UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

	(Mark One)
	☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2018
		For the fiscal year ended December 31, 2019
		or
	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from _____________to ______________

Commission file number: 1-14088

Acacia Diversified Holdings, Inc.

(Exact name of registrant as specified in its charter)

Texas	75-2095676
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

13575 58th Street North - #138 Clearwater, FL 33760

(Address of principal executive offices) (Zip Code)

Issuer’s telephone number: (727) 678-4420

____________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock ACCA OTCQB

Securities registered pursuant to section 12(g) of the Act: None

Common Stock

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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. (1) Yes ☒ No ☐ (2) Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ (Not required) ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth 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 ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)			Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and asked price of such common equity as of June 30, ~~2018~~2019 was $31,~~954~~090,~~405~~199.

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 2152,~~318~~481,~~763~~507 Common shares as of ~~March~~June 277, ~~2019~~2020.

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TABLE OF CONTENTS

PART I.		PAGE
Item 1.	Description of Business	3
Item 1A.	Risk Factors	78
Item 1B.	Unresolved Staff Comments	78
Item 2.	Description of Property	78
Item 3.	Legal Proceedings	78
Item 4.	Mine Safety Disclosures	78
PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	89
Item 6.	Selected Financial Data	910
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	910
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	1718
Item 8.	Financial Statements and Supplementary Data	1718
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	1718
Item 9A (T).	Controls and Procedures	1718
Item 9B.	Other Information	19
PART III.
Item 10.	Directors, Executive Officers, and Corporate Governance	2021
Item 11.	Executive Compensation	2324
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	2526
Item 13.	Certain Relationships and Related Transactions, and Director Independence	2627
Item 14.	Principle Accountant Fees and Services	2728
PART IV.
Item 15.	Exhibits, Financial Statement Schedule and Reports on Form 8-K	2829
	SIGNATURES	2930

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PART I

Item 1. Description of Business

Description of business, principal products, services and their markets

Acacia Diversified Holdings, Inc. (“we”, “us”, the “Company”, or the “Parent Company”) was incorporated in Texas on October 1, 1984 as Gibbs Construction, Inc. (“Gibbs”). The Company changed its name from Gibbs Construction, Inc. to Acacia Automotive, Inc. effective February 20, 2007. On October 18, 2012, the Company changed its name from Acacia Automotive, Inc. to Acacia Diversified Holdings, Inc. in an effort to exemplify the Company’s desire to expand into alternative industries as well as more diversified service and product offerings.

On January 15, 2016, the Company acquired the assets of the MariJ Group of companies that included MariJ Agricultural, JR Cannabis Industries, LLC and Canna-Cures Research & Development Center, LLC. The transaction had an effective date of January 4, 2016. On January 19, 2016 the Company filed a Current Report on Form 8-K announcing the acquisition. The Company subsequently filed expanded and updated information relating to that acquisition on its Amended Current Report on Form 8-K/A on April 25, 2016. That document is available for viewing on the Company’s website at http://www.acacia.bz/sec/sec.htm and on the SEC website at:

https://www.sec.gov/Archives/edgar/data/1001463/000118518516004336/0001185185-16-004336-index.htm

In 2016, following the acquisition, the Company formed two new subsidiaries to conduct its new medical hemp business activities, being MariJ Pharmaceuticals, Inc. (“MariJ Pharma”) and Canna-Cures Research & Development Center, Inc. (“Canna-Cures”). In 2017, the Company formed a new subsidiary Eufloria Medical of Tennessee, Inc. (“EMT”) to conduct its retail business in the state of Tennessee. In July 2018, the Company announced the completion of its acquisition of Medahub Operations Group, Inc. and Medahub, Inc., technology companies (“Medahub”), complete with a current compounding pharmacy license in Florida.

On March 26, 2020, the Company announced in a current report on Form 8-k that its operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic spreading throughout the United States and the world and thus the Company’s business operations have been disrupted and it was unable to timely review and prepare the Company’s financial statements for the 2019 fiscal year. As such, the Company would be making use of the 45-day grace period provided by the SEC’s Order and available filing extension to delay filing of its Annual Report.

On March 31, 2020, Richard K. Pertile resigned his position as Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer for the Company. On the same date, the Company filed a current report on Form 8-k to announce that it issued in escrow 1,475,000 shares of the Company’s Series B Convertible Preferred Stock (the “Preferred Stock”) to ORCIM Financial Holdings, LLC (“OFH”). Each share of the Preferred Stock has fifty (50) votes per share and may be converted into fifty (50) $0.001 par value common shares. As of March 31, 2020, the Company had 43,290,331 shares of its common stock issued and outstanding. There were no other shares of any capital stock outstanding except for the common stock and Preferred Stock. As the result of the issuance of the Preferred Stock and, upon satisfaction of the terms of the Acquisition Agreement, OFH would have voting control over the Company with 73,750,000 votes on all matters submitted to stockholders for a vote. On May 20, 2020, the conditions of the Acquisition Agreement were satisfied with the resignation of the former board of directors of the Company and the change of control became effective.

OFH is a limited liability company domiciled in Maryland. OFH is controlled by Mr. Jeffery D. Bearden, who owns 100% of the membership interests of OFH. The Preferred Stock was acquired by OFH in exchange for its agreement to assume the debt of the Company in the approximate amount of $450,000. The funds to satisfy the outstanding debt of the Company were acquired by OFH through a loan from a hedge fund entity known as Geneva Capital.

On March 31, 2020, Mr. Larnell C. Simpson, Jr., age 47, was appointed as a director for Acacia Diversified Holdings, Inc. (the “Company”). Mr. Simpson also was appointed to the position of Vice President.

On May 20, 2020, directors Danny Gibbs, Neil B. Gholson and Dr. Richard Paula each resigned their respective positions as a director for Acacia Diversified Holdings, Inc.

MariJ Pharmaceuticals, Inc.

MariJ Pharma ~~has~~had a proprietary mobile CO2, supercritical hemp oil extraction unit which was USDA certified Organic on September 28th, 2016, by OneCert, under the US National Organic Program; 7 CFR PART 205. MariJ Pharma ~~extracts~~extracted and ~~processes~~processed very high quality, high-cannabinoid profile content medical grade hemp oils from medicinal hemp plants. MariJ ~~specializes~~specialized in organic strains of the plant where available, setting itself apart from the general producers of non-organic products.

~~During 2018, the Company performed its extraction activity in the state of North Carolina where its activities are deemed legal under the laws of such state.~~3

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Canna-Cures Research & Development Center, Inc.

Canna-Cures engaged in research and development activities as well as retail and wholesale distribution of medicinal hemp products and dietary supplements in Colorado until it closed operations in July 2017. As a part of its R&D efforts, Canna-Cures sought to align itself with institutions of higher learning in working to develop new products and to identify and develop additional uses for its medicinal hemp products.

Canna-Cures launched its first research and development center in Colorado. In conjunction with that opening, Canna-Cures officially launched the Dahlia’s Botanicals Endocannabinoid Nutraceuticals product line. A portion of the proceeds from our Dahlia’s Botanicals line ~~are~~were awarded to the Canna Moms 501(c)(3) organization in support of its continuing public education and awareness campaign.

Eufloria Medical of Tennessee, Inc.

In July 2018, the Company announced that its wholly-owned subsidiary, Eufloria Medical of Tennessee, Inc. (“EMT”), an entity focused on the growing and distribution of new and proprietary medicinal hemp products for patients. EMT ~~intends~~intended to utilize MariJ Pharma's USDA certified organic mobile processing and handling solutions for its customers, and technology solutions for the expanding physician market, ~~has~~ leased a 14-acre farm with 32,000 square feet of indoor growing area in southern Tennessee. EMT also acquired an option to purchase the farm upon favorable terms~~, which option, EMT intends to exercise as soon as possible~~. During 2018, EMT completed excavation and other cleanup activities and developed the farm into its first grow facility, allowing for improved efficiencies through growing, processing and manufacturing the Company’s own product line and building sales through dedicated distributors. The Company ~~will~~grew ~~grow~~ its own plant material, ~~process~~processed that plant material through another wholly owned subsidiary, MariJ Pharmaceuticals, Inc. (“MariJ”) and ~~manufacture~~manufactured consumer products with the “EUFLORIA” branding for the dedicated distribution channels.

3EMT also commenced its retail and wholesale distribution of medicinal hemp products and dietary supplements in Tennessee. In addition to its current extraction operations, the Company was invited to be part of the hemp pilot program in Tennessee. This program provided the Company the license to grow, manufacture, and dispense USDA organic hemp oil in Tennessee and represented the first step in moving its operations to the east coast of the United States. The Company planned on participating in this pilot program through this new, wholly-owned subsidiary.

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EMT also commenced its retail and wholesale distribution of medicinal hemp products and dietary supplements in Tennessee. In addition to our current extraction operations, the Company has been invited to be part of the hemp pilot program in Tennessee. This program provides the Company the license to grow, manufacture, and dispense USDA organic hemp oil in Tennessee and represents the first step in moving its operations to the east coast of the United States. The Company plans on participating in this pilot program through this new, wholly-owned subsidiary.

Medahub, Inc.

In July 2018, the Company announced the completion of its acquisition of Medahub Operations Group, Inc. and Medahub, Inc., technology companies (“Medahub”), complete with a current compounding pharmacy license in Florida. The Medahub acquisition ~~allows~~allowed the Company to be fully HIPAA compliant and cloud based on an HL7 platform. The Company ~~can~~could ~~now~~ offer licensing agreements for other hemp companies wanting to be HIPAA compliant from left to right or seed to sale and Doctor to Patient. The Company iscontinued ~~continuing~~ to develop the capabilities of this technology ahead of marketing this platform to users.

Distribution methods of the products and services

MariJ Pharma ~~extracts~~extracted and ~~processes~~processed a very high quality, high-cannabinoid profile content medical grade hemp oils from medicinal hemp plants in its propriety mobile CO2, supercritical hemp oil extraction unit which was USDA certified Organic on September 28th, 2016, by OneCert, under the US National Organic Program; 7 CFR PART205. The finished product iswas then delivered to its customers.

EMT ~~plans~~planned to sell medicinal hemp products and dietary supplements primarily through its retail dispensaries in Tennessee and through a dedicated distribution model.

Status of any publicly announced new products or services

During 2018, the Company acquired Medahub to develop its proprietary ~~GeoTrackingTechnology~~GeoTracking Technology that iswas fully compliant with the Health Insurance Portability and Accountability standard (“HIPAA”) utilizing its “plant to patient” solution. This ~~GeoTraking~~GeoTracking Technology iswas designed to provide a full-channel patient care tracking system that iswas fully compliant under today’s strict HIPAA regulations that ~~require~~required privacy and security of the patient’s information. Beginning with RFID labeling and tracking of every single seed employed in the grow program and continuing through the sale of medicinal products in a sophisticated retail Point of Sale delivery system.

The Company also plans to enter into research and development projects with institutions of higher learning in efforts to: (i) develop new and better strains of medical hemp related products for dispensing as medications, nutraceuticals, cosmeceuticals, and potential dietary supplements; and (ii) provide private label packaging services; and (iii) sell additional medical hemp oils, oil-infused products, and other merchandise through its web-based portal or retail dispensaries planned for that purpose; and (iv) sell cosmeceutical and nutraceutical products and dietary supplements containing its high-quality hemp oil extracts.

The Company currently does not have sufficient working capital to pursue our business plan in its entirety as described herein. Our ability to implement our business plan will depend on our ability to obtain sufficient working capital and to fund our operations. No assurance can be given that we will be able to obtain additional capital, or, if available, that such capital will be available at terms acceptable to us, or that we will be able to generate profit from operations, or if profits are generated, that they will be sufficient to carry out our business plans, or that the plans will not be modified.

Competitive business conditions and the Company’s competitive position in the industry and methods of competition

Any industry served by the Company is likely to be highly competitive across the entire United States and the rest of the world. In particular, the hemp industry, being the impetus of all the Company’s attention at this juncture, is very highly competitive and has drawn thousands of competing entities. While the Company believes its technology, programs, and plans place it in a posture to compete at the highest levels, the sheer numbers of competitors must be recognized. The Company has elected to devote the majority of its efforts on production and sales of its products and services within the continental United States but may institute operations in diverse countries. Even so, the Company must be considered as currently competing with other companies in diverse countries that can potentially produce and sell competitive products at lower prices. While the Company believes that there are other hurdles for those foreign entities to overcome, including the high cost of international shipping to U.S. buyers, we believe that they nonetheless can compete with us in our markets. We will potentially compete with a variety of companies, both domestic and international, and as such will be subject to various levels of competition.

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The Company also planned to enter into research and development projects with institutions of higher learning in efforts to: (i) develop new and better strains of medical hemp related products for dispensing as medications, nutraceuticals, cosmeceuticals, and potential dietary supplements; and (ii) provide private label packaging services; and (iii) sell additional medical hemp oils, oil-infused products, and other merchandise through its web-based portal or retail dispensaries planned for that purpose; and (iv) sell cosmeceutical and nutraceutical products and dietary supplements containing its high-quality hemp oil extracts.

The Company did not have sufficient working capital to pursue its business plan in its entirety as described herein. Its ability to implement its business plan would depend on its ability to obtain sufficient working capital and to fund its operations. No assurance can be given that it would be able to obtain additional capital, or, if available, that such capital would be available at terms acceptable to the Company, or that it would be able to generate profit from operations, or if profits were generated, that they would be sufficient to carry out its business plans, or that the plans would not be modified.

In late March 2020, the Company’s operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic spreading throughout the United States and the world.

Competitive business conditions and the Company’s competitive position in the industry and methods of competition

Any industry served by the Company is likely to be highly competitive across the entire United States and the rest of the world. In particular, the hemp industry, being the impetus of all the Company’s attention at this juncture, is very highly competitive and has drawn thousands of competing entities. While the Company believed its technology, programs, and plans place it in a posture to compete at the highest levels, the sheer numbers of competitors must be recognized. The Company devoted the majority of its efforts on production and sales of its products and services within the continental United States but may institute operations in diverse countries. Even so, the Company must be considered as currently competing with other companies in diverse countries that can potentially produce and sell competitive products at lower prices. While the Company believed that there are other hurdles for those foreign entities to overcome, including the high cost of international shipping to U.S. buyers, we believed that they nonetheless could compete with us in our markets. We would potentially compete with a variety of companies, both domestic and international, and as such would be subject to various levels of competition.

There is no assurance the Company will be able to adhere to its plans or to engage in any acquisitions or mergers. The Company will consider potential opportunities to buy, sell or distribute its products in other countries.

Sources and availability of raw materials and the names of principal suppliers

One of the ingredients used in the extraction process is carbon dioxide. MariJ Pharma ~~depends~~depended on a supplier to supply high quality carbon dioxide. This supplier ~~produces~~produced the highest quality carbon dioxide for the medicinal hemp industry. If MariJ Pharma was not able to obtain carbon dioxide from this supplier, it would need to look to other suppliers to supply this critical ingredient. However, the quality of the ingredient would suffer and the Company may not be able to obtain it at reasonable cost. ~~At the present time, the Company is not anticipating a disruption of service by this supplier, whose identity we choose to keep confidential.~~

Dependence on one or a few major customers

During the year ended December 31, 2019, the Company’s revenues were concentrated on two customers, Beyond Organic Nutritional and LMK Hemp, who accounted for approximately 70% and 22%, of the total consolidated revenues, respectively.

During the year ended December 31, 2018, the Company’s revenues were concentrated on two customers, WNC Hemp and CFH, Inc., who accounted for approximately 59% and 21%, of the total consolidated revenues, respectively.

During the year ended December 31, 2017, the Company’s revenues were concentrated on three customers, CBD Rx, Precision Cultivation, Inc. and Blue Circle Development, Inc., who accounted for approximately 33%, 28% and 32%, of the total consolidated revenues, respectively.

Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration

The Company ~~currently~~had ~~has~~ patents pending, trademarks pending, and no franchises, concessions, royalty agreements or labor contracts. The Company ~~intends~~intended to acquire, through its MariJ Pharma subsidiary, portions or complete ownership of licenses and grow operations in one or more states and iswas seeking to cultivate, organically extract and process its medicinal hemp crops year around in indoor facilities. The acquisition of these licenses iswas anticipated to provide the Company with the opportunity to compound medicinal products using mixtures of high cannabinoid profile oils that have very little hallucinogenic properties but have significantly improved medicinal properties.

