UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,December 31, 2021
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
000-56090
Commission File Number
PHARMAGREEN BIOTECH INC. |
(Exact name of registrant as specified in its charter) |
Nevada |
| 98-0491567 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
2987 Blackbear Court, Coquitlam, |
| V3E 3A2 |
(Address of principal executive offices) |
| (Zip Code) |
702-803-9404
(Registrant’s telephone number, including area code)
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 ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 ☐☒ 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 |
|
Accelerated filer | ☐ | Smaller reporting company | ☒ |
|
| Emerging Growth | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 12, 2021,February 21, 2022, we had 355,831,269397,221,269 shares of common stock issued and outstanding.
TABLE of CONTENTS
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3 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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2 |
Table of Contents |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
PHARMAGREEN BIOTECH INC.
Condensed Consolidated Financial Statements
For the NineThree Months Ended June 30,December 31, 2021
(Expressed in U.S. Dollars)
(Unaudited)
3 |
Table of Contents |
PHARMAGREEN BIOTECH INC.
Condensed Consolidated Balance Sheets
(Expressed in U.S. dollars)
|
| June 30, 2021 |
| September 30, 2020 |
|
| December 31, 2021 |
| September 30, 2021 |
| ||||||
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| $ |
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| $ |
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| $ |
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| $ |
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| (Unaudited) |
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| (Unaudited) |
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Assets |
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Current assets |
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Cash |
| 19,218 |
| 12,196 |
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| 10,474 |
| 25,300 |
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Amounts receivable |
| 88 |
| 295 |
|
| 62 |
| 290 |
| ||||||
Prepaid expenses and deposits |
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| 0 |
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| 253,754 |
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Prepaid expenses and deposits (Note 11) |
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| 347,217 |
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| 347,491 |
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Total assets |
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| 19,306 |
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| 266,245 |
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| 357,753 |
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| 373,081 |
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Liabilities and Stockholders’ Deficit |
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Current liabilities |
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Accounts payable and accrued liabilities (Notes 3 and 7) |
| 624,461 |
| 539,663 |
|
| 699,454 |
| 659,437 |
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Advances from Alliance Growers Corp. (Note 11(a)) |
| 60,450 |
| 56,303 |
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Advances from Alliance Growers Corp. (Note 12(a)) |
| 59,258 |
| 59,122 |
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Loans payable (Note 4) |
| 40,000 |
| 40,000 |
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Convertible notes – current portion (Note 5) |
| 190,834 |
| 190,834 |
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Derivative liabilities (Note 6) |
| 237,729 |
| 472,003 |
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Due to related parties (Note 7) |
| 607,827 |
| 508,874 |
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| 673,680 |
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| 605,019 |
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Note payable (Note 4) |
| 40,000 |
| 40,000 |
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Convertible notes – current portion, net of unamortized discount of $Nil and $182,012, respectively (Note 5) |
| 190,834 |
| 641,077 |
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Derivative liabilities (Note 6) |
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| 298,301 |
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| 1,380,957 |
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Total current liabilities |
| 1,821,873 |
| 3,166,874 |
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| 1,900,955 |
| 2,026,415 |
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Loan payable (Note 4) |
| 32,240 |
| 30,028 |
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| 31,604 |
| 31,532 |
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Convertible notes, net of unamortized discount of $20,696 and $23,619, respectively (Note 5) |
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| 6,371 |
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| 3,448 |
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Convertible notes, net of unamortized discount of $17,434 and $19,233, respectively (Note 5) |
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| 9,633 |
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| 7,834 |
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Total liabilities |
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| 1,860,484 |
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| 3,200,350 |
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| 1,942,192 |
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| 2,065,781 |
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Stockholders’ deficit |
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Preferred stock |
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Authorized: 1,000,000 shares, $0.001 par value; 10,000 and nil shares issued and outstanding, respectively |
| 10 |
| 0 |
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| 10 |
| 10 |
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Common stock |
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Authorized: 2,000,000,000 shares, $0.001 par value; 355,129,269 and 95,806,289 shares issued and outstanding, respectively |
| 355,129 |
| 95,806 |
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Common stock issuable (Note 8) |
| 121,500 |
| 180,000 |
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Authorized: 2,000,000,000 shares, $0.001 par value; 385,171,269 and 381,171,269 shares issued and outstanding, respectively |
| 385,171 |
| 381,171 |
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Additional paid-in capital |
| 8,628,541 |
| 3,967,261 |
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| 9,768,572 |
| 9,680,572 |
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Accumulated other comprehensive income (loss) |
| (31,735 | ) |
| 36,679 |
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Accumulated other comprehensive loss |
| (10,841 | ) |
| (8,378 | ) | ||||||||||
Deficit |
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| (10,867,990 | ) |
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| (7,167,346 | ) |
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| (11,680,693 | ) |
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| (11,699,417 | ) |
Total Pharmagreen Biotech Inc. stockholders’ deficit |
| (1,794,545 | ) |
| (2,887,600 | ) |
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| (1,537,781 | ) |
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| (1,646,042 | ) | ||
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Non-controlling interest |
|
| (46,633 | ) |
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| (46,505 | ) |
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| (46,658 | ) |
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| (46,658 | ) |
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Total stockholders’ deficit |
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| (1,841,178 | ) |
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| (2,934,105 | ) |
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| (1,584,439 | ) |
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| (1,692,700 | ) |
