Pharmagreen Biotech Inc 10-K for FY2022
Pharmagreen Biotech Inc. (PHBI)
About this 10-K
Pharmagreen Biotech Inc filed this 10-K on January 17, 2023, covering the fiscal year ended September 30, 2022 (FY2022).
Headline figures
Fiscal year ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $875.51K
- compared with a net loss of $4.53M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended
or
For the transition period from __________ to __________
Commission File Number
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☐ Yes ☒
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”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | ☒ | |
Accelerated filer | ☐ | Smaller reporting company | |
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| 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Securities registered pursuant to Section 12(b) of the Act:
Title of class:
Trading symbol:
Name of each exchange on which registered: OTC
As at March 31, 2022, the last business day of the registrant's most recently completed fiscal second quarter, the aggregate market value of the registrant's outstanding common shares held by non-affiliates was approximately $
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 January 16, 2023, we had
TABLE of CONTENTS
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PART I
Item 1. 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. These consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In 2021, the Company had changed its business development from Canada to the United States, as it was determined that the opportunities in the hemp and cannabis industries were much greater in the United States, specifically California.
On July 25, 2021, the Company entered into a Memorandum of Understanding to acquire all the assets and cannabis business operation (includes 12 acres property, structure and cannabis licenses, existing sales channels and distribution networks) from a private company situated in Northern California. Upon reaching a definitive agreement, the Company intends to further develop a state-of-the-art flowering greenhouse of approximately 12,000 square feet or the maximum allowed by California State and Regional County. The acquisition price is $2.4 million to be paid through a combination of cash and shares. The Company also has an option from the seller to acquire an additional 120 acres or more of land for business expansion and development. The Company currently lacks funds with which to consummate the contemplated transaction and has not negotiated a definitive agreement with respect to the contemplated transaction. Thus, there is no assurance that the Company will ever enter into, and consummate, a definitive agreement with respect to the contemplated transaction.
In 2022, the Cannabis market in California entered a regression stage with prices for the raw materials dropping below production costs including greatly diminished demand for the sun grown raw material. Because of the current state of the Cannabis market in California, the company has put the acquisition on hold. The Company plans to move forward with the biotech complex infrastructure capable of producing tissue cultured high CBD hemp starter plantlets, once the economy turns around.
Focusing on immediate revenues, the Company has been and is currently formulating its nutraceutical products from blends of therapeutic plants and fungi. Utilizing the Company’s expertise in plant genetics, Pharmagreen’s transgenic program uses the newest technology available to research and create nutraceuticals, for daily supplements with the potential to help, support and improve human lives, and to address a wide variety of ailments.
Pharmagreen's first new product, MaxGenomic(TM) Supplement, is a proprietary blend, formulated in the U. S. A., of nine medicinal mushrooms and six medicinal plants to help support the human mind and body. This supplement is produced in a U.S.A cGMP facility, in enteric capsules to enhance the bioavailability of the MaxGenomic(TM) supplement.
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. The extent to which the COVID-19 pandemic 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 potential impact on the Company. Even after the COVID-19 pandemic has subsided, the Company may 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.
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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 30 to September 30.
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.
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 1B. Unresolved Staff Comments.
None
Item 2. Properties.
We do not own any real estate or other properties and have not entered into any long-term lease or rental agreements for property.
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Item 3. 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 $8,690 and penalty and fees aggregating $19,500.
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 plaintiff filed for an oral argument which was heard by the State of New York Supreme Court on September 15, 2022 and is pending a final decision. 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 4. Mine Safety Disclosures.
N/A
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our Common Stock is currently quoted on the OTC Market under the symbol “PHBI.” Prior to July 31, 2018, our Common Stock was quoted under the symbol “AITGD.” Quotations of our Common Stock began on June 10, 2008. Our Common Stock was listed and commenced trading on the OTC Market on June 10, 2008.
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The Company’s Regulation offering was “qualified” on September 24, 2021. Under the terms of the offering, the Company is offering for sale up to a maximum of 300,000,000 units at $0.025 per unit to raise up to US $7.5 million. The minimum investment is set at US $1,000.00. The primary use of proceeds is to be used for the acquisition of a California based Cannabis Licensed Company and to construct state of the art greenhouse on property owned by this Company.
As of September 30, 2022, we had 442,260,969 shares of our Common Stock issued and outstanding held by approximately 217 stockholders of record. To date, we have not paid dividends on our Common Stock.
Our Common Stock is very thinly traded and, thus, pricing of our Common Stock on OTC Markets does not necessarily represent its fair market value.
Item 6. Selected Financial Data
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 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management’s Discussion and Analysis
This section of the Form 10-K 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.
Capital Resources and Liquidity
Our auditors have issued a “going concern” opinion, meaning that there is substantial doubt if we can continue as an on-going business unless we obtain additional capital. No substantial revenues from our planned business model are anticipated until we have completed financing the Company. As at September 30, 2022, the Company has a working capital deficit of $1,703,176 and an accumulated deficit of $12,574,895. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
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 an 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 September 30, 2022, we had $8,016 in cash, amounts receivable of $383, and prepaid expenses and deposits of $200,572, as compared to $25,300 in cash, amounts receivable of $290 and prepaid expenses and deposits of $347,491 as of September 30, 2021. The primary reason for the decrease in cash was due to the increase in cash used in operating activities, while prepaids and deposits decreased due to fewer shares being issued in advance to consultants as payment for their future services. As of the date of this Form 10-K, the current funds available to the Company will not be sufficient to fund the expenses related to maintaining our planned operations. We are in the process of seeking additional equity financing in the form of private placements, loans and registration statements to fund our intended business operations.
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
We had no revenue for the years ended September 30, 2022 and 2021.
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Total operating expenses for the fiscal year ended September 30, 2022 was $1,101,493 compared to operating expenses for the fiscal year ended September 30, 2021, of $744,064. In addition to operating expenses, we had other income $225,998 during the fiscal year ended September 30, 2022 compared to incurring other expenses of $3,788,160 for the fiscal year ended September 30, 2021. During the fiscal year ended September 30, 2022, we incurred a net loss of $875,478 compared to a net loss of $4,532,071 for the year ended September 30, 2021. The decrease in net loss for the fiscal year ended September 30, 2022 compared to September 30, 2021 was mainly due to the following:
| · | A decrease in accretion of discount of convertible notes from $88,264 in 2021 to $18,465 in 2022 due to the decrease in the convertible notes balance from $198,668 in 2021 to $120,038 in 2022; |
| · | A decrease in interest and finance costs from $680,714 in 2021 to $28,780 in 2022 due to the decrease in finance and commitment fees from $250,000 in 2021 to $nil in 2022, a decrease in loan interest from $108,851 in 2021 to $28,780 in 2022, and a decrease in default penalties on convertible notes from $321,863 in 2021 to $nil in 2022; and |
| · | A change in fair value of derivative liabilities from loss of $3,257,122 in 2021 to a gain of $215,620 in 2022 due to a court judgement ordering the surrender of a convertible note’s conversion rights, leading to the derecognition of its derivative liability. |
The increase was partially offset by the following:
| · | An increase in consulting fees from $526,522 in 2021 to $924,625 in 2022 due to a larger number of consulting agreements entered into in 2022; and |
| · | A decrease in recovery of default penalties from $237,940 in 2021 to $57,613 in 2022 due to the derecognition of a default penalty relating to the court judgement of a convertible note. |
During the year ended September 30, 2022, and 2021, we incurred a net loss of $0.00 and $0.02 per share, respectively.
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 7A. 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.
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Item 8. Financial Statements and Supplementary Data
PHARMAGREEN BIOTECH INC.
Consolidated Financial Statements
Years Ended September 30, 2022, and 2021
(Expressed in U.S. Dollars)
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Pharmagreen Biotech Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Pharmagreen Biotech Inc. (“the Company”) as of September 30, 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Matter #1
Critical Audit Matter Description
As described further in Notes 5 and 6 of the financial statements, during the year ended September 30, 2022, and in prior periods, the Company issued convertible notes and warrants that required management to assess whether the conversion features of the convertible notes required bifurcation and separate valuation as a derivative liability, and whether the warrants required accounting treatment as derivative liabilities. The Company determined that the conversion features of certain of its convertible notes and issued in financing arrangements required to be accounted for as derivative liabilities. The derivative liabilities were recorded at fair value when issued and subsequently re-measured to fair value upon settlement or at the end of each reporting period. The Company utilized a Cox-Ross-Rubinstein binomial lattice pricing model to determine the fair value of the derivative liabilities, which uses certain assumptions related to exercise price, term, expected volatility, and risk- free interest rate.