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Effect of existing or probable governmental regulations on the business

Congress voted in December 2018 to legalize the cultivation of hemp in the United States, after months of debate and negotiation between lawmakers. Hemp legalization was tucked into the 2018 farm bill, a massive piece of legislation that also addresses issues such as nutrition, conservation, trade, energy and forestry. The bill received strong bipartisan support, and the President signed it into law.

Now that hemp is legal, there are all kinds of implications for farmers, researchers and consumers. For decades, the federal government has treated hemp just like any other cannabis plant. Since 1970, it had been classified as a schedule 1 drug on the Drug Enforcement Administration's list of controlled substances, alongside heroin, LSD and marijuana. The DEA defines schedule 1 drugs as having no currently accepted medical use and a high potential for abuse. The new bill takes hemp off that list. The schedule 1 designation made universities reluctant to get involved in hemp research. With hemp being legalized now, those restrictions and hesitations about legal jeopardy have been removed.

The Company, through its new subsidiaries, ~~will~~operated ~~operate~~ in the medical hemp sector. In order to help our shareholders better understand the products we ~~intend~~intended to employ in our business plans, we ~~have~~ provided certain explanations and definitions below.

The Company ~~will~~extracted ~~initially extract~~ and ~~process~~processed a derivative of the hemp plant known as CBD oil. CBD is one of dozens of compounds found in hemp plants that belong to a class called cannabinoids. Of these compounds, CBD, CBG, CBN, CBC and THC are usually present in the highest concentrations and have the most common practical applications in the medical field. The Company’s subsidiaries ~~currently~~gave ~~give~~ most attention to high-CBD/low-THC products. Marijuana, unlike most modern-day medicine, contains a wide range of chemical compounds. Scientists have identified to date, over 114 unique molecules in hemp known as cannabinoids, which include THC and CBD. Many other non-cannabinoid compounds are produced by the plant, but these are the compounds that are most addressed as having a use by the medical community.

Terpenes, the molecules responsible for marijuana’s smell, among other things, have been shown to block some cannabinoid receptor sites in the brain while promoting cannabinoid binding in others. As a result, terpenes are believed to affect many aspects of how the brain takes in THC or CBD, while offering various therapeutic benefits of their own. In fact, while THC has gotten most of the attention, studies suggest many of the compounds in marijuana work together to produce a synergy of effects. This is known as the “entourage effect.”

5CBD and THC levels tend to vary between different strains and varieties of hemp. By using selective breeding techniques, certain growers have managed to create varieties with high levels of CBD, CBG and THCA, being the varieties employed for oil production by the Company’s MariJ Pharmaceuticals subsidiary. That subsidiary also specialized in extracting oil from certified organic plants, rather than the standard non-organic varieties.

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CBD and THC levels tend to vary between different strains and varieties of hemp. By using selective breeding techniques, certain growers have managed to create varieties with high levels of CBD, CBG and THCA, being the varieties currently employed for oil production by the Company’s MariJ Pharmaceuticals subsidiary. That subsidiary also specialized in extracting oil from certified organic plants, rather than the standard non-organic varieties.

Unlike THC; CBD, CBG, CBC, and CBN do not cause a high or hallucinogenic effect. The reason why CBD is non-psychoactive is due to its lack of affinity for CB1 receptors, such as are found in high concentrations in the brain, and which become the channels through which THC is able to port its psychoactive effects.

Like most other companies in this industry, we are subject to various business regulations, permits and licenses. The Company, through its new subsidiaries, ~~has~~ entered a new business realm that may entail considerably more regulation than its previous endeavors. The Company ~~believes~~believed that it has complied with appropriate state requirements for operations and ~~believes~~believed it has obtained all permits necessary to function under the current state regulations where we have business operations.

Despite the passage of the Farm Bill, inherent risks continue to exist in this industry as a result of the determination by many nationally-chartered banks. As such, some businesses maintain large sums of cash on hand, and meeting payrolls and accounts payable obligations with cash rather than checks. As a result, those businesses are placed at high risk of internal and external theft and crimes relating to the lack of controls and security afforded by transactional banking. The Company isutilized ~~currently utilizing~~ various financial institutions for its deposit needs, but this still ~~creates~~created risks when the proceeds at diverse production locations, often themselves in cash due to the same issues, cannot be deposited in nearby accessible depositories. The Company ~~has~~had an armored vehicle for use in the transport of cash and hemp products but believes those risks ~~will~~would not be minimized until national depository institutions allow hemp-related businesses to utilize their facilities.

Estimate of the amount of money spent during each of the last two fiscal years on research and development

The Company spent a de-minimus amount on research and development during its last two fiscal years.

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Costs and effects of compliance with environmental laws

The hemp industry, just like other industries, impacts our environment. Environmental laws relating to water rights, energy consumption, pollution, and overall carbon footprint all can and do impact the hemp industry.

While some areas of environmental law focus on the protection of the environment, others are designed to control human use of natural resources by setting up a system of environmental approvals. Environmental laws cover topics such as chemicals and pesticides, climate change and energy, coastal, marine and fisheries management, farming and private land management, forestry, clearing vegetation, trees, marine, pollution, water, just to name a few. Given all the facets of both indoor, outdoor, and greenhouse cultivation, in addition to chemical-intensive extractions and infusions of hemp oil products, it is easy to see why environmental laws are coming into play in the cannabis industry.

One of the most common environmental law issues for the hemp industry is waste management. Most states that legalize some form of hemp consumption strictly dictate the disposition and storage of the hemp by-products, as well as the types of pesticides, soil amendments, and fertilizers that can be safely applied to cannabis crops.

However, fewer states have enacted laws dealing with the industry’s impact on water and air quality, but the industry is certainly under more scrutiny. In certain states, producers and processors must pay a fee to their local or state government and submit an application for a permit, provide information on odor control equipment for producing, growing, or processing and solvent usage information for each type.

Energy consumption by hemp growers is also becoming an important issue. The significant use of electricity in indoor hemp production has caused concerns for the carbon-footprint of its production. States may pass legislatures to regulate energy consumption by passing the cost of such effects and consumption onto the hemp industry by instituting licensing and permitting fees.

Outdoor growers are not completely free of environmental concerns. They are also facing pressure under environmental laws because outdoor growing has led to deforestation, loss of wildlife, and erosion, and it often requires large amounts of water and pesticides.

Additional risk factor

War, terrorism, other acts of violence or natural or man-made disasters, including a global pandemic, may affect the markets in which the Company operates, the Company’s customers, the Company’s delivery of products and customer service, and could have a material adverse impact on our business, results of operations, or financial conditions.

The Company’s business may be adversely affected by instability, disruption or destruction in a geographic region in which it operates, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or man-made disasters, including famine, food, fire, earthquake, storm or pandemic events and spread of disease (including the recent outbreak of the coronavirus commonly referred to as “COVID-19”). Such events may cause customers to suspend their decisions on using the Company’s products and services, make it impossible to attend or sponsor trade shows or other conferences in which our products and services are presented to customers and potential customers, cause restrictions, postponements and cancellations of events that attract large crowds and public gatherings such as trade shows at which we have historically presented our products, and give rise to sudden significant changes in regional and global economic conditions and cycles that could interfere with purchases of goods or services, commitments to develop new products. These events also pose significant risks to the Company’s personnel and to physical facilities, transportation and operations, which could materially adversely affect the Company’s financial results.

Number of total employees and number of full-time employees

As of December 31, ~~2018~~2019, the Company had a total of ~~nine~~seven employees, ~~six~~five of which are full time.

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Available Information

Our Web address is www.acaciadiversifiedholdings.com. The Company makes its electronic filings with the Securities and Exchange Commission (“SEC”), including all Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and if applicable, amendments to those reports, available free of charge on its Web site as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. In addition, information regarding our board of directors is available on our Web site. The information posted on our Web site is not incorporated into this Annual Report on Form 10-K.

Any materials that we file with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet Web site that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov.

Item 1A. Risk Factors

As a smaller reporting company we are not required to provide any information under this item.

Item 1B. Unresolved Staff Comments

None.

Item 2. Description of Properties

At December 31, ~~2018~~2019, the Company does not currently own any real properties.

The Company ~~rents~~rented its administrative office in Clearwater, Florida on a month to month basis, ~~has~~had a two-year lease on its retail space in Nashville, Tennessee and ~~lease~~leased property for its growing facility in Pulaski, Tennessee.

Item 3. Legal Proceedings

None.

Item 4. Mine Safety Disclosures

None.

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PART II

Our common stock is presently quoted on the OTCQB of the OTC Markets marketplace under the trading symbol ACCA. Historically, trading in our stock has been very limited and the trades that have occurred cannot be characterized as amounting to an established public trading market. As a result, the trading prices of our common stock may not reflect the price that would result if our stock was actively traded.

The following are high and low closing prices quoted on the OTCQB during the periods indicated.

	Closing Prices
	High		Low
Quarters ending in 2017
March 31	$	2.00	$	1.30
June 30	$	1.75	$	1.07
September 30	$	1.29	$	0.53
December 31	$	0.59	$	0.34
Quarters ending in 2018
March 31	$	0.80	$	0.45
June 30	$	0.72	$	0.18
September 30	$	0.25	$	0.16
December 31	$	0.24	$	0.15
Quarters ending in 2019
March 31	$	0.24	$	0.11
June 30	$	0.13	$	0.03
September 30	$	0.08	$	0.03
December 31	$	0.14	$	0.07

As of December 31, ~~2018~~2019, the Company had ~~218~~225 registered stockholders of record. The Company believes that it may also have as many as 200 or more additional beneficial shareholders. The number of both shareholders of record and beneficial shareholders may change on a daily basis and without the Company’s immediate knowledge.

Holders of common stock are entitled to receive dividends as may be declared by our board of directors and, in the event of liquidation, to share pro rata in any distribution of assets after payment of liabilities. The board of directors has sole discretion to determine: (i) whether to declare a dividend; (ii) the dividend rate, if any, on the shares of any class of series of our capital stock, and if so, from which date or dates; and (iii) the relative rights of priority of payment of dividends, if any, between the various classes and series of our capital stock. We have not paid any dividends and do not have any current plans to pay any dividends.

At its meeting of directors on February 1, 2007, the Company’s board of directors approved the Acacia Automotive, Inc. 2007 Stock Incentive Plan1 (the “Plan”), which was approved by our stockholders on November 2, 2007, reserving 1,000,000 shares to be issued there under in the form of common stock or common stock purchase options. On July 26, 2012, our shareholders voted to update and extend the Acacia Automotive, Inc. 2007 Stock Incentive Plan, renaming it the Acacia Diversified Holdings, Inc. 2012 Stock Incentive Plan. Warrants, which may be included as equity compensation of used in other manners, are not a component of the Plan. On June 29, 2015 shareholders holding a majority of the shares of the Company voted to discontinue the Company’s stock incentive plans, but shares or options may still be authorized and issued by the Company’s Board of Directors. In resolutions since the implementation of the Plan, the directors granted restricted stock, warrants, and options for compensation summarized as follows as of December 31, ~~2018~~2019:

SUMMARY OF THE PLAN

Plan Description at December 31, 2018 and 2017	Number of Shares to be Issued Upon Exercise of Outstanding Options		Weighted Average Exercise Price of Outstanding Options		Number of Shares Remaining Available for Future Issuance
Plan Description at December 31, 2019 and 2018	Number of Shares to be Issued Upon Exercise of Outstanding Options		Weighted Average Exercise Price of Outstanding Options		Number of Shares Remaining Available for Future Issuance
Initial Number of Securities Available for Issue Under the Plan						1,000,000
Total Equity Plan Options outstanding at December 31, 2016 (2)		75,000	$	0.41		*-
Total options approved and issued in 2017		-		-		-
Options expired in 2017		10,000		-		-
Total Equity Plan Options outstanding at December 31, 2017 (3)		65,000	$	0.35		*-
Total options approved and issued in 2018		-		-		-
Options expired in 2018		15,000		0.50		-
Total Equity Plan Options outstanding at December 31, 2018 (4)		50,000	$	0.30		*-
Options expired in 2019		30,000		0.10		-
Total Equity Plan Options outstanding at December 31, 2019 (5)		20,000	$	0.60		*-

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* The plan was terminated on June 29, 2015.

(2) Of the 75,000 options still active as of December 31, 2016: (i) 10,000 expire at 11-2-2017; (ii) 15,000 expire at 12-31-2018; (iii) 30,000 expire at 11-6-2019; and, (iv) 20,000 expire at 12-23-2020.9

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(3)	Of the 65,000 options still active as of December 31, 2017: (i) 15,000 expire at 12-31-2018; (ii) 30,000 expire at 11-6-2019; and, (iii) 20,000 expire at 12-23-2020.

(4) Of the 50,000 options still active as of December 31, 2018: (i) 30,000 expire at 11-6-2019; and, (ii) 20,000 expire at 12-23-2020.

(4)	Of the 50,000 options still active as of December 31, 2018: (i) 30,000 expire at 11-6-2019; and, (ii) 20,000 expire at 12-23-2020.
(5)	These options expire at 12-23-2020.

In February 2018, the Company adopted the Acacia Diversified Holdings, Inc. 2018 Stock Grant and Option Plan (“2018 Plan”). The purpose of the 2018 Plan is to offer selected employees, directors and consultants an opportunity to acquire a proprietary interest in the success of the Company. Awards that can be granted from the 2018 Plan include registered shares, restricted shares and options as well as the direct award or sale of shares of the Company’s common stock. The aggregate number of shares which may be issued or transferred pursuant to an award shall not exceed 5,000,000 shares of authorized common stock of the Company. Subsequent to the adoption of the 2018 Plan, the Company filed Form S-8 with the Securities and Exchange Commission to register 1,000,000 shares of the Company’s common stock pursuant to a consulting agreement.

Item 6. Selected Financial Data

As a smaller reporting company we are not required to provide any information under this item.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the other sections of this Annual Report, including our consolidated financial statements and related notes set forth in Item 8. This discussion and analysis contains forward-looking statements, including information about possible or assumed results of our financial condition, operations, plans, objectives and performance that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated and set forth in such forward-looking statements.

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Forward-Looking Statements

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “will”, “should”, “could”, “predicts”, “potential”, “proposed”, or “continue” or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements due to numerous factors, including, but not limited to, availability of financing for operations, successful performance of operations, impact of competition and other risks detailed below as well as those discussed elsewhere in this Form 10-K and from time to time in the Company’s Securities and Exchange Commission filings and reports. In addition, general economic and market conditions and growth rates could affect such statements. Any forward-looking statement made by the Company speaks only as of the date on which it is made. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, subsequent events or otherwise.

Executive Overview

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On January 15, 2016, the Company acquired the assets and businesses of the MariJ Group of companies that included MariJ Agricultural, JR Cannabis Industries, LLC and Canna-Cures Research & Development Center, LLC. The transaction has an effective date of January 4, 2016.

On March 26, 2020, the Company announced in a current report on Form 8-k that its operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic spreading throughout the United States and the world and it was unable to timely review and prepare the Company’s financial statements for the 2019 fiscal year. As such, the Company would be making use of the 45-day grace period provided by the SEC’s Order and available filing extension to delay filing of its Annual Report.

On May 20, 2020, directors Danny Gibbs, Neil B. Gholson and Dr. Richard Paula each resigned their respective positions as a director for the Company.

MariJ Pharmaceuticals, Inc.

MariJPharma ~~engages~~engaged in the extraction and processing of very high quality, high-CBD/low-THC content medical grade hemp oils from medical hemp plants. MariJPharma ~~specializes~~specialized in utilizing organic strains of the hemp plant, setting itself apart from the general producers of non-organic products. In addition, MariJPharma ~~has~~had the technical expertise and capability to process and formulate the oils and to employ them in its compounding operations. MariJPharma ~~will~~sought ~~seek~~ to become engaged as owner or co-owner of a grow facility such as to produce its own plants for processing. The Company ~~intends~~intended to acquire, through its MariJ Pharma subsidiary, portions or complete ownership of licenses and grow operations in one or more states and ~~seeks~~sought to cultivate, organically extract and process its medicinal hemp crops year around in indoor facilities. The acquisition of these licenses iswas anticipated to provide the Company with the opportunity to compound medicinal products using mixtures of high cannabinoid profile oils that have very little hallucinogenic properties but have significantly improved medicinal properties. This ~~GeoTraking~~GeoTracking Technology iswas designed to provide a full-channel patient care tracking system that is fully compliant under today’s strict HIPAA regulations that require privacy and security of the patient’s information. Beginning with RFID labeling and tracking of every single seed employed in the grow program and continuing through the sale of medicinal products in a sophisticated retail Point of Sale delivery system.