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Total liabilities and stockholders’ deficit |
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| 19,306 |
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| 266,245 |
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| 357,753 |
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| 373,081 |
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Nature of business and continuance of operations (Note 1) |
Contingency (Note 4) |
Commitments (Note |
Subsequent event (Note |
(The accompanying notes are an integral part of these condensed consolidated financial statements)
4 |
Table of Contents |
PHARMAGREEN BIOTECH INC.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Expressed in U.S. dollars)
(Unaudited)
|
| Three months ended June 30, 2021 $ |
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| Three months ended June 30, 2020 $ |
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| Nine months ended June 30, 2021 $ |
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| Nine months ended June 30, 2020 $ |
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| Three months ended December 31, 2021 $ |
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| Three months ended December 31, 2020 $ |
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Expenses |
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Consulting fees (Note 7) |
| 190,794 |
| 30,108 |
| 296,987 |
| 153,999 |
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| 139,528 |
| 50,140 |
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Foreign exchange loss (gain) |
| (3,044 | ) |
| (15,824 | ) |
| (16,951 | ) |
| 6,025 |
|
| 576 |
| (11,106 | ) | |||||||
General and administrative |
| 20,716 |
| 28,704 |
| 64,376 |
| 91,688 |
|
| 27,213 |
| 24,412 |
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Professional fees |
| 18,829 |
| 40,068 |
| 111,788 |
| 89,915 |
|
| 31,459 |
| 33,508 |
| ||||||||||
Salaries and wages |
| 5,085 |
|
| 3,858 |
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| 14,753 |
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| 13,005 |
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| 4,884 |
| 4,670 |
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Total expenses |
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| 232,380 |
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| 86,914 |
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| 470,953 |
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| 354,632 |
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| 203,660 |
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| 101,624 |
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Net loss before other income (expense) |
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| (232,380 | ) |
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| (86,914 | ) |
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| (470,953 | ) |
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| (354,632 | ) |
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| (203,660 | ) |
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| (101,624 | ) |
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Other income (expense) |
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Accretion of discount on convertible notes (Note 5) |
| (1,179 | ) |
| (54,877 | ) |
| (86,801 | ) |
| (77,889 | ) |
| (1,799 | ) |
| (72,376 | ) | ||||||
Interest and finance costs (Notes 4 and 5) |
| (10,091 | ) |
| (36,230 | ) | ||||||||||||||||||
Gain (loss) on change in fair value of derivative liabilities (Note 6) |
| 101,418 |
| (1,187,033 | ) |
| (3,083,420 | ) |
| (1,347,031 | ) |
| 234,274 |
| (674,912 | ) | ||||||||
Gain (loss) on settlement on convertible notes (Note 5) |
| 0 |
| (31,898 | ) |
| 613,526 |
| (38,411 | ) | ||||||||||||||
Interest and finance costs (Note 5) |
| (10,087 | ) |
| 0 |
| (673,124 | ) |
| (45,000 | ) | |||||||||||||
Write-off of accounts payable |
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| 0 |
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| 0 |
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| 0 |
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| 292,557 |
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Gain on settlement on convertible notes |
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| 0 |
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| 468,032 |
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Total other income (expense) |
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| 90,152 |
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| (1,273,808 | ) |
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| (3,229,819 | ) |
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| (1,215,774 | ) |
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| 222,384 |
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| (315,486 | ) |
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Net loss |
| (142,228 | ) |
| (1,360,722 | ) |
| (3,700,772 | ) |
| (1,570,406 | ) | ||||||||||||
Net income (loss) |
| 18,724 |
| (417,110 | ) | |||||||||||||||||||
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Less: net loss attributable to non-controlling interest |
|
| 83 |
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| 8 |
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| 128 |
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| 161 |
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| 0 |
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| 1 |
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Net loss attributable to Pharmagreen Biotech Inc. |
| (142,145 | ) |
| (1,360,714 | ) |
| (3,700,644 | ) |
| (1,570,245 | ) | ||||||||||||
Net income (loss) attributable to Pharmagreen Biotech Inc. |
| 18,724 |
| (417,109 | ) | |||||||||||||||||||
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Comprehensive income (loss) |
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Comprehensive loss |
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Foreign currency translation gain (loss) |
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| (13,215 | ) |
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| (17,081 | ) |
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| (68,414 | ) |
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| 2,045 |
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Foreign currency translation loss |
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| (2,463 | ) |
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| (42,455 | ) | ||||||||||||||||
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Comprehensive loss attributable to Pharmagreen Biotech Inc. |
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| (155,360 | ) |
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| (1,377,795 | ) |
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| (3,769,058 | ) |
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| (1,568,200 | ) | ||||||||
Comprehensive income (loss) attributable to Pharmagreen Biotech Inc. |
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| 16,261 |
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| (459,564 | ) | ||||||||||||||||
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Basic and diluted loss per share attributable to Pharmagreen Biotech Inc. stockholders |
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| 0 |
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| (0.02 | ) |
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| (0.01 | ) |
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| (0.02 | ) | ||||||||
Basic and diluted income (loss) per share attributable to Pharmagreen Biotech Inc. stockholders |
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| 0.00 |
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| (0.00 | ) | ||||||||||||||||
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Weighted average number of shares outstanding used in the calculation of net loss per share attributable to Pharmagreen Biotech Inc. |
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| 351,763,390 |
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| 82,854,083 |
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| 271,420,624 |
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| 78,042,762 |
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| 384,214,747 |
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| 157,102,642 |
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
5 |
Table of Contents |
PHARMAGREEN BIOTECH INC.