We identified auditing the determination and valuation of the derivative liabilities as a critical audit matter due to the significant judgements used by the Company in determining whether the embedded conversion features and warrants required derivative accounting treatment and the significant judgements used in determining the fair value of the derivative liabilities. Auditing the determination and valuation of the derivative liabilities involved a high degree of auditor judgement, and specialized skills and knowledge were needed.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures included the following, among others:
| · | We inspected and reviewed debt agreements, conversion notices, and settlement agreements to evaluate the Company's determination of whether derivative accounting was required, including assessing and evaluating management's application of relevant accounting standards to such transactions. |
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| · | We tested the reasonableness of the assumptions used by the Company in the binomial option model, including exercise price, expected term, expected volatility, and risk-free interest rate. |
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| · | We tested the accuracy and completeness of data used by the Company in developing the assumptions used in the binomial option model. |
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| · | We developed an independent expectation for comparison to the Company's estimate, which included developing our own binomial option model and assumptions. |
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| · | We evaluated the accuracy and completeness of the Company's presentation of these instruments in the financial statements and related disclosures in Notes 5 and 6, including evaluating whether such disclosures were in accordance with relevant accounting standards. |
Professionals with specialized skill and knowledge were utilized by the Firm to assist in the evaluation of the Company estimate of fair value and the development of our own independent expectation.
/s/
We have served as the Company’s auditor since 2022
January 16, 2023
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Pharmagreen Biotech Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Pharmagreen Biotech Inc. (the “Company”) as of September 30, 2021, and the related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for the year then ended and related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at September 30, 2021, and the results of their operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph Regarding Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred significant operating losses and negative cash flows from operations since inception. As at September 30, 2021, the Company has a working capital deficit of $1,653,334 and an accumulated deficit of $11,699,417. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. As part of our audit, we are required to obtain an understanding of the Company’s internal controls over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (i) relate to accounts or disclosures that are material to the financial statements; and (ii) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter, in any way, our opinion on the consolidated financial statements taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures for which they relate.
Accounting for Embedded Conversion Features (Derivative Liabilities) within Convertible Notes Payable
Description of Critical Audit Matter
As at September 30, 2021, the Company had $472,003 of derivative liabilities resulting from two convertible note agreements with third parties that have a floating rate of conversion into the Company’s common shares based on a discount percentage of the lowest trading price of the Company’s common stock on the prior twenty trading days prior to conversion. The determination of the fair value of the derivative liabilities requires the fair value of the conversion feature to be bifurcated from the original terms of the convertible note, and requires management judgement to determine the appropriate fair value of the embedded conversion feature using valuation techniques that utilizes management judgement in determining appropriate inputs to the valuation model.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures relating to the evaluation for the Company’s assessment of the fair value of the derivative liabilities included:
| · | Independent confirmation of convertible note balances, including accrued interest and terms of the agreement as at September 30, 2021; |
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| · | Independent assessment of the appropriate valuation model for derivative liability, including performing independent calculations based on the same model utilized by the Company, and comparing the results of our assessment to the Company; |
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| · | Reviewing board resolutions and communications from convertible note holders to determine if any other default factors or additional penalties should be considered for recognition in the Company’s consolidated financial statements; and |
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| · | Testing of substantially all transaction related to this matter, including the issuance of common shares relating to the conversion of convertible notes. |
Saturna Group Chartered Professional Accountants LLP
We have served as the Company’s auditor since 2017
Vancouver, Canada
December 29, 2021
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PHARMAGREEN BIOTECH INC.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
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| September 30, 2022 |
|
| September 30, 2021 |
| ||
|
| $ |
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| $ |
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Assets |
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Current assets |
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Cash |
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Amounts receivable |
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Prepaid expenses and deposits (Notes 11 and 12) |
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Total assets |
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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) |
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Advances from Alliance Growers Corp. (Note 12(a)) |
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Loans payable (Note 4) |
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Convertible notes – current portion, net of unamortized discount of $ |
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Derivative liabilities (Notes 4, 5 and 6) |
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Due to related parties (Note 7) |
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Total current liabilities |
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Loans payable (Note 4) |
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Loans payable to related parties (Note 7) |
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Convertible notes, net of unamortized discount of $nil and $ |
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Total liabilities |
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Stockholders’ deficit |
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Preferred stock Authorized: |
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Common stock Authorized: |
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Common stock issuable (Note 12) |
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Additional paid-in capital (Note 8) |
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Accumulated other comprehensive income (loss) |
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| ( | ) | |
Deficit |
|
| ( | ) |
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| ( | ) |
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|
Total Pharmagreen Biotech Inc. stockholders’ deficit |
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| ( | ) |
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| ( | ) |
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Non-controlling interest |
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| ( | ) |
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| ( | ) |
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Total stockholders’ deficit |
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| ( | ) |
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| ( | ) |
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|
Total liabilities and stockholders’ deficit |
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Nature of business and continuance of operations (Note 1) |
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Commitments and contingency (Note 12) |
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Subsequent events (Note 14) |
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(The accompanying notes are an integral part of these consolidated financial statements)
| 11 |
| Table of Contents |
PHARMAGREEN BIOTECH INC.
Consolidated Statements of Operations and Comprehensive Loss
(Expressed in U.S. dollars)
|
| Year ended September 30, 2022 $ |
|
| Year ended September 30, 2021 $ |
| ||
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Expenses |
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Consulting fees (Note 7 and 12) |
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Foreign exchange loss (gain) |
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| ( | ) | |
General and administrative |
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Professional fees |
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Salaries and wages |
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Total expenses |
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Net loss before other income (expenses) |
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| ( | ) |
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| ( | ) |
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Other income (expense) |
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|
Accretion of discount on convertible notes (Note 5) |
|
| ( | ) |
|
| ( | ) |
Interest and finance costs (Note 4 and 5) |
|
| ( | ) |
|
| ( | ) |
Gain (loss) on change in fair value of derivative liabilities (Note 4 and 6) |
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| ( | ) | |
Recovery of default penalties (Note 4 and 5) |
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Total other income (expense) |
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| ( | ) | |
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Net loss |
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| ( | ) |
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| ( | ) |
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Less: net loss attributable to non-controlling interest |
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Net loss attributable to Pharmagreen Biotech Inc. |
|
| ( | ) |
|
| ( | ) |
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Comprehensive income (loss) |
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Foreign currency translation loss |
|
| ( | ) |
|
| ( | ) |
|
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|
|
|
|
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|
Comprehensive loss attributable to Pharmagreen Biotech Inc. |
|
| ( | ) |
|
| ( | ) |
|
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Basic and diluted loss per share attributable to Pharmagreen Biotech Inc. stockholders |
|
| ( | ) |
|
| ( | ) |
|
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|
|
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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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| ||
(The accompanying notes are an integral part of these consolidated financial statements)
| 12 |
| Table of Contents |
PHARMAGREEN BIOTECH INC.