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MariJ Pharma’s revenues ~~are~~were anticipated to be generated primarily from several activities, including but not limited to the following:

a. Hemp oil extraction and processing. MariJ Pharma ~~has~~had a unique mobile hemp oil processing and extraction unit designed into a heavy-duty trucks. That unit ~~has~~performed ~~already begun performing~~ extractions and processing of medical hemp oils at various sites and iswas ~~currently~~ developing additional contracts for services. b. Wholesale of raw and processed medical hemp oils. c. Compounding and manufacturing. MariJ Pharma constructed a mobile laboratory and testing unit, also on a heavy-duty truck chassis, intended to address the growing demand for these services in the medical hemp industry. d. Licensing and support of the Company’s GeoTracking Technology systems e. Processing and compounding services for medical grade hemp oils

bOn September 28, 2016, MariJ Pharmaceuticals, Inc. ~~Wholesale~~received ~~sale~~an ofOrganic ~~raw~~Certification under the U.S. National Organic Program (7 CFR Part 205) for its proprietary CO2 mobile hemp oil extraction process and ~~processed~~handling ~~medical~~from OneCert, Inc., the issuing authority for that certification. As such, MariJ was authorized to process directly for certified organic farms and was able to produce certified organic hemp oils.

c.The ~~Compounding~~Company sought additional investments and ~~manufacturing.~~financing ~~MariJ~~to ~~Pharma~~pay ~~has~~the ~~begun~~costs of building its second mobile oil extraction and processing unit, to finance final construction of aits mobile ~~laboratory~~compounding and ~~testing~~manufacturing unit for the same industry, ~~also~~and onto acomplete ~~heavy~~the roll-~~duty~~out ~~truck~~of ~~chassis~~its GeoTracking Technology system. Unfortunately, ~~intended~~the Company’s operations and business have experienced disruption due to ~~address~~the unprecedented conditions surrounding the ~~growing~~COVID-19 ~~demand~~pandemic ~~for~~spreading ~~these~~throughout ~~services~~the inUnited States and the ~~medical~~world ~~hemp~~and ~~industry~~was not able to secure the necessary funds to carry out its business plan.

d. Licensing and support of the Company’s GeoTraking Technology systems

e. Processing and compounding services for medical grade hemp oils

On September 28, 2016, MariJ Pharmaceuticals, Inc. received an Organic Certification under the U.S. National Organic Program (7 CFR Part 205) for its proprietary CO2 mobile hemp oil extraction process and handling from OneCert, Inc., the issuing authority for that certification. As such, MariJ is now authorized to process directly for certified organic farms and is able to produce certified organic hemp oils.

The Company is preparing to seek additional investments and financing to pay the costs of building its second mobile oil extraction and processing unit, to finance final construction of its mobile compounding and manufacturing unit for the same industry, and to complete the roll-out of its GeoTraking Technology system. There can be no assurance the Company will be successful in its plans to generate the required capital.

Canna-Cures Research & Development Center, Inc.

The Company acquired the assets and the business of Canna-Cures Research & Development Center, LLC, a Florida limited liability company, on January 15, 2016. The Company utilizes this subsidiary to engage in research and development activities as well as retail and wholesale distribution of medicinal hemp products and dietary supplements in the state of Colorado, depending upon our ability to comply in each instance with FDA rules and other regulations. Canna-Cures closed its retail operations in 2017 and began to focus its efforts in its development activities in Tennessee.

Eufloria Medical of Tennessee, Inc.

In addition to ~~our~~its ~~current~~ extraction operations, the Company ~~has~~was ~~been~~ invited to be part of the hemp pilot program in Tennessee. This program ~~provides~~provided the Company the license to grow, manufacture, and dispense hemp oil in Tennessee and ~~represents~~represented the first step in moving its operations to the east coast of the United States. The Company ~~plans~~planned on participating in this pilot program through this new, wholly-owned subsidiary.

The Company also acquired land in Tennessee and ~~has~~ completed excavation and other cleanup ~~and~~to ~~developed~~develop the farm into its first grow facility, allowing for improved efficiencies through growing, processing and manufacturing the Company’s own product line and building sales through dedicated distributors. The Company ~~will~~grew ~~grow~~ its own plant material, ~~process~~processed that plant material through another wholly owned subsidiary, MariJ Pharma and ~~manufacture~~manufactured consumer products with the “EUFLORIA” branding for the dedicated distribution channels.

EMT ~~will~~sought ~~seek~~ to align itself with institutions of higher learning in working to develop new products and to identify and develop additional uses for its medical hemp products. It iswas anticipated that EMT could generate revenues from the following activities:

1) EMT ~~will~~sought ~~seek~~ to enter into product development projects with institutions of higher learning in efforts to develop new and better strains of medical hemp related products for dispensing as medications, nutraceuticals, cosmeceuticals, and probably dietary supplements. EMT ~~anticipates~~anticipated participating in state and federal grants in conjunction with one or more universities as a means to defray part of its costs in these efforts. 2) Private label packaging services - the Company obtained a majority of the equipment required to engage in the business of packaging and labeling of medical hemp oils, oil-infused products, and related items. 3) Retail sales of medical hemp oils, oil-infused products, and other merchandise through its web-based portal or retail dispensaries planned for that purpose. These activities depended in large part upon meeting FDA regulations and criteria relating to the sale and distribution of hemp-infused products, and the Company was in the process of determining the status of those criteria. 4) Retail, and wholesale distributor, sales of cosmeceutical and nutraceutical products and dietary supplements containing its high-quality hemp oil extracts, subject to compliance with FDA and other regulations. 5) Growing high quality hemp plants and extracting oil for sale or for manufacturing of oil-infused products.

2) Private label packaging services - the Company has obtained a majority of the equipment required to engage in the business of packaging and labeling of medical hemp oils, oil-infused products, and related items.12

3) Retail sales of medical hemp oils, oil-infused products, and other merchandise through its web-based portal or retail dispensaries planned for that purpose. These activities are dependent in large part upon meeting FDA regulations and criteria relating to the sale and distribution of hemp-infused products, and the Company is currently in the process of determining the status of those criteria.

4) Retail, and wholesale distributor, sales of cosmeceutical and nutraceutical products and dietary supplements containing its high-quality hemp oil extracts, subject to compliance with FDA and other regulations.

5) Growing high quality hemp plants and extracting oil for sale or for manufacturing of oil-infused products.

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The Company ~~will~~required ~~require~~ additional capital to execute these plans and there can be no assurance that the Company will be successful in its plans to generate that capital. Unfortunately, the Company’s operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic spreading throughout the United States and the world and was not able to secure the necessary funds to carry out its business plan.

Discussion Regarding the Company’s Consolidated Operating Results

The results of operations are based on preparation of financial statements in conformity with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to select accounting policies for critical accounting areas as well as estimates and assumptions that affect the amounts reported in the financial statements. The Company’s accounting policies are more fully described in Note 3 to the Consolidated Financial Statements.

During the year ended December 31, ~~2018~~2019, we generated $~~415~~519,~~051~~221 of revenue compared to $~~478~~415,~~231~~051, an ~~decrease~~increase of $63104,~~180~~170 or 1325%. The ~~decrease~~increase is primarily as a result of having ~~fewer~~more contracts for extraction services in ~~2018~~2019. ~~In 2017, revenue was higher as a result of more aggressive advertising and marketing effort which enabled us to obtain additional contracts for extraction services.~~ Costs of goods sold increased by $34217,~~967~~589, or 1479%, from $~~241~~276,~~343~~310 to $~~276~~493,~~310~~899, primarily due to increase in extraction costs, including ~~costs~~compensation ofto ~~the~~ extraction technicians and depreciation on extraction equipment. As a result, gross profit decreased by $98113,~~147~~419 or 4182% from $~~236~~138,~~888~~741 to $~~138~~25,~~741~~322.

During the year ended December 31, ~~2018~~2019, our selling, general and administrative expenses decreased by $76536,~~340~~812 or 534% from $1,~~634~~558,~~885~~545 to $1,~~558~~021,~~545~~733. ~~Employee~~The ~~compensation~~Company ~~expenses~~was ~~decreased~~not ~~primarily~~successful ~~due to the closing of our retail store~~ in ~~Colorado~~raising in the ~~summer~~necessary ofcapital ~~2017 and a reduction of commission paid~~ to ~~extraction~~continue ~~technicians~~its inoperations ~~2018. This decrease is offset by the increase~~ in ~~general and administrative expenses~~Tennessee. ~~The~~Therefore, ~~increase~~it inclosed ~~general~~of ~~and~~its ~~administrative expenses is primarily due to the planning and opening our~~ retail and grow operations in Tennessee ~~in 2018~~. WeThis ~~incurred~~resulted ~~significant~~a ~~travel~~decrease ~~expense~~in ~~and~~general ~~growing~~ and ~~retail~~administrative ~~facilities~~expenses ~~expense as a result of operating~~ in ~~Tennessee~~2019.

As a result of the above, operating losses ~~increased~~decreased by $21423,~~807~~393 or 230% from $1,~~397~~419,~~997~~804 to $1996,~~419,804~~411 during the year ended December 31, ~~2018~~2019.

The Company’s other expenses were $592,517 and $292,~~898~~899 during the ~~year~~years ended December 31, 2019 and 2018, respectively. This is ~~primarily~~a ~~due~~result toof non-cash derivative expense from issuances of convertible notes payable, ~~and~~ the related amortization of debt issuance costs and interest accrued on various debt obligations. ~~The~~Increase ~~Company’s~~in other expenses ~~were~~was $~~435~~299,~~731~~618, or 102% during the year ended December 31, ~~2017~~2019. ~~This~~The increase is ~~primarily~~as ~~due~~a toresult ~~cash~~of ~~and~~issuances ~~non-cash~~of ~~interest~~additional ~~expense~~convertible ~~incurred~~notes ~~on note~~ payable ~~with related party~~ and ontheir ~~convertible~~related ~~note~~non-cash ~~and~~derivative ~~amortization of debt issuance costs. Decrease in other~~ expenses ~~was $142,833, or 33% during the year ended December 31, 2018~~.

As a result of the above, our consolidated net loss for the year ended December 31, ~~2018~~2019 amounted to $1,~~712~~588,~~703~~928 compared to a consolidated net loss of $1,~~833~~712,~~728~~703 for the year ended December 31, ~~2017~~2018, ana decrease of $~~121~~123,~~025~~775 or 7%.

Total Assets. Total assets at December 31, ~~2018~~2019 and ~~December~~2018 ~~31, 2017~~ were $ ~~696~~654,~~895~~237 and $~~606~~ 696,~~800~~895, respectively. Total assets consist of current assets of $~~239~~136,~~132~~318 and $~~119~~239,~~528~~132, respectively, net property and equipment of $~~453~~350,~~562~~509 and $~~483~~453,~~931~~562, respectively, and ~~deposits~~other assets of $4167,~~201~~410 and $34,~~341~~201, respectively. Total assets ~~increased~~decreased by $9042,~~095~~658, or 156% primarily due to ana ~~increase~~decrease in accounts receivable of $~~113~~83,~~150~~509 or ~~496~~61% due to ~~meeting~~collection ~~the~~efforts ~~revenue~~put ~~recognition~~forth ~~criteria~~during ~~for an extraction contract completed towards~~ the ~~end~~year ofended ~~2018.~~December ~~Management~~31, ~~provided~~2019, andepreciation ~~allowance~~on ~~for~~property ~~doubtful~~and ~~accounts~~equipment, inoffset by the ~~amount~~acquisition of ~~$25,000 as~~ an ~~estimated~~right-of-use ~~reserve~~finance lease.

Total Liabilities. Total liabilities at December 31, ~~2018~~2019 and ~~2017~~2018 were $12,~~649~~167,~~675~~975 and $1,~~092~~649,~~168~~675, respectively. Total liabilities increased by $~~557~~518,~~507~~300, or 5131%. The increase is primarily attributable to ~~the~~an ~~followings.~~increase ~~Accounts~~in accounts payable and accrued expenses ~~decreased~~of by $~~151~~106,~~033,~~460 ~~from~~as ~~$440,838~~the toCompany ~~$289,805,~~experienced orcash ~~34%~~flows ~~primarily~~challenges. ~~represents~~Accrued ~~settlement~~expenses ofincluded accrued salary, ~~bonus~~ and ~~expenses~~bonus ~~through~~to ~~issuance of~~ the Company'’s ~~common~~former ~~stock~~CEO toand ~~the~~COO. ~~Company's~~In ~~CEO~~addition, ~~offset~~the ~~by an~~ increase inis ~~accounts~~also ~~payable~~attributable to ~~our~~a ~~vendors~~net ~~due to~~ increase inof ~~operating~~convertible ~~activities in Tennessee. In addition, the Company also issued~~ notes payable toof ~~its~~$65,000 ~~CEO~~and toincrease ~~obtain~~in ~~working~~the ~~capital.~~related ~~The~~derivative ~~Company~~liability ~~also~~of ~~entered~~$184,812 ~~into~~as ~~two~~a ~~convertible~~result ~~notes~~of ~~agreement~~their ~~with~~conversion anfeature, ~~unrelated~~lease ~~entity~~liability toof ~~obtain working capital. As~~ a ~~result~~ right-of-use ~~the~~finance ~~variable~~lease ~~conversion~~of ~~features~~$164,255, inoffset ~~these~~by ~~convertible~~a ~~notes,~~decrease ~~the~~in ~~Company~~other ~~incurred~~related ~~additional~~party ~~derivative liability~~obligations.

Liquidity and Capital Resources

Our consolidated financial statements have been prepared assuming that we will continue as a going concern. For the year ended December 31, ~~2018~~2019, we had a net loss of $1,~~712~~588,~~703~~928. InThe ~~light~~Company ofhas ~~the~~not ~~continued~~generated ~~net~~profit ~~losses,~~to ~~our~~date. ~~ability~~The Company expects to continue asto aincur ~~going~~operating ~~concern~~losses. isThe ~~dependent~~Company ~~upon~~expects ~~our ability~~ to ~~begin~~incur ~~operations~~professional ~~and~~fees to ~~achieve~~maintain aits ~~level~~reporting ofcompany ~~profitability~~status. WeUntil ~~intend~~such ontime ~~financing~~that ~~our~~the ~~future~~Company ~~development~~is ~~activities~~able to generate revenue and ~~our~~become ~~working~~profitable ~~capital~~or ~~needs~~find ~~largely~~new ~~from~~sources of capital, the ~~sale~~Company ofwill ~~its~~find ~~common~~it ~~stock~~difficult ~~with~~to ~~some~~continue ~~additional~~to ~~funding~~meet ~~from~~its ~~related~~obligations ~~parties~~as ~~until~~they ~~such~~come ~~time~~due. There can be no assurance that ~~funds~~the ~~provided~~Company bywill ~~operations~~be ~~are~~successful ~~sufficient~~in its efforts to ~~fund~~raise ~~working~~capital, or if it were successful in raising capital, ~~requirements.~~that ~~Our~~it ~~consolidated~~would ~~financial~~be ~~statements~~successful doin ~~not~~meeting ~~include~~its ~~any~~business ~~adjustments~~plans. Management’s ~~relating~~plans include attempting to raise funds from the ~~recoverability~~public ~~and~~through ~~classification~~an equity offering of ~~recorded~~the ~~assets,~~Company’s orcommon ~~the~~stock ~~amounts~~and identifying and ~~classifications~~developing ofnew ~~liabilities~~opportunities. ~~that~~However, ~~might~~the berecent ~~necessary~~COVID-19 ~~should~~pandemic wehas ~~become~~presented ~~unable~~unprecedented challenges to ~~continue~~businesses asand athe ~~going~~investing ~~concern~~landscape around the world. Therefore, there can be no assurance that Management’s plans will be successful.

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As previously mentioned, since inception, we ~~have~~ financed our operations largely from the sale of common stock, notes payable and advances from our majority stockholder and entering into financing agreements with unrelated parties. During the year ended December 31, ~~2018~~2019, we obtained working capital from issuing notes payable to a related party in the amount of $~~254~~54,000, entering into convertible notes with an unrelated party and received proceeds of $~~175~~242,000 and obtained $7091,~~000~~200 of proceeds from sale of our common stock. During the year ended December 31, ~~2017~~2018, we obtained working capital largely from issuing anotes ~~note~~ payable to a related party in the amount of $~~537~~254,~~283~~000 and issuing convertible notes with an unrelated party and received proceeds of $175,000 and obtained $70,000 of proceeds from sale of our common stock.

