PHBI 10-Q

Pharmagreen Biotech Inc. (PHBI)

10-Q 2021-08-18 For: 2021-06-30

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Added on April 06, 2026

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2987 Blackbear Court, Coquitlam, British Columbia BC		V3E 3A2
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	☐	Non-accelerated filer	☐
Accelerated filer	☐	Smaller reporting company	☒
		Emerging Growth	☒

	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	25
Item 4.	Controls and Procedures.	25

	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings.	26
Item 1A.	Risk Factors.	26
Item 2.	Unregistered Sales of Securities and Use of Proceeds.	26
Item 3.	Defaults Upon Senior Securities.	26
Item 4.	Mine Safety Disclosure.	26
Item 5.	Other Information.	26
Item 6.	Exhibits.	27
	SIGNATURES	28

	June 30, 2021			September 30, 2020
	$			$
	(Unaudited)
Assets

Current assets

Cash		19,218			12,196
Amounts receivable		88			295
Prepaid expenses and deposits		-			253,754
Total assets		19,306			266,245

Liabilities and Stockholders’ Deficit

Current liabilities

Accounts payable and accrued liabilities (Notes 3 and 7)		624,461			539,663
Advances from Alliance Growers Corp. (Note 11(a))		60,450			56,303
Due to related parties (Note 7)		607,827			508,874
Note payable (Note 4)		40,000			40,000
Convertible notes – current portion, net of unamortized discount of $Nil and $182,012, respectively (Note 5)		190,834			641,077
Derivative liabilities (Note 6)		298,301			1,380,957
Total current liabilities		1,821,873			3,166,874

Loan payable (Note 4)		32,240			30,028
Convertible notes, net of unamortized discount of $20,696 and $23,619, respectively (Note 5)		6,371			3,448
Total liabilities		1,860,484			3,200,350

Stockholders’ deficit

Preferred stock
Authorized: 1,000,000 shares, $0.001 par value; 10,000 and nil shares issued and outstanding, respectively		10			-
Common stock
Authorized: 2,000,000,000 shares, $0.001 par value; 355,129,269 and 95,806,289 shares issued and outstanding, respectively		355,129			95,806
Common stock issuable (Note 8)		121,500			180,000
Additional paid-in capital		8,628,541			3,967,261
Accumulated other comprehensive income (loss)		(31,735	)		36,679
Deficit		(10,867,990	)		(7,167,346	)
Total Pharmagreen Biotech Inc. stockholders’ deficit		(1,794,545	)		(2,887,600	)

Non-controlling interest		(46,633	)		(46,505	)

Total stockholders’ deficit		(1,841,178	)		(2,934,105	)

Total liabilities and stockholders’ deficit		19,306			266,245

	Three months ended June 30, 2021 $			Three months ended June 30, 2020 $			Nine months ended June 30, 2021 $			Nine months ended June 30, 2020 $

Expenses

Consulting fees (Note 7)		190,794			30,108			296,987			153,999
Foreign exchange loss (gain)		(3,044	)		(15,824	)		(16,951	)		6,025
General and administrative		20,716			28,704			64,376			91,688
Professional fees		18,829			40,068			111,788			89,915
Salaries and wages		5,085			3,858			14,753			13,005
Total expenses		232,380			86,914			470,953			354,632

Net loss before other income (expense)		(232,380	)		(86,914	)		(470,953	)		(354,632	)

Other income (expense)

Accretion of discount on convertible notes (Note 5)		(1,179	)		(54,877	)		(86,801	)		(77,889	)
Gain (loss) on change in fair value of derivative liabilities (Note 6)		101,418			(1,187,033	)		(3,083,420	)		(1,347,031	)
Gain (loss) on settlement on convertible notes (Note 5)		-			(31,898	)		613,526			(38,411	)
Interest and finance costs (Note 5)		(10,087	)		-			(673,124	)		(45,000	)
Write-off of accounts payable		-			-			-			292,557

Total other income (expense)		90,152			(1,273,808	)		(3,229,819	)		(1,215,774	)

Net loss		(142,228	)		(1,360,722	)		(3,700,772	)		(1,570,406	)