Condensed Consolidated Statements of Stockholders’ Deficit
(Expressed in U.S. dollars)
(Unaudited)
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| Preferred stock |
| Common stock |
| Common stock |
| Additional paid-in |
| Accumulated other comprehensive |
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| Non -controlling |
| Total stockholders’ |
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| Preferred stock |
| Common stock |
| Common stock |
| Additional paid-in |
| Accumulated other comprehensive |
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| Non -controlling |
| Total stockholders’ |
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| Number of shares |
| Amount $ |
| Number of shares |
| Amount $ |
| issuable $ |
| capital $ |
| income (loss) $ |
| Deficit $ |
| interest $ |
| deficit $ |
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| Number of shares |
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| Amount $ |
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| Number of shares |
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| Amount $ |
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| issuable $ |
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| capital $ |
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| income (loss) $ |
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| Deficit $ |
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| interest $ |
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| deficit $ |
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Balance, September 30, 2019 |
| – |
| 0 |
| 75,646,835 |
| 75,647 |
| 0 |
| 3,772,781 |
| 47,824 |
| (4,729,476 | ) |
| (1,274 | ) |
| (834,498 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2020 |
| – |
| 0 |
| 95,806,289 |
| 95,806 |
| 180,000 |
| 3,967,261 |
| 36,679 |
| (7,167,346 | ) |
| (46,505 | ) |
| (2,934,105 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Issuance of units for cash |
| – |
| 0 |
| 5,400,000 |
| 5,400 |
| 0 |
| 21,600 |
| 0 |
| 0 |
| 0 |
| 27,000 |
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Issuance of preferred shares for cash |
| 10,000 |
| 10 |
| – |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 10 |
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Issuance of common stock pursuant to the conversion of convertible notes |
| – |
| 0 |
| 144,315,380 |
| 144,316 |
| (180,000 | ) |
| 1,647,737 |
| 0 |
| 0 |
| 0 |
| 1,612,053 |
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Issuance of common stock for services |
| – |
| 0 |
| 90,000 |
| 90 |
| 0 |
| 1,265 |
| 0 |
| 0 |
| 0 |
| 1,355 |
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Foreign currency translation loss |
| – |
| 0 |
| – |
| 0 |
| 0 |
| 0 |
| (12,399 | ) |
| 0 |
| 0 |
| (12,399 | ) |
| – |
| 0 |
| – |
| 0 |
| 0 |
| 0 |
| (42,455 | ) |
| 0 |
| 0 |
| (42,455 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
Net loss for the period |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (206,021 | ) |
|
| (36 | ) |
|
| (206,057 | ) |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (417,109 | ) |
|
| (1 | ) |
|
| (417,110 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2019 |
| – |
| 0 |
| 75,646,835 |
| 75,647 |
| 0 |
| 3,772,781 |
| 35,425 |
| (4,935,497 | ) |
| (1,310 | ) |
| (1,052,954 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock pursuant to the conversion of convertible notes |
| – |
| 0 |
| 78,064 |
| 78 |
| 0 |
| 20,999 |
| 0 |
| 0 |
| 0 |
| 21,077 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain |
| – |
| 0 |
| – |
| 0 |
| 0 |
| 0 |
| 31,525 |
| 0 |
| 0 |
| 31,525 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (3,510 | ) |
|
| (117 | ) |
|
| (3,627 | ) | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2020 |
| – |
| 0 |
| 75,724,899 |
| 75,725 |
| 0 |
| 3,793,780 |
| 66,950 |
| (4,939,007 | ) |
| (1,427 | ) |
| (1,003,979 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock pursuant to the conversion of convertible notes |
| – |
| 0 |
| 15,420,104 |
| 15,420 |
| 0 |
| 126,910 |
| 0 |
| 0 |
| 0 |
| 142,330 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation loss |
| – |
| 0 |
| – |
| 0 |
| 0 |
| 0 |
| (17,081 | ) |
| 0 |
| 0 |
| (17,081 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (1,360,714 | ) |
|
| (8 | ) |
|
| (1,360,722 | ) | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2020 |
|
| – |
|
|
| 0 |
|
|
| 91,145,003 |
|
|
| 91,145 |
|
|
| 0 |
|
|
| 3,920,690 |
|
|
| 49,869 |
|
|
| (6,299,721 | ) |
|
| (1,435 | ) |
|
| (2,239,452 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2020 |
|
| 10,000 |
|
|
| 10 |
|
|
| 245,611,669 |
|
|
| 245,612 |
|
|
| 0 |
|
|
| 5,637,863 |
|
|
| (5,776 | ) |
|
| (7,584,455 | ) |
|
| (46,506 | ) |
|
| (1,753,252 | ) |
(The accompanying notes are an integral part of these condensed consolidated financial statements)
6 |
Table of Contents |
PHARMAGREEN BIOTECH INC.