We ~~have~~ incurred significant net losses and negative cash flows from operations since its inception. As of December 31, ~~2018~~2019, we had an accumulated deficit of $68,~~666~~259,~~649~~979.

WeDuring ~~anticipate~~the ~~that~~year ~~cash~~ended ~~used~~December in31, ~~product~~2019, ~~development~~we ~~and~~used cash from operations of $340,168 ~~especially~~compared to $465,638 in ~~the~~2018, ~~marketing~~a decrease of $125,470. ~~production~~This is largely attributable to a lower account receivable balance at the end of 2019 and ~~sale~~higher accounts payable and accrued expense balances at the end of ~~our~~2019. ~~products~~To generate a positive cash flow, ~~may~~we would have to increase ~~significantly~~our inrevenues ~~the~~and ~~future~~decrease expenses.

WeDuring ~~will~~the beyear ~~dependent~~ended ~~upon~~December ~~its~~31, ~~existing cash~~2019, ~~together~~we ~~with~~invested ~~anticipated~~$55,928 ~~net~~in ~~proceeds~~the ~~from~~purchase ~~any sale~~ of ~~common~~property ~~stock~~ and ~~future debt issuances~~equipment, compared to ~~finance~~$47,109 ~~our~~in ~~planned~~2018 ~~operations~~as ~~through the next 12 months. Additional capital may not be available when required or on favorable terms. If adequate funds are not available,~~ we ~~may~~continued ~~be required~~ to ~~significantly~~make ~~reduce~~improvements ~~or refocus our operations or~~ to obtain funds through arrangements that may require us to relinquish rights to certain or potential markets, either of which could have a material adverse effect on our business, financial condition and results of operations. To the ~~extent~~property ~~that additional capital is raised through the sale of equity or debt securities, the issuance of such securities would result~~ in ~~ownership dilution to our existing stockholders~~Tennessee.

During the year ended December 31, ~~2018~~2019, we ~~used~~generated ~~cash~~$374,064 from ~~operations~~financing ofactivities ~~$465,638~~ compared to $~~566~~536,~~271~~127 in ~~2017~~2018. In 2019, awe ~~decrease of~~turned ~~$100,633.~~to ~~This~~an isunrelated ~~largely~~party ~~attributable~~for working capital by entering into convertible notes payable as our related party’s ability to acontinue ~~higher~~to ~~account~~provide ~~receivable~~working ~~balance~~capital atwaned. During the ~~end~~year ended December 31, 2019, we obtained working capital from issuing notes payable to a related party in the amount of ~~2018~~$54,000, entering into convertible notes with an unrelated party and ~~lower~~received ~~accounts~~proceeds ~~payable~~of $242,000 and ~~accrued~~obtained ~~expense~~$91,200 ~~balances~~of proceeds from sale of our common stock. ToDuring ~~generate~~the ayear ~~positive~~ended ~~cash~~December ~~flow~~31, 2018, we ~~will~~obtained ~~have~~working capital largely from issuing notes payable to ~~increase~~a ~~our~~related ~~revenues~~party in the amount of $254,000 and ~~decrease~~issuing ~~expenses~~convertible notes with an unrelated party and received proceeds of $175,000 and obtained $70,000 of proceeds from sale of our common stock.

~~During~~As a result of the ~~year~~above, ~~ended~~as of December 31, ~~2018~~2019, we ~~invested~~had ~~$47,109~~a innegative ~~the~~consolidated ~~purchase~~net ofcash ~~property~~outflow ~~and~~of ~~equipment, compared to~~ $1122,~~284~~032 infor ~~2017.~~the ~~Cash~~year ~~investment~~compared into ~~property~~a ~~and~~positive ~~equipment~~consolidated ~~was~~net ~~higher~~cash ininflow ~~current~~of ~~year~~$23,380 ~~because~~for ~~we were making improvements to~~ the ~~property~~year ~~and~~ended ~~retail~~December ~~space~~31, ~~in Tennessee~~2018.

During the year ended December 31, 2018, we generated $536,127 from financing activities compared to $562,094 in 2017. In 2018, we obtained working capital from issuing notes payable to a related party in the amount of $254,000, entering into convertible notes with an unrelated party and received proceeds of $175,000 and obtained $70,000 of proceeds from sale of our common stock. In 2017, we obtained working capital largely from issuing note payable to a related party for $405,000 and from issuance of a convertible note to an investor for $79,050 which was paid back in 2017.

As a result of the above, as of December 31, 2018, we had a positive consolidated cash flow of $23,380 for the year compared to a negative consolidated cash flow of $15,461 for the year ended December 31, 2017.

Discussions Regarding Operating Leases and Commitments

As of December 31, ~~2018~~2019, the Company has the following operating lease obligations.

The Company ~~rents~~rented administrative space in Clearwater, Florida at $965 per month on a month to month basis and rents retail space in Nashville, Tennessee at $2,500 per month beginning in December 2017 for the first twelve months and at $2,250 per month for the next twelve months. The retail space lease ended in November 2019. Rent expense for these leases for the years ended December 31, 2019 and 2018 were $40,124 and $42,040, respectively.

On May 1, 2016, the Company entered into an employment agreement with its former CEO. The term of the employment iswas through December 31, 2019. The salary for our former CEO for the years ~~2018~~2019 and ~~2017~~2018 was $195,000 each year plus annual bonus at 35% of the salary.. Any salary and bonus increases must be reviewed and approved by the Company’s board of directors. The agreement ~~provides~~provided for a storage and corporate housing allowance of $1,000 per month, retroactively to January 1, 2018 and a monthly automobile allowance to our former CEO of $1,000. In May 2018, the board of directors approved to discontinue payment of the storage and corporate housing allowance, ofretroactively to January 1, 2018. As a result, no expenses related to the storage and corporate housing allowance was recorded since January 1, 2018. The automobile allowance remains unchanged at $1,000 per month. As such, the Company was committed to an annual expenditures of $12,000 for athe ~~property~~year ~~owned~~ended byDecember 31, 2019. During the years ended December 31, 2019 and 2018, expenses related to the automobile allowances totaled $12,000 for each year. At December 31, 2019, the Company owed its former CEO $75,000 of unpaid salary, $52,500 of accrued bonus and $9,000 of unpaid automobile allowance. The employment agreement was renewed through June 30, 2020 at an annual salary of $150,000 and continued to provide for a monthly automobile allowance of $1,000. The agreement also provided for severance payment to the former CEO in the event of a change in control.

InOn ~~August~~May 1, 2016, the Company entered into aan ~~licensing~~employment agreement towith ~~use~~its ~~exclusively~~former aCOO. ~~brand~~The ~~name~~term ~~for~~of ~~its~~the ~~products~~employment ~~for~~was ~~five~~through ~~years~~December 31, 2019. ~~Pursuant~~The tosalary ~~the~~for ~~terms~~our offormer ~~the~~COO ~~agreement,~~for the ~~Company~~years ~~issued~~2019 2and 2018 was $116,833 and $105,000, ~~shares~~respectively, ofplus ~~its~~annual ~~restricted~~bonus ~~common~~at ~~stock~~35% toof the ~~brand~~salary. ~~owner~~Any salary and ~~2,000~~bonus ~~shares~~increases atmust ~~the~~be ~~end~~reviewed ofand ~~each~~approved ofby the ~~next~~Company’s ~~four~~board ~~years~~of directors. ~~During~~At ~~the years ended~~ December 31, ~~2018~~2019, ~~and~~the ~~2017~~Company ~~was~~owed its former COO $120,~~420~~717 of unpaid salary and $379,~~620,~~562 ~~respectively~~of accrued bonus. ~~There~~The ~~remains~~employment 6agreement was renewed through June 30, 2020 at an annual salary of $96,000. ~~shares~~The toagreement bealso ~~issued~~provided for severance payment to the ~~brand~~former ~~owner~~COO in the event of a change in control.

1314

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In ~~May~~August ~~2018~~2016, the ~~board~~Company ofentered ~~directors~~into ~~approved~~a tolicensing ~~discontinue~~agreement ~~payment~~to ofuse ~~the~~exclusively ~~storage~~a ~~and~~brand ~~corporate~~name ~~housing~~for ~~allowance~~its ofproducts ~~$1,000~~for ~~per~~five ~~month,~~years. ~~retroactively~~Pursuant to ~~January~~the 1terms of the agreement, ~~2018.~~the AsCompany aissued ~~result~~2,000 noshares ~~expenses~~of ~~related~~its restricted common stock to the ~~storage~~brand owner and ~~corporate~~2,000 ~~housing~~shares ~~allowance~~at ~~was~~the ~~recorded~~end ~~during~~of ~~the~~each ~~year~~of ~~ended~~the ~~December~~next ~~31,~~four ~~2018~~years. ~~The~~During ~~automobile~~the ~~allowance~~years ~~remains~~ended ~~unchanged~~December ~~at $1~~31,~~000~~ ~~per~~2019 ~~month. As~~and ~~such~~2018, ~~the~~these ~~Company~~shares iswere ~~committed~~valued toat an$3,184 ~~annual~~and ~~expenditures~~$1,420, ofrespectively. ~~$12~~There remains 4,000 ~~for~~shares ~~the~~to ~~year~~be ~~ended~~issued ~~December~~to ~~31,~~the ~~2019~~brand owner.

In July 2018, the board of directors approved issuance of 85,000 shares of the Company's restricted common stock to the Company's CEO to settle the storage and corporate housing allowance and automobile allowance in the amount of $17,000 accrued through July 2018. As a result, $5,000 and $10,000 remained owed to the Company’s CEO at December 31, 2018 and 2017, respectively.

During the year ended December 31, 2018, expenses related to the automobile allowances totaled $12,000. During the year ended December 31, 2017, expenses related to the housing and automobile allowances totaled $24,000.

Rent expense for the above leases and commitments for the years ended December 31, 2018 and 2017 were approximately $42,040 and $46,200, respectively.

In December 2018, the Company entered into an agreement with a consulting firm for corporate structure and sales support services. The agreement began in January 2019 and will end in March 2019. The terms of the agreement call for compensation of $2,000 per month, 7.5% of the sales the consulting firm brought into the Company as well as payment in the form of stock based compensation for funds raised. To date, the consulting firm has not brought in any sales to nor raised any funds on behalf of the Company.

The Company’s commitment to these expenditures for the year ending December 31, 2019 are as follow:

Tennessee retail space lease	$	30,600
Consulting fee		6,000
CEO automobile allowance		12,000
	$	48,600

Financing of Planned Expansions and Other Expenditures

We ~~anticipate~~anticipated seeking additional capital through the sale of our equity securities in a private placement offering, but no assurance can be made that we ~~will~~would be able to find willing buyers for such securities. Moreover, as we ~~contemplates~~contemplated selling our securities by way of an exemption from registration, there can be no assurance that we ~~can~~would be able to identify a satisfactory number of suitable buyers to whom we may legally offer such securities, or if we ~~are~~were successful in identifying suitable buyers that we ~~will~~would be successful in raising capital, or if successful in raising capital that we ~~can~~could be successful in implementing any plan for acquisitions or adding or expanding any operations.

WeUnfortunately, ~~would~~the ~~anticipate~~Company’s ~~using~~operations ~~the~~and ~~proceeds~~business ~~from~~have ~~any~~experienced ~~capital~~disruption ~~raise~~due to ~~bolster~~the ~~our~~unprecedented ~~new~~conditions ~~operations,~~surrounding ~~pay~~ the ~~costs~~COVID-19 ofpandemic ~~adding~~spreading ~~new~~throughout ~~equipment~~the United States and ~~services~~the ~~that~~world ~~could~~and ~~provide~~was ~~revenue~~not ~~streams~~able to ~~meet~~secure ~~our~~the ~~expenses,~~necessary ~~and/or~~funds ~~acquire~~to acarry ~~partial~~out orits ~~whole~~business ~~interest in a grow facility~~plan.

Going Concern

The Company has not generated profit to date. The Company expects to continue to incur operating losses ~~as it proceeds with its growing and retail operations in Tennessee, extraction and research and development activities and continues to navigate it through the regulatory process~~. The Company expects ~~general~~to ~~and~~incur ~~administrative~~professional ~~costs~~fees to ~~increase,~~maintain asits ~~the~~reporting ~~Company~~company ~~adds~~status. ~~personnel~~Until ~~and~~such ~~other~~time ~~administrative~~that ~~expenses~~the ~~associated~~Company ~~with~~is ~~its~~able ~~current~~to ~~efforts.~~generate Asrevenue ~~such,~~ and ~~without~~become ~~substantially~~profitable ~~increasing revenue~~ or ~~finding~~find new sources of capital, the Company will find it difficult to continue to meet its obligations as they come due. ~~The~~There Company is still locating new clients for its services and products, and the business is generally seasonal with the second and third quarters of the calendar year being the slowest as a result of it being the “off season” for outside grow of hemp plants. The Company is currently involved in a capital raise. However, there can be no assurance that the Company will be successful in its efforts to raise capital, or if it were successful in raising capital, that it would be successful in meeting its business plans. While the services performed by the Company’s MariJ Pharma subsidiary and sales of current inventory supplies, if sold on a seasonally-adjusted basis, are anticipated to be sufficient to meet the Company’s liquidity needs, these factors raise some doubt as to the ability of the Company to continue as a going concern. Management’s plans include ~~increasing production at the Company’s new MariJ Pharma subsidiary by locating additional extraction contracts, selling its inventories of products, and~~ attempting to raise funds from the public through an equity offering of the Company’s common stock and identifying and developing new opportunities. ~~Management~~However, ~~intends~~the torecent ~~make~~COVID-19 ~~every~~pandemic ~~effort~~has presented unprecedented challenges to ~~identify~~businesses and ~~develop~~the ~~all~~investing ~~these~~landscape ~~sources~~around ofthe ~~funds~~world. Therefore, ~~but~~ there can be no assurance that Management’s plans will be successful.

14The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses for all periods presented and has a substantial accumulated deficit. As of December 31, 2019, these factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

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The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses for all periods presented and has a substantial accumulated deficit. As of December 31, 2018, these factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies

Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) applied on a consistent basis. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements. A complete summary of these policies is included in Note 4 of the notes to our financial statements. We believe that the following accounting policies are those most critical to the judgment and estimates used in preparation of our consolidated financial statements.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS – The Company’s accounts receivable represents amounts due from customers for extraction services performed. Allowance for uncollectible accounts receivable is estimated based on the aging of the accounts receivable and management estimate of uncollectible amounts.

INVENTORIES – Inventories are stated at the lower of cost or market. Cost is determined using the average cost method. The Company’s inventory consists of raw materials and finished goods. Finished goods inventories are separated into two discernible product lines of organic and non-organic products. Cost of inventory includes cost of ingredients, labor, quality control and all other costs incurred to bring our inventories to condition ready to be sold.

DEFERRED FARM EXPENSE - The Company's subsidiary EMT grows hemp plants in both its indoor and outdoor facility. In accordance with Accounting Standards Codification 905 - Agriculture, all direct and indirect costs of growing the plants are accumulated until the time of harvest. Crop costs such as soil preparation incurred before planting are deferred and allocated to the growing crop.15

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DEFERRED FARM EXPENSE - The Company's subsidiary EMT grew hemp plants in both its indoor and outdoor facilities. In accordance with Accounting Standards Codification 905 - Agriculture, all direct and indirect costs of growing the plants are accumulated until the time of harvest. These deferred cost cannot exceed the realizable value of the oil processed from the hemp plants. Crop costs such as soil preparation incurred before planting are deferred and allocated to the growing crop. Deferred farm expense is included as inventory costs.

PROPERTY AND EQUIPMENT – Property and equipment are stated at cost less accumulated depreciation. Major renewals and improvements are capitalized, while minor replacements, maintenance and repairs are charged to current operations. Depreciation is computed by applying the straight-line method over the estimated useful lives, which are generally two to seven years.

IMPAIRMENT OF LONG-LIVED ASSETS – In accordance with Accounting Standards Codification 360-10-05 - Impairment or Disposal of Long-Lived Assets, long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment at least annually or whenever facts and circumstances indicate that the carrying value may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. The Company did not recognize any impairment losses for any periods presented.

DEBT ISSUANCE COSTS - The Company follows Accounting Standard Update 2015-03 – Simplifying the Presentation of Debt Issuance Costs, which requires direct costs associated with the issuance of convertible note to be presented in the balance sheet as a direct reduction from the carrying value of the associated debt liability. These costs are amortized into interest expense over the contractual term of the note or a shorter amortization period when deemed appropriate. The Company amortizes debt issuance costs for its convertible note immediately upon issuance since the note is convertible on demand.