Less: net loss attributable to non-controlling interest		83			8			128			161

Net loss attributable to Pharmagreen Biotech Inc.		(142,145	)		(1,360,714	)		(3,700,644	)		(1,570,245	)

Comprehensive income (loss)

Foreign currency translation gain (loss)		(13,215	)		(17,081	)		(68,414	)		2,045

Comprehensive loss attributable to Pharmagreen Biotech Inc.		(155,360	)		(1,377,795	)		(3,769,058	)		(1,568,200	)

Basic and diluted loss per share attributable to Pharmagreen Biotech Inc. stockholders		-			(0.02	)		(0.01	)		(0.02	)

Weighted average number of shares outstanding used in the calculation of net loss per share attributable to Pharmagreen Biotech Inc.		351,763,390			82,854,083			271,420,624			78,042,762

	Preferred stock				Common stock				Common stock		Additional paid-in		Accumulated other comprehensive						Non -controlling			Total stockholders’
	Number of shares		Amount $		Number of shares		Amount $		issuable $		capital $		income (loss) $			Deficit $			interest $			deficit $

Balance, September 30, 2019		–		-		75,646,835		75,647		-		3,772,781		47,824			(4,729,476	)		(1,274	)		(834,498	)

Foreign currency translation loss		–		-		–		-		-		-		(12,399	)		-			-			(12,399	)

Net loss for the period		–		-		–		-		-		-		-			(206,021	)		(36	)		(206,057	)

Balance, December 31, 2019		–		-		75,646,835		75,647		-		3,772,781		35,425			(4,935,497	)		(1,310	)		(1,052,954	)

Issuance of common stock pursuant to the conversion of convertible notes		–		-		78,064		78		-		20,999		-			-			-			21,077

Foreign currency translation gain		–		-		–		-		-		-		31,525			-			-			31,525

Net loss for the period		–		-		–		-		-		-		-			(3,510	)		(117	)		(3,627	)

Balance, March 31, 2020		–		-		75,724,899		75,725		-		3,793,780		66,950			(4,939,007	)		(1,427	)		(1,003,979	)

Issuance of common stock pursuant to the conversion of convertible notes		–		-		15,420,104		15,420		-		126,910		-			-			-			142,330

Foreign currency translation loss		–		-		–		-		-		-		(17,081	)		-			-			(17,081	)

Net loss for the period		–		-		–		-		-		-		-			(1,360,714	)		(8	)		(1,360,722	)

Balance, June 30, 2020		–		-		91,145,003		91,145		-		3,920,690		49,869			(6,299,721	)		(1,435	)		(2,239,452	)

	Nine months ended June 30, 2021 $			Nine months ended June 30, 2020 $

OPERATING ACTIVITIES

Net loss		(3,700,772	)		(1,570,406	)

Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of discount on convertible notes		86,801			77,889
Financing fees and default penalties		673,124			45,000
Loss on change in fair value of derivative liabilities		3,083,420			1,347,031
Loss (gain) on settlement of convertible notes		(613,526	)		38,411
Shares issued or issuable for services		130,175			-
Write-off of accounts payable		-			(292,557	)

Changes in operating assets and liabilities:
Amounts receivable		207			9,849
Prepaid expenses and deposits		3,754			(236,798	)
Accounts payable and accrued liabilities		120,273			21,189
Due to related parties		65,307			13,840

Net cash used in operating activities		(151,237	)		(546,552	)

FINANCING ACTIVITIES

Proceeds from issuance of convertible notes		-			570,080
Proceeds from units issued and issuable for cash		186,725			-
Proceeds from issuance of preferred shares		10			-
Repayment of loans from related parties		-			(128,813	)
Proceeds from related party loans		33,646			64,981
Proceeds from loans payable		-			29,388
Financing costs		-			(5,000	)

Net cash provided by financing activities		220,381			530,636

Effect of foreign exchange rate changes on cash		(62,122	)		(12,184	)

Change in cash		7,022			(28,100	)

Cash, beginning of period		12,196			62,682

Cash, end of period		19,218			34,582

Non-cash investing and financing activities:

Original issue discount on convertible notes		-			532,594
Common shares issued for settlement of convertible notes		4,545,270			163,407
Issuance of promissory note as a financing fee		-			40,000

Supplemental disclosures:
Interest paid		-			4,601
Income taxes paid		-			-

	(a)	Interim Financial Statements

		These condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

	(b)	Basis of Presentation

		The accompanying condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. These condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, WFS Pharmagreen Inc. (“WFS”), and its 89.7% owned subsidiary 1155097 B.C. Ltd. (“115BC”), companies incorporated in British Columbia, Canada. All inter-company accounts and transactions have been eliminated. The Company’s fiscal year-end is September 30.