Condensed Consolidated Statements of Stockholders’ Deficit (continued)
(Expressed in U.S. dollars)
(Unaudited)
|
| Preferred stock |
|
| Common stock |
|
| Common stock |
|
| Additional paid-in |
|
| Accumulated other comprehensive |
|
|
|
|
| Non -controlling |
|
| Total stockholders’ |
| ||||||||||||||||
|
| Number of shares |
|
| Amount $ |
|
| Number of shares |
|
| Amount $ |
|
| issuable $ |
|
| capital $ |
|
| income (loss) $ |
|
| Deficit $ |
|
| interest $ |
|
| deficit $ |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Balance, September 30, 2020 |
|
| – |
|
|
| 0 |
|
|
| 95,806,289 |
|
|
| 95,806 |
|
|
| 180,000 |
|
|
| 3,967,261 |
|
|
| 36,679 |
|
|
| (7,167,346 | ) |
|
| (46,505 | ) |
|
| (2,934,105 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of units for cash |
|
| – |
|
|
| 0 |
|
|
| 5,400,000 |
|
|
| 5,400 |
|
|
| 0 |
|
|
| 21,600 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 27,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred shares for cash |
|
| 10,000 |
|
|
| 10 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock pursuant to the conversion of convertible notes |
|
| – |
|
|
| 0 |
|
|
| 144,315,380 |
|
|
| 144,316 |
|
|
| (180,000 | ) |
|
| 1,647,737 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,612,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services |
|
| – |
|
|
| 0 |
|
|
| 90,000 |
|
|
| 90 |
|
|
| 0 |
|
|
| 1,265 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (42,455 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (42,455 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (417,109 | ) |
|
| (1 | ) |
|
| (417,110 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
|
| 10,000 |
|
|
| 10 |
|
|
| 245,611,669 |
|
|
| 245,612 |
|
|
| 0 |
|
|
| 5,637,863 |
|
|
| (5,776 | ) |
|
| (7,584,455 | ) |
|
| (46,506 | ) |
|
| (1,753,252 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of units for cash |
|
| – |
|
|
| 0 |
|
|
| 17,411,250 |
|
|
| 17,411 |
|
|
| 6,113 |
|
|
| 72,701 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 96,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock pursuant to the conversion of convertible notes |
|
| – |
|
|
| 0 |
|
|
| 84,845,100 |
|
|
| 84,845 |
|
|
| 0 |
|
|
| 2,848,372 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,933,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services |
|
| – |
|
|
| 0 |
|
|
| 300,000 |
|
|
| 300 |
|
|
| 0 |
|
|
| 7,020 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 7,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (12,744 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (12,744 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (3,141,390 | ) |
|
| (44 | ) |
|
| (3,141,434 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021 |
|
| 10,000 |
|
|
| 10 |
|
|
| 348,168,019 |
|
|
| 348,168 |
|
|
| 6,113 |
|
|
| 8,565,956 |
|
|
| (18,520 | ) |
|
| (10,725,845 | ) |
|
| (46,550 | ) |
|
| (1,870,668 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of units for cash |
|
| – |
|
|
| 0 |
|
|
| 6,961,250 |
|
|
| 6,961 |
|
|
| (6,113 | ) |
|
| 62,585 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 63,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issuable for services |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 121,500 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 121,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (13,215 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (13,215 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (142,145 | ) |
|
| (83 | ) |
|
| (142,228 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021 |
|
| 10,000 |
|
|
| 10 |
|
|
| 355,129,269 |
|
|
| 355,129 |
|
|
| 121,500 |
|
|
| 8,628,541 |
|
|
| (31,735 | ) |
|
| (10,867,990 | ) |
|
| (46,633 | ) |
|
| (1,841,178 | ) |
|
| Preferred stock |
|
| Common stock |
|
| Common stock |
|
| Additional paid-in |
|
| Accumulated other comprehensive |
|
|
|
| Non -controlling |
|
| Total stockholders’ |
| |||||||||||||||||
|
| Number of shares |
|
| Amount $ |
|
| Number of shares |
|
| Amount $ |
|
| issuable $ |
|
| capital $ |
|
| income (loss) $ |
|
| Deficit $ |
|
| interest $ |
|
| deficit $ |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Balance, September 30, 2021 |
|
| 10,000 |
|
|
| 10 |
|
|
| 381,171,269 |
|
|
| 381,171 |
|
|
| 0 |
|
|
| 9,680,572 |
|
|
| (8,378 | ) |
|
| (11,699,417 | ) |
|
| (46,658 | ) |
|
| (1,692,700 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for cash, net of issuance costs |
|
| – |
|
|
| 0 |
|
|
| 4,000,000 |
|
|
| 4,000 |
|
|
| 0 |
|
|
| 88,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 92,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (2,463 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (2,463 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period |
|
| – |
|
|
| 0 |
|
|
| – |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
| 18,724 |
|
|
| 0 |
|
|
| 18,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021 |
|
| 10,000 |
|
|
| 10 |
|
|
| 385,171,269 |
|
|
| 385,171 |
|
|
| 0 |
|
|
| 9,768,572 |
|
|
| (10,841 | ) |
|
| (11,680,693 | ) |
|
| (46,658 | ) |
|
| (1,584,439 | ) |
(The accompanying notes are an integral part of these condensed consolidated financial statements)
7 |
Table of Contents |
PHARMAGREEN BIOTECH INC.
Condensed Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
(Unaudited)
|
| Nine months ended June 30, 2021 $ |
| Nine months ended June 30, 2020 $ |
|
| Three months ended December 31, 2021 $ |
|
| Three months ended December 31, 2020 $ |
| |||||
|
|
|
|
|
|
|
|
|
|
| ||||||
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
| |||||||||||
Net loss |
| (3,700,772 | ) |
| (1,570,406 | ) | ||||||||||
Net income (loss) |
| 18,724 |
| (417,110 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Accretion of discount on convertible notes |
| 86,801 |
| 77,889 |
|
| 1,799 |
| 72,376 |
| ||||||
Financing fees and default penalties |
| 673,124 |
| 45,000 |
| |||||||||||
Loss on change in fair value of derivative liabilities |
| 3,083,420 |
| 1,347,031 |
| |||||||||||
Loss (gain) on settlement of convertible notes |
| (613,526 | ) |
| 38,411 |
| ||||||||||
Shares issued or issuable for services |
| 130,175 |
| 0 |
| |||||||||||
Write-off of accounts payable |
| 0 |
| (292,557 | ) | |||||||||||
(Gain) loss on change in fair value of derivative liabilities |
| (234,274 | ) |
| 674,912 |
| ||||||||||
Gain on settlement of convertible note |
| 0 |
| (468,032 | ) | |||||||||||
Shares issued for services |
| 0 |
| 1,355 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Changes in operating assets and liabilities: |
|
|
|
|
| |||||||||||
Changes in non-cash operating assets and liabilities: |
|
|
|
|
| |||||||||||
Amounts receivable |
| 207 |
| 9,849 |
|
| 228 |
| 498 |
| ||||||
Prepaid expenses and deposits |
| 3,754 |
| (236,798 | ) |
| 274 |
| 0 |
| ||||||