OFFERING COSTS - The Company follows the SEC Staff Accounting Bulletin, Topic 5 - Miscellaneous Accounting, which requires that specific incremental costs directly attributable to a proposed or actual offering of securities may be deferred and charged against gross receipts of the offering. However, deferred costs of an aborted offering, or a postponement of existing offering exceeding 90 days, may not be deferred and charged against proceeds of a subsequent offering.

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REVENUE RECOGNITION - In May 2014, the FASB issued Accounting Standard Update 2014-09 - Revenue from Contracts with Customers (Topic 606), which replaces numerous requirements in U.S. GAAP, including industry specific requirements, and provides a single revenue recognition model for recognizing revenue from contracts with customers. The Company adopted this standard effective January 1, 2018.

The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenues from extraction activities and from retail sales are recognized at a point in time.

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenues.

~~STOCK~~The ~~BASED~~two ~~COMPENSATION~~permitted -transition ~~The~~methods ~~Company~~under ~~accounts~~the ~~for~~new ~~stock-based~~standard ~~compensation~~are ~~under~~the ~~Accounting~~full ~~Standards~~retrospective ~~Codification~~method, ~~718~~in -which ~~Compensation-Stock~~case ~~Compensation~~the ~~(“ASC~~standard ~~718”).~~would ~~ASC~~be ~~718~~applied ~~requires~~to ~~that~~each ~~all~~prior ~~stock-based~~reporting ~~compensation~~period presented and the cumulative effect of applying the standard would be recognized asat ~~expense~~the earliest period shown, or the modified retrospective method, in which case the ~~financial~~cumulative ~~statements~~effect ~~and~~of ~~that~~applying ~~such~~the ~~cost~~standard would be ~~measured~~recognized at the ~~fair~~date ~~value~~ of ~~the~~initial ~~award~~application atto accumulated deficit. Additionally, incremental footnote disclosures are required to present the 2018 revenues ~~grant~~under ~~date~~the ~~and~~prior ~~recognized~~standard. ~~over~~Under the ~~period~~modified ~~during~~retrospective ~~which~~method, an ~~employee~~entity may also iselect ~~required~~ to ~~provide~~apply ~~services~~the ~~(requisite~~standard ~~service~~to ~~period~~either (i). Anall ~~additional~~contracts ~~requirement~~as of January ~~ASC~~1, ~~718~~2018, or is(ii) only to contracts that ~~estimated~~are not completed ~~forfeitures~~as beof January ~~considered~~1, 2018. The Company elected to adopt this guidance using the modified retrospective method at January 1, 2018 which did not result in ~~determining~~an ~~compensation~~adjustment ~~expense~~to accumulated deficit. ~~Estimating~~Additionally, ~~forfeitures~~upon ~~did~~adoption, ~~not~~the ~~have~~Company aevaluated ~~material~~its ~~impact~~revenue onrecognition policy for all revenue streams within the ~~determination~~scope of ~~compensation~~the ~~expense~~ASU ~~during~~under previous standards and using the five-step ~~years~~model ~~ended~~under ~~December~~the ~~31,~~new ~~2018~~guidance and ~~2017~~confirmed that there were no differences in the pattern of revenue recognition.

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STOCK BASED COMPENSATION - The Company accounts for stock-based compensation under Accounting Standards Codification 718 - Compensation-Stock Compensation (“ASC 718”). ASC 718 requires that all stock-based compensation be recognized as expense in the financial statements and that such cost be measured at the fair value of the award at the grant date and recognized over the period during which an employee is required to provide services (requisite service period). An additional requirement of ASC 718 is that estimated forfeitures be considered in determining compensation expense. Estimating forfeitures did not have a material impact on the determination of compensation expense during the years ended December 31, 2019 and 2018.

The Company accounts for stock-based awards based on the fair market value of the instrument using the Black-Scholes option pricing model and utilizing certain assumptions including the followings:

Risk-free interest rate – This is the yield on U.S. Treasury Securities posted at the date of grant (or date of modification) having a term equal to the expected life of the option. An increase in the risk-free interest rate will increase compensation expense.

Expected life—years – This is the period of time over which the options granted are expected to remain outstanding. Options granted by the Company had a maximum term of ten years. An increase in the expected life will increase compensation expense.

Expected volatility – Actual changes in the market value of stock are used to calculate the volatility assumption. An increase in the expected volatility will increase compensation expense.

Dividend yield – This is the annual rate of dividends per share over the exercise price of the option. An increase in the dividend yield will decrease compensation expense. The Company does not currently pay dividends and has no immediate plans to do so in the near future.

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of Accounting Standards Codification 505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete.

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MEDAHUB ACQUISITION - In July 2018, the Company announced the completion of its acquisition of Medahub Operations Group, Inc. and Medahub, Inc., technology companies (“Medahub”), which includes a current compounding pharmacy license in Florida. The Medahub acquisition allows the Company to be fully HIPAA compliant and cloud based on an HL7 platform. The Company can soon offer licensing agreements for other cannabis companies wanting to be HIPAA compliant from left to right or seed to sale and Doctor to Patient. The Company issued 600,000 shares of its restricted common stock to the principal of Medahub as consideration of the acquisition, valued at $126,000.

When determining the accounting of the acquisition, the Company concluded that the acquisition does not constitute the acquisition of a business since there was no inputs, processes or outputs within Medahub. In addition, although the Company acquired certain software and technology from Medahub, the most significant asset it acquired was Medahub's principal's commitment to provide support, guidance and direction for implementing this technology. Without the principal's commitment of his time, the Company will not be able to implement the technology and begin generating cash flows. Therefore, the Company believes that the value of the purchase is concentrated on the service provided by Medahub's principal. As a result, the Company allocated the entire purchase price to the service provided and accounted for it as professional fee expense.

LEASES

In February 2016, the FASB issued ASU 2016-02, Leases, which aims to make leasing activities more transparent and comparable and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. The new guidelines are contained in Accounting Standards Codification ASC Topic 842 - Leases ("ASC 842"). This ASU is effective for all interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company applied this standard retrospectively on January 1, 2019 through a cumulative effect adjustment recognized as of January 1, 2019. In applying this standard, the Company elects to apply all practical expedients to not reassess the followings:

Whether a pre-existing contract is or contain a lease

Whether a pre-existing lease should be classified as an operating or finance lease, and

Whether the initial direct costs capitalized for a pre-existing lease under the previously lease accounting standard ASC Topic 840 qualify for capitalization

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In addition, in the applying ASC 842, the Company does not elect the hindsight practical expedient.

As a result, the Company recorded its right-of-use assets and corresponding lease liabilities on its balance sheet beginning January 1, 2019.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company we are not required to provide any information under this item.

Item 8. Financial Statements and Supplementary Data

The response to this item is submitted as a separate section of this Form 10-K. See “Item 15. Exhibits, Financial Statements and Reports on Form 8-K.”

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None

Item 9A(T). Controls and Procedures

Inherent Limitations on the Effectiveness of Controls Over Financial Reporting

As is typical with most smaller enterprises, our control processes are oriented toward operations, and production of financial statements reflects an outgrowth of operations and results of those operations. Internally, financial statements are a management tool to evaluate the operations and not an end of those operations. We closely monitor the daily results of our cash position and make certain that our cash position is adequate for the foreseeable future. Our financial statements are generated as part of the reporting on our operations, one metric of our operations, and as part of our obligations as a public entity.

Management, including our Principal Executive Officer, who acts as our Principal Financial Officer and Principal Accounting Officer, does not expect that our controls and procedures will prevent all errors and fraud, and our present efforts are oriented on improving the availability and thoroughness of information to management and to generate financial statements. In designing and evaluating the controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports, such as this report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, particularly our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding operations and required disclosure.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures to provide reasonable assurance of achieving their objective pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Principal Executive Officer, Chief Executive Officer and Principal Accounting Officer, Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, ~~2018~~2019.

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Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our Principal Executive Officer, Chief Executive Officer and Principal Financial Officer, Chief Financial Officer 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. Internal control over financial reporting includes policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the Company’s transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements and that receipts and expenditures of the Company’s assets are made in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company’s financial statements would be prevented or detected.

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, ~~2018~~2019 using the criteria set forth in the Internal Control over Financial Reporting - Guidance for Smaller Public Companies issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon the evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, ~~2018~~2019 because of material weaknesses in our internal control over financial reporting. A material weakness is a control deficiency or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. Our management concluded that the Company has material weaknesses in our internal control over financial reporting because of inadequate segregation of duties over authorization, review and recording of transactions, as well as the financial reporting of such transactions. Management has, however, implemented controls and procedures in recent years surrounding cash disbursements, internal financial accounting, including cross reconciliations covering equity transactions and hiring a financial controller to further enhance our internal controls.

Despite the existence of these material weaknesses, the Company believes the financial information presented herein is materially correct and in accordance with generally accepted accounting principles in the United States.

While the implementation of improved controls and procedures has strengthened our internal control framework and disclosure controls, we continue to believe we have a material weakness related to the lack of sufficient segregation of duties surrounding the cash disbursements cycle. Accordingly, the Company is currently developing a plan of remediation with the amount of resources available.

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 is not subject to attestation by the Company’s registered public accounting firm because the Company is not an accelerated filer under the Exchange Act.

Changes in Control over Financial Reporting

No change in the Company’s internal control over financial reporting occurred during the year ended December 31, ~~2018~~2019, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. During the year ended December 31, ~~2018~~2019, management has, however, continued to strengthen internal controls and procedures through the implementation of entity-level controls.

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Item 9B. Other Information

~~Steven~~On LMarch 31, 2020, Richard K. ~~Sample~~Pertile resigned ashis anposition ~~employee~~as ~~and~~Chairman ~~director~~ of the ~~Company~~Board as of ~~December 31~~Directors, ~~2016~~Chief ~~and~~Executive ~~accepted~~Officer aand ~~settlement~~Chief inFinancial ~~cancelling~~Officer ~~the~~for ~~remainder of his employment contract with~~ the Company. ~~on January 17, 2017~~Mr. ~~Those~~ ~~events~~Pertile ~~were~~did ~~reported~~not inhave ~~their~~any ~~entirety~~disagreement bywith the Company onor ~~its~~Board ~~Current~~of ~~Report~~Directors onregarding ~~Form~~any ~~8-K~~matter onpertaining ~~January~~to ~~24,~~his ~~2017. That~~employment ~~document~~with ~~is available for viewing on~~ the Company~~’s website at: http://www~~.~~acacia.bz/sec/sec.htm and on the SEC website at:~~

~~https://www~~On March 31, 2020, the Company issued in escrow 1,475,000 shares of the Company’s Series B Convertible Preferred Stock (the “Preferred Stock”) to ORCIM Financial Holdings, LLC (“OFH”).~~sec~~ Each share of the Preferred Stock has fifty (50) votes per share and may be converted into fifty (50) $0.~~gov/Archives/edgar/data/1001463/000118518517000112/0001185185-17-000112-index~~001 par value common shares.~~htm~~ As of March 31, 2020, the Company had 43,290,331 shares of its common stock issued and outstanding. There were no other shares of any capital stock outstanding except for the common stock and Preferred Stock. As the result of the issuance of the Preferred Stock and, upon satisfaction of the terms of the Acquisition Agreement, OFH would have voting control over the Company with 73,750,000 votes on all matters submitted to stockholders for a vote. On May 20, 2020, the conditions of the Acquisition Agreement were satisfied with the resignation of the former board of directors of the Company and the change of control became effective.

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On March 31, 2020, Mr. Larnell C. Simpson, Jr., age 47, was appointed as a director for Acacia Diversified Holdings, Inc. Mr. Simpson also was appointed to the position of Vice President.

On May 20, 2020, directors Danny Gibbs, Neil B. Gholson and Dr. Richard Paula each resigned their respective positions as a director for the Company.

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PART III

Item 10. Directors, Executive Officers, and Corporate Governance

Executive Officers and Directors

The directors and executive officers of the Company, and their respective ages, as of December 31, ~~2018~~2019, and positions held with the Company, were as follows:

Name	Age	Position
Richard K. Pertile	5758	Director, President, Chairman of the Board, Chief Executive Officer and Chief Financial Officer
Danny R. Gibbs	6162	Director
Neil Gholson	5960	Director
Gary J. Roberts, Jr.	5253	Director
Dr. Richard Paula	5152	Director
Kim Edwards	5152	Vice President and Chief Operating Officer

Richard K. Pertile, age 5758, became CEO, President, a Director, and Chairman of the Board of Directors of the Company on January 15, 2016. Since 2013 until January 15, 2016 Mr. Pertile served as President and Chief Executive Officer of MariJ Agricultural, Inc. He founded JR Hemp Industries, Canna-Tags, and Canna-Cures R&D in Clearwater Florida where he began building a medical hemp consortium. Born, raised and educated in the Chicago area, he successfully operated his own restaurants, hotel and nightclub. Relocating to Pinellas County, Florida in 1989, Mr. Pertile joined Cornerstone Marketing of America, a subsidiary of United Insurance Companies, quickly being promoted to Executive Vice-President with responsibility for building its nationwide outside sales team. By the end of 2003, Mr. Pertile achieved year-over-year compounded growth of 30%, generating more than $1 billion in sales through 8,000 independent contractors in 40 states. After retiring in 2004, he turned his attention to philanthropy work in helping build a workout facility with the Juvenile Protection Services Program of Florida. From 2006 to 2010, after re-entering the business sector, he became President and Chief Marketing Officer of Independent Producers of America, a small Texas corporation he lead to becoming a publicly traded company on the Nasdaq Exchange. Again turning his attention to philanthropies in 2010, he formed the Pertile Family Foundation and was appointed to the Board of Directors of the Tampa Chapter of the American Diabetes Association where he concentrated his fundraising activities. Mr. Pertile earned degrees in Business Management and Wastewater Engineering from the College of Lake County, Illinois, and trained under such recognized business leaders as Zig Ziglar, Dr. David Cook, Dr. Rick Jernigan, Brian Flanagan, and Brian Tracy. Mr. Pertile resides in Florida with his wife of 27 years, Debbie. They have two sons, both residing in Florida. On March 31, 2020, Richard K. Pertile resigned his position as Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer for the Company. Mr. Pertile did not have any disagreement with the Company or Board of Directors regarding any matter pertaining to his employment with the Company.

Danny R. Gibbs, age 6162 was reappointed to the Board of Directors on September 1, 2013 after originally serving from October of 1984 through September 29, 2011. Mr. Gibbs was the President of Gibbs Construction, Inc. (later becoming Acacia Automotive, Inc. and ultimately Acacia Diversified Holdings, Inc.) and a charter member of the Company’s Board of Directors beginning with its formation in October of 1984 until April of 2000, and in February of 2007 Mr. Gibbs agreed to serve on Acacia’s new board, where he served until September 29, 2011. The Company was most pleased to welcome Mr. Gibbs’ return to its Board of Directors as he brings decades of experience in the public domain. From 2000 through 2003, Mr. Gibbs served as Senior Project Manager for TOC Companies in the Dallas, Texas area. From the beginning of 2004 through the present, he has served in a similar capacity with Dimensional Construction, Inc. Both companies were located in Garland, Texas where Mr. Gibbs resides with his family. On May 20, 2020, Mr. Gibbs resigned his position as a director of the Company.

Neil B. Gholson, age 5960. Mr. Gholson’s background is rooted deeply in the financial services and insurance industries since 1988, serving on the board of directors with 4 companies during the last ten years. Mr. Gholson has been the owner and principal of Long Term Care Financial Solutions, LLC since 2003, and co-owner and principal of Medicare Insurance Consultants, LLC since 2015. He graduated with a BA in History from Atlantic Christian College in 1981 and earned a Certificate in Financial Planning from Florida State University in 2006. Mr. Gholson resides in Tampa, Florida with wife Michele and 2 daughters. On May 20, 2020, Mr. Gholson resigned his position as a director of the Company.