	(c)	Use of Estimates and Judgments

		The preparation of these condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the recoverability of property and equipment, the equity component of convertible notes, fair value of derivative liabilities, fair value of share-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 and in the factors regarding the impairment of the property and equipment. The Company tests property and equipment 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.

	(d)	Recently Adopted Accounting Pronouncements

		The Company has implemented all new accounting pronouncements that are in effect and that may impact its condensed consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

3.	Accounts Payable and Accrued Liabilities

	Accounts payable and accrued liabilities consists of the following:

	June 30, 2021 $		September 30, 2020 $

Accounts payable (Note 7)		550,871		455,310
Accrued interest payable (Notes 4 and 5)		73,590		84,353

		624,461		539,663

	(a)	On November 22, 2019, the Company entered into a promissory note with an unrelated party for $40,000 in connection with an equity purchase agreement (Refer to Note 11(b)). The promissory note is unsecured, was due on November 30, 2020, and bears interest on the unpaid principal balance at a rate of 10% per annum. At June 30, 2021, the Company has recorded accrued interest payable of $6,404 (September 30, 2020 - $3,421) and the promissory note is in default. On March 10, 2021, this 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 $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.

	(b)	On April 22, 2020, the Company received a loan for Cdn$40,000from the Government of Canada under the Canada Emergency Business Account program (“CEBA”). As at June 30, 2021, the balance owing is $32,240 (Cdn$40,000) (September 30, 2020 – $30,028 (Cdn$40,000)). These funds are interest free until December 31, 2022, at which time the remaining balance will convert to a 3-year term loan at an interest rate of 5% per annum. If the Company repays the loan prior to December 31, 2022, there will be loan forgiveness of 25% of the principal balance repaid, up to a maximum of Cdn$10,000.

	(b)	On October 1, 2019, the Company entered into a convertible note with an unrelated party for $78,000, of which $3,255 was paid directly to third parties for financing costs, resulting in net proceeds to the Company of $74,745. The note is due on October 1, 2020, and bears interest on the unpaid principal balance at a rate of 10% per annum, which increases to 24% per annum upon default of the note.The note may be converted at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to lower of: (i) the lowest trading price during the 10-trading day period prior to the issuance date; or (ii) 61% of the average 2 lowest trading prices during the 10-trading day period prior to the conversion date. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, 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 $70,744. The Company recognized the maximum intrinsic value of the embedded beneficial conversion feature of $74,245 and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible note up to its face value of $78,000.

		On July 22, 2020, the Company received a preliminary statement of claim from the note holder for failure of the Company to deliver shares of common stock upon receipt of notices of conversion. Pursuant to the claim, the note holder 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 in the 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. Upon default, the Company recognized the remaining debt discount of $46,904 as accretion expense. 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 $77,500 and a default penalty of $85,864. During the nine months ended June 30, 2021, the Company recorded an additional $253,856 of default penalties. During the nine months ended June 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. 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. As at March 12, 2021, the carrying value of the convertible note was $nil (September 30, 2020 - $163,864) and the fair value of the derivative liability was $nil (September 30, 2020 - $485,863).

	(c)	On October 17, 2019, the Company entered into a convertible note with an unrelated party for $63,000, of which $3,000 was paid directly to third parties for financing costs, resulting in net cash proceeds to the Company of $60,000. The note is due on October 17, 2020, and bears interest on the unpaid principal balance at a rate of 10% per annum, which increases to 22% per annum upon default of the note. The note may be converted at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the average 2 lowest trading prices during the 10-trading day period prior to the conversion date.