Consolidated Statements of Stockholders’ Deficit
(Expressed in U.S. dollars)
|
| Preferred stock |
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| Common stock |
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Common stock |
|
| Additional paid-in |
|
| Accumulated other comprehensive |
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| Non -controlling |
|
| Total stockholders’ |
| ||||||||||||||||
|
| Number of shares |
|
| Amount $ |
|
| Number of shares |
|
| Amount $ |
|
| issuable $ | capital $ |
|
| income (loss) $ | Deficit $ |
|
| interest $ | deficit $ |
| ||||||||||||||||
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| ||||||||||
Balance, September 30, 2020 |
|
| - |
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| ( |
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| ( |
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| ( | |||||||||
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Issuance of units for cash |
|
| - |
|
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Issuance of preferred shares for cash |
|
|
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|
|
|
| - |
|
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Issuance of common stock pursuant to the conversion of convertible notes |
|
| - |
|
|
|
|
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|
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| ( |
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Issuance of common stock for services |
|
| - |
|
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|
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|
|
|
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|
Foreign currency translation loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( |
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| ( | ||||||||
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|
Net loss for the year |
|
| - |
|
|
|
|
|
| - |
|
|
|
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| ( |
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| ( |
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| ( | ||||||||
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|
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|
|
Balance, September 30, 2021 |
|
|
|
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|
|
|
|
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| ( |
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| ( |
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| ( |
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| ( | ||||||||||
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Issuance of common stock for services |
|
| - |
|
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Issuance of units for cash |
|
| - |
|
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Common stock issuable for services |
|
| - |
|
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|
|
|
| - |
|
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Common stock returned and cancelled |
|
| - |
|
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| ( |
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| ( |
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| ( |
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| ( | |||||||||
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|
Foreign currency translation loss |
|
| - |
|
|
|
|
|
| - |
|
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Net income for the year |
|
| - |
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|
|
| - |
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| ( |
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| ( |
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| ( | ||||||||
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|
Balance, September 30, 2022 |
|
|
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| ( |
|
| ( |
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| ( | ||||||||||
(The accompanying notes are an integral part of these consolidated financial statements)
| 13 |
| Table of Contents |
PHARMAGREEN BIOTECH INC.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
|
| Year ended September 30, 2022 |
|
| Year ended September 30, 2021 |
| ||
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
| ||
OPERATING ACTIVITIES |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Net loss |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Accretion of discount on convertible notes |
|
|
|
|
|
| ||
Financing fees and default penalties (recovery) |
|
| ( | ) |
|
|
| |
Gain on settlement of convertible note |
|
|
|
|
| ( | ) | |
Loss on change in fair value of derivative liabilities |
|
| ( | ) |
|
|
| |
Common stock issued or issuable for services |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Changes in non-cash operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| ( | ) |
|
|
| |
Prepaid expenses and deposits |
|
|
|
|
| ( | ) | |
Accounts payable and accrued liabilities |
|
|
|
|
|
| ||
Due to related parties |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
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|
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|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
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|
Proceeds from issuance of convertible note |
|
|
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|
| ||
Proceeds from issuance of units |
|
|
|
|
|
| ||
Proceeds from issuance of preferred shares |
|
|
|
|
|
| ||
Proceeds from loans from related party |
|
|
|
|
|
| ||
Repayment of loans from related parties |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
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|
|
|
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
Change in cash |
|
| ( | ) |
|
|
| |
|
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Cash, beginning of year |
|
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| ||
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Cash, end of year |
|
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| ||
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Non-cash investing and financing activities: |
|
|
|
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|
|
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|
|
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|
|
Issuance of common stock for consulting fees included in prepaid expenses |
|
|
|
|
|
| ||
Issuance of common stock pursuant to conversion of convertible notes |
|
|
|
|
|
| ||
Common stock issuable pursuant to conversion of convertible notes |
|
|
|
|
| ( | ) | |
|
|
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|
|
Supplemental disclosures: |
|
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|
|
Interest paid |
|
|
|
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|
| ||
Income taxes paid |
|
|
|
|
|
| ||
(The accompanying notes are an integral part of these consolidated financial statements)
| 14 |
| Table of Contents |
PHARMAGREEN BIOTECH INC.
Notes to the Consolidated Financial Statements
Years Ended September 30, 2022, and 2021
(Expressed in U.S. dollars)
1. | Nature of Business and Continuance of Operations |
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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 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 September 30, 2022, the Company has not earned any revenues from operations, has a working capital deficit of $
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. |
2. | Significant Accounting Policies |
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| (a) | Basis of Presentation |
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The accompanying 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 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 BC 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. |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
2. | Significant Accounting Policies (continued) |
| (b) | Use of Estimates and Judgments |
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The preparation of these 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 equity component of convertible notes, fair value of derivative liabilities, fair value of stock-based payments, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
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 period. |
| (c) | Cash and Cash Equivalents |
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The Company considers all highly liquid investments with a maturity of three months or less at the time of issuance to be cash equivalents. |
| (d) | Property and Equipment |
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Property and equipment is measured at cost less accumulated depreciation, residual values, and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable to bringing the asset to a working condition for the intended use and borrowing costs on qualifying assets. During their construction, items of property, plant, and equipment are classified as construction in progress. When the asset is available for use, it is transferred from construction in progress to the appropriate category of property, plant, and equipment and depreciation on the item commences.
The Company capitalizes borrowing costs on capital invested in projects under construction. Upon the asset becoming available for use, capitalized borrowing costs, as a portion of the total cost of the asset, are depreciated over the estimated useful life of the related asset. |
| (e) | Long-lived Assets |
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In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
2. | Significant Accounting Policies (continued) |
| (f) | Fair Value Measurements |
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The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available.
The three-level hierarchy is defined as follows: |
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| Level 1 – quoted prices for identical instruments in active markets. Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and. Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
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| Financial instruments consist principally of cash, amounts receivable, accounts payable and accrued liabilities, advances from Alliance Growers Corp., amounts due to related parties, loans payable, convertible notes and derivative liabilities. The fair value of cash is determined based on Level 1 inputs and the fair value of derivative liabilities is determined based on Level 3 inputs. The recorded values of all other financial instruments, with the exception of non-current convertible notes, approximate their current fair values because of their nature and respective relatively short maturity dates or durations. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
The following table presents assets and liabilities that are measured and recognized at fair value as of September 30, 2022, on a recurring basis:
September 30, 2022 |
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| (g) | Foreign Currency Translation |
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The Company’s functional and reporting currency is the U.S. dollar. Transactions may occur in foreign currencies and management has adopted ASC 830, “Foreign Currency Translation Matters”. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the consolidated statement of operations. The Company uses the current rate method to translate the accounts of its wholly-owned subsidiary into U.S. dollars. Monetary assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period. The resulting exchange gains or losses are recognized in accumulated other comprehensive income. |
| (h) | Sequencing Policy |
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Under ASC 815-40-35, the Company has adopted a sequencing policy whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance of securities to the Company’s employees or directors are not subject to the sequencing policy. |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
2. | Significant Accounting Policies (continued) |
| (i) | Stock-based Compensation |
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The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations and comprehensive loss over the requisite service period. |
| (j) | Loss Per Share |
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The Company computes loss per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing the loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at September 30, 2022, there were |
| (k) | Comprehensive Loss |
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| ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. As at September 30, 2022 and 2021, comprehensive loss consists of foreign currency translation gains and losses. |
| (l) | Income Taxes |
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The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized. As of September 30, 2022 and 2021, the Company did not have any amounts recorded pertaining to uncertain tax positions.