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Gary J. Roberts, Jr., age 5253. As a young entrepreneur attending the University of Alabama, Mr. Roberts started and grew various service-oriented companies. Following college, Mr. Roberts played a key role in developing Transplatinum Plus, an electronic fuel card transfer company in Nashville, Tennessee that was eventually sold to Fleet One. For the next eight years Mr. Roberts served as Vice President and Chief Operating Officer of Perma Crete Resurfacing Products in Nashville, Tennessee from 1993 to 2001 where he expanded the operation nationally with an extensive dealership distribution system as well as running a national retail installation department. In 2001, Gary shifted gears and turned his focus to the Health Insurance industry. He was District Manager with Cornerstone America from 2000 to 2002 while building one of the top teams in the nation. Gary assumed the position of Vice President of the Company’s Southeastern Territory in 2003, maintaining that position through the present. During this time, Mr. Roberts has continued to build it into one the nation’s largest insurance distribution groups, with his territory ranking in the top two USA every year as well as being ranked as the top territory in the USA one of those years. On March 24, 2020, Mr. Roberts was tragically killed in an automobile accident in Alabama.

Dr. Richard Paula, age 5052. Dr. Paula joined the Company's board of directors in July 2018. Dr. Paula has over 20 years’ experience in the medical field. From March 2010 through January 2014, Dr. Paula was employed by Tampa General Hospital as the Chief Medical Information Officer and Vice President. From January 2014 through the present, Dr. Paula has been employed by the Shriners Hospitals for Children in Tampa, Florida. He currently serves as the Chief Medical Information Officer at the Shriners Hospitals for Children. We believe that Dr. Paula’s substantial experience in the medical field will be of great benefit to the Company as we explore and determine the various uses, including potential medical applications, for our industrial hemp oil products. On May 20, 2020, Dr. Paula resigned his position as a director of the Company.

Mrs. Edwards, age 5152, was born and raised in Boston, Massachusetts until moving to Florida to assume a position in resource and financial management, later managing advisory services for an independent financial firm. Mrs. Edwards subsequently owned and operated retail businesses in Florida. After serving as a Director in the healthcare industry for Independent Producers of America April 2009 through May 2014, Mrs. Edwards joined MariJ Agricultural, Inc. May 2014. Following the merger between the MariJ Group of companies and Acacia, Mrs. Edwards assumed the duties of Chief Operating Officer of the consolidated entity and was appointed as Vice President of the Company in conjunction with her other duties on August 18, 2016. Mrs. Edwards and her husband of 25 years reside in the Palm Harbor, Florida area with their three children. In March 2020, Mrs. Edwards was laid off by the Company due to business disruption as a result of the COVID-19 pandemic.

Section 16(a) Beneficial Ownership Reporting Compliance

Our shares of common stock are registered under the Exchange Act, and therefore our officers, directors and holders of more than 10% of our outstanding shares are subject to the provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon our review of reports submitted to us during the fiscal year ended December 31, ~~2018~~2019, the following table sets forth the name of any such person that failed to file the required forms on a timely basis, including the number of late reports, the number of transactions not reported on a timely basis and any known failure to file a required form.

Name

Number of late reports

Number of transactions

not reported timely

None

Committees of the Board of Directors

On January 15, 2016, the Company appointed various directors to committees and the chairs thereof as follows:

Board Committees

The Board has a standing Audit Committee, Compensation Committee, and Nominating Committee. The Board has determined that the Chairs and all non-employee committee members are independent under applicable NASDAQ, NYSE, and SEC rules for committee memberships. The members of the committees are shown in the table below. The Company’s former CEO, Mr. Pertile, as ana former employee and director of the Company, ~~are~~was considered to be “not independent”.

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The table below reflects each of the directors and the committee(s) on which they serve. A committee member who is also the chair of that committee is designated as “Chair” rather than as “Member”.

Director Name

Audit Committee

Compensation Committee

Nominating Committee

Primary Committee

Richard K. Pertile

—

Member

Danny R. Gibbs

Chair

Member

Neil B. Gholson

Member

Chair

—

Gary J. Roberts, Jr.

Member

—

Chair

Dr. Richard Paula

Member

Audit Committee

The Audit Committee has not yet adopted a written charter. However, the Audit Committee has (i) reviewed and discussed the audited financial statements with management; (ii) discussed with the independent auditors the matters required to be discussed by Auditing Standard No. 16, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board (“PCAOB”); (iii) received the written disclosures and the letter from the independent accountants required by the Public Company Accounting Oversight Board (Rule No. 3526, Communications with Audit Committees Concerning Independence), as may be modified or supplemented; (iv) discussed with the independent accountant the independent accountant’s independence; and (v) recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10–K.

The Company believes the Audit Committee should be responsible primarily for assisting the Board in fulfilling its oversight and monitoring responsibility of reviewing the financial information provided to shareholders and others, appointing the independent registered public accounting firm, reviewing the services performed by the Company’s independent registered public accounting firm, evaluating the Company’s accounting policies and the system of internal controls established by management and the Board, and reviewing significant financial transactions. The Audit Committee does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of the Company’s financial statements.

Primary Committee

The Corporation’s Board of Directors determined that it was in the best interests of the Corporation to discontinue its Acacia Diversified Holdings, Inc. 2012 Stock Incentive Plan in its entirety, continuing to honor any shares, options, or warrants heretofore issued under the Plan. The Corporation’s Primary Committee continues to have full authority to issue shares, options, and warrants as it deems necessary without the Acacia Diversified Holdings, Inc. 2012 Stock Incentive Plan, and unanimously approved those actions in a meeting of the Board of Directors on June 9, 2015. Those actions were ratified in a Special Meeting of Shareholders of the Corporation by the written consent of more than 50% of the shareholders on June 29, 2015.

Compensation Committee

The Compensation Committee is responsible primarily for reviewing the compensation arrangements for the Company’s executive officers, including the CEO, and reviewing the Board’s compensation. It is authorized by the Board of Directors to approve compensation arrangements and employment agreements. The only employment agreements ~~currently~~ in place iswas that of Richard K. Pertile, the Company’s ~~current~~former CEO who ~~serves~~served as an employee and a director, and Kim Edwards who ~~serves~~served as the Company’s Chief Operating Officer

Nominating Committee

The Nominating Committee assists the Board in identifying qualified individuals to become directors and can make recommendations to the Board concerning the size, structure and composition of the Board and its committees. In evaluating potential nominees to the Board, the Nominating Committee considers, among other things, independence, character, ability to exercise sound judgment, demonstrated leadership skills, and experience in the context of the needs of the Board.. The Nominating Committee can consider candidates proposed by shareholders and would evaluate them using the same criteria as for other candidates.

Three members of the board of directors are considered to be independent directors, but Mr. Pertile and Ms. Edwards, as ~~current~~former CEO and COO, respectively, of the Company and by virtue of their status as affiliates of the Company, ~~are~~were not considered to be independent. Thus, there iswas a potential conflict in that Mr. Pertile and, as a former board member who ~~are~~was also part of management, ~~will~~would participate in discussions concerning issues that may affect management decisions.

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Code of Ethics

On November 6, 2017, the Board of Directors approved, and the Company adopted the Code of Business Conduct and Ethics and the Code of Ethics for the President and Senior Financial Officers.

Item 11. Executive Compensation

The following table sets forth certain information concerning the compensation earned during the years ended December 31, ~~2018~~2019 and ~~2017~~2018 by the Company’s former Chief Executive Officers, Chief Financial Officer and Chief Operating Officer, for whom disclosure is required:

SUMMARY COMPENSATION TABLE

		Annual Compensation
Name and Principal Position	Fiscal Year	Salary		Bonus		Total
Richard K. Pertile (1)	~~2018~~2019	$	195,000	$	68,250	$	263,250
	2017	$	195,000	$	68,250	$	263,250
	2018	$	195,000	$	68,250	$	263,250
Kim Edwards (2)	~~2018~~2019	$	~~105~~116,~~000~~833	$	3640,~~750~~891	$	~~141~~157,~~750~~742
	2017	$	101,192	$	35,417	$	136,609
	2018	$	105,000	$	36,750	$	141,750

(1) Mr. Pertile became CEO and CFO of the Company on January 15, 2016 and has continued to serve in that capacity without interruption. During 2018, the board of directors approved settling accrued salary and bonus with ~~its~~Mr. ~~CEO~~Pertile through issuance of the Company's restricted common stock. The Company issued 2,148,125 shares of the Company's restricted common stock to ~~its~~Mr. ~~CEO~~Pertile to settle $262,500 of accrued salary and $167,125 of accrued bonus owed to ~~its~~Mr. ~~CEO~~Pertile. During 2019, the board of directors approved settling accrued salary and bonus with Mr. Pertile through issuance of the Company's restricted common stock. The Company issued 3,178,125 shares of the Company's restricted common stock to Mr. Pertile to settle $82,500 of accrued salary and $44,625 of accrued bonus owed to Mr. Pertile. On March 31, 2020, Richard K. Pertile resigned his position as Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer for the Company. Mr. Pertile did not have any disagreement with the Company or Board of Directors regarding any matter pertaining to his employment with the Company.

(2) Ms. Edwards became Vice President and COO of the Company on August 18, 2016 and has continued to serve in that capacity without interruption. During 2018, the board of directors approved settling accrued bonus with ~~its~~Ms. ~~COO~~Edwards through issuance of the Company's restricted common stock. AtDuring 2019, the ~~present~~board ~~time~~of directors approved settling accrued salary and bonus with Ms. Edwards through issuance of the Company's restricted common stock. The Company issued 1,018,700 ~~all~~shares of the Company's restricted common stock to Ms. Edwards to settle $40,748 of accrued bonus owed to ~~our~~Ms. ~~COO~~Edwards. ~~remains~~In ~~unpaid~~addition, it was determined that the Company also owed Ms. Edwards $20,717 of accrued salary at December 31, 2019. In March 2020, Ms. Edwards was laid off by the Company due to business disruption as a result of the COVID-19 pandemic.

Option Tables

The following table sets forth certain information concerning grants of options to purchase shares of common stock of the Company made during the years ended December 31, ~~2018~~2019 and ~~2017~~2018, to the executive officers named in the Summary Compensation Table.

EXECUTIVE STOCK OPTION GRANTS

(YEARS ENDED DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018)

Number of Securities Underlying Unexercised Options

Number of Securities Underlying Unexercised Options Unexercisable

Weighted Average Per Share Exercise Price

Expiration Dates

None

~~Director Compensation~~24

Since February 1, 2007 through December 31, 2010 directors of the Company served without compensation except under the Acacia Automotive, Inc. 2007 Stock Incentive Plan for which each non-employee director of the Company was granted an option to acquire an initial 10,000 shares of common stock upon his appointment or election to the board, and 15,000 additional options were granted upon election to a full term and annually thereafter. On December 30, 2010, the Company’s Board of Directors suspended the issuance of options as compensation to its directors effective January 1, 2011, and as such issued no options as director compensation from that time through December 31, 2018. The Company did not issue any common stock purchase options for any reason since December 31, 2010.

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~~The~~Director ~~following table sets forth certain information regarding compensation paid to directors for the fiscal years ended December 31, 2018 and 2017:~~Compensation

	Dollar Amount Recognized for Financial Reporting Purposes
	2018		2017
Richard K. Pertile (1)	$	-0-	$	-0-
Steven L. Sample (2)		-0-		-0-
Neil B. Gholson (3)(8)		7,013		33,000
Gary J. Roberts, Jr. (4)(8)		7,013		33,000
Danny Gibbs (5)(8)		7,013		33,000
Dr. Richard Paula (6)(7)		3,600		-0-
Total	$	24,639	$	99,000

Since February 1, 2007 through December 31, 2010 directors of the Company served without compensation except under the Acacia Automotive, Inc. 2007 Stock Incentive Plan for which each non-employee director of the Company was granted an option to acquire an initial 10,000 shares of common stock upon his appointment or election to the board, and 15,000 additional options were granted upon election to a full term and annually thereafter. On December 30, 2010, the Company’s Board of Directors suspended the issuance of options as compensation to its directors effective January 1, 2011, and as such issued no options as director compensation from that time through December 31, 2019. The Company did not issue any common stock purchase options for any reason since December 31, 2010.

The following table sets forth certain information regarding compensation paid to directors for the fiscal years ended December 31, 2019 and 2018:

	Dollar Amount Recognized for Financial Reporting Purposes
	2019		2018
Richard K. Pertile (1)	$	-0-	$	-0-
Neil B. Gholson (3)(8)		-0-		7,013
Gary J. Roberts, Jr. (4)(8)		-0-		7,013
Danny Gibbs (5)(8)		-0-		7,013
Dr. Richard Paula (6)(7)		-0-		3,600
Total	$	-0-	$	24,639

Upon a change of control, all outstanding options granted to executive officers and directors vest.

(1) Appointed as Chairman of the Company’s Board of Directors January 15, 2016.

(1)	Appointed as Chairman of the Company’s Board of Directors January 15, 2016. On March 31, 2020, Richard K. Pertile resigned his position as Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer for the Company.
(3)	Appointed to the Company’s Board of Directors on January 15, 2016. On May 20, 2020, Mr. Gholson resigned his position as a director of the Company.
(4)	Appointed to the Company’s Board of Directors on January 15, 2016. On March 24, 2020, Mr. Roberts was tragically killed in an automobile accident in Alabama.
(5)	Originally served on the Company’s board of directors from 1984 through August of 2006. Was again appointed to the Board of Directors on February 1, 2007 where he served until September 29, 2011. Was reappointed to the Board of Directors on September 1, 2013 and continues to serve. On May 20, 2020, Mr. Gibbs resigned his position as a director of the Company.
(6)	Appointed to the Company’s Board of Directors on July 13, 2018. On May 20, 2020, Dr. Paula resigned his position as a director of the Company.
(7)	In the year ended December 31, 2018, the Company's board of directors approved issuance of 20,000 shares of the Company's restricted common stock to this director for services performed in 2018. These shares were valued at $3,600 on commitment date. There was no cash compensation paid to the director.
(8)	In the year ended December 31, 2018, the Company's board of directors approved issuance of 30,000 shares of the Company's restricted common stock to these directors for services performed in 2018. The 90,000 shares were valued at $21,039 on commitment date. There was no cash compensation paid to the directors.

(2) Served as Chairman of the Company’s Board of Directors from August 2006 until January 15, 2016, at which time he continued to serve as a director until resigning on January 17, 2017.

(3) Appointed to the Company’s Board of Directors on January 15, 2016.

(4) Appointed to the Company’s Board of Directors on January 15, 2016.

(5) Originally served on the Company’s board of directors from 1984 through August of 2006. Was again appointed to the Board of Directors on February 1, 2007 where he served until September 29, 2011. Was reappointed to the Board of Directors on September 1, 2013 and continues to serve.

(6) Appointed to the Company’s Board of Directors on July 13, 2018.

(7) In the year ended December 31, 2018, the Company's board of directors approved issuance of 20,000 shares of the Company's restricted common stock to this director for services performed in 2018. These shares were valued at $3,600 on commitment date and were not yet issued at December 31, 2018. There was no cash compensation paid to the director.

(8) In the year ended December 31, 2018, the Company's board of directors approved issuance of 30,000 shares of the Company's restricted common stock to these directors for services performed in 2018. Only 10,000 shares were issued to each of these directors at December 31, 2018. The 90,000 shares were valued at $21,039 on commitment date. In the year ended December 31, 2017, each of these directors was issued 20,000 shares of the Company’s restricted common stock for services performed. These 60,000 shares were valued at $99,000 on commitment date. There was no cash compensation paid to the directors.

Benefit Plans

As a part of the changes resulting in the emergence of Acacia Automotive, Inc. from the former Gibbs Construction, Inc. in 2007, all stock option plans and warrants existing prior to the change of name and change of control to Acacia’s management in 2007 were canceled. At the board of directors meeting held on February 1, 2007, the Company adopted a new stock incentive plan. Awards of options made after that date were in congruence with the Acacia Automotive, Inc. 2007 Stock Incentive Plan. On July 26, 2012, shareholders representing a majority of the votes of the Company voted to extend the Company’s stock incentive plan and rename it the Acacia Diversified Holdings, Inc. 2012 Stock Incentive Plan. The Company provided health, disability, and life insurance plans for its parent Company employees until July 31, 2012 and provided certain additional benefits to its CEO at the time under the terms of his employment agreement. On June 29, 2015 shareholders representing a majority of the votes of the Company voted to terminate the Acacia Diversified Holdings, Inc. 2012 Stock Incentive Plan. In actions of January 15, 2016 the Company discontinued certain benefits to Mr. Sample following his resignation as CEO, President and Chairman of the Board by granting him a Modified Employment Agreement effective as of that date. He remained as an employee and a director of the Company until terminating his Employment Agreement and resigning on January 17, 2017.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth as of December 31, ~~2018~~2019, the ownership of common stock by (i) each person known by the Company to be the beneficial owner of more than five percent of the Company’s common stock, (ii) each director of the Company, and (iii) all directors and officers as a group. Except as otherwise indicated, each stockholder identified in the table possesses sole dispositive voting and investment power with respect to its or his shares.

