2017, the Company marked-to-market the~~excess fair value at an initial measurement of ~~the~~$3,681 being recognized as a loss on derivative ~~liabilities related to notes and determined an aggregate~~ fair value of $0 and recorded a $4,043 gain from change in fair value and $111,758 due to conversion for the three months ended December 31, 2017. The fair value of the embedded derivatives for the notes was determined using a Monte Carlo simulation model based on the following assumptions: (1) expected volatility of 111%, (2) risk-free interest rate of 1.3%, and (3) expected life of 0.25 of a year.measurement.

As discussed in “Note 712 – Convertible ~~Notes Payable~~Debentures”, the Company issued a ~~$125,000 Convertible Promissory Notes~~total of $374,000 of convertible debentures to an unrelated ~~party~~parties that ~~matures~~mature on ~~March 2, 2018.~~dates ranging from October 17, 2020 to October 23, 2020. The ~~note bears interest at~~Company issued a ~~rate~~total of ~~8% per annum and can be~~187,000 warrants to purchase additional shares of common stock of the Company in connection with the convertible into the Company’s common shares six months after issuance, at the holder’s option, at the conversion rate equal to a 35% discount from the lowest trading price in the fifteen trading days prior to conversion.debentures. The Company analyzed the ~~conversion feature of the agreement~~issued warrants for derivative accounting consideration ~~under ASC 815-15 “Derivatives and Hedging”~~ and determined that the ~~embedded conversion features~~warrants should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model.derivative. The aggregate fair value of the derivative at the issuance date of the ~~note~~warrants was ~~$157,523~~$73,383 which was recorded as a derivative liability on the balance ~~sheet. The~~sheet, for which the Company recorded aan equivalent debt discount ~~of $125,000 which was up~~ to the ~~face value of the~~ convertible ~~note with the excess fair value at initial measurement of $32,523 being recognized as a loss on derivative fair value measurement.~~debentures.

~~During the three months ended December~~At March 31, ~~2017, the noteholder elected to convert a total of $125,000 of principal. At December 31, 2017,~~2020, the Company marked-to-market the fair value of the derivative liabilities related to ~~notes~~warrants and determined an aggregate fair value of $0$44 and recorded a ~~$5,967~~$181,772 gain from change in fair value ~~and $106,332 due to conversion~~ for the ~~three~~six months ended ~~December~~March 31, ~~2017.~~2020. The fair value of the ~~embedded~~ derivatives ~~for the notes~~ was determined using a ~~Monte Carlo simulation~~Black-Scholes option pricing model based on the following assumptions: (1) expected volatility of ~~113%~~160%, (2) risk-free interest rate of ~~1.3%~~0.17%, (3) exercise prices of $0.60 to $0.80, and ~~(3)~~(4) expected ~~life~~lives of ~~0.18 of a year.~~0.55 – 0.56 years.

The following table summarizes the change in derivative liabilities included in the balance sheet at ~~September 30, 2017:~~March 31, 2020:

Fair Value of Embedded Derivative Liabilities:

Balance, September 30, 2016

$ 775,246

Initial measurement of derivative liabilities

1,312,384

Change in fair market value

(195,907
)
Write off due to conversion

(1,597,086 )
Balance, September 30, 2017

$ 294,637

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~~Table of Contents~~

Fair Value of Embedded Derivative Liabilities:
Balance, September 30, 2019	$	2,545,735
Change in fair market value		(225,797	)
Balance, March 31, 2020	$	2,319,938

The following table summarizes the ~~derivative liabilities included in the balance sheet at December 31, 2017:~~

Fair Value of Embedded Derivative Liabilities:

Balance, September 30, 2017

$ 294,637

Initial measurement of derivative liabilities

-

Change in fair market value

(13,322 )
Write off due to conversion

(281,315 )
Balance, December 31, 2017

$ -

~~The following table summarizes the loss~~gain (loss) on derivative liability included in the income statement for the three months ended ~~December~~March 31, ~~2017~~2020 and ~~2016,~~2019, respectively.

	December 31,
	2017			2016			Six Months Ended March 31,
							2020			2019
Day one loss due to derivatives on convertible debt	$	-		$	287,714		$	(68,682	)		(780,678	)
Change in fair value of derivatives		(13,322	)		(181,471	)		294,479			224,021
Total derivative expense (gain)	$	(13,322	)	$	106,243
Total derivative gain (loss)							$	225,797			(556,647	)

~~Note 9 – INDUSTRY SEGMENTS~~

~~This summary reflects the Company’s current segments, as described below.~~

~~Corporate~~

~~The parent Company provides overall management and corporate reporting functions for the entire organization.~~

~~Consulting~~

The Company provides advisory, licensing and compliance services to the cannabis industry. Consulting clients are located in states that have state managed medical and/or recreational programs. EVIO assists these companies with license applications, business planning, state compliance and ongoing operational support.

~~Testing Services~~

The Company provides analytical testing services to the cannabis industry under the EVIO Labs brand. As of December 31, 2017, EVIO Labs has six operating labs. EVIO Labs clients are located in Oregon, California and Massachusetts and consist of growers, processors and dispensaries. Operating under the rules of the appropriate state regulating body, EVIO Labs certifies products have been tested and are free from pesticides and other containments before resale to patients and consumers.

Three months ended December 31, 2017

Corporate

Consulting
Services

Testing
Services

Total
Consolidated

Revenue

$ -

$ 59,516

$ 887,349

$ 946,865

Segment income (loss) from operations

(195,286 )

(356,585 )

(115,189 )

(667,060 )
Total assets

297,459

1,534,332

4,335,123

6,166,914

Capital expenditures

-

(1,038 )

(5,914 )

(6,952 )
Depreciation and amortization

-

5,974

80,526

86,500

Three months ended December 31, 2016

Corporate

Consulting
Services

Testing
Services

Total
Consolidated

Revenue

$ -

$ 99,878

$ 568,578

$ 668,456

Segment income (loss) from operations

(215,342 )

12,365

(188,339 )

(391,316 )
Total assets

50,562

143,370

3,684,608

3,878,540

Capital expenditures

-

(1,038 )

(25,276 )