Accounts payable and accrued liabilities |
| 120,273 |
| 21,189 |
|
| 40,017 |
| 93,862 |
| ||||||
Due to related parties |
|
| 65,307 |
|
|
| 13,840 |
|
|
| 24,702 |
|
|
| 37,759 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net cash used in operating activities |
|
| (151,237 | ) |
|
| (546,552 | ) |
|
| (148,530 | ) |
|
| (4,380 | ) |
|
|
|
|
|
|
|
|
|
|
| ||||||
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Proceeds from issuance of convertible notes |
| 0 |
| 570,080 |
| |||||||||||
Proceeds from units issued and issuable for cash |
| 186,725 |
| 0 |
| |||||||||||
Proceeds from issuance of units |
| 0 |
| 27,000 |
| |||||||||||
Proceeds from issuance of preferred shares |
| 10 |
| 0 |
|
| 0 |
| 10 |
| ||||||
Proceeds from issuance of shares, net of issuance costs |
| 92,000 |
| 0 |
| |||||||||||
Proceeds from loans from related parties |
| 50,000 |
| 33,646 |
| |||||||||||
Repayment of loans from related parties |
| 0 |
| (128,813 | ) |
| (6,041 | ) |
| 0 |
| |||||
Proceeds from related party loans |
| 33,646 |
| 64,981 |
| |||||||||||
Proceeds from loans payable |
| 0 |
| 29,388 |
| |||||||||||
Financing costs |
|
| 0 |
|
|
| (5,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Net cash provided by financing activities |
|
| 220,381 |
|
|
| 530,636 |
|
|
| 135,959 |
|
|
| 60,656 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Effect of foreign exchange rate changes on cash |
|
| (62,122 | ) |
|
| (12,184 | ) |
|
| (2,255 | ) |
|
| (38,708 | ) |
|
|
|
|
|
|
|
|
|
|
| ||||||
Change in cash |
| 7,022 |
| (28,100 | ) |
| (14,826 | ) |
| 17,568 |
| |||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash, beginning of period |
|
| 12,196 |
|
|
| 62,682 |
|
|
| 25,300 |
|
|
| 12,196 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash, end of period |
|
| 19,218 |
|
|
| 34,582 |
|
|
| 10,474 |
|
|
| 29,764 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Original issue discount on convertible notes |
| 0 |
| 532,594 |
| |||||||||||
Common shares issued for settlement of convertible notes |
| 4,545,270 |
| 163,407 |
| |||||||||||
Issuance of promissory note as a financing fee |
|
| 0 |
|
|
| 40,000 |
| ||||||||
Common stock issuable pursuant to conversion of convertible notes |
|
| 0 |
|
|
| 1,612,053 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Supplemental disclosures: |
|
|
|
|
|
|
|
|
|
| ||||||
Interest paid |
| 0 |
| 4,601 |
|
| 0 |
| 0 |
| ||||||
Income taxes paid |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
(The accompanying notes are an integral part of these condensed consolidated financial statements)
8 |
Table of Contents |
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30,December 31, 2021
(Expressed in U.S. dollars)
(unaudited)
1. | Nature of Business and Continuance of Operations |
|
|
| Pharmagreen Biotech Inc. (“the Company”) was incorporated under the laws of the State of Nevada, U.S. on November 26, 2007, under the name Azure International, Inc. On October 30, 2008, and effective as of the same date, the Company filed Articles of Merger (“Articles”) with the Secretary of State of the State of Nevada, to effect a merger by and between Air Transport Group Holdings, Inc., a Nevada corporation and Azure International, Inc. As a result of the merger, the Company changed its name to Air Transport Group Holdings, Inc. The Company was previously in the business of providing technical advisory and appraisals to the aircraft and aviation business as well as providing sourcing for aircraft leases and parts. Pursuant to a Share Exchange Agreement with WFS Pharmagreen Inc. (“WFS”) on May 2, 2018, the Company changed its name to Pharmagreen Biotech Inc. and changed its principal business to the production of starter plantlets for the North American high CBD hemp and medical cannabis industries through the application of the proprietary plant tissue culture in vitro process called “Chibafreen”. This proprietary process will produce plantlets that will be genetically identical and free of pests and disease free with consistent and certifiable constituent properties.
Going Concern
These condensed consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As at
The outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the U.S. and global economies, disruptions of financial markets, and created uncertainty regarding potential impacts to the Company’s supply chain, operations, and customer demand. The COVID-19 pandemic has impacted and could further impact the Company’s operations and the operations of the Company’s suppliers and vendors as a result of quarantines, facility closures, and travel and logistics restrictions. Specifically, the Company attributes the pandemic to a delay in a planned financing which was to be used for the construction of the biotech complex, resulting in an impairment of the capitalized construction-in-progress at September 30, 2020. The extent to which the COVID-19 pandemic further impacts the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on the Company’s customers, suppliers, and vendors and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume. The management team is closely following the progression of COVID-19 and its impact on the Company. Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future. Therefore, the Company cannot reasonably estimate the impact at this time our business, liquidity, capital resources, and financial results. |
9 |
Table of Contents |
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30,December 31, 2021
(Expressed in U.S. dollars)
(unaudited)
2. | Significant Accounting Policies |
| (a) | Interim Financial Statements |
|
|
|
|
| These condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. |
|
|
|
| (b) | Basis of Presentation |
|
|
|
|
| The accompanying condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. These condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, WFS Pharmagreen Inc. (“WFS”), and its 89.7% owned subsidiary 1155097 B.C. Ltd. (“115BC”), companies incorporated in British Columbia, Canada. All inter-company accounts and transactions have been eliminated. The Company’s fiscal year-end is September 30. |
|
|
|
| (c) | Use of Estimates and Judgments |
|
|
|
|
| The preparation of these condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the
The Company applies judgment in the application of the going concern assumption which requires management to take into account all available information about the future, which is at least, but not limited to, 12 months from the end of the reporting |
|
|
|
| (d) | Recently Adopted Accounting Pronouncements |
|
|
|
|
| The Company has implemented all new accounting pronouncements that are in effect and that may impact its condensed consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. |
10 |
Table of Contents |
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30,December 31, 2021