		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 $63,000, and accrued interest owing on the note of $5,775 which was due on September 30, 2020. Upon entering into the settlement agreement, the Company immediately recognized the remaining debt discount of $1,657. On September 30, 2020, the Company failed to meet the repayment terms within the settlement agreement which resulted in a default penalty of $63,000 and the resumption of the convertibility feature at a conversion price equal to 61% of the average 2 lowest trading prices during the 10-trading day period prior to the conversion date. 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 $112,822. 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 $3,000 and a default penalty of $63,000. During the nine months ended June 30, 2021, the Company issued 7,730,486 shares of common stock upon the conversion of $126,000 of the convertible note. As at June 30, 2021, the carrying value of the convertible note was $nil (September 30, 2020 - $126,000) and the fair value of the derivative liability was $nil (September 30, 2020 - $112,822).

	(d)	On January 2, 2020, the Company entered into a convertible note with an unrelated party for $53,000, of which $3,000 was paid directly to third parties for financing costs, resulting in cash proceeds to the Company of $50,000. The note is due on January 2, 2021, and bears interest on the unpaid principal balance at a rate of 10% per annum, which increases to 22% per annum upon default of the note. The note may be converted at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the average 2 lowest trading prices during the 10-trading day period prior to the conversion date.

		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 $53,000 and accrued interest owing on the note. Upon entering into the settlement agreement, the Company immediately recognized the remaining debt discount of $2,286. Effective September 30, 2020, the Company failed to meet the repayment terms of the settlement agreement and defaulted on the convertible note. 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 $139,702. 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 $3,000 and a default penalty of $53,000. During the nine months ended June 30, 2021, the Company issued 16,994,905 shares of common stock upon the conversion of $106,000 of the convertible note. As at June 30, 2021, the carrying value of the convertible note was $nil (September 30, 2020 - $106,000) and the fair value of the derivative liability was $nil (September 30, 2020 - $139,702).

	(e)	On January 14, 2020, the Company entered into a convertible note with an unrelated party for $78,000, of which $3,000 was paid for financing costs, resulting in net proceeds to the Company of $75,000. The note is due on January 14, 2021, and bears interest on the unpaid principal balance at a rate of 12% per annum, which increases to 15% per annum upon default of the note. The note may be converted at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to lower of: (i) 65% of the lowest trading price during the 20-trading day period prior to the issuance date; or (ii) 65% of the lowest trading price during the 20-trading day period prior to the conversion date. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, 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 $76,330. The Company recognized the maximum intrinsic value of the embedded beneficial conversion feature of $74,500, resulting in a loss on change in fair value of derivative liabilities of $1,830, and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible note up to its face value of $78,000.

		The financing costs were netted against the convertible note and are being amortized over the term using the effective interest rate method. During the year ended September 30, 2020, the Company recognized accretion expense of $16,447. During the nine months ended June 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. On January 14, 2021, the Company failed to repay the note upon maturity and recorded additional default principal of $53,007. As at June 30, 2021, the carrying value of the convertible note was $112,084 (September 30, 2020 - $16,947), net of an unamortized discount of $nil (September 30, 2020 - $61,053), and the fair value of the derivative liability was $170,586 (September 30, 2020 - $110,604).

	(f)	On January 15, 2020, the Company entered into a convertible note with an unrelated party for $61,000, of which $7,400 was paid directly to third parties for financing costs and an original issue discount of $3,000, resulting in proceeds to the Company of $50,600. The note is due on January 15, 2021, and bears interest on the unpaid principal balance at a rate of 10% per annum, payable in common stock, which increases to 24% per annum upon default of the note. The note may be converted at any time after the date of issuance into shares of Company’s common stock at a conversion price equal 65% of the lowest trading price during the 20-trading day period prior to the conversion date. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, 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 $67,846.

		The Company recognized the maximum intrinsic value of the embedded beneficial conversion feature of $50,100, resulting in a loss on change in fair value of derivative liabilities of $17,746, and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible note up to its face value of $61,000. 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 $63,440 on a non-convertible basis, of which $15,000 was payable on or before July 24, 2020 (paid), followed by 6 monthly instalment payments of $8,073. Upon entering into the settlement agreement, the Company immediately recognized the remaining debt discount of $56,566. Effective August 24, 2020, the Company failed to meet the repayment terms and defaulted on the settlement agreement. 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 $60,500. During the nine months ended June 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. As at June 30, 2021, the carrying value of the convertible note was $nil (September 30, 2020 - $46,000) and the fair value of the derivative liability was $nil (September 30, 2020 - $69,320).