Shares Owned at December 31, 2018
Shares Owned at December 31, 2019
Name and Address of Beneficial Owner	Number of Shares		Percent
Richard K. Pertile (1)		612,~~677~~459,~~125~~605		3130	%
Neil B. Gholson (3)		~~970~~1,720,000		4	%
Gary J. Roberts, Jr. (4)		~~407~~907,~~720~~520		2	%
Danny R. Gibbs (5)		~~243~~157,~~518~~000		10	%
Dr. Richard Paula (6)		2030,000		0	%
All directors and officers as a group (five persons)		815,~~318~~274,~~363~~125		3837	%
Steven L. Sample (2)		1,~~333~~583,065		64	%
All of the above as a group (six persons)		916,~~651~~857,~~428~~190		4440	%

(1) Mr. Pertile became the CEO and President of the Company and the Chairman of the Board of Directors on January 15, 2016. HeOn ~~acquired~~March 131,~~014~~ 2020,~~000~~ ~~shares~~Richard ~~of the Company’s Common stock in the Asset Purchase Agreement on that same date by and between the Company and the MariJ Group of Companies~~K. ~~Mr.~~ Pertile ~~also~~resigned ~~acquired~~his ~~another~~position ~~1,220,000~~as ~~shares~~Chairman of the ~~Company’s~~Board ~~Common stock in the remainder~~ of ~~2016. Mr. Pertile was issued 210~~Directors,~~000~~ ~~shares~~Chief ofExecutive ~~the~~Officer ~~restricted~~and ~~Common~~Chief ~~stock~~Financial ofOfficer ~~the Company in 2017~~ for ~~services and interest on his loans to~~ the Company. Mr. Pertile ~~had~~did ~~also~~not ~~obtained~~have ~~from~~any ~~Mr.~~disagreement ~~Sample, in conjunction~~ with the ~~acquisition, the right to acquire an additional 2,500,000 shares of Mr. Sample’s Common stock of the~~ Company, ~~and~~or inBoard ~~2017 Mr. Pertile exercised his option to do so. In addition, Mr. Pertile had an option to acquiring an additional 1,000,000 shares~~ of ~~Mr.~~Directors ~~Sample’s~~regarding ~~shares~~any inmatter ~~the~~pertaining ~~Company under a separate agreement but did not exercise such option. In 2018, Mr. Pertile was issued 2,233,125 shares of the Company's restricted common stock~~ to ~~settle accrued salary, bonus and other expenses. Mr. Pertile also transferred 500,000 shares of~~ his ~~own~~employment ~~shares to direct Neil Gholson in 2018. This resulted in Mr. Pertile’s ownership of 6,677,125 shares of Company’s common stock~~ with ~~a corresponding number of votes, or 31% of~~ the ~~total issued and outstanding shares of the~~ Company.

(2) Mr. Sample served as the Company’s CEO, President, and Chairman of the Board from 2006 until January 15, 2016, when the Company acquired the MariJ Group of companies and installed that group’s chief executive as Acacia’s. Mr. Sample’s holdings as reflected in the table above excludes 950,000 warrants held by Mr. Sample issued in exchange for converting all his shares of the Company’s preferred stock to common stock in 2010, and not for compensation, at an average exercise price of $3.00 per share. Those warrants expired at December 31, 2016. Further, 2,500,000 of Mr. Sample’s shares in the above table were extended to Mr. Pertile through an offer to purchase in conjunction with the MariJ Asset Purchase Agreement. Mr. Pertile exercised his right to acquire those shares on January 17, 2017. Mr. Pertile also had an option to acquire an additional 1,000,000 of Mr. Sample’s Acacia shares under a separate agreement. Mr. Pertile did not exercise this option. On January 17, 2017, Mr. Sample resigned as an employee and director of the Company. Mr. Sample disclaims any beneficial ownership of any securities owned by others and disclaims any beneficial ownership by others of any securities he owns.

(3) Mr. Gholson became a director of the Company on January 15, 2016 ~~and acquired 60,000 shares of the Company’s Common stock in the Asset Purchase Agreement of that same date and purchased an additional 110,000 shares in 2016~~. InOn ~~2017,~~May Mr. Gholson also was issued 50,000 shares of the Company’s common stock for services performed related to the Company’s Equity Purchase Agreement with Peak One Investments, LLC and Peak One Opportunity Fund, LP and issuance of convertible notes to Peak One Opportunity Fund, LP. In addition, Mr. Gholson was issued 20,~~000~~ ~~shares of the Company’s common stock as compensation for serving as a director of the Company. In 2018~~2020, Mr. Gholson ~~was~~resigned ~~issued~~his ~~30,000~~position ~~shares of the Company's restricted common stock for serving~~ as a director of the Company. Mr. Gholson also acquired 200,000 shares of the Company's common stock. Mr. Gholson also acquired 500,000 shares from the Company's CEO directly. This resulted in Mr. Gholson’s ownership of 970,000 shares of Company’s common stock with ~~a corresponding number of votes, or 4% of~~ the ~~total issued and outstanding shares of the~~ Company.

25(4) Mr. Roberts became a director of the Company on January 15, 2016. On March 24, 2020, Mr. Roberts was tragically killed in an automobile accident in Alabama.

~~Table~~(5) Mr. Gibbs is a founder of ~~Contents~~the Company, first becoming a director in October 1984 before departing in September 2011. Mr. Gibbs rejoined the board in 2013. On May 20, 2020, Mr. Gibbs resigned his position as a director with the Company.

(46) Mr Dr. ~~Roberts~~Paula became a director of the Company on ~~January~~July 1513, ~~2016 and acquired 102,200 shares of the Company’s Common stock in the Asset Purchase Agreement of that same date and purchased an additional 150,000 shares in 2016~~2018. In ~~2017,~~On ~~Mr.~~May ~~Roberts acquired another 10~~20,~~000~~ ~~shares. In addition~~2020, MrDr. ~~Roberts~~Paula ~~was~~resigned ~~issued 20,000 shares as compensation for serving as a director of the Company, and 95,520 shares for~~ his ~~efforts~~position in acquiring and preparing the properties owned by the Company’s subsidiary Eufloria Medical of Tennessee, Inc. In 2018, Mr. Roberts was issued 30,000 shares of the Company's restricted common stock for serving as a director ~~of the Company. This resulted in Mr. Roberts’s ownership of 407,720 shares of Company’s common stock~~ with ~~a corresponding number of votes, or 2% of~~ the ~~total issued and outstanding shares of the~~ Company.

(5) Mr. Gibbs is a founder of the Company, first becoming a director in October 1984 before departing in September 2011. Mr. Gibbs rejoined the board in 2013 and has continued to serve until the present. Mr. Gibbs purchased 40,000 restricted shares of the Company in 2016 and owned 157,500 shares of the Company’s common stock at December 31, 2016. In 2017, Mr. Gibbs was issued 20,000 shares of the Company’s common stock as compensation for serving as a director of the Company. In 2018, Mr. Roberts was issued 30,000 shares of the Company's restricted common stock for serving as a director of the Company and 36,018 shares of the Company’s common stock as compensation for his efforts in renovating a property owned by the Company’s subsidiary Eufloria Medical of Tennessee, Inc. This resulted in Mr. Gibbs ownership of 243,518 shares of Company’s common stock with a corresponding number of votes, or 1% of the total issued and outstanding shares of the Company.

(6) Dr. Paula became a director of the Company on July 13, 2018. In 2018, Dr. Paula was issued 20,000 shares of the Company's restricted common stock for serving as a director of the Company. This resulted in Dr. Paula's ownership of 20,000 shares of Company’s common stock with a corresponding number of votes, or less than 0.1% of the total issued and outstanding shares of the Company.

Unless otherwise indicated, the address for each of the above-named individuals is 13575 58th Street North, Suite 138, Clearwater, Florida, 33760.

Change of Control

InOn ~~January~~March ~~2017~~31, ~~and as a result of the acquisition of significant shares of the Company’s Common stock by its CEO~~2020, MrRichard K. Pertile ~~and~~resigned ahis ~~significant~~position ~~reduction~~as inChairman ~~ownership~~ of the ~~Company’s~~Board ~~Common~~of ~~stock~~Directors, byChief ~~its~~Executive ~~previous~~Officer ~~CEO~~and ~~Mr.~~Chief ~~Sample,~~Financial ~~Mr.~~Officer ~~Pertile~~for ~~became~~ the Company~~’s largest shareholder with effective control~~.

On March 31, 2020, the Company issued in escrow 1,475,000 shares of the Company’s Series B Convertible Preferred Stock (the “Preferred Stock”) to ORCIM Financial Holdings, LLC (“OFH”). Each share of the Preferred Stock has fifty (50) votes per share and may be converted into fifty (50) $0.001 par value common shares. As of March 31, 2020, the Company had 43,290,331 shares of its common stock issued and outstanding. There were no other shares of any capital stock outstanding except for the common stock and Preferred Stock.

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As the result of the issuance of the Preferred Stock and, upon satisfaction of the terms of the Acquisition Agreement, OFH would have voting control over the Company with 73,750,000 votes on all matters submitted to stockholders for a vote. On May 20, 2020, the conditions of the Acquisition Agreement were satisfied with the resignation of the former board of directors of the Company and the change of control became effective.

On March 31, 2020, Mr. Larnell C. Simpson, Jr., age 47, was appointed as a director for Acacia Diversified Holdings, Inc. Mr. Simpson also was appointed to the position of Vice President.

On May 20, 2020, directors Danny Gibbs, Neil B. Gholson and Dr. Richard Paula each resigned their respective positions as a director for Acacia Diversified Holdings, Inc.

In 2006 the board of directors named Gwendolyn Sample as the Company’s assistant secretary and on February 1, 2007, granted her an option to acquire 5,000 shares of Common stock for $0.01 per share, which options Mrs. Sample exercised on June 16, 2016. On November 6, 2009, the Company granted her options to purchase 20,000 shares for $0.10 per share, and on December 23, 2010, she was awarded options to acquire 10,000 additional shares at $0.60 per share. Ms. Sample is the spouse of Steven L. Sample, prior CEO of the Company. In addition, the board of directors awarded L. Palmer Sample, an IT and MIS professional, 20,000 shares of restricted common stock for work performed in maintaining the company’s computer network system and financial server system, as well as creating, hosting, and maintaining the Company’s e-mail system and Internet web site. In 2014 he was awarded 10,000 shares of restricted common stock for similar services. On November 2, 2007, he was awarded 10,000 options to purchase common stock for $0.80 per share, on November 6, 2009, was granted options to purchase 5,000 shares of common stock for $0.10 per share, and on December 23, 2010 was awarded 10,000 options to purchase Common stock at $0.60 per share, all for services to the Company. In 2013 he installed a new computer server for financial and accounting uses for the Company in Ocala, Florida, and continued to perform services maintaining all those systems. Palmer is the son of Steven L. Sample and Gwendolyn G. Sample. Mr. Sample’s spouse and his son disclaim any beneficial ownership by Mr. Sample of any securities they own, and they disclaim any beneficial ownership of any securities he owns.

Mr. Sample became CEO, President, and Chairman of the Board of Directors of the Company in 2006 and resigned that position in favor of Richard K. Pertile on January 15, 2016 in conjunction with the Company’s acquisition of the assets and businesses of the MariJ Group of companies on that date. Mr. Sample disclaims any beneficial ownership of any securities owned by others and disclaims any beneficial ownership by others of any securities he owns.

Mr. Pertile became CEO, President, and Chairman of the Board of Directors of the Company on January 15, 2016 and continues to serve in those positions. On March 31, 2020, Richard K. Pertile resigned his position as Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer for the Company.

26On March 31, 2020, the Company issued in escrow 1,475,000 shares of the Company’s Series B Convertible Preferred Stock (the “Preferred Stock”) to ORCIM Financial Holdings, LLC (“OFH”). Each share of the Preferred Stock has fifty (50) votes per share and may be converted into fifty (50) $0.001 par value common shares. As of March 31, 2020, the Company had 43,290,331 shares of its common stock issued and outstanding. There were no other shares of any capital stock outstanding except for the common stock and Preferred Stock. As the result of the issuance of the Preferred Stock and, upon satisfaction of the terms of the Acquisition Agreement, OFH would have voting control over the Company with 73,750,000 votes on all matters submitted to stockholders for a vote. On May 20, 2020, the conditions of the Acquisition Agreement were satisfied with the resignation of the former board of directors of the Company and the change of control became effective.

~~Table~~OFH is a limited liability company domiciled in Maryland. OFH is controlled by Mr. Jeffery D. Bearden, who owns 100% of ~~Contents~~the membership interests of OFH. The Preferred Stock was acquired by OFH in exchange for its agreement to assume the debt of the Company in the approximate amount of $450,000. The funds to satisfy the outstanding debt of the Company were acquired by OFH through a loan from a hedge fund entity known as Geneva Capital.

On May 20, 2020, directors Danny Gibbs, Neil B. Gholson and Dr. Richard Paula each resigned their respective positions as a director for Acacia Diversified Holdings, Inc.

Director Independence

We believe that, in accordance with the Company Guide of the American Stock Exchange, that Messrs. Gibbs, Gholson, Roberts and Dr. Paula ~~are~~were independent directors, those ~~three~~four individuals being a majority of our current Board of Directors. As employee-officers and directors of the Company, Mr. Pertile and Ms. Edwards ~~are~~were not considered to be independent. In addition, as a result of a change in control, Mr. Simpson became the sole independent director of the Company on March 31, 2020.

Conflicts of Interest.

The Company and its management may be subject to various conflicts of interest policies. The Company’s management iswas not independent, yet the Company relies solely on management for guiding its day-to-day operations and managing its assets. As such, certain employees may have conflicts of interest in allocating time, services and functions to the Company in deference to their other activities.

The Company has no other full-time corporate officers except for Mr. Pertile, its President and CEO, and Mrs. Edwards, its Vice President and COO, who devote the majority of their business time and efforts to the management and direction of the Company and its subsidiaries. The President and CEO of the Company serves as a director of the Company as well as serving as an officer and director of the Company’s subsidiary corporations. Service in those capacities with the subsidiaries is not considered to constitute a conflict of interest on the part of employees, managers, or directors. The Company’s CEO and COO continued to serve in those capacities as of December 31, 2018. Mr. Sample resigned as CEO, President and Chairman of the Board of the Company on January 15, 2016 in favor of selection of new officers following the Company’s acquisitions of the MariJ Group of companies on that same date. Mr. Sample remained as a non-officer employee and director of the Company until January 17, 2017, at which time he resigned, effective December 31, 2016. 27

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The Company currently has no full-time corporate officers. Mr. Pertile, its former President and CEO, and Ms. Edwards, its former Vice President and COO, devoted the majority of their business time and efforts to the management and direction of the Company and its subsidiaries. Mr. Pertile served as a director of the Company as well as serving as an officer and director of the Company’s subsidiary corporations. Service in those capacities with the subsidiaries is not considered to constitute a conflict of interest on the part of employees, managers, or directors. On March 31, 2020, Richard K. Pertile resigned his position as Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer for the Company. In March 2020, Ms. Edwards was laid off by the Company due to business disruption as a result of the COVID-19 pandemic.

Item 14. Principle Accountant Fees and Services

Aggregate fees for professional services rendered by KWCO for the years ended December 31, ~~2018~~2019 and ~~2017~~2018 were as follows:

	2018		2017
	2019		2018
Audit fees	$	4672,~~650~~950	$	7446,~~790~~650
Tax preparation fees		913,000		119,~~500~~000
Total fees	$	5585,~~650~~950	$	8655,~~290~~650

Audit Fees. Audit fees consist of professional services rendered in connection with the audits of the Company’s annual consolidated financial statements, reviews of the Company’s internal accounting and reporting controls under Section 404 of the Sarbanes-Oxley Act, and reviews of interim consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q.

Tax Preparation Fees. Tax preparation fees include preparation of federal and state tax returns. In ~~2018~~2019 and ~~2017~~2018, the Company incurred $913,000 and $119,~~500~~000 for preparation of its ~~2017~~2018 and ~~2016~~2017 tax returns, respectively.

The audit committee reviews all audit and non-audit related fees at least annually. The audit committee pre-approve all audit and non-audit related services in fiscal years ~~2018~~2019 and ~~2017~~2018.