(Expressed in U.S. dollars)
(unaudited)
3. | Accounts Payable and Accrued Liabilities |
|
|
| Accounts payable and accrued liabilities consists of the following: |
|
| June 30, 2021 $ |
|
| September 30, 2020 $ |
| ||
|
|
|
|
|
|
| ||
Accounts payable (Note 7) |
|
| 550,871 |
|
|
| 455,310 |
|
Accrued interest payable (Notes 4 and 5) |
|
| 73,590 |
|
|
| 84,353 |
|
|
|
|
|
|
|
|
|
|
|
|
| 624,461 |
|
|
| 539,663 |
|
|
| December 31, 2021 $ |
|
| September 30, 2021 $ |
| ||
|
|
|
|
|
|
| ||
Accounts payable |
|
| 611,215 |
|
|
| 579,851 |
|
Accrued interest payable |
|
| 88,239 |
|
|
| 79,586 |
|
|
|
| 699,454 |
|
|
| 659,437 |
|
4. | Note and Loan Payable |
| (a) | On November 22, 2019, the Company entered into a promissory note with an unrelated party for $40,000 in connection with an equity purchase agreement (Refer to Note |
|
|
|
| (b) | On April 22, 2020, the Company received a loan for Cdn$ |
5. | Convertible Notes |
| (a) | On April 4, 2018, the amount of $32,485 owed to related parties was converted to Series A convertible notes, which are unsecured, non-interest bearing, and due on April 4, 2023. These notes are convertible in whole or in part, at any time until maturity, to common shares of the Company at $0.0001 per share. The outstanding balance remaining at maturity shall bear interest at 12% per annum until fully paid. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 Debt with Conversion and Other |
|
|
|
|
| During the year ended September 30, 2018, the Company issued 31,745,000 shares of common stock upon the conversion of $3,175 of Series A convertible notes, which included 18,000,000 common shares to the President of the Company and 5,320,000 common shares to family members of the President of the Company. Upon conversion, the Company immediately recognized the related remaining debt discount of $3,112 as accretion expense.
During the year ended September 30, 2019, the Company issued 3,900,000 shares of common stock upon the conversion of $390 of Series A convertible notes. Upon conversion, the Company immediately recognized the related remaining debt discount of $375 as accretion expense.
During the year ended September 30, 2020, the Company issued 18,525,000 shares of common stock upon the conversion of $1,853 of Series A convertible notes. Upon conversion, the Company immediately recognized the related remaining debt discount of $1,670 as accretion expense.
As at |
11 |
Table of Contents |
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30, 2021
(Expressed in U.S. dollars)
(unaudited)
|
|
|
| |
| ||
|
|
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30,December 31, 2021
(Expressed in U.S. dollars)
(unaudited)
5. | Convertible Notes (continued) |
|
| |
|
| |
|
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30, 2021
(Expressed in U.S. dollars)
(unaudited)
|
|
| On January 14, 2020, the Company entered into a convertible note with an unrelated party for $78,000, of which $3,000 was paid for financing costs, resulting in net proceeds to the Company of $75,000. The note is due on January 14, 2021, and bears interest on the unpaid principal balance at a rate of 12% per annum, which increases to 15% per annum upon default of the note. The note may be converted at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to lower of: (i) 65% of the lowest trading price during the 20-trading day period prior to the issuance date; or (ii) 65% of the lowest trading price during the 20-trading day period prior to the conversion date. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, | |
|
|
|
|
| The financing costs were netted against the convertible note and are being amortized over the term using the effective interest rate method. During the year ended September 30, 2020, the Company recognized accretion expense of $16,447.
During the |
|
|
|
|
|
|
|
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30, 2021
(Expressed in U.S. dollars)
(unaudited)
|
|
|
| |
| ||
|
| |
|
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30, 2021
(Expressed in U.S. dollars)
(unaudited)
|
|
| ||
| On January 22, 2020, the Company entered into a convertible note with an unrelated party for $78,750, of which $9,750 was paid directly to third parties for financing costs, resulting in proceeds to the Company of $69,000. The note is due on January 22, 2021, and bears interest on the unpaid principal balance at a rate of 10% per annum, payable in common stock, which increases to 24% per annum upon default of the note. The note may be converted at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to 65% of the lowest trading price during the 20-trading day period ending on the latest complete trading day prior to the conversion date. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, | |
|
|
|
|
| The financing costs were netted against the convertible note and are being amortized over the term using the effective interest rate method. During the year ended September 30, 2020, the Company defaulted on the convertible note and recognized accretion expense of $78,250. On January 22, 2021, the Company failed to repay the note upon maturity. As at |
|
| |
|
Table of Contents |
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30, 2021
(Expressed in U.S. dollars)
(unaudited)
|
|
|
6. | Derivative Liabilities |
|
|
| The embedded conversion option |
|
| Balance | $ |
| |
Balance, September 30, |
|
|
| ||
|
|
|
|
| |
|
|
| ( | ) | |
| |||||
|
|
|
|
| |
Balance, |
|
|
|
| The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair values were determined by using a binomial model based on various assumptions. Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the |
|
| Expected volatility |
|
| Risk-free interest rate |
|
| Expected dividend yield |
|
| Expected life (in years) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
As at June 30, 2021 |
|
| 256 | % |
|
| 0.1 | % |
|
| 0 | % |
|
| 0.5 |
|
|
| Expected volatility |
|
| Risk-free interest rate |
|
| Expected dividend yield |
|
| Expected life (in years) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
As at December 31, 2021 |
|
| 150 | % |
|
| 0.39 | % |
|
| 0 | % |
|
| 0.75 |
|
7. | Related Party Transactions |
| (a) | As at |
|
|
|
| (b) | As at |
|
|
|
| (c) | As at |
|
|
|
| (d) | As at |
|
|
Table of Contents |
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30,December 31, 2021
(Expressed in U.S. dollars)
(unaudited)
8. | Common Stock |
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30, 2021
(Expressed in U.S. dollars)
(unaudited)
|
|
|
|
| |
|
| |
|
|
9. | Preferred Stock |
|
|
| On October 13,
The Series A Super Voting Preferred Stock has the following rights and restrictions:
Dividends - Initially, there will be no dividends due or payable on the Series A Super Voting 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.