(26,314 )
Depreciation and amortization

-

5,974

46,863

52,837

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~~Table of Contents~~

~~Note 10~~NOTE 14 – STOCK OPTIONS AND WARRANTS

The following ~~table summarizes~~tables summarize all stock option and warrant activity for the ~~year ended September 30, 2017 and the~~ three months ended ~~December~~March 31, ~~2017:~~2020:

Shares

Weighted-
Average
Exercise Price
Per Share

Outstanding, September 30, 2016

315,000

$ 0.449

Granted

380,000

1.295

Exercised

-

-

Forfeited

(40,000 )

1.075

Expired

-

-

Outstanding, September 30, 2017

655,000

$ 0.902

Shares

Weighted-
Average
Exercise Price
Per Share

Outstanding, September 30, 2017

655,000

$ 0.902

Granted

75,000

0.65

Exercised

-

-

Forfeited

-

-

Expired

-

-

Outstanding, December 31, 2017

730,000

$ 0.876

	Shares		Weighted- Average Exercise Price Per Share
Outstanding, September 30, 2019		5,484,970		0.742
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding, March 31, 2020		5,484,970		0.742

The following table discloses information regarding outstanding and exercisable options and warrants at ~~September 30, 2017:~~March 31, 2020:

		Outstanding						Exercisable					Outstanding						Exercisable
Exercise Prices	Exercise Prices	Number of Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (Years)		Number of Option Shares		Weighted Average Exercise Price		Exercise Prices	Number of Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (Years)		Number of Option Shares		Weighted Average Exercise Price
$	0.400		150,000	$	0.400		3.88		75,000	$	0.400	0.225		200,000	$	0.225		4.46		200,000	$	0.225
$	0.500		155,000	$	0.500		3.88		77,500	$	0.500	0.400		110,000	$	0.400		1.62		110,000	$	0.400
$	1.260		270,000	$	1.260		4.75		-	$	1.260	0.420		330,000	$	0.420		4.05		330,000	$	0.420
$	1.386		60,000	$	1.386		4.75		-	$	1.386	0.500		165,000	$	0.500		1.70		162,500	$	0.500
$	1.300		10,000	$	1.300		4.05		2,500	$	1.300	0.600		627,220	$	0.600		0.11		627,220	$	0.600
$	1.666		10,000	$	1.666		4.84		-		1.666	0.650		145,000	$	0.650		2.82		36,250	$	0.650
Total			655,000	$	0.902		4.33		155,000	$	0.465
$												0.800		3,482,750	$	0.800		1.43		3,095,250	$	0.800
$												0.850		100,000	$	0.850		3.29		-	$	0.850
$												1.050		25,000	$	1.050		3.79		-	$	1.050
$												1.260		220,000	$	1.260		2.50		110,000	$	1.260
$												1.300		10,000	$	1.300		1.80		7,500	$	1.300
$												1.386		60,000	$	1.386		2.50		30,000	$	1.386
$												1.666		10,000	$	1.666		2.59		5,000	$	1.666
												Total		5,484,970	$	0.742		1.95		4,713,720	$	0.718

23
~~Table of Contents~~
Compensation related to stock-based compensation was $126,581 and $169,922, respectively, for the three months ended March 31, 2020 and 2019.

In determining the compensation cost of the stock options granted, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes option pricing model. The assumptions used in these calculations are summarized as follows:Note 15 – Subsequent Events

Common Stock Issuances	~~September 30,~~ ~~2017~~
~~Expected term of options granted~~	~~5 years~~
~~Expected volatility~~		~~2.68~~	%
~~Risk-free interest rate~~		~~1.89~~	%
~~Expected dividend yield~~		0	%

~~The following table discloses information regarding outstanding and exercisable options and warrants at December 31, 2017:~~

Outstanding

Exercisable

Exercise Prices

Number of
Option Shares

Weighted
Average
Exercise Price

Weighted
Average
Remaining Life (Years)

Number of
Option Shares

Weighted
Average
Exercise Price

$
0.400

150,000

$ 0.400

3.62

75,000

$ 0.400

$
0.500

155,000

$ 0.500

3.62

77,500

$ 0.500

$
0.650

75,000

$ 0.650

4.82

-

$ 0.650

$
1.260

270,000

$ 1.260

4.50

-

$ 1.260

$
1.386

60,000

$ 1.386

4.50

-

$ 1.386

$
1.300

10,000

$ 1.300

3.80

5,000

$ 1.300

$
1.666

10,000

$ 1.666

4.59

-

1.666

Total

730,000

$ 0.876

4.08

157,500

$ 0.478

	~~December 31,~~ ~~2017~~
~~Expected term of options granted~~	~~4.98 years~~
~~Expected volatility~~		~~256~~	%
~~Risk-free interest rate~~		~~2.01~~	%
~~Expected dividend yield~~		0	%

The Company ~~recognized~~made the following issuances of common stock subsequent to March 31, 2020:

●	10,500,000 common shares for the conversion of $100,000 of principal on convertible debentures.

On April 13, 2020, the Company entered into a convertible note payable with an unrelated party for $66,000 which included $6,000 originator issuer discount resulting in net cash proceeds to the Company of $60,000. The convertible note payable carries interest at a rate of 12% per annum, is due on November 30, 2020 and is convertible into common stock of the Company at the option ~~expense~~ of ~~$72,587 and $17,208 during~~ the ~~three~~noteholder six months ~~ended December 31, 2017 and 2016, respectively. There was $434,347~~after issuance at a rate equal to a 35% discount from the lowest trading price of ~~unrecognized~~the Company’s common stock ~~based compensation expense as of December 31, 2017.~~in the preceding 15 trading days.

24
~~Table of Contents~~

~~Note 11 – COMMITMENTS AND CONTINGENCIES~~Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

During the year ended September 30, 2017, the Company purchased a software license for $200,000 in cash. The Company relied on the representation of the seller regarding the assignability of the license. However, independent verification of the assignability was not obtained. As a result, the Company recognized a $200,000 impairment loss on the write off of the asset. There have been no additional amounts accrued for potential losses related to the assignability of the license.