	(g)	On January 15, 2020, the Company entered into a convertible note with an unrelated party for $55,000, of which $2,500 was paid directly to third parties for financing costs, resulting in proceeds to the Company of $52,500. The note is due on January 15, 2021, and bears interest on the unpaid principal balance at a rate of 10% per annum, which increases to 24% per annum upon default of the note. The note may be converted at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to lower of: (i) the lowest trading price during the 20-trading day period ending on the latest complete trading day prior to the issuance date; or (ii) 65% of the lowest trading price during the 20 consecutive trading day period on which at least 100 shares of common stock were traded prior to the conversion date. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, 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 $61,173. The Company recognized the maximum intrinsic value of the embedded beneficial conversion feature of $52,000, resulting in a loss on change in fair value of derivative liabilities of $9,173, and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible note up to its face value of $55,000.

		During the year ended September 30, 2020, the Company defaulted on the convertible note which resulted in a default penalty of $27,500 and the amendment of the conversion rate from 65% to 50% of the lowest trading price during the 20 consecutive trading days prior to conversion. The Company recognized the remaining debt discount of $50,767 as accretion expense. 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 $54,500 and a default penalty of $27,500. During the nine months ended June 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. As at June 30, 2021, the carrying value of the convertible note was $nil (September 30, 2020 - $82,500) and the fair value of the derivative liability was $nil (September 30, 2020 - $146,272).

	(h)	On January 21, 2020, the Company entered into a convertible note with an unrelated party for $66,150, of which $7,800 was paid directly to third parties for financing costs and an original issue discount of $3,150, resulting in proceeds to the Company of $55,200. The note is due on January 21, 2021, and bears interest on the unpaid principal balance at a rate of 8% per annum, payable in common stock, which increases to 24% per annum upon default of the note. The note may be converted at any time after the date of issuance into shares of Company’s common stock at a conversion price equal 60% of the lowest trading price during the 20-trading day period prior to the conversion date. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, 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 $71,278.

		The Company recognized the maximum intrinsic value of the embedded beneficial conversion feature of $54,700, resulting in a loss on change in fair value of derivative liabilities of $16,578, and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible note up to its face value of $66,150.

		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 $13,202. During the nine months ended June 30, 2021, the Company issued 4,431,963 shares of common stock upon the conversion of $66,150of the convertible note and $3,907 of accrued interest. As at June 30, 2021, the carrying value of the convertible note was $nil (September 30, 2020 - $13,702), net of an unamortized discount of $nil (September 30, 2020 - $52,448), and the fair value of the derivative liability was $nil (September 30, 2020 - $98,579).

	(i)	On January 22, 2020, the Company entered into a convertible note with an unrelated party for $78,750, of which $9,750 was paid directly to third parties for financing costs, resulting in proceeds to the Company of $69,000. The note is due on January 22, 2021, and bears interest on the unpaid principal balance at a rate of 10% per annum, payable in common stock, which increases to 24% per annum upon default of the note. The note may be converted at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to 65% of the lowest trading price during the 20-trading day period ending on the latest complete trading day prior to the conversion date. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, 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 $75,179. The Company recognized the maximum intrinsic value of the embedded beneficial conversion feature of $68,500, resulting in a loss on change in fair value of derivative liabilities of $6,679, and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible note up to its face value of $78,750.

		The financing costs were netted against the convertible note and are being amortized over the term using the effective interest rate method. During the year ended September 30, 2020, the Company defaulted on the convertible note and recognized accretion expense of $78,250. On January 22, 2021, the Company failed to repay the note upon maturity. As at June 30, 2021, the carrying value of the convertible note was $78,750 (September 30, 2020 - $78,750) and the fair value of the derivative liability was $127,715 (September 30, 2020 - $107,660).