The Company files federal and provincial income tax returns in Canada and federal, state and local income tax returns in the U.S., as applicable. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and U.S. income tax returns, the open taxation years range from 2014 to 2022. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and U.S. have not examined any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years noted above. |
| (m) | Recently Adopted Accounting Pronouncements |
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The Company has implemented all new accounting pronouncements that are in effect and that may impact its 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. |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
3. | Accounts Payable and Accrued Liabilities |
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4. | Loans Payable |
| (a) | On November 22, 2019, the Company entered into a promissory note with an unrelated party for $ |
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| (b) | On April 22, 2020, the Company received a loan for Cdn$ |
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| (c) | On August 2, 2022, a lender of the Company was ordered to surrender all common stock of the Company for cancellation, and surrender conversion rights for all remaining convertible notes pursuant to a judgement filed by the Securities and Exchange Commission with the United States District Court, Southern District of New York against the lender. As a result, the Company received and cancelled |
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As at September 30, 2022, the principal balance owing is $ |
5. | Convertible Notes | |
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| (a) | On April 4, 2018, the amount of $ |
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During the year ended September 30, 2018, the Company issued 31,475,000 shares of common stock upon the conversion of $
During the year ended September 30, 2019, the Company issued |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
5. | Convertible Notes (continued) | |
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As of September 30, 2022, the carrying value of the convertible notes was $ |
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| (b) | On October 1, 2019, the Company entered into a convertible note with an unrelated party for $ |
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| The financing costs were netted against the convertible note and were being amortized over the term using the effective interest rate method. During the year ended September 30, 2020, the Company recognized accretion expense of $ |
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| On March 12, 2021, the Company entered into a settlement agreement with the noteholder. Pursuant to the agreement, the Company was required to honour various conversion notices and the noteholder agreed to waive all principal, interest and penalties incurred. |
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| (c) | On October 17, 2019, the Company entered into a convertible note with an unrelated party for $ |
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| On June 17, 2020, the Company entered into a settlement agreement with the lender, whereby the Company and the lender agreed on repayment terms for the remaining principal balance of $ |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
5. | Convertible Notes (continued) |
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| On September 30, 2020, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, and determined the note and conversion feature qualified as derivatives. The Company classified the conversion feature as a derivative liability at fair value. The initial fair value of the conversion feature was determined to be $ |
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| The financing costs were netted against the convertible note and were being amortized over the term using the effective interest rate method. During the year ended September 30, 2020, the Company recognized accretion expense of $ |
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| During the year ended September 30, 2021, the Company issued |
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| (d) | On January 2, 2020, the Company entered into a convertible note with an unrelated party for $ |
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| On June 17, 2020, the Company entered into a settlement agreement with the lender, whereby the Company and the lender agreed on repayment terms for the remaining principal of $ |
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| The financing costs were netted against the convertible note and were being amortized over the term using the effective interest rate method. During the year ended September 30, 2020, the Company recognized accretion expense of $ |
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| During the year ended September 30, 2021, the Company issued |
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| (e) | On January 14, 2020, the Company entered into a convertible note with an unrelated party for $ |
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| 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 $ |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
5. | Convertible Notes (continued) |
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| In relation to the judgement in Note 4(c), the Company derecognized the additional default principal of $ |
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| In accordance to the judgement, the note’s conversion feature was relinquished. The Company derecognized the related derivative liability and reclassified the note as a loans payable. As at September 30, 2022, the carrying value of the convertible note was $nil (2021 - $ |
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| (f) | On January 15, 2020, the Company entered into a convertible note with an unrelated party for $ |
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| On July 23, 2020, the Company entered into a settlement agreement with the note holder, wherein the Company and the lender agreed to settle a convertible note and accrued interest for a total of $ |
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| The financing costs were netted against the convertible note and were being amortized over the term using the effective interest rate method. During the year ended September 30, 2020, the Company recognized accretion expense of $ |
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| During the year ended September 30, 2021, the Company issued |
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| (g) | On January 15, 2020, the Company entered into a convertible note with an unrelated party for $ |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
5. | Convertible Notes (continued) |
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| During the year ended September 30, 2020, the Company defaulted on the convertible note which resulted in a default penalty of $ |
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| The financing costs were netted against the convertible note and were being amortized over the term using the effective interest rate method. During the year ended September 30, 2020, the Company recognized accretion expense of $ |
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| During the year ended September 30, 2021, the Company issued |
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| (h) | On January 21, 2020, the Company entered into a convertible note with an unrelated party for $ |
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| The Company recognized the maximum intrinsic value of the embedded beneficial conversion feature of $ |
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| 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 $ |
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| During the year ended September 30, 2021, the Company issued |
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| (i) | On January 22, 2020, the Company entered into a convertible note with an unrelated party for $ |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
5. | Convertible Notes (continued) |
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| 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 $ |
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| As at September 30, 2022, the carrying value of the convertible note was $ |
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| (j) | On February 4, 2020, the Company entered into a convertible note with an unrelated party for $ |
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| During the year ended September 30, 2020, the noteholder converted $ |
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| 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 $ |
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| During the year ended September 30, 2021, the Company issued |
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| (k) | On March 11, 2022, the Company entered into a convertible note with an unrelated party for $ |
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| As at September 30, 2022, the carrying value of the convertible note was $ |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
6. | Derivative Liabilities |
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The embedded conversion option of the Company’s convertible notes described in Note 5 contain a conversion feature that qualifies for embedded derivative classification. The fair value of this liability will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on change in fair value of derivative liabilities. The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities: |
Balance, September 30, 2020 |
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Balance, September 30, 2022 |
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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 assumptions used in the calculations:
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7. | Related Party Transactions |
| (a) | As at September 30, 2022, the Company owed $ |
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| (b) | As at September 30, 2022, the Company owed $ |
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| (c) | As at September 30, 2022, the Company owed $ |
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| (d) | As at September 30, 2022, the Company owed $ |
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| (e) | On June 1, 2022, the Company entered into a loan agreement with the father of the President of the Company with a principal of $ |
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| (f) | On June 1, 2022, the Company entered into a loan agreement with the father of the President of the Company with a principal of $ |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
8. | Common Stock |
| Year ended September 30, 2022
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| (a) | On October 21, 2021, the Company issued |
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| (b) | On January 19, 2022, the Company issued |
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| (c) | On January 19, 2022, the Company issued |
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| (d) | On January 19, 2022, the Company issued |
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| (e) | On January 19, 2022, the Company issued |
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| (f) | On January 21, 2022, the Company issued |
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| (g) | On February 10, 2022, the Company issued |
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| (h) | On May 3, 2022, the Company issued |
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| (i) | On June 8, 2022, the Company issued |
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| (j) | On August 22, 2022, the Company issued |
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| (k) | On September 13, 2022, the Company issued |
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| (l) | On September 20, 2022, the Company received and cancelled |
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| (m) | In December 2020, the Company issued |
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| (n) | Between January 11 to February 16, 2021, the Company issued |
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| (o) | On March 1, 2021, the Company issued |
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| (p) | During the year ended September 30, 2021, the Company issued |
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| (q) | During the year ended September 30, 2021, the Company issued |
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| (r) | During the year ended September 30, 2021, the Company issued |
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| (s) | During the year ended September 30, 2021, the Company issued |
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PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
8. | Common Stock (continued) |
| (t) | During the year ended September 30, 2021, the Company issued |
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| (u) | During the year ended September 30, 2021, the Company issued |
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| (v) | During the year ended September 30, 2021, the Company issued |
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| (w) | During the year ended September 30, 2021, the Company issued |
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| (x) | On October 20, 2020, the Company issued |
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| (y) | On November 1, 2020, the Company issued |
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| (z) | On November 26, 2020, the Company issued |
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| (aa) | On December 11, 2020, the Company issued |
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| (bb) | On February 2, 2021, the Company issued |
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| (cc) | On March 29, 2021, the Company issued |
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| (dd) | On May 14, 2021, the Company issued |
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| (ee) | On July 13, 2021, the Company issued |
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| (ff) | On August 25, 2021, the Company issued |
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| (gg) | On August 25, 2021, the Company issued |
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| (hh) | On September 22, 2021, the Company issued |
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| (ii) | On September 22, 2021, the Company issued 6,750,000 shares of common stock with a fair value of $236,250 pursuant to an infomercial production and broadcasting agreement. During the year ended September 30, 2022, the Company recognized consulting fees of $56,495 (2021 - $179,755) pursuant to the agreement. As at September 30, 2022, the Company has recognized $nil (2021 – $56,495) in prepaid expenses and deposits. |
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| (jj) | On September 22, 2021, the Company issued 6,000,000 shares of common stock with a fair value of $210,000 pursuant to an infomercial production and broadcasting agreement. During the year ended September 30, 2022, the Company recognized consulting fees of $188,137 (2021 - $21,863) pursuant to the agreement. As at September 30, 2022, the Company has recognized $nil (2021 – $188,137) in prepaid expenses and deposits. |
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| (kk) | On September 22, 2021, the Company issued |
| 27 |
| Table of Contents |
PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
9. | Preferred Stock |
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| On October 13, 2020. The Company filed a certificate of amendment to its articles of incorporation, whereby it increased the authorized capital to
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: |
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| · | [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: |
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| · | [the number of shares of Series A Super Voting Preferred Stock issued and outstanding at the time of voting] |
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| 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.