~~The Company has entered into various office and laboratory leases as well as a long term operating lease. Future minimum rental payments under the terms of the lease are:~~

Year ending September 30,

2018

258,915

2019

303,811

2020

265,392

2021

203,742

2022

118,410

Total

$ 1,150,270

~~Note 12 – SUBSEQUENT EVENTS~~

~~Employment Agreements~~

On May 9, 2019, Stephanie Head, a former part-time lab administrator for EVIO Labs Eugene, LLC, filed a wrongful termination lawsuit with the US District Court - District of Oregon, Eugene Division, Case No. 6:19-CV-00681, against EVIO Labs Eugene, LLC, EVIO, Inc., and Lori Glauser. In December ~~27, 2017,~~2018, EVIO Labs Eugene, LLC terminated Stephanie Head because she was not available to work full-time. In February 2019, Ms. Head filed a complaint to the ~~Company entered into~~Oregon Bureau of Labor & Industries (“BOLI”) with allegations that she was discriminated against and unlawfully terminated. In October 2019 BOLI found substantial evidence of unlawful employment ~~agreements with its Chief Executive Officer, Chief Operating Officer, President~~on the basis of protected whistle-blowing, but found no substantial evidence of Ms. Head’s seven other allegations of unlawful employment practice. In April 2019, BOLI notified EVIO Labs Eugene, LLC that BOLI elected not to pursue the charges further and ~~amended~~closed the ~~agreement of its Chief Science Officer. Each agreement is effective~~file. On January ~~1, 2018.~~

The agreement with our Chief Executive Officer carries a three year term with a base salary of $150,000 annually plus a car allowance of $750 monthly. Additionally, 750,000 stock options were granted with an exercise price of $0.80 which will vest quarterly over a two year period.

The agreement with our Chief Operating Officer carries a three year term with a base salary of $150,000 annually plus a car allowance of $500 monthly. Additionally, 450,000 stock options were granted with an exercise price of $0.80 which will vest quarterly over a two year period.

The agreement with our Chief Science Officer carries a three year term with a base salary of $120,000 annually plus a car allowance of $350 monthly. Additionally, 250,000 stock options were granted with an exercise price of $0.80 which will vest quarterly over a two year period.

~~The agreement with our newly appointed President carries a two year term. Under~~28, 2020, the ~~terms of the agreement, total compensation will be $24,000~~case was settled for $35,000, $25,000 payable in cash, ~~annually plus a total of 450,000 common shares which vest quarterly over a two year period.~~

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~~Table of Contents~~

and $10,000 in EVIO Common ~~Stock Issuances~~

~~The Company made the following issuances of common stock subsequent to December 31, 2017:~~

· ~~17,500 common shares valued at $23,800 for the vesting of restricted stock grants for consultants~~
· 50,000 common shares valued at $68,000 subject to vesting requirements of an employment agreement with our President. The agreement requires a total of 450,000 common shares be issued which vest in quarterly amounts of 50,000 shares from January 2018 to December 2018 then 62,500 quarterly for January 2019 to December 2019 so that a total of 450,000 common shares are earned over the course of two years.

~~Acquisitions~~Stock.

On ~~January 1, 2018,~~February 6, 2020, MC CRE Investments, LLC landlord for the ~~Company completed its acquisition~~Palm Desert location, filed a Breach of ~~C3 Labs, LLC (“C3 Labs”). In consideration of a 60% ownership,~~Lease Agreement with the ~~Company issued a $500,000 convertible note payable which carries no interest and matures on June 30, 2018. Upon maturation, the note will convert to common stock~~Superior Court of the ~~Company at $0.75 per share. Additionally,~~State of California, County of Riverside. EVIO Labs Palm Desert has vacated the ~~Company issued a $100,000 note payable due on March 31, 2018.~~

space and turned it back over to the landlord. The Company has ~~been granted two options to purchase additional interest of C3 Labs subject to~~expensed past due rents and late fees and these items are included in the ~~following terms and conditions.~~

~~(a) 30% Option. Effective as of Closing and terminating~~liabilities in the date three (3) years from the Closing Date, the C3 Members hereby collectively grant EVIO the right to ratably purchase from the C3 Members an aggregate of 30% of the Interests in C3 LABS following the issuance of 60% of the Interests to EVIO. EVIO may exercise its option by providing C3 LABS and the C3 Members written notice of its intent to exercise the option. The C3 Members shall have three (3) days following the date of such notice to execute assignments of Interests totaling 30% of the then outstanding membership interests in C3 LABS in favor of EVIO California. If EVIO should elect to exercise its option within nine (9) months from the Closing Date, the exercise price for the 30% of Interests shall be $450,000.00, to be paid in cash or EVIO’s common stock, as agreed by the C3 Members. If EVIO does not exercise the option within nine (9) months from the Closing Date, the exercise price shall be set by mutual agreement between the parties or, if no such agreement can be reached, as determined by an independent third-party valuation by an appraiser agreed to by the parties.

(b) 10% Option. Effective as of three (3) years after the Closing Date and terminating the date twenty four (24) months therefrom, the C3 Members hereby collectively grant EVIO the right to ratably purchase from the C3 Members an aggregate of 10% of the then outstanding Interests in C3 LABS (comprising the remaining Interests not owned by EVIO). EVIO may exercise its option by providing C3 LABS and the C3 Members written notice of its intent to exercise the option. The C3 Members shall have three (3) days following the date of such notice to execute assignments of Interests totaling 10% of the then outstanding membership interests in C3 LABS in favor of EVIO. Upon notice of its intent to exercise the option granted hereby, the exercise price shall be set by mutual agreement between the parties or, if no such agreement can be reached, as determined by an independent third-party valuation by an appraiser agreed to by the parties.

~~Convertible Debenture Issuance~~balance sheet.

On ~~January 30, 2018,~~or about March 5, 2020, Paul Tomaso, and Jonah Barber beneficiaries for MRX Labs, LLC, filed a Breach of Promissory Note in the Company issued a total of 5,973 units of 8% unsecured convertible debentures. Each unit consists of one convertible debenture with a principal face value of $1,000 and 250 warrants. The gross proceeds were $5,973,000.

~~Each warrant shall entitle the holder thereof to purchase one additional common share of the Company at an exercise price of $0.80 per warrant for a period of 24 months.~~

The convertible debentures have a maturity date of 36 months from issuance. Simple interest shall be paid at a rate of 8% per annum. It shall be paid quarterly in arrears until maturity or until conversion.