	(j)	On February 4, 2020, the Company entered into a convertible note with an unrelated party for $100,000, of which $16,970 was paid directly to third parties for financing costs, resulting in proceeds to the Company of $83,030. The note is due on February 4, 2021, and bears interest on the unpaid principal balance at a rate of 12% per annum, which increases to 24% per annum upon default of the note. The note may be converted at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to lower of: (i) the lowest trading price during the 10-trading day period ending on the latest complete trading day prior to the issuance date; or (ii) 60% of the average of the two lowest trading prices during the 10-trading day period prior to the conversion date. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Derivatives and Hedging, 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 $125,640. The Company recognized the maximum intrinsic value of the embedded beneficial conversion feature of $82,530, resulting in a loss on change in fair value of derivative liabilities of $43,110, and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible note up to its face value of $100,000.

		During the year ended September 30, 2020, the noteholder converted $24,175 of the convertible note for 2,000,000 common shares with a fair value of $180,000 and was issued on October 20, 2020. Upon the notice of conversion, the Company immediately recognized the related remaining debt discount of $23,136 as accretion expense. 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 $7,854.

6.	Derivative Liabilities

	The embedded conversion option of certain 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	1,380,957

Conversion of convertible notes	(4,166,076	)
Change in fair value	3,083,420

Balance, June 30, 2021	298,301

	(a)	As at June 30, 2021, the Company owed $548,586 (Cdn$680,628) (September 30, 2020 - $453,697(Cdn$604,366)) to the President of the Company, which is non-interest bearing, unsecured, and due on demand. During the nine months ended June 30, 2021, the Company incurred consulting fees of $72,171 (2020 - $63,044) to the President of the Company.

	(b)	As at June 30, 2021, the Company owed $59,241 (Cdn$73,500) (September 30, 2020 - $55,177 (Cdn$73,500)) to the father of the President of the Company, which is non-interest bearing, unsecured, and due on demand.

	(c)	As at June 30, 2021, the Company owed $27,565 (Cdn$34,200) (September 30, 2020 – $25,674 (Cdn$34,000)) 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.

	(d)	As at June 30, 2021, the Company owed $431,105 (Cdn$534,870) (September 30, 2020 – $347,229 (Cdn$462,540)) 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 nine months ended June 30, 2021, the Company incurred consulting fees of $72,171 (2020 - $63,044) to the company controlled by the Chief Financial Officer of WFS.

	(e)	On October 14, 2020, the Company issued 10,000 shares of Series A Super Voting Preferred Stock to a director of the Company for proceeds of $10.

	(a)	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.

	(b)	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.

	(c)	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.

	(d)	During the nine months ended June 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 (Note 5(b)).

	(e)	During the nine months ended June 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 (Note 5(c)).

	(f)	During the nine months ended June 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 (Note 5(d)).

	(g)	During the nine months ended June 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 (Note 5(e)).

	(h)	During the nine months ended June 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 (Note 5(f)).

	(i)	During the nine months ended June 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 (Note 5(g)).

	(j)	During the nine months ended June 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 (Note 5(h)).

	(k)	During the nine months ended June 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 (Note 5(j)).

	(l)	On November 1, 2020, the Company issued 22,500 shares of common stock with a fair value of $401 for management consulting and strategic business advisory services.

	(m)	On November 26, 2020, the Company issued 45,000 shares of common stock with a fair value of $733 for management consulting and strategic business advisory services.

	(n)	On December 11, 2020, the Company issued 22,500 shares of common stock with a fair value of $221 for management consulting and strategic business advisory services.

	(o)	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.

	(p)	On March 29, 2021, the Company issued 150,000 shares of common stock with a fair value of $4,620 for management consulting and strategic business advisory services.

	(q)	As at September 30, 2020, the Company received a conversion notice for 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 (see Note 5(j)). The common shares were issued on October 20, 2020.

8.	Common Stock (continued)

	Nine months ended June 30, 2021 (continued)

	(r)	On May 14, 2021, the Company issued 611,250 units at $0.01 per unit for proceeds of $6,113 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.

	(s)	On May 14, 2021, the Company issued 6,350,000 units at $0.01 per unit for proceeds of $63,500. 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.

	(t)	As at June 30, 2021, the Company agreed to issue 6,750,000 shares of common stock with a fair value of $121,500, which has been included in shares issuable, pursuant to a production agreement (Note 11(d)).