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 | ||
| 28 |
| Table of Contents |
PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
10. | Share Purchase Warrants |
The following table summarizes the continuity of the Company’s share purchase warrants:
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Balance, September 30, 2020 |
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Balance, September 30, 2022 |
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As at September 30, 2022, the following share purchase warrants were outstanding:
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11. | Memorandum of Understanding |
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On July 25, 2021 the Company entered into a Memorandum of Understanding (“MOU”) to acquire all the assets and cannabis business operation, including 12 acres of property, structure and cannabis licenses, existing sales channels and distribution networks, from a private company situated in Northern California. Upon reaching a definitive agreement, the Company intends to further develop a state- of-the-art flowering greenhouse of approximately 12,000 square feet or the maximum allowed by California State and Regional County. The acquisition price is $ |
| 29 |
| Table of Contents |
PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
12. | Commitments and Contingency |
| (a) | Effective December 11, 2017, the Company entered into a binding Letter of Intent (“LOI”) with Alliance Growers Corp. (“Alliance”), whereby the Company will build a new cannabis biotech complex located in Deroche, British Columbia, through their subsidiary, 115BC. On January 25, 2019, the Company’s subsidiaries WFS and 115BC entered into an option agreement with Alliance, which superseded the LOI entered into on December 11, 2017. |
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| (b) | On November 22, 2019, the Company entered into an equity purchase agreement with an unrelated party, whereby the third party is to purchase up to $ |
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| On | March 10, 2021, the noteholder 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 $ |
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| (c) | Effective May 14, 2021, the Company entered into a Software as a Service Agreement with Novation Solutions Inc. (“DealMaker”) to effect the Company’s planned Regulation A offering, including the set-up of an automated tracking, signing, and reconciliation portal. |
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| (d) | On May 2, 2022, the Company entered into a consulting agreement with a six-month term. Pursuant to the agreement, the Company agreed to issue |
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| (e) | On May 20, 2022, the Company entered into a consulting agreement with a six-month term. Pursuant to the agreement, |
| 30 |
| Table of Contents |
PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
12. | Commitments and Contingency (continued) |
| (f) | On September 8, 2022, the Company entered into a consulting agreement with a six-month term. Pursuant to the agreement, |
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| (g) | On September 15, 2022, the Company entered into a consulting agreement with a twelve-month term. Pursuant to the agreement, |
13. | Income Taxes |
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The Company is subject to Canadian federal and provincial taxes at an approximate rate of |
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Permanent differences and other |
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The significant components of deferred income tax assets and liabilities are as follows:
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| 31 |
| Table of Contents |
PHARMAGREEN BIOTECH INC. Notes to the Consolidated Financial Statements Years Ended September 30, 2022, and 2021 (Expressed in U.S. dollars) |
13. | Income Taxes (continued) |
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The Company has net operating losses carried forward of $ |
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2029 |
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2030 |
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2034 |
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2035 |
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2036 |
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2037 |
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2038 |
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2039 |
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2040 |
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2041 |
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2042 |
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14. | Subsequent Events |
| (a) | On October 3, 2022, the Company issued |
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| (b) | On November 2, 2022, the Company entered into a convertible promissory note for $ |
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| (c) | On November 3, 2022, the Company entered into a consulting agreement for a term of 1 month, whereby the Company agreed to pay the consultant $ |
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| (d) | On November 28, 2022, the Company entered into a Product Endorsement Agreement with Tyrell Crosby. The term of the agreement is 18 months and shall be renewed by mutual consent of both parties, for an additional year on the anniversary of the agreement, unless otherwise terminated. In consideration for the endorsement services, the Company agreed to issue |
| 32 |
| Table of Contents |
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None
Item 9A. 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 September 30, 2022 our disclosure controls and procedures were not effective due to the existence of material weaknesses in our internal controls over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s Principal Executive and Principal Financial officer and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
| 1. | Pertains to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and disposition of assets; |
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| 2. | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the United States of America and receipts and expenditures are being made in accordance with authorizations of management and directors; and |
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| 3. | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements. |
Management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in SEC guidance on conducting such assessments as of the end of the period covered by this report. Management conducted the assessment based on certain criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. As of September 30, 2022, management determined material weaknesses occurred over our internal control over financial reporting as discussed below.
The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. Due to these material weaknesses management concluded that our internal control over financial reporting was not effective as of September 30, 2022.
| 33 |
| Table of Contents |
Material Weakness Discussion and Remediation
Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an effect on the Company's previous reported financial results. However, management believes that the lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures can result in the Company's determination to its financial statements for the future periods.
We are committed to improving our financial organization. As part of this commitment, we will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to the Company: i) Appointing one or more outside directors to our board of directors who shall be appointed to the audit committee of the Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and ii) Preparing and implementing sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on the Company's Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support the Company if personnel turn over issues within the department occur. This coupled with the appointment of additional outside directors will greatly decrease any control and procedure issues the company may encounter in the future.
We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d)of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the small business issuer’s last fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information.
Item 9B. Other Information.
None
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None
| 34 |
| Table of Contents |
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Identification of directors and executive officers
Our directors serve until their successor are elected and qualified. Our officers are elected by the Board of Directors to a term of one (1) year and serve until their successor(s) is duly elected and qualified, or until they are removed from office. The Board of Directors has no nominating or compensation committees. The company’s current Audit Committee consists of our officers and directors.
Our directors serve until a successor is elected and qualified. Our officers are elected by the Board of Directors to a term of one (1) year and serves until their successor(s) is duly elected and qualified, or until they are removed from office. The Board of Directors has no nominating or compensation committees. The company’s current Audit Committee consists of our officers and directors.
The name, age and position of our present officers and directors is set forth below:
Management
Directors of the Company are elected by the shareholders to a term of one year and serve until their successors are elected and qualified. Officers of the Company are appointed by the Board of Directors to a term of one year and serve until their successors are duly appointed and qualified, or until the officer is removed from office. The Board of Directors has no nominating, auditing or compensation committees.
Management of Pharmagreen Biotech Inc.
Name | Age | Position | Director Since |
Peter Wojcik | 51 | President/Sole Director | February 2, 2018 |
Peter Wojcik B.A. Adv., President / Sole Director
A graduate of advanced degree in Economics from the University of Regina. Additionally, Mr. Wojcik has a natural compassion for the health and well-being of others, which has naturally led to his decade-plus experience in the research and application of cannabis and its extracts as a therapeutic agent, specifically in their application in the treatment of illness and disease for individuals.
Mr. Wojcik has been the President and Director of Pharmagreen Biotech, Inc. since May 2018.
Mr. Wojcik duties include making major corporate decisions, managing the overall operations and resources of a company, acting as the main point of communication between the board of directors and corporate operations, and being the public face of the company.
Mr. Wojcik has held the offices/positions since February 2, 2018 to his respective office/positions, is expected to hold said office/position until the next annual meeting of the shareholders. The persons named above are the company’s only officers, directors, promoters and control persons.
Management of WFS Pharmagreen Inc. (wholly owned subsidiary of Pharmagreen Biotech Inc.)
Directors of the Company are elected by the shareholders to a term of one year and serve until their successors are elected and qualified. Officers of the Company are appointed by the Board of Directors to a term of one year and serve until their successors are duly appointed and qualified, or until the officer is removed from office. The Board of Directors has no nominating, auditing or compensation committees.
Name | Age | Position | Director Since |
Peter Wojcik | 51 | Chief Executive Officer / Director | December 19, 2013 |
Terry Kwan | 75 | Chief Financial Officer / Director | July 22, 2015 – May 1, 2022 |
Fawzia Afreen | 56 | Chief Operations Officer |
|
Mr. Wojcik has held the offices/positions since the inception of the Company and Mr. Kwan was appointed on July 22, 2015 to his respective office/positions, both are expected to hold said offices/positions until the next annual meeting of the shareholders. The persons named above are the company’s only officers, directors, promoters and control persons.
| 35 |
| Table of Contents |
WFS Pharmagreen Inc. (wholly owned subsidiary of Pharmagreen Biotech Inc.)
Peter Wojcik B.A. Adv., Chief Executive Officer / Director
Mr. Wojcik has been the Chief Executive Officer of WFS Pharmagreen Inc. since December 2013. Mr. Wojcik duties for WFS include day to day management of the company, oversight for the construction project development, coordinating with Engineering firms and project manager, in charge of Health Canada cannabis license application process.
Terry Kwan B. Comm., CPA, CA, Chief Financial Officer
Terry is a graduate from the University of British Columbia with a Bachelor of Commerce and is a chartered professional accountant with the Institute of Chartered Professional Accountants of B.C. He brings more than four decades of significant finance related experience in both the private and public sectors.
2005 - 2015 Mr. Kwan worked for Global Securities Corp. and Global Securities Futures Corp., where he was CFO, a compliance officer and broker.
August 2013 to current Mr. Kwan is CFO of WFS Pharmagreen Inc.
His responsibilities include financial management and reporting and corporate structuring. He sits on the business development committee and the tissue culture complex planning, design and construction committees. He is the “Head of Security” for purposes of the application for the Cannabis license application with Health Canada. Additional responsibility will be to design and implement a reporting system that meets both Health Canada Guidelines and good corporate governance.