~~The~~original principal amount of $750,000, plus late fees and penalties, with the ~~debentures and any accrued interest thereon are convertible at the option~~Circuit Court of the ~~holder into common shares of~~State in Oregon, in Multnomah County against Greenhaus Analytical Labs, LLC. The Company has expensed penalties and late fees and these items are included in the ~~Company at any time at a conversion price of $0.60 per share.~~liabilities in the balance sheet.

~~In addition to~~On or about April 30, 2020, Michele Malaret and Gordon Griswold filed, filed a Breach of Contract in the ~~warrants~~original principal amount of $500,000, with the Superior Court of California, County of Humboldt. The Company currently recognizes the full liability on its balance sheet. There is no interest due associated with the convertible debentures, the Company issued an additional 597,300 warrants to purchase common stock of the Company as offering costs. This represents an equivalent of 6% of the fully converted debentures. The warrants are exerciseable at $0.60 per share.note.


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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained herein involve risks and uncertainties, including statements as to:

	· ●	our future operating results;
	· ●	our business prospects;
	· ●	our contractual arrangements and relationships with third parties;
	· ●	the dependence of our future success on the general economy;
	· ●	our possible financings; and
	· ●	the adequacy of our cash resources and working capital.

These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives, or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of this report. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

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

~~You should read~~Overview

We operate as a Colorado corporation and through our subsidiaries which provide analytical testing and advisory services to the ~~following discussion~~emerging legalized cannabis industry.

Our active subsidiaries as of ~~our~~March 31, 2020, are as follows:

Trade Name (dba)

Company Name

State of
Incorporation

Ownership %

Acquisition Month

EVIO Labs Medford

Smith Scientific Industries, LLC

Oregon

June 2016

EVIO Labs Portland

Greenhaus Analytical Labs

Oregon

100

October 2016

EVIO Labs MA

Viridis Analytics

Massachusetts

100

August 2017

EVIO Labs Berkeley

C3 Labs, LLC

California

January 2018

Keystone Labs

Keystone Labs, Inc.

Ontario, Canada

May 2018

In addition to the wholly-owned subsidiaries, the Company has entered into license agreements with independent testing laboratories in Florida and Colorado. Under the terms of the agreements, the independent laboratories are granted non-transferable and non-exclusive rights to use the Company’s trademarks and trade name.

Going Concern

The Company’s financial ~~condition~~statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and ~~results~~liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have an established source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

In the coming year, the Company’s foreseeable cash requirements will relate to the continual development of the operations ~~in conjunction~~of its business, maintaining its good standing and making the requisite filings with the ~~financial statements~~Securities and Exchange Commission, and the ~~notes thereto, included elsewhere in this report.~~payment of expenses associated with operations and business developments. The ~~following discussion contains forward-looking statements that reflect our plans, estimates~~Company may experience a cash shortfall and ~~beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute~~be required to ~~those differences include those discussed below and elsewhere in this report, particularly in the “Risk Factors” section.~~raise additional capital.

Historically, it has mostly relied upon private offerings and internally generated funds such as shareholder loans and advances to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future public or private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.

Critical Accounting Policies and ~~Estimates.~~ Estimates.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.

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RESULTS OF OPERATIONS

~~Business of Registrant~~Three Months Ended March 31, 2020, compared to Three Months Ended March 31, 2019

EVIO, INC., a Colorado corporation, and its subsidiaries (“EVIO”, the “Company”, the “Registrant”, “we”, “our”, or “us”) provide analytical testing and advisory services to the emerging legalized cannabis industry.COVID-19

~~EVIO, INC. was originally incorporated in~~On March 11, 2020, the ~~State of New York, December 12, 1977 under~~World Health Organization (“WHO”) declared the ~~name 3171 Holding Corporation. On February 22, 1979 the name was changed~~COVID-19 outbreak to Electronomic Industries Corp. and on February 23, 1983 the name was changed to Quantech Electronics Corp. The Company was reincorporated in the State of Colorado on December 15, 2003. On August 29, 2014, the Company completedbe a reverse merger with Signal Bay Research, Inc., a Nevada Corporation, and took over its operations. In September 2014, the Company changed its name from Quantech Electronics Corp. to Signal Bay, Inc. then to EVIO, INC. during August 2017. The Company has selected September 30 as its fiscal year end. The Company is domiciled in the State of Colorado, and its corporate headquarters is located in Bend, Oregon.

EVIO Consulting Services provides advisory and research services to cannabis companies including regulatory licensing and compliance, industry research, operational support, educational services and operating services for current and prospective licensed cannabis businesses.

EVIO, Inc. d/b/a EVIO Labs is the wholly owned analytical laboratory division of the Company. EVIO Labs consists of six operating companies, CR Labs, Inc. d/b/a EVIO Labs Bend, EVIO Labs Eugene LLC, Smith Scientific Industries, Inc. d/b/a EVIO Labs Medford, Greenhaus Analytical Services LLC d/b/a EVIO Labs Portland, EVIO California and Viridis Analytics MA d/b/a EVIO Labs MA all of which provide compliance testing services. Tests include identification of compounds and contaminants including cannabinoid potency and terpene profiling, as well as screening for residual solvents, pesticides, and hazardous microbiological growth., of cannabis products.

~~The subsidiaries of EVIO, Inc. are as follows:~~

~~Trade Name (dba)~~	~~Company Name~~	~~State of Incorporation~~	~~Ownership %~~	~~Acquisition Month~~
~~EVIO Labs Bend (dba)~~	~~CR Labs, Inc.~~	~~Oregon~~	~~80%~~	~~September 2015~~
~~EVIO Labs Eugene~~	~~EVIO Labs Eugene, LLC~~	~~Oregon~~	~~100%~~	~~May 2016~~
~~EVIO Labs Medford (dba)~~	~~Smith Scientific Industries, LLC~~	~~Oregon~~	~~80%~~	~~June 2016~~
~~EVIO Labs Yuba City (dba)~~	~~EVIO California, Inc.~~	~~California~~	~~100%~~	~~October 2016~~
~~EVIO Labs Portland (dba)~~	~~Greenhaus Analytical Labs~~	~~Oregon~~	~~100%~~	~~October 2016~~
~~EVIO Labs MA~~	~~Viridis Analytics~~	~~Massachusetts~~	~~100%~~	~~August 2017~~

global pandemic. In addition to the ~~wholly owned subsidiaries,~~devastating effects on human life, the ~~Company has entered into license agreements with independent testing laboratories~~pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in ~~Florida~~the global financial markets. Most US states and ~~Colorado. Under~~many countries have issued policies intended to stop or slow the ~~terms~~further spread of the ~~agreements, the independent laboratories are granted non-transferable and non-exclusive rights to use the Company’s trademarks, trade-name and testing methodologies.~~ disease.