Liquidation and Redemption Rights - Upon the occurrence of a Liquidation Event, the holders of Series A Super Voting Preferred Stock are entitled to receive net assets on a pro-rata basis. Each holder of Series A Super Voting Preferred Stock is entitled to receive ratably any dividends declared by the Board, if any, out of funds legally available for the payment of dividends.
Rank - All shares of the Series A Super Voting Preferred Stock shall rank (i) senior to the Corporation’s (A) Common Stock, par value $0.001 per share ( “Common Stock” ), and any other class or series of capital stock of the Corporation hereafter created, except as otherwise provided in clauses (ii) and (iii) of this Section 4, (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 Super Voting 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.
Voting Rights - If at least one share of Series A Super Voting Preferred Stock is issued and outstanding, then the total aggregate issued shares of Series A Super Voting Preferred Stock at any given time, regardless of their number, shall have voting rights equal to 20 times the sum of: i) the total number of shares of Common stock which are issued and outstanding at the time of voting, plus ii) the total number of shares of all Series of Preferred stocks which are issued and outstanding at the time of voting.
Each individual share of Series A Super Voting Preferred Stock shall have the voting rights equal to: |
· [twenty times the sum of: {all shares of Common stock issued and outstanding at the time of voting + all shares of Series A, Series A and any newly designated Preferred stock issued and outstanding at the time of voting}] Divided by:
· [the number of shares of Series A Super Voting Preferred Stock issued and outstanding at the time of voting]
| · | [twenty times the sum of: {all shares of Common stock issued and outstanding at the time of voting + all shares of Series A, Series A and any newly designated Preferred stock issued and outstanding at the time of voting}] Divided by: | |
· | [the number of shares of Series A Super Voting Preferred Stock issued and outstanding at the time of voting] |
| With respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Series A Super Voting Preferred Stock shall vote together with the holders of Common Stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Certificate of Incorporation or By-laws. |
Table of Contents |
PHARMAGREEN BIOTECH INC.
Notes to the Condensed Consolidated Financial Statements
June 30,December 31, 2021
(Expressed in U.S. dollars)
(unaudited)
9. | Preferred Stock (continued) |
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| Protective Provisions - So long as any shares of Series A Super Voting Preferred Stock are outstanding, the Corporation shall not, without first obtaining the unanimous written consent of the holders of Series A Super Voting Preferred Stock, alter or change the rights, preferences or privileges of the Series A Super Voting Preferred so as to affect adversely the holders of Series A Super Voting Preferred Stock.
On October 14, 2020, the Company issued 10,000 shares of Series A Super Voting Preferred Stock to a Director of the Company for proceeds of $10. In connection with the issuance of the Series A Super Voting Preferred Stock, the Company evaluated whether the preferred stock should be classified as a liability based on the guidance under ASC 480, Distinguishing Liabilities from |
PHARMAGREEN BIOTECH INC. Notes to the Condensed Consolidated Financial Statements
(Expressed in U.S. dollars) (unaudited)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This section of the Form 10-Q includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
Company History Overview
Pharmagreen Biotech Inc. (“the Company”) was incorporated under the laws of Nevada, U.S. on November 26, 2007 under the name Azure International, Inc. On October 30, 2008 and effective as of the same date, the Company filed Articles of Merger with the Secretary of the State of Nevada, to effect a merger by and between Air Transport Group Holdings, Inc., a Nevada corporation incorporated on October 16, 2008, and Azure International, Inc. As a result of the merger, the Company changed its name to Air Transport Group Holdings, Inc.
On April 12, 2018, the Company entered into a share exchange agreement with WFS Pharmagreen Inc., a private company incorporated under the laws of British Columbia, Canada, whereby the Company acquired all of the issued and outstanding shares of WFS Pharmagreen Inc. in exchange for 37,704,500 shares of common stock of the Company. Upon completion of this transaction, the shareholders of WFS Pharmagreen hold 95.5% of voting control of the Company.
Immediately prior to closing of the Agreement, the majority shareholder of the Company was also the majority shareholder of WFS. As a result of the common ownership upon closing of the transaction, the acquisition was considered a common-control transaction and was outside the scope of the business combination guidance in ASC 805-50. The entities are deemed to be under common control as of February 27, 2018, which was the date that the majority shareholder acquired control of the Company and, therefore, held control over both companies. On May 2, 2018, the Share Exchange Agreement was effected. In connection with this transaction, the Company changed its name on May 8, 2018 to Pharmagreen Biotech Inc. and changed its year end from April 30th to September 30th.
Our principal executive offices are temporarily located at 2987 Blackbear Court, Coquitlam, British Columbia, Canada. Our telephone number is (702-803-9404). Our internet address is www.pharmagreen.ca.
On August 7, 2020, our company (including our subsidiaries) filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Nevada, Case No. 20-13886.
On October 9, 2020, a stay order was lifted by a United States District Judge of the United States District Court for the Southern District of New York, on an action filed by a lender. This effectively removed the Company from its Chapter 11 bankruptcy proceedings and protection.
We expect to continue to incur losses for at least the next 12 months. We do not expect to generate revenue that is sufficient to cover our expenses, and we do not have sufficient cash and cash equivalents to execute our plan of operations for at least the next twelve months. We will need to obtain additional financing, through equity security sales, debt instruments and private financing, to conduct our day-to-day operations, and to fully execute our business plan. We plan to raise the capital necessary to fund our business through the sale of equity securities, debt instruments or private financing. These factors raise substantial doubt upon the Company’s ability to continue as a going concern. This report does not reflect all the adjustments that may be necessary if the Company is unable to continue as a going concern.