10.	Share Purchase Warrants

	The following table summarizes the continuity of the Company’s share purchase warrants:

	Number of warrants		Weighted average exercise price $

Balance, September 30, 2020		114,286		0.55

Issued		29,772,500		0.05

Balance, June 30, 2021		29,886,786		0.05

Number of warrants		Exercise price		Expiry date

	114,286	$	0.55	July 16, 2022
	400,000	$	0.05	December 2, 2022
	3,000,000	$	0.05	December 11, 2022
	2,000,000	$	0.05	December 30, 2022
	2,300,000	$	0.05	January 11, 2023
	13,500,000	$	0.05	January 30, 2023
	1,000,000	$	0.05	February 16, 2023
	611,250	$	0.05	March 1, 2023
	6,961,250	$	0.05	May 14, 2023

	29,886,786

	(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. The option agreement grants an option to Alliance to purchase 10% equity interest in 115BC for Cdn$1,350,000 and previously granted a second option to purchase an additional 20% equity interest in 115BC for funding of 30% of the total construction and equipment costs for the biotech complex less Cdn$1,350,000. On January 25, 2019, 115BC issued 8 shares of common stock to Alliance upon exercise of the first option for consideration of $1,018,182 (Cdn$1,350,008), which was recognized as additional paid-in capital. The second option expired unexercised. As at June 30, 2021, the Company received advances of $60,450 (Cdn$75,000) (September 30, 2020 - $56,303 (Cdn$75,000)) from Alliance, which is unsecured, non-interest bearing, and due on demand.

	(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 $10,000,000 of the Company’s common stock. The equity purchase agreement is effective for a term of 2 years from the effective date of the registration statement. The purchase price would be 85% of the market price. In return, the Company issued a promissory note of $40,000 (Refer to Note 4(a)). In addition, the third party is required to pay an additional commitment fee of $10,000, of which $5,000 was paid upon signing the term sheet and the remaining $5,000 is due upon completion of the first tranche of the financing.

	(c)	On December 13, 2020, the Company entered into a consulting agreement with a six month term. Pursuant to the agreement, the Company will 75,000 shares of common stock per month in exchange for consulting services. On June 13, 2021, the Company extended the consulting agreement for an additional six month term for the issuance of 117,000 common shares per month. Refer to Note 12(a).

	(d)	Effective May 13, 2021, the Company entered into a production agreement with New to the Street Group LLC. Pursuant to the terms of the agreement, New to the Street Group LLC will provide investor relations and consulting services for a period of six months. Pursuant to the agreement,the Company agreed to pay New to the Street Group LLC $3,500 upon signing, $3,500 per month and 6,750,000 restricted shares of the Company’s common stock. At June 30, 2021, the 6,750,000 restricted shares of common stock have not been issued.

	(e)	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. The Company will pay DealMaker $3,000 upon signing the agreement, $7,000 payable within 30 days of launching the portal, and a post launch monthly fee of $1,000.

	(a)	On July 13, 2021, the Company issued 702,000 common shares for consulting services. Refer to Note 11(c).

	(b)	Subsequent to the nine months ended June 30, 2021, the Company received common stock subscriptions totaling $56,000 in connection with the proposed issuance of 5,600,000 shares of common stock at $0.01 per unit. Each unit will be 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.

Exhibit Number		Description

2.1		Articles of Incorporation and Bylaws dated November 26, 2007 as previously filed with the SEC on March 20, 2019

2.2		Articles of Merger dated, October 30, 2008 (Azure International, Inc./ Air Transport Group Holding, Inc. as previously filed with the SEC on March 20, 2019

2.10		Equity Purchase Agreement with Oscaleta Partners LLC as previously filed with the SEC on December 2, 2019

2.11		Registration Rights Agreement with Oscaleta Partners LLC as previously filed with the SEC on December 2, 2019

31.1		Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934*

31.2		Certification of Chief Executive Officer Pursuant to Rule 13a–14(a) or 15d-14(a) of the Securities Exchange Act of 1934**

32.1		Certification of Chief Executive Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Principal Financial Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

	Pharmagreen Biotech Inc.

Dated August 16, 2021	By:	/s/ Peter Wojcik
		Peter Wojcik
		President and Director Principal Executive Officer