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COVID-19 and the US’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations.

~~RESULTS OF OPERATIONS~~Revenues

~~Three Months Ended December~~For the three months ended March 31, ~~2017 and 2016~~

~~Revenues and Costs~~2020, we generated revenues of ~~Revenues~~

Percentage of Revenue

2017

2016

Change

2017

2016

Testing services

$ 887,349

$ 568,578

$ 318,771

94 %

85 %
Consulting services

59,516

99,878

(40,362 )

6 %

15 %
Total revenue

946,865

668,456

278,409

100 %

100 %

Cost of revenue

Testing services

$ 696,658

$ 559,277

$ 137,381

74 %

84 %
Consulting services

10,492

12,500

(2,008 )

1 %

2 %
Depreciation

29,113

18,302

10,811

3 %

3 %
Total cost of revenue

736,263

590,079

146,184

78 %

88 %

Gross Profit

$ 210,602

$ 78,377

$ 132,225

22 %

12 %

~~Revenues~~$867,814 compared to $735,179 for the three months ended ~~December~~March 31, ~~2017 were $946,865~~2019, an increase of $132,635 or approximately 18%. The increase was due primarily to increased testing sales in Oregon and California.

Gross Profit

For the three months ended March 31, 2020, the gross loss was $(152,632) compared to ~~$668,456~~a gross loss of $(421,863) for the three months ended ~~December~~March 31, ~~2016.~~2019 an increase of $269,231. The ~~increase~~reduced losses was primarily attributed to increased sales in ~~revenues during~~Oregon and decreased operating costs across all labs.

Operating Expenses

For the three months ended ~~December~~March 31, 2017 is the result of increased testing services resulting from acquisitions completed after the three months ended December 31, 2016, partially offset by decreased advisory services performed in the current period as2020, total operating expenses were $1,446,465 compared to ~~the prior period.~~

~~Cost of revenues~~$1,262,778 for the three months ended ~~December~~March 31, ~~2017 were $736,263~~2019, an increase of $183,697. The increase is primarily attributed to increase in sales, general and administrative expenses.

Other (Expense)

For the three months ended March 31, 2020, other expense, net was $1,383,589, compared to ~~$590,079~~other expense, net of $2,135,116 for the three months ended ~~December~~March 31, ~~2016.~~2019. The ~~increase~~decrease in ~~the cost~~other income, net of revenues during the three months ended December 31, 2017 is the result of the increased direct costs associated with providing testing services and increased costs of revenue associated with performing additional testing. Gross profit for the three months ended December 31, 2017$751,527 was ~~$210,602 compared to $78,377 during the three months ended December 31, 2016. The Company experienced an increase of $132,225 in gross profit~~ primarily attributable to ~~the Company’s ability to leverage fixed overhead costs in costs of revenue.~~

~~Operating Expenses~~

Percentage of Revenue

2017

2016

Change

2017

2016

Selling, general and administrative

$ 820,275

$ 435,158

$ 385,117

87 %

65 %
Depreciation and amortization

57,387

34,535

22,852

6 %

5 %

$ 877,662

$ 469,693

$ 407,969

93 %

70 %

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Total operating expenses during the three months ended December 31, 2017 were $877,662 compared to $469,693 during the three months ended December 31, 2016. The Company experienced an increase of $407,969 or 87% in selling, general and administrative expenses during the three months ended December 31, 2017 compared to the three months ended December 31, 2016 due to increased business size due to acquisitions and organic growth that has occurred during the period of January 1, 2017 to October 1, 2017. Additionally, total stock based compensation included in selling, general and administrative expenses was $258,703 during the three months ended December 31, 2017 compared to $166,924 during the same period in 2016. There was an increase of $22,852 in depreciation and amortization which was driven by the amortization of intangible assets and equipment associated with the acquisition completed during the period from January 1, 2017 to October 1, 2017.

~~Other Expenses (Income)~~

Percentage of Revenue

2017

2016

Change

2017

2016

Interest expense, net of interest income

$ 284,651

$ 323,422

$ (38,771 )

30 %

48 %
Loss on settlement of debt

56,093

-

56,093

6 %

0 %
(Gain) loss on change in fair market value of derivative liabilities

(13,322 )

106,243

(119,565 )

-1%

16 %

$ 327,422

$ 429,665

$ (102,243 )

35 %

64 %

~~Total other income (expense) was~~ a net expense of $327,422 during the three months ended December 31, 2017 compared to a net expense of $429,665 during the three months ended December 31, 2016. The decrease in net expense of $102,243 is from the decrease in the ~~loss on~~change in the fair market value of ~~derivatives~~derivative liabilities of ~~$119,565 combined with an increase in interest income of $26,214 which was present during the current period and not prior and a decrease in interest expense of $61,995 from the recognition~~$1,215,039, offset by increased cost of debt ~~discounts associated with convertible and non-convertible notes payable.~~discount amortization.

Net Loss

Percentage of Revenue

2017

2016

Change

2017

2016

Net loss

$ (994,482 )

$ (820,981 )

$ (173,501 )

-105%

-123%

Net loss during the three months ended ~~December~~March 31, ~~2017~~2020, was ~~$994,482~~$2,982,686, compared to ~~$820,981~~a net loss of $3,820,370 during the three months ended ~~December~~March 31, ~~2016.~~2019. The ~~increase~~reduction of $837,684 in net loss is ~~directed from~~ the result of an increase in gross margin and a reduction in other expenses, ~~partially offset by an increase in revenues and gross margins as described above.~~net.

Liquidity and Capital Resources

During the six months ended March 2020, the Company used $698,030 in cash from operating activities compared to cash used in operating activities of $1,078,049 for the six months ended March 31, 2019. The improvement of $535,401 is primarily attributable to a reduction in operating losses in 2019.