Fawzia Afreen Ph.D., Chief Operations Officer
Fawzia has a Ph.D. in Botany from University of Hull (UK). She has achieved designation as a JSPS Fellow from Chiba University, Japan, teaching M.Sc. courses in (I) Protected Horticulture; (ii) Plant Tissue Culture, and (iii) Plant Production in Controlled Environment. In addition to holding three international patents, publishing over 40 articles in peer-reviewed international journals and publishing two books, Fawzia brings 16 years of experience in plant horticulture, plant tissue culture, plant production and an increase of secondary metabolites in a controlled environment to the Company.
Consulting role from June of 2014 to June of 2015 and on January 1, 2018 Dr. Fawzia Afreen became the Chief Operating Officer of WFS Pharmagreen Inc.
Dr. Afreen duties for WFS include, the head of the committee for facility design, assisting in building engineering plans, planning and selecting of equipment requirements, screening and hiring process of future facility employees, in charge of development of standard operating procedures, and quality control person for the cannabis license.
1155907 B.C. Ltd. (wholly owned subsidiary of WFS Pharmagreen Inc.)
Directors of the Company are elected by the shareholders to a term of one year and serve until their successors are elected and qualified. Officers of the Company are appointed by the Board of Directors to a term of one year and serve until their successors are duly appointed and qualified, or until the officer is removed from office. The Board of Directors has no nominating, auditing or compensation committees.
Name | Age | Position | Director Since |
Peter Wojcik | 51 | Chief Executive Officer / Director | March 2, 2018 |
Mr. Wojcik has held the offices/positions since March 2, 2018 to his respective office/positions, is expected to hold said office/position until the next annual meeting of the shareholders. The persons named above are the company’s only officers, directors, promoters and control persons.
This company will be used as an operating entity, once the Biotech Complex is built and occupied.
| 36 |
| Table of Contents |
Our directors and officers do not hold positions on the board of directors of any other U.S. reporting companies and have no affiliation with any company that has filed for bankruptcy within the last five years. The Company is not aware of any proceedings to which any of the Company’s officers or directors, or any associate of any such officer or director, is a party adverse to the Company or any of the Company’s subsidiaries or has a material interest adverse to it or any of its subsidiaries.
The Company believes that Mr. Wojcik’s business experience and his entrepreneurial success make him well suited to serve as our officer and director.
Our directors and officers do not hold positions on the board of directors of any other U.S. reporting companies and has no affiliation with any company that has filed for bankruptcy within the last five years. The Company is not aware of any proceedings to which any of the Company’s officers or directors, or any associate of any such officer or director, is a party adverse to the Company.
Significant Employees
The Company does not, at present, have any employees other than the current officer and director. We have not entered into any employment agreements, as we currently do not have any employees other than the current officer and director.
Family Relations
There are no family relationships among the Directors and Officers of Pharmagreen Biotech Inc.
Involvement in Legal Proceedings
No executive Officer or Director of the Company has been convicted in any criminal proceeding or is the subject of a criminal proceeding that is currently pending.
No Executive Officer or Director of the Company is involved in any bankruptcy petition by or against any business in which they are a general partner or executive officer at this time or within two years of any involvement as a general partner, executive officer, or Director of any business.
Corporate Governance
The Company does not have a compensation committee and it does not have an audit committee financial expert. It does not have a compensation committee because its Board of Directors consists of only one director who is not independent as he is also an officer. There is no independent audit committee financial expert because it is believed the cost related to retaining a financial expert at this time is prohibitive in the circumstances of the Company. Further, because there are only minimal operations, at the present time, it is believed the services of a financial expert are not warranted.
Conflicts of Interest
The Company does not currently foresee any conflict of interest.
Section 16(a) Beneficial Ownership Reporting Compliance
16(a) of the Securities Exchange Act of 1934 requires the company directors and executive officers, and persons who own more than ten percent of the Company’s common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes of ownership of its common stock. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the company with copies of all Section 16(a) forms they file. The Company intends to ensure to the best of its ability that all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners are complied with in a timely fashion.
| 37 |
| Table of Contents |
Item 11. Executive Compensation.
The table below summarizes all compensation awarded to, earned by, or paid to our named executive officers and director for all services rendered in all capacities to us for the fiscal year September 30, 2022, and fiscal year September 30, 2021. The Board of Directors may adopt an incentive stock option plan for the executive officers that would result in additional compensation.
Summary Executive Compensation Table
Name and Principal Position |
| Fiscal Year Ended 09/30 |
| Salary and Bonus ($) |
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| Stock Awards ($) |
| Option Awards ($) |
| Non-Equity Incentive Plan Compensation ($) |
| Nonqualified Deferred Compensation Earnings ($) |
| All Other Compensation ($) |
| Total ($) |
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Peter Wojcik (1)(2) |
| 2022 |
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| 93,964 |
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| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
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| 93,964 |
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President, CEO, Secretary, Treasurer and Director |
| 2021 |
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| 94,980 |
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| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
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| 94,980 |
|
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Terry Kwan (1)(3) |
| 2022 |
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| 93,964 |
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| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
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| 93,964 |
|
| Principal Accounting Officer |
| 2021 |
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| 94,980 |
|
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
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| 94,980 |
|
| ||||||||||||||||||||
Fawzia Afreen (4) |
| 2022 |
| -0- |
|
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
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COO |
| 2021 |
| -0- |
|
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| ||
(1) Peter Wojcik and Terry Kwan, two Company’s officers and sole director currently devote approximately 45-55 hours per week to manage the affairs of the Company, including, but not limited to the upkeep of Pharmagreen Biotech Inc., and its subsidiaries.
(2) Mr. Wojcik is the President, CEO, Secretary, Treasurer and a sole Director of Pharmagreen Biotech Inc., he is the CEO, Director of the subsidiary WFS Pharmagreen Inc. and CEO, Director of the subsidiary 1155907 B.C. Ltd.
(3) Mr. Kwan is the CFO and was a Director (July 22, 2015 – May 1, 2022) of the WFS Pharmagreen Inc., wholly owned subsidiary of Pharmagreen Biotech Inc., since July 22, 2015. Mr Kwan is the Principal Accounting Officer of Pharmagreen Biotech Inc.
(4) Dr. Afreen has been an officer of WFS Pharmagreen Inc., wholly owned subsidiary of Pharmagreen Biotech Inc., since January 1, 2018. Dr. Afreen is employed by Botanical Research In Motion Inc., a British Columbia corporation owned by Peter Wojcik. Because of Dr. Afreen’s close association with Mr. Wojcik and her work at Botanical Research In Motion Inc., she volunteers a limited amount of time to act as COO of Pharmagreen Biotech, Inc. and WFS Pharmagreen Inc.
| 38 |
| Table of Contents |
Narrative Disclosure to Summary Compensation Table
There are no compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.
Outstanding Equity Awards at Fiscal Year-End
No executive officer received any equity awards, or holds exercisable or un-exercisable options, as of the year ended September 30, 2022.
Stock Awards Plan
The company has not adopted a Stock Awards Plan, but may do so in the future. The terms of any such plan have not been determined.
Compensation Committee
The Company currently does not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.
There have never been any grants of stock options to our officers or directors.
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until their successors are elected or appointed. Our officers are appointed by our board of directors and serve at the discretion of the board.
We believe Mr. Wojcik is qualified to act as director based upon his knowledge of business practices and, in particular, the regulations relating to public companies.
Mr. Wojcik is not independent as that term is defined in Section 803 of the NYSE MKT Company Guide.
We do not have a financial expert as that term is defined by the Securities and Exchange Commission.
Our Board of Directors does not have standing audit, nominating, or compensation committees, committees performing similar functions, or charters for such committees. Instead, the functions that might be delegated to such committees are carried out by our Directors, to the extent required. Our Directors believe that the cost of associated with such committees, has not been justified under our current circumstances.
Compensation of Directors
During the years ended September 30, 2022, and 2021, we did not compensate any person for serving as a director.
There have never been any grants of stock options to our officers or directors.