Our Current Business
Pharmagreen Biotech Inc. (the “Company”) was incorporated under the laws of the State of Nevada on November 26, 2007. The Company is headquartered in Coquitlam, British Columbia. The Company’s mission is to advance the technology of tissue culture science and to provide the highest quality 100% germ free, disease free and all genetically the same plantlets of high CBD hemp and other flora and offering full spectrum DNA testing for plant identification, live genetics preservation using low temperature storage for various cannabis and horticulture plants; extraction of botanical oils mainly CBD oil, and to deliver laboratory based services to the North American high CBD hemp, Cannabis and agriculture sectors.
Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. However, if the Company is unable to raise additional capital in the near future, due to the Company’s liquidity problems, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favourable terms and/or pursue other remedial measures.
The Company has decided that immediate business development in the hemp and cannabis industries provides a much greater opportunity in the United States. The project at Deroche has been placed on hold while the Company moves forward to build out a similar infrastructure planned for Deroche within the United States.
The recent outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020,has led to adverse impacts on the U.S. and global economies, disruptions of financial markets, and created uncertainty regarding potential impacts to the Company’s supply chain, operations, and customer demand. The COVID-19 pandemic has impacted and could further impact the Company’s operations and the operations of the Company’s suppliers and vendors as a result of quarantines, facility closures, and travel and logistics restrictions.
Capital Resources and Liquidity
Our auditors have issued a “going concern” opinion,
We need to seek capital from resources such as the sale of private placements in the Company’s common stock or debt financing, which may not even be available to the Company. However, if such financing were available, because we are a, early-stage company with no or limited operations to date, it would likely have to pay additional costs associated with such financing and in the case of high risk loans be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such financing. If the Company cannot raise additional proceeds via such financing, it may be required to cease business operations.
As of
Management believes that if subsequent private placements are successful or we are successful in raising funds from registered securities, we will generate sales revenue within twelve months thereof. However, additional equity financing may not be available to us on acceptable terms or at all, and thus we could fail to satisfy our future cash requirements.
We do not anticipate researching any further products nor the purchase or sale of any significant equipment. We also do not expect any significant additions to the number of employees.
Results of Operations
Three Months Ended
We had
We incurred a comprehensive
During the three months ended
Off-balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the company is a party, under which the company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
In connection with this quarterly report, as required by Rule 15d-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company’s management, including our company’s principal executive officer and principal financial officer. Based upon that evaluation, our company’s principal executive officer and principal financial officer concluded that as of
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter ended
Saturna Group Chartered Professional Accountants LLP, our independent auditors, are not required to and have not performed an assessment of our internal controls over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
On July 22, 2020, the Company received a preliminary statement of claim from a convertible note holder for failure of the Company to deliver shares of common stock upon receipt of notices of conversion. Pursuant to the claim, the plaintiff has requested receipt of all shares of common stock requested in the notices of conversion, and also damages in an amount to be determined at trial but in any event in excess of principal amount of $78,000 for a total sum of $180,000, including without limitation the balance of any portion of the convertible note that ultimately is not converted into shares of common stock, along with default interest, liquidated damages, and damages as provided for in the convertible note.
On October 9, 2020, a stay order was lifted by a United States District Judge of the United States District Court for the Southern District of New York, on an action filed by a lender. This effectively removed the Company from its Chapter 11 bankruptcy proceedings and protection. The lifting of the stay order further allowed the convertible note holders to convert thereby increasing the number of shares issued and outstanding.
On October 29, 2020 a second note holder filed a statement of claim. This lender, as of December 24, 2020, has completely converted the full amount of the note of $100,000, interest of
Also, as mentioned above, the Company filed voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Nevada on August 7, 2020. The Company’s filing with the Court was designated as Case No. 20-13886. During the pendency of this matter, the Company has also filed motions with the Court seeking authorization to continue to operate its businesses as “debtors-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court. Due to the stay order mentioned, the Company did not file a plan of reorganization with the Court for approval.
On March 12, 2021, the Company entered into a settlement agreement with the convertible noteholder that had filed a preliminary statement of claim on July 22, 2020. Pursuant to the agreement the Company was required to honor various conversion notices and the noteholder agreed to wave all principal, interest and penalties incurred.
On March 10, 2021, the promissory note holder referred to in Note 4 (a) of the accompanying consolidated financial statements filed a Notice of Motion For Summary Judgement in Lieu of Complaint (the “Notice”) with the State of New York Supreme Court, County of New York for $40,504 plus interest at the rate of 10% per annum from January 6, 2021 plus costs. On July 31, 2021, the Notice was dismissed without prejudice by the State of New York Supreme Court. On October 20, 2021, the promissory note holder filed an Amended Notice of Motion for Summary Judgment in Lieu of Complaint with the State of New York Supreme Court, County of New York for $44,504 plus interest at the rate of 10% per annum from January 6, 2021, plus costs and attorney fees. The Company believes the claim is without merit, as evidenced by the initial claim being dismissed by the same courts, and will vigorously defend its position.
Except as mentioned in the preceding paragraphs, there are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or stockholder is a party adverse to the Company or has a material interest adverse to the Company.
Item 1A. Risk Factors.
As a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information called for by this Item.
Item 2. Unregistered Sales of Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
The commencement of the Chapter 11 Cases discussed above constituted an event of default under certain of the Company’s debt instruments, including various convertible notes, which resulted in automatic acceleration of the Company’s obligations under such debt instruments.
Item 4. Mine Safety Disclosure.
N/A
Item 5. Other Information.
None
Item 6. Exhibits.
The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:
* Included in Exhibit 31.1
** Included in Exhibit 32.1
SIGNATURES*
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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