During the six months ended March 31, 2020, the Company used $44,674 in investing activities compared to $580,075 used in investing activities during the same period ended March 31, 2019. The reduction of $535,401 is attributable to a decrease in the purchase of fixed assets

During the six months ended March 31, 2020, net cash from financing activities was $648,477 compared to $1,631,419 during the same six month period ended March 31, 2019. The decrease in the 2019 period is primarily attributable a decrease in proceeds from the issuance of common stock, convertible debentures, and convertible notes, while the company increased its repayments of capital leases and loans.

Dividends

The Company had cash on hand of $221,820 as of December 31, 2017, current assets of $856,100 and current liabilities of $3,923,440 creating a working capital deficit of $3,067,340. Current assets consisted of cash totaling $221,820, accounts receivable net of allowances totaling $202,643, prepaid expenses totaling $149,685, other current assets of $33,952, current portions of a note receivable of $100,000 and subscription receivables totaling $148,000. Current liabilities consisted of accounts payable and accrued liabilities of $835,985, client deposits of $78,577, deferred revenue of $33,300, convertible notes payable net of discounts of $1,068,402, current capital lease obligations of $40,526, interest payable of $184,845, current portions of notes payable net of discounts of $1,438,450 and current portions of related party payables of $243,355.has never declared dividends.

The Company had cash on hand of $121,013 as of September 30, 2017, current assets of $627,572 and current liabilities of $4,428,578 creating a working capital deficit of $3,801,006. Current assets consisted of cash totaling $121,013, accounts receivable net of allowances totaling $229,564, prepaid expenses totaling $169,557, other current assets of $7,438 and current portion of a note receivable of $100,000. Current liabilities consisted of accounts payable and accrued liabilities of $773,053, client deposits of $119,281, deferred revenue of $40,800, convertible notes payable net of discounts of $1,212,720, current capital lease obligations of $37,990, interest payable of $133,697, derivative liabilities of $294,637, current portions of notes payable net of discounts of $1,503,545 and current portions of related party payables of $312,855.

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~~Three Months Ended December 31, 2017~~

~~The Company used $192,386 of cash in operating activities which consisted of a net loss of $994,482, non-cash losses of $622,362 and changes in working capital of $179,734.~~

~~Net cash used in investing activities totaled $6,952 during the three months ended December 31, 2017 which consisted solely of cash used to purchase equipment.~~

During the three months ended December 31, 2017, the Company generated cash of $300,145 from financing activities. The Company received $350,000 from the sale of common stock, made repayments of $9,391 on capital leases, repayments of $2,636 on loans payment and $37,828 on related party loans payable.

~~Three Months Ended December 31, 2016~~

~~The Company used $7,691 of cash in operating activities which consisted of a net loss of $820,981, non-cash losses of $621,415 and changes in working capital of $191,875.~~

Net cash used in investing activities totaled $33,244 during the three months ended December 31, 2016. The Company acquired net cash of $13,070 in asset purchases, paid $26,314 for the purchase of equipment and used net cash in acquisitions of $20,000.

During the three months ended December 31, 2016, the Company generated cash of $135,332 from financing activities. The Company received $114,500 of cash from the sale of series D preferred stock, $70,000 in cash from convertible notes payable, repayments of notes payable of $31,687 and net repayments on related party notes payable of $17,481.

~~Dividends~~

~~The Company declared $0 of dividends during the three months ended December 31, 2017 and 2016.~~

Critical Accounting Policies and Estimates.

Our ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared~~Critical Accounting Policies can be found in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.

~~While our significant accounting policies are more fully described in notes~~ Note 1. ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES to our consolidated financial statements appearing elsewhere in this Form 10-Q, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we used in the preparation of our financial statements.

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~~Table of Contents~~

~~Revenue Recognition:~~

EVIO recognizes revenue from the sale of services in accordance with ASC 606. The Company first identifies the promised goods or services in the contract and reduces the cost and complexity then evaluates whether promised goods and services are distinct. Specifically as it relates to certain licensing agreements whereby licensees have access to certain intellectual property of the Company, revenue is recognized ratably over the term of the agreement. In agreements were training and other support is required, revenue us recognized as services are performed.

~~Stock Based Compensation~~

Pursuant to Accounting Standards Codification (“ASC”) 505, the guidelines for recording stock issued for services require the fair value of the shares granted be based on the fair value of the services received or the publicly traded share price of the Company’s registered shares on the date the shares were granted (irrespective of the fact that the shares granted were unregistered), whichever is more readily determinable. This position has been further clarified by the issuance of ASC 820. ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. Accordingly, the Company elected the application of these guidelines. EVIO has determined that the fair value of all common stock issued for goods or services is more readily determinable based on the publicly traded share price on the date of grant.

~~Emerging Growth Company Status~~

We are an “emerging growth company” as defined under the Jumpstart Our Business Startups Act, commonly referred to as the JOBS Act. We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

As an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:

not being required to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act (we also will not be subject to the auditor attestation requirements of Section 404(b) as long as we are a “smaller reporting company,” which includes issuers that had a public float of less than $ 75 million as of the last business day of their most recently completed second fiscal quarter);

~~reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and~~

~~exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.~~

In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Under this provision, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. In other words, an “emerging growth company” can delay the adoption of such accounting standards until those standards would otherwise apply to private companies until the first to occur of the date the subject company (i) is no longer an “emerging growth company” or (ii) affirmatively and irrevocably opts out of the extended transition period provided in Securities Act Section 7(a) (2) (B). The Company has elected to take advantage of this extended transition period and, as a result, our financial statements may not be comparable to the financial statements of other public companies. Accordingly, until the date that we are no longer an “emerging growth company” or affirmatively and irrevocably opt out of the exemption provided by Securities Act Section 7(a) (2) (B), upon the issuance of a new or revised accounting standard that applies to your financial statements and has a different effective date for public and private companies, clarify that we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.

~~Table of Contents~~

~~Accounting and Audit Plan~~

~~In the next twelve months, we anticipate spending approximately $70,000 - $85,000 to pay for our accounting and audit requirements.~~

~~Off-balance sheet arrangements~~

~~On March 31, 2017, the Company entered into a long term operating lease requiring monthly payments of $10,275 for a period of 48 months terminating on March 31, 2021.~~

We have no other significant 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 that is material to stockholders.

Our Website.

Our website can be found at www.eviolabs.com.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company, as a smaller reporting company, as defined by Rule 229.10(f)(1), is not required to provide the information required by this Item.