Name |
|
Year |
| Fees earned or paid in cash 0($) |
| Stock awards ($) |
| Option awards ($) |
| Non-equity incentive plan compensation ($) |
| Nonqualified deferred compensation earnings ($) |
| All other compensation ($) |
| Total ($) |
|
Peter Wojcik |
| 2022 |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
|
|
| 2021 |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
|
Terry Kwan |
| 2022 |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
|
|
| 2021 |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
|
Fawzia Afreen |
| 2022 |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
|
|
| 2021 |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- |
|
| 39 |
| Table of Contents |
Director Independence
The Board of Directors is currently composed of one member. Peter Wojcik does not qualify as an independent director in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of the Company’s employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, the board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had the board of directors made these determinations, the board of directors would have reviewed and discussed information provided by the directors and the Company with regard to each director’s business and personal activities and relationships as they may relate to the Company and its management.
Item 12. Security Ownership of Certain Beneficial Ownership and Management and Related Stockholder Matters.
The following table sets forth certain information at September 30, 2022, with respect to the beneficial ownership of shares of Common Stock by (i) each person known to the Company who owns beneficially more than 5% of the outstanding shares of Common Stock (based upon reports which have been filed and other information known to the Company), (ii) each of the Directors, (iii) each of the Executive Officers and (iv) all of the Executive Officers and Directors as a group. Unless otherwise indicated, each stockholder has sole voting and investment power with respect to the shares shown. As of September 30, 2022, the Company had 442,260,969 shares of common stock and 10,000 Series A Super Voting preferred stock issued and outstanding.
Beneficial Name of Owner |
| Number of Series A Preferred Stock |
|
| Percentage of Ownership as at September 30, 2022 |
|
| Number of Common Shares After Offering |
|
| Percentage of Ownership as at September 30, 2022 |
| ||||
Peter Wojcik(2)(7) |
|
| 10,000 |
|
|
| 100 | % |
|
| 35,077,500 |
|
|
| 7.93 | % |
Terry Kwan(3) |
|
| - |
|
|
| - |
|
|
| 5,000,000 |
|
|
| 1.13 | % |
Fawzia Afreen(4) |
|
| - |
|
|
| - |
|
|
| 2,000,000 |
|
|
| 0.45 | % |
All Officers and Directors as a Group(5) |
|
| 10,000 |
|
|
| 100 | % |
|
| 42,077,500 |
|
|
| 9.51 | % |
Harvey Larochelle |
|
| - |
|
|
| - |
|
|
| 29,926,786 |
|
|
| 6.67 | % |
Wlaydyslaw Wojcik(6) |
|
| - |
|
|
| - |
|
|
| 12,730,000 |
|
|
| 2.88 | % |
(1) Under Rule 13d-3 promulgated under the Exchange Act, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.
(2) Peter Wojcik has 31,077,500 shares in his name and his group includes, Jordan Wojcik, son of Peter Wojcik, residing at same residence who has 1,000,000 shares, Jessica Wojcik, daughter of Peter Wojcik, residing at same residence, who has 1,000,000 shares and Leonna Wojcik, wife of Peter Wojcik, residing at same residence, who has 2,000,000, who collectively hold 35,077,500 shares. The residence is located at 2987 Blackbear Court, Coquitlam, B.C., Canada, V3E 3A2.
(3) Terry Kwan is the current officer and director of WFS Pharmagreen Inc., the wholly owned subsidiary of Pharmagreen Biotech Inc. The 5,000,000 shares are held in TK Investments Ltd., and he may be deemed to have voting and investment power over the shares held thereby.
(4) Fawzia Afreen is the current Chief Operating Officer of WFS Pharmagreen Inc., the wholly owned subsidiary of Pharmagreen Biotech Inc.
| 40 |
| Table of Contents |
(5) All officers and directors as a group includes the officer and director of Pharmagreen Biotech Inc. and its wholly owned subsidiary WFS Pharmagreen Inc.
(6) Wladyslaw Wojcik has 5,830,000 shares in his name that he controls and he also has 6,900,000 in W. Wojcik Medical Professional Corporation, which he controls.
(7) The shares of Series A Super Voting Preferred Stock have 20 times that number of votes on all matters submitted to the shareholders that each shareholder of our common stock is entitled to vote at each meeting of shareholders. The shares of Series A Super Voting Preferred Stock vote together with the holders of the Company’s common stock as a single class. Peter Wojcik, our sole officer and director, holds 100% of the Series A Super Voting Preferred Stock.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
| · | As at September 30, 2022, the Company owed $588,165 (Cdn$804,285) (2021 - $547,079 (Cdn$693,998)) to the President of the Company, which is non-interest bearing, unsecured, and due on demand. During the year ended September 30, 2022, the Company incurred consulting fees of $93,964 (2021 - $94,980) to the President of the Company. |
|
|
|
| · | As at September 30, 2022, the Company owed $53,750 (Cdn$73,500) (2021 - $57,940 (Cdn$73,500)) to the father of the President of the Company, which is non-interest bearing, unsecured, and due on demand. |
|
|
|
| · | As at September 30, 2022, the Company owed $25,010 (Cdn$34,200) (2021 – $26,960 (Cdn$34,200)) to a company owned by the father of the President of the Company, which is included in accounts payable and accrued liabilities. The amount due is non-interest bearing, unsecured, and due on demand. |
|
|
|
| · | As at September 30, 2022, the Company owed $509,610 (Cdn$696,866) (2021 – $445,591 (Cdn$565,256)) to a company controlled by the Chief Financial Officer of WFS, which is included in accounts payable and accrued liabilities. The amount due is non-interest bearing, unsecured, and due on demand. During the year ended September 30, 2022, the Company incurred consulting fees of $93,964 (2021 - $94,980) to the company controlled by the Chief Financial Officer of WFS. |
|
|
|
| · | On June 1, 2022, the Company entered into a loan agreement with the father of the President of the Company with a principal of $50,000, which bears interest at 10% per annum, is unsecured and due on June 1, 2026. |
|
|
|
| · | On June 1, 2022, the Company entered into a loan agreement with the father of the President of the Company with a principal of $40,221 (Cdn$55,000), which bears interest at 10% per annum, is unsecured and due on June 1, 2026. |
Common Stock
Year ended September 30, 2022
| · | On October 21, 2021, the Company issued 4,000,000 shares of common stock at $0.025 per share for proceeds of $100,000. In connection with the financing, the Company incurred commission fees of $8,000. |
|
|
|
| · | On January 19, 2022, the Company issued 650,000 units at $0.01 per unit for proceeds of $6,500. Each unit is comprised of one share of common stock and one share purchase warrant exercisable at $0.05 per share of common stock expiring 24 months from the date of issuance. |
|
|
|
| · | On January 19, 2022, the Company issued 800,000 shares of common stock at $0.025 per share for proceeds of $20,000. |
|
|
|
| · | On January 19, 2022, the Company issued 6,800,000 shares of common stock with a fair value of $136,000 for consultation communication and media services. |
|
|
|
| · | On January 19, 2022, the Company issued 1,800,000 shares of common stock with a fair value of $36,000 for strategic and business development advisory services. |
|
|
|
| · | On January 21, 2022, the Company issued 1,000,000 shares with a fair value of $19,700 for management consulting and strategic business advisory services. |
| 41 |
| Table of Contents |
| · | On February 10, 2022, the Company issued 1,000,000 shares of common stock with a fair value of $17,000 for market awareness services. |
|
|
|
| · | On May 3, 2022, the Company issued 7,000,000 shares of common stock with a fair value of $84,700 for market awareness services. |
|
|
|
| · | On June 8, 2022, the Company issued 20,200,000 units at $0.0025 per unit for proceeds of $68,500. Each unit is comprised of one share of common stock and one purchase warrant exercisable at $0.05 per share of common stock expiring 24 months from the date of issuance. |
|
|
|
| · | On August 22, 2022, the Company issued 9,000,000 shares of common stock with a fair value of $81,000 for public relations and communications services. |
|
|
|
| · | On September 13, 2022, the Company issued 9,500,000 shares of common stock with a fair value of $85,500 for corporate development, investor, media, and public relations, and marketing services. |
|
|
|
| · | On September 20, 2022, the Company received and cancelled 660,300 with a fair value of $4,606 due to a court judgement ordering the lender to surrender all common stock of the Company for cancellation and surrender conversion rights for all remaining convertible notes. |
| Year ended September 30, 2021 | |
|
|
|
| · | In December 2020, the Company issued 5,400,000 units at $0.005 per unit for proceeds of $27,000 in a private placement. Each unit is comprised of one share of common stock and one share purchase warrant exercisable into an additional share of common stock at an exercise price of $0.05 per share for a period of 24 months. |
|
|
|