ITEM 4 – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our principal executive and principal financial officers have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this ~~report.~~report for the reasons disclosed in our annual report on Form 10-K.

This ~~annual~~quarterly report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to Rule 308(b) of Regulation S-K, which permits the Company to provide only management’s report in this ~~Annual~~Quarterly Report.

(b) Changes in Internal Control over Financial Reporting

There were no ~~change~~changes in Internal Controls over ~~Financial Reporting~~financial reporting during the three months ended ~~December~~March 31, ~~2017.~~2020. Upon hiring additional financial staff, EVIO will prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions, and prepare, review, and submit SEC filings in a timely manner.

33
~~Table of Contents~~

PART II --— OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~None.~~From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

On May 9, 2019, Stephanie Head, a former part-time lab administrator for EVIO Labs Eugene, LLC, filed a wrongful termination lawsuit with the US District Court - District of Oregon, Eugene Division, Case No. 6:19-CV-00681, against EVIO Labs Eugene, LLC, EVIO, Inc., and Lori Glauser. In December 2018, EVIO Labs Eugene, LLC terminated Stephanie Head because she was not available to work full-time. In February 2019, Ms. Head filed complaint to Oregon Bureau of Labor & Industries (“BOLI”) with allegations that she was discriminated against and unlawfully terminated. In October, 2019 BOLI found substantial evidence of unlawful employment on the basis of protected whistle-blowing, but found no substantial evidence of Ms. Head’s seven other allegations of unlawful employment practice. In April 2019, BOLI notified EVIO Labs Eugene, LLC that BOLI elected not to pursue the charges further and closed the file. On January 28, 2020, the case was settled for $35,000, $25,000 payable in cash, and $10,000 in EVIO Common Stock.

On February 6, 2020, MC CRE Investments, LLC landlord for the Palm Desert location, filed a Breach of Lease Agreement with the Superior Court of the State of California, County of Riverside. EVIO Labs Palm Desert has vacated the space and turned it back over to the landlord. The Company has expensed past due rents and late fees and these items are included in the liabilities in the balance sheet.

On or about March 5, 2020, Paul Tomaso, and Jonah Barber beneficiaries for MRX Labs, LLC, filed a Breach of Promissory Note in the original principal amount of $750,000, plus late fees and penalties, with the Circuit Court of the State in Oregon, in Multnomah County against Greenhaus Analytical Labs, LLC. The Company has expensed penalties and late fees and these items are included in the liabilities in the balance sheet.

On or about April 30, 2020, Michele Malaret and Gordon Griswold filed, filed a Breach of Contract in the original principal amount of $500,000, with the Superior Court of California, County of Humboldt. The Company currently recognizes the full liability on its balance sheet. There is no interest due associated with the note.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

The above statement notwithstanding, shareholders and prospective investors should be aware that certain risks exist with respect to the Company and its business, including those risk factors contained in our most recent Registration Statements on Form S-1 and Form 10, as amended. These risks include, among others: limited assets, lack of significant revenues, and only losses since inception, industry risks, dependence on third party manufacturers/suppliers and the need for additional capital. The Company’s management is aware of these risks and has established the minimum controls and procedures to ~~insure~~ensure adequate risk assessment and execution to reduce loss exposure.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

There was no other information during the quarter ended ~~December~~March 31, ~~2017,~~2020, which was not previously disclosed in our filings during that period.

34
~~Table of Contents~~

ITEM 6. EXHIBITS

31.1		Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002
31.2		Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1		Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002
32.2		Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase


3536


~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on ~~February 13, 2018.~~September 9, 2020.

	EVIO, INC.

	By:	/s/ William Waldrop
		William Waldrop
		Chief Executive Officer,


	~~By:~~	~~/s/ Christian Carnell~~
		~~Christian Carnell~~
		Interim Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on ~~February 13, 2018.~~September 9, 2020.

	By:	/s/ William Waldrop
		William Waldrop
		Director & Principal Executive Officer

	By:	/s/ Lori Glauser
		Lori Glauser
		Director

	~~By:~~	~~/s/ Anthony Smith~~
		~~Anthony Smith~~
		~~Director~~

	~~By:~~	~~/s/ Henry Grimmett~~
		~~Henry Grimmett~~
		~~Director~~

	December 31, 2017			September 30, 2017
	(unaudited)
ASSETS

Current assets
Cash	$	221,820		$	121,013
Accounts receivable, net of allowance of $77,850 and $74,782		202,643			229,564
Prepaid expenses		149,685			169,557
Other current assets		33,952			7,438
Note receivable, current portion		100,000			100,000
Subscription receivable		148,000			-
Total current assets		856,100			627,572

Property and equipment, net of accumulated depreciation of $260,983 and $213,447, respectively		506,489			547,073
Security deposits		92,892			92,892
Note receivable, net of current portion		1,200,000			1,200,000
Intangible assets, net of accumulated amortization, net of accumulated amortization of $228,439 and $189,475		553,296			592,260
Goodwill		2,958,137			2,958,137

Total assets	$	6,166,914		$	6,017,934

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Accounts payable and accrued liabilities	$	835,985		$	773,053
Client deposits		78,577			119,281
Deferred revenue		33,300			40,800
Interest payable		184,845			133,697
Capital lease obligation, current		40,526			37,990
Derivative liability		-			294,637
Convertible notes payable, net of discounts of $33,998 and $208,680, respectively		1,068,402			1,212,720
Loans payable, current, net of discounts of $73,568 and $127,662		1,438,450			1,503,545
Loans payable, related party, current		243,355			312,855
Total current liabilities		3,923,440			4,428,578

Capital lease obligation, net of current portion		40,850			52,777
Loans payable, net of current portion		56,385			59,832
Loans payable, related party, net of current portion, net of discounts of $35,471 and $42,044, respectively		1,235,523			1,251,306
Total liabilities		5,256,198			5,792,493

Stockholders’ equity
Series A Convertible Preferred Stock, Par Value $0.0001; 1,850,000 authorized; 0 shares issued and outstanding at December 31, 2017 and September 30, 2017, respectively		-			-
Series B Convertible Preferred Stock, Par Value $0.0001; 5,000,000 authorized; 5,000,000 shares issued and outstanding at December 31, 2017 and September 30, 2017, respectively		500			500
Series C Convertible Preferred Stock, Par Value $0.0001; 500,000 authorized; 500,000 shares issued and outstanding at December 31, 2017 and September 30, 2017, respectively		50			50
Series D Convertible Preferred Stock, Par Value $.0001; 1,000,000 authorized; 744,772 and 832,500 shares issued and outstanding at December 31, 2017 and September 30, 2017, respectively		74			83
Common Stock, Par Value $.0001, 1,000,000,000 authorized; 13,890,028 and 10,732,922 issued and outstanding at December 31, 2017 and September 30, 2017, respectively		1,389			1,073
Additional paid in capital		9,337,432			7,657,982
Accumulated deficit		(8,578,963	)		(7,592,371	)
Total stockholders’ equity		760,482			67,317
Non-controlling interest		150,234			158,124
Total equity		910,716			225,441

Total liabilities and stockholders’ equity	$	6,166,914		$	6,017,934

	Three months ended December 31,
	2017			2016
Revenues
Testing services	$	887,349		$	568,578
Consulting services		59,516			99,878
Total revenue		946,865			668,456

Cost of revenue
Testing services		696,658			559,277
Consulting services		10,492			12,500
Depreciation and amortization		29,113			18,302
Total cost of revenue		736,263			590,079

Gross margin		210,602			78,377

Operating expenses
Selling, general and administrative		820,275			435,158
Depreciation and amortization		57,387			34,535
Total operating expenses		877,662			469,693

Loss from operations		(667,060	)		(391,316	)

Other income (expense)
Interest expense, net of interest income		(284,651	)		(323,422	)
Loss on settlement of debt and account payable		(56,093	)		-
Gain (loss) on change in fair market value of derivative liabilities		13,322			(106,243	)
Total other income (expense)		(327,422	)		(429,665	)

Net loss	$	(994,482	)	$	(820,981	)
Income (loss) attributable to non-controlling interest		(7,890	)		4,736
Net loss attributable to EVIO, Inc.	$	(986,592	)	$	(825,717	)

Basic and diluted loss per common share	$	(0.08	)	$	(0.09	)

Weighted average common shares outstanding		11,713,103			8,833,481

Year ended September 30,	Principal		Interest		Total
2018	$	31,307	$	10,399	$	41,706
2019		39,214		5,354		44,568
2020		10,855		298		11,153
Total	$	81,376	$	16,051	$	97,427

For the years ended September 30,	Amortization
2018	$	122,755
2019		149,651
2020		149,651
2021		107,476
2022		9,722
Thereafter		24,041
Total	$	533,296

	December 31, 2017			September 30, 2017
On March 16, 2017, the Company executed notes payable for the purchase of three vehicles. The notes carry interest at 6.637% annually and mature on March 31, 2023.	$	68,403		$	71,039

On August 1, 2017, the Company entered into a note payable totaling $500,000 for the acquisition of Viridis (see note 3). The note carries interest at 8% annually and is due on July 1, 2018.		500,000			500,000

On September 6, 2017, the Company entered into a note payable totaling $1,000,000 for the purchase of an outstanding note receivable. The note carries interest at 8% annually and is due on July 6, 2018.		1,000,000			1,000,000

On August 31, 2017, the Company executed a note payable for $120,000 of which $20,000 was an original issue discount resulting in cash proceeds of $100,000. The note carries interest at 8% annually and is due on March 3, 2018.		-			120,000
		1,568,403			1,691,039
Less: unamortized original issue discounts		(73,568	)		(127,662	)
Total loans payable		1,494,835			1,563,377
Less: current portion of loans payable		1,438,450			1,503,545

Long-term portion of loans payable	$	56,385		$	59,832

Fair Value of Embedded Derivative Liabilities:
Balance, September 30, 2016	$	775,246
Initial measurement of derivative liabilities		1,312,384
Change in fair market value		(195,907	)
Write off due to conversion		(1,597,086	)
Balance, September 30, 2017	$	294,637

Three months ended December 31, 2017	Corporate			Consulting Services			Testing Services			Total Consolidated
Revenue	$	-		$	59,516		$	887,349		$	946,865
Segment income (loss) from operations		(195,286	)		(356,585	)		(115,189	)		(667,060	)
Total assets		297,459			1,534,332			4,335,123			6,166,914
Capital expenditures		-			(1,038	)		(5,914	)		(6,952	)
Depreciation and amortization		-			5,974			80,526			86,500

Three months ended December 31, 2016	Corporate			Consulting Services			Testing Services			Total Consolidated
Revenue	$	-		$	99,878		$	568,578		$	668,456
Segment income (loss) from operations		(215,342	)		12,365			(188,339	)		(391,316	)
Total assets		50,562			143,370			3,684,608			3,878,540
Capital expenditures		-			(1,038	)		(25,276	)		(26,314	)
Depreciation and amortization		-			5,974			46,863			52,837

	Shares			Weighted- Average Exercise Price Per Share
Outstanding, September 30, 2016		315,000		$	0.449
Granted		380,000			1.295
Exercised		-			-
Forfeited		(40,000	)		1.075
Expired		-			-
Outstanding, September 30, 2017		655,000		$	0.902

Year ending September 30,
2018		258,915
2019		303,811
2020		265,392
2021		203,742
2022		118,410
Total	$	1,150,270

	·	~~17,500 common shares valued at $23,800 for the vesting of restricted stock grants for consultants~~

	·	50,000 common shares valued at $68,000 subject to vesting requirements of an employment agreement with our President. The agreement requires a total of 450,000 common shares be issued which vest in quarterly amounts of 50,000 shares from January 2018 to December 2018 then 62,500 quarterly for January 2019 to December 2019 so that a total of 450,000 common shares are earned over the course of two years.

								Percentage of Revenue
	2017		2016		Change			2017			2016
Testing services	$	887,349	$	568,578	$	318,771			94	%		85	%
Consulting services		59,516		99,878		(40,362	)		6	%		15	%
Total revenue		946,865		668,456		278,409			100	%		100	%

Cost of revenue
Testing services	$	696,658	$	559,277	$	137,381			74	%		84	%
Consulting services		10,492		12,500		(2,008	)		1	%		2	%
Depreciation		29,113		18,302		10,811			3	%		3	%
Total cost of revenue		736,263		590,079		146,184			78	%		88	%

Gross Profit	$	210,602	$	78,377	$	132,225			22	%		12	%