| · | Between January 11 to February 16, 2021, the Company issued 16,800,000 units at $0.005 per unit for proceeds of $84,000 in a private placement. Each unit is comprised of one share of common stock and one share purchase warrant exercisable into an additional share of common stock at an exercise price of $0.05 per share for a period of 24 months. |
|
|
|
| · | On March 1, 2021, the Company issued 611,250 units at $0.01 per unit for proceeds of $6,112 in a private placement. Each unit is comprised of one share of common stock and one share purchase warrant exercisable into an additional share of common stock at an exercise price of $0.05 per share for a period of 24 months. |
|
|
|
| · | During the year ended September 30, 2021, the Company issued 133,226,100 shares of common stock upon the conversion of $417,719 of the convertible note and $11,000 of conversion fees. |
|
|
|
| · | During the year ended September 30, 2021, the Company issued 7,730,486 shares of common stock upon the conversion of $126,000 of the convertible note and $3,150 of accrued interest. |
|
|
|
| · | During the year ended September 30, 2021, the Company issued 16,994,905 shares of common stock upon the conversion of $106,000 of the convertible note and $2,650 of accrued interest. |
|
|
|
| · | During the year ended September 30, 2021, the Company issued 2,600,000 shares of common stock upon the conversion of $18,923 of the convertible note and $4,500 of conversion fees. |
|
|
|
| · | During the year ended September 30, 2021, the Company issued 3,601,718 shares of common stock upon the conversion of $46,000 of the convertible note, $5,586 of accrued interest and $500 of conversion fees. |
|
|
|
| · | During the year ended September 30, 2021, the Company issued 17,557,925 shares of common stock upon the conversion of $82,500 of the convertible note, $7,693 of accrued interest and $3,000 of conversion fees. |
|
|
|
| · | During the year ended September 30, 2021, the Company issued 4,431,963 shares of common stock upon the conversion of $66,150 of the convertible note, $3,907 of accrued interest. |
|
|
|
| · | During the year ended September 30, 2021, the Company issued 41,017,383 shares of common stock upon the conversion of $75,825 of the convertible note, $2,154 of accrued interest and $18,750 of fees. |
|
|
|
| · | On October 20, 2020, the Company issued 2,000,000 shares of common stock with a fair value of $180,000 pursuant to the conversion of $30,750 of a convertible note, which was included in common stock issuable at September 30, 2020. |
|
|
|
| · | On November 1, 2020, the Company issued 22,500 shares of common stock with a fair value of $405 for management consulting and strategic business advisory services. |
| 42 |
| Table of Contents |
| · | On November 26, 2020, the Company issued 45,000 shares of common stock with a fair value of $720 for management consulting and strategic business advisory services. |
|
|
|
| · | On December 11, 2020, the Company issued 22,500 shares of common stock with a fair value of $225 for management consulting and strategic business advisory services. |
|
|
|
| · | On February 2, 2021, the Company issued 150,000 shares of common stock with a fair value of $2,700 for management consulting and strategic business advisory services. |
|
|
|
| · | On March 29, 2021, the Company issued 150,000 shares of common stock with a fair value of $4,650 for management consulting and strategic business advisory services. |
|
|
|
| · | On May 14, 2021, the Company issued 6,961,250 units at $0.01 per unit for proceeds of $69,613. Each unit is comprised of one share of common stock and one share purchase warrant exercisable at $0.05 per share of common stock expiring 24 months from the date of issuance. |
|
|
|
| · | On July 13, 2021, the Company issued 702,000 shares of common stock with a fair value of $17,550 for management consulting and strategic business advisory services. |
|
|
|
| · | On August 25, 2021, the Company issued 150,000 shares of common stock with a fair value of $3,300 for management consulting and strategic business advisory services. |
|
|
|
| · | On August 25, 2021, the Company issued 6,100,000 units at $0.01 per unit for proceeds of $61,000. Each unit is comprised of one share of common stock and one share purchase warrant exercisable at $0.05 per share of common stock expiring 24 months from the date of issuance. |
|
|
|
| · | On September 22, 2021, the Company issued 2,000,000 units at $0.01 per unit for proceeds of $20,000. Each unit is comprised of one share of common stock and one share purchase warrant exercisable at $0.05 per share of common stock expiring 24 months from the date of issuance. |
|
|
|
| · | On September 22, 2021, the Company issued 6,750,000 shares of common stock with a fair value of $236,250 pursuant to an infomercial production and broadcasting agreement. |
|
|
|
| · | On September 22, 2021, the Company issued 6,000,000 shares of common stock with a fair value of $210,000 pursuant to an infomercial production and broadcasting agreement. |
|
|
|
| · | On September 22, 2021, the Company issued 4,340,000 shares of common stock with a fair value of $151,900 for marketing consulting services. |
Item 14. Principal Accounting Fees and Services.
Our independent registered public accounting firm is Sadler, Gibb & Associates, LLC, Draper, Utah, PCAOB ID No.
During the fiscal year ended September 30, 2022, we incurred $29,515 in fees to our principal independent accountants for professional services rendered in connection with the audit of financial statements for the fiscal year ended September 30, 2022, and reviews of our financial statements for the quarters ended December 30, 2021, March 31, 2022, and June 30, 2022.
During the fiscal year ended September 30, 2021, we incurred $33,500 in fees to our principal independent accountants for professional services rendered in connection with the audit of financial statements for the fiscal year ended September 30, 2021, and reviews of our financial statements for the quarters ended December 30, 2020, March 31, 2021, and June 30, 2021 and $1,850 in other fees relating to prospectus filings.
During the fiscal years ended September 30, 2022, and 2021, we did not incur any other fees for professional services rendered by our principal independent accountants for all other non-audit services which may include, but not limited to, tax related services, actuarial services or valuation services.
| 43 |
| Table of Contents |
PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:
Exhibit Number |
| Description |
(3) | Articles of Incorporation; and (ii) Bylaws | |
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
(10) | Material Contracts | |
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
(31) |
| Rule 13a-14(a)/15d-14(a) Certifications |
|
|
|
| ||
|
|
|
| ||
|
|
|
(32) |
| Section 1350 Certifications |
|
|
|
| ||
|
|
|
| ||
|
|
|
101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document). |
|
|
|
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
101.LAB |
| Inline XBRL Taxonomy Extension Labels Linkbase Document. |
|
|
|
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* Included in Exhibit 31.1
** Included in Exhibit 32.1
| 44 |
| Table of Contents |
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.
| Pharmagreen Biotech Inc. |
| |
|
|
| |
Dated January 16, 2023 | By: | /s/ Peter Wojcik |
|
|
| Peter Wojcik |
|
|
| President and Director Principal Executive Officer |
|
| By: | /s/ Terry Kwan |
|
|
| Terry Kwan |
|
|
| Principal Accounting Officer |
|
| 45 |
EXHIBIT 31.1
CERTIFICATION
Peter Wojcik and Terry Kwan, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Pharmagreen Biotech Inc. for the fiscal year ended September 30, 2022; |
|
|
|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
|
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
|
| 4. | We are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
|
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
|
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
|
|
|
|
|
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | We have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
|
|
|
|
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
|
|
|
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. |
| January 16, 2023 | ||
|
|
|
|
| By: | /s/ Peter Wojcik |
|
|
| Peter Wojcik |
|
|
| President and Director |
|
|
| Principal Executive Officer |
|
|
|
|
|
| By: | /s/ Terry Kwan |
|
|
| Terry Kwan |
|
|
| Principal Accounting Officer |
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K for the fiscal year ended September 30, 2022, of Pharmagreen Biotech Inc, a Nevada corporation (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), we, Peter Wojcik, Principle Executive Officer of the Company and Terry Kwan, Principal Financial Officer of the Company certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Annual Report fully complies with the requirements of Section 13(a) or15(d) of the Securities and Exchange Act of 1934, as amended; and |
|
|
|
| 2. | The information contained in this Annual Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
|
|
|
| January 16, 2023 | |
|
|
|
| /s/ Peter Wojcik |
|
| Peter Wojcik |
|
| President and Director Principal Executive Officer |
|
|
|
|
| /s/ Terry Kwan |
|
| Terry Kwan Principal Accounting Officer |
|