The Company’s independent registered public accounting firm may not be engaged to provide non-audit services that are prohibited by law or regulation to be provided by it, nor may the Company’s principal accountant be engaged to provide any other non-audit service unless it is determined that the engagement of the principal accountant provides a business benefit resulting from its inherent knowledge of the Company while not impairing its independence. The Audit Committee must pre-approve the engagement of the Company’s principal accountant to provide both audit and permissible non-audit services. No non-audit services were provided by the independent registered public accounting firm during the past two fiscal years.

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Item 15. Exhibits, Financial Statement Schedule and Reports on Form 8-K

(a) Financial Statements

The following financial statements are included herewith:

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statement of Changes in Stockholders’ (Deficit)	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7 to F-2325

(b) Exhibits required by Item 601, Regulation S-K;

Exhibit Number and Description				Location Reference
	(3.0)	Articles of Incorporation
		(3.1)	Articles Of Amendment And Restated Articles Of Incorporation of Acacia Diversified Holdings, Inc. dated June 9, 2015	See Exhibit Key
		(3.2)	Restated Bylaws Of Acacia Diversified Holdings, Inc. dated June 29, 2015	See Exhibit Key
	(9.0)	Voting Proxy Agreement between Rick Pertile and Steven L. Sample		See Exhibit Key
	(10.1)	Consolidated Loan Agreement		See Exhibit Key
	(10.2)	Consolidated Promissory Note		See Exhibit Key
	(10.3)	Security Agreement – Acacia Diversified Holdings, Inc.		See Exhibit Key
	(10.4)	Security Agreement --– Marij Agriculture, Inc.		See Exhibit Key
	(10.5)	Security Agreement --– Marij Agriculture, Inc.		See Exhibit Key
	(10.6)	Security Agreement – CannaCures Research & Development Center, Inc.		See Exhibit Key
	(10.7)	Definitive Asset Purchase Agreement between Acacia Diversified Holdings, Inc. and the Medahub Companies		See Exhibit Key
	(14.0)	Code of Ethics		See Exhibit Key
	(21.0)	List of Subsidiaries		See Exhibit Key
	(31.1)	Certificate of Chief Executive Officer And Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Filed herewith
	(32.1)	Certification of Chief Executive Officer And Chief Financial Officer Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		Filed herewith
	101.INS	XBRL Instance Document
	101.SCH	XBRL Taxonomy Extension Schema Document
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit Key

3.1 Incorporated by reference herein from the Company’s Form 8-K filed on July 16, 2015.
3.2 Incorporated by reference herein from the Company’s Form 8-K filed on July 16, 2015.
9.0 Incorporated by reference herein from the Company’s Form 10-K filed on April 2, 2018.
10.1 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.
10.2 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.
10.3 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.
10.4 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.
10.5 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.
10.6 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.
10.7 Incorporated by reference herein from the Company's Form 10-Q filed on November 5, 2018
14.0 Incorporated by reference herein from the Company’s Form 10-Q filed on November 13, 2017.
21.0 Incorporated by reference herein from the Company’s Form 10-Q filed on August 7, 2017.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Acacia Diversified Holdings, Inc.
Date: April 1, 2019	By:	/s/ Richard K. Pertile
Date: June 26, 2020	By:	/s/ Larnell C. Simpson, Jr.
		Richard K. Pertile
		Larnell C. Simpson, Jr.
		Principle Executive Officer Principle Financial Officer Principle Accounting Officer
		Vice President

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Richard K. Pertile	Director	April 1, 2019
/s/ Larnell C. Simpson, Jr.	Director	June 26, 2020
Richard K. Pertile
Larnell C. Simpson

/s/ Neil B. Gholson		Director		April 1, 2019
Neil B. Gholson

/s/ Gary J. Roberts, Jr.		Director		April 1, 2019
Gary J. Roberts, Jr.

/s/ Danny R. Gibbs		Director		April 1, 2019
Danny R. Gibbs

/s/ Richard Paula		Director		April 1, 2019
Richard Paula

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ACACIA DIVERSIFIED HOLDING, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2018 and 2017	F-3
Consolidated Balance Sheets at December 31, 2019 and 2018	F-3
Consolidated Statements of Operations for the years ended December 31, 2087 and 2017	F-4
Consolidated Statements of Operations for the years ended December 31, 2019 and 2018	F-4
Consolidated Statements of Changes in Stockholders’ (Deficit) for the years ended December 31, 2018 and 2017	F-5
Consolidated Statements of Changes in Stockholders’ (Deficit) for the years ended December 31, 2019 and 2018	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017	F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018	F-6
Notes to Consolidated Financial Statements	F-7

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Acacia Diversified Holdings, Inc.

~~Acacia~~Opinion ~~Diversified~~on ~~Holdings,~~the ~~Inc.~~Financial Statements

~~Opinion~~We onhave audited the accompanying consolidated balance sheets of Acacia Diversified Holdings, Inc. (the Company) as of December 31, 2019 and 2018, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years ended December 31, 2019 and 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2019 and 2018, and the results of its consolidated operations and its consolidated cash flows for the years ended December 31, 2019 and 2018, in conformity with accounting principles generally accepted in the United States of America.

WeBasis have audited the accompanying consolidated balance sheets of Acacia Diversified Holdings, Inc. (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, changes in stockholder’s deficit, and cash flows for years ended December 31, 2018 and 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018 and 2017, and the results of its consolidated operations and cash flows for the years ended December 31, 2018 and 2017, in conformity with accounting principles generally accepted in the United States of America.Opinion

~~Basis~~These ~~for~~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.

~~These~~We ~~consolidated~~conducted ~~financial~~our ~~statements~~audits ~~are~~in accordance with the ~~responsibility~~standards of the ~~Company’s management~~PCAOB. ~~Our~~Those ~~responsibility~~standards isrequire tothat ~~express~~we anplan ~~opinion~~and onperform the ~~Company’s~~audit to obtain reasonable assurance about whether the consolidated financial statements ~~based~~are onfree ~~our~~of ~~audits~~material misstatement, whether due to error or fraud. WeThe ~~are~~Company ais ~~public~~not ~~accounting~~required ~~firm~~to ~~registered~~have, ~~with~~nor ~~the~~were ~~Public~~we ~~Company~~engaged ~~Accounting~~to ~~Oversight~~perform, ~~Board~~an ~~(United~~audit ~~States)~~of ~~(“PCAOB”)~~its ~~and~~internal control over financial reporting. As part of our audits, we are required to beobtain ~~independent~~an ~~with~~understanding ~~respect~~of tointernal ~~the~~control ~~Company~~over infinancial ~~accordance~~reporting, ~~with~~but ~~the~~not ~~U.S.~~for ~~federal~~the ~~securities~~purpose ~~laws~~of ~~and~~expressing ~~the~~an ~~applicable~~opinion ~~rules~~on ~~and~~the ~~regulations~~effectiveness of the ~~Securities~~Company’s ~~and~~internal ~~Exchange~~control ~~Commission~~over ~~and~~financial ~~the~~reporting. ~~PCAOB~~Accordingly, we express no such opinion.

WeOur ~~conducted~~audits ~~our~~included ~~audits~~performing inprocedures ~~accordance~~to ~~with~~assess the ~~standards~~risks of ~~the~~material ~~PCAOB.~~misstatement ~~Those~~of ~~standards require that we plan and perform~~ the ~~audits to obtain reasonable assurance about whether the~~ consolidated financial statements ~~are free of material misstatement~~, whether due to error or fraud., ~~The~~and ~~Company~~performing isprocedures ~~not~~that ~~required~~respond to ~~have,~~those ~~nor~~risks. ~~were~~Such weprocedures ~~engaged~~included ~~to perform~~examining, anon ~~audit~~a oftest ~~its~~basis, ~~internal~~evidence ~~control~~regarding ~~over~~the ~~financial~~amounts ~~reporting.~~and Asdisclosures ~~part~~in ofthe ~~our~~financial ~~audits~~statements. weOur ~~are~~audits ~~required~~also toincluded ~~obtain~~evaluating anthe ~~understanding~~accounting ofprinciples ~~internal~~used ~~control~~and ~~over~~significant ~~financial~~estimates ~~reporting~~made ~~but~~by ~~not~~management, ~~for~~as ~~the~~well ~~purpose~~as ofevaluating ~~expressing~~the anoverall ~~opinion~~presentation onof the ~~effectiveness~~consolidated offinancial ~~the~~statements. ~~Company’s~~We ~~internal~~believe ~~control~~that ~~over~~our ~~financial~~audits ~~reporting.~~provide ~~Accordingly,~~a wereasonable ~~express~~basis nofor ~~such~~our opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 supporting the amounts and disclosures in the consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and its limited capital resources raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ KWCO, PC KWCO, PC We have served as the Company’s auditor since 2015. Odessa, Texas June 26, 2020

We have served as the Company’s auditor since 2015.

Odessa, Texas

April 1, 2019

F-2

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ACACIA DIVERSIFIED HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

	December 31,			December 31,
	2018			2017
	2019			2018
ASSETS
CURRENT ASSETS:
Cash	$	5129,~~797~~765		$	2851,~~417~~797
Accounts receivable, net of allowance for doubtful accounts of $25,000 and $17,450 in 2018 and 2017, respectively		135,970			22,820
Accounts receivable, net of allowance for doubtful accounts of $0 in 2019 and $25,000 in 2018		52,461			135,970
Inventories		4346,~~550~~197			5743,~~257~~550
Prepaid expenses and other current assets		7,~~815~~895			117,~~034~~815
Total Current Assets		~~239~~136,~~132~~318			~~119~~239,~~528~~132
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $277,343 and $172,783 in 2018 and 2017, respectively		453,562			483,931
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $417,144 and $277,343 in 2019 and 2018, respectively		350,509			453,562
DEPOSITS		4,201			3,341
OTHER ASSETS
TOTAL ASSETS	$	696,895		$	606,800
Deposits		4,651			4,201
ROU asset - finance lease, net of accumulated amortization of $14,879 in 2019		162,759			-
		167,410			4,201
TOTAL ASSETS	$	654,237		$	696,895
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	~~289~~396,~~805~~265		$	~~440~~289,~~838~~805
Current portion of long-term debt		4,359			-4,359
Convertible notes payable		199,100			-
Current portion of lease liability - finance lease		9,008			-
Notes payable to related party		812,400			558,400
Convertible notes payable		264,100			199,100
Accrued interest on notes payable to related party		65,774			11,872
Notes payable to related party		752,400			812,400
Payable to related parties		66,500			81,058
Accrued interest on notes payable to related party		116,629			65,774
Total Current Liabilities		1,437,938			1,092,168
Payable to related parties		68,768			66,500
Total Current Liabilities		1,611,529			1,437,938
LONG-TERM LIABILITY:
Long-term debt, net of current portion		15,219			-
Long-term debt		10,861			15,219
Derivative liability		~~196~~381,~~518~~330			-196,518
Total Long-term Liability		211,737			-
Lease liability - finance lease		164,255			-
Total Liabilities		1,649,675			1,092,168
Total Long-term Liability		556,446			211,737
Total Liabilities		2,167,975			1,649,675
Commitments and contingencies		-			-
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value; 150,000,000 shares authorized; 21,813,625 and 17,539,982 shares issued and outstanding at December 31, 2018 and 2017, respectively		21,814			17,540
Common stock, $0.001 par value; 150,000,000 shares authorized; 39,583,543 and 21,813,625 shares issued and outstanding at December 31, 2019 and 2018, respectively		39,584			21,814
Additional paid-in capital		56,~~692~~706,~~055~~657			45,~~451~~692,~~038~~055
Accumulated deficit		(68,~~666~~259,~~649~~979	)		(46,~~953~~666,~~946~~649	)
Total Stockholders' Deficit		(~~952~~1,~~780~~513,738	)		(~~485~~952,~~368~~780	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	~~696~~654,~~895~~237		$	~~606~~696,~~800~~895

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

F-3

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ACACIA DIVERSIFIED HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, ~~2018~~2019 AND ~~2017~~ 2018

	2018			2017
	2019			2018
REVENUE	$	~~415~~519,~~051~~221		$	~~478~~415,~~231~~051
COSTS OF GOODS SOLD
Costs of goods sold		~~195~~387,~~266~~475			~~168~~195,~~400~~266
Depreciation expense		81106,~~044~~424			7281,~~943~~044
		276,310			241,343
		493,899			276,310
GROSS PROFIT		~~138~~25,~~741~~322			~~236~~138,~~888~~741
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Employee compensation expenses		~~572~~581,~~444~~719			~~720~~572,~~141~~444
General and administrative expenses		~~962~~381,~~585~~042			~~909~~962,~~230~~585
Depreciation expense		23,516			5,514
Depreciation and amortization expense		58,972			23,516
		1,558,545			1,634,885
		1,021,733			1,558,545
LOSS FROM OPERATIONS		(1996,~~419,804~~411	)		(1,~~397~~419,~~997~~804	)
OTHER INCOME (EXPENSE)
Derivative expense		(196,518	)		-
Derivative income (expense)		(467,930	)		(196,518	)
Loss on sale of assets		(12,362	)		(9,530	)
Loss on disposition of assets		(8,464	)		(12,362	)
Interest expense		(84118,~~794~~841	)		(~~427~~84,~~572~~794	)
Other income		~~775~~2,718			~~1,371~~775
TOTAL OTHER INCOME (EXPENSE)		(292,899	)		(435,731	)
TOTAL OTHER EXPENSE		(592,517	)		(292,899	)
NET LOSS BEFORE INCOME TAXES	$	(1,~~712~~588,~~703~~928	)	$	(1,~~833~~712,~~728~~703	)
Income taxes		-			-
NET LOSS	$	(1,~~712~~588,~~703~~928	)	$	(1,~~833~~712,~~728~~703	)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED	$	(0.0905	)	$	(0.1109	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED		1932,~~604~~409,~~467~~778			1719,~~372~~604,~~858~~467

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

F-4

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ACACIA DIVERSIFIED HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

	Common Stock
	Shares		Par Value		Additional Paid-in Capital		Accumulated Deficit			Total
Balance December 31, 2016		16,931,816	$	16,932	$	3,393,539	$	(3,120,218	)	$	290,253
Balance December 31, 2017		17,539,982	$	17,540	$	4,451,038	$	(4,953,946	)	$	(485,368	)
Common stock issued for services		340,900		341		565,228					565,569
Common stock issued for interest expense		216,000		216		366,184					366,400
Employee stock plan compensation		10,000		10		75,405					75,415
Common stock issued to acquire property and equipment		41,266		41		50,682					50,723
Net loss								(1,833,728	)		(1,833,728	)
Balance December 31, 2017		17,539,982		17,540		4,451,038		(4,953,946	)		(485,368	)
Common stock issued for services		1,197,000		1,197		535,711					536,908
Common stock issued for acquisition of Medahub, Inc.		600,000		600		125,400					126,000
Common stock issued for accrued expense		2,233,125		2,233		444,392					446,625
Common stock issued to related party for leasehold improvement		36,018		36		17,613					17,649
Employee stock plan compensation		7,500		8		48,101					48,109
Common stock issued for cash		200,000		200		69,800					70,000
Net loss								(1,712,703	)		(1,712,703	)
Balance December 31, 2018		21,813,625	$	21,814	$	5,692,055	$	(6,666,649	)	$	(952,780	)
Common stock issued for services		5,398,825		5,398		234,597					239,995
Common stock issued for conversion of convertible note		8,296,501		8,297		211,853					220,150
Settlement of derivative liability from conversion of convertible note		-		-		283,117					283,117
Employee stock plan compensation		40,000		40		66,886					66,926
Common stock issued for cash		760,000		760		90,440					91,200
Settlement of payable to related party		200,000		200		7,800					8,000
Settlement of notes payable and accrued interest with related party		3,074,592		3,075		119,909					122,984
Cumulative adjustments from adoption of ASC 842		-		-		-		(4,402	)		(4,402	)
Net loss		-		-		-		(1,588,928	)		(1,588,928	)
Balance December 31, 2019		39,583,543	$	39,584	$	6,706,657	$	(8,259,979	)	$	(1,513,738	)

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

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ACACIA DIVERSIFIED HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

	2018			2017
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,~~712~~588,~~703~~928	)	$	(1,~~833~~712,~~728~~703	)
Adjustments to reconcile net loss to net cash and cash equivalents used by operating activities:
Depreciation		104,560			78,457
Depreciation and amortization		165,396			104,560
Common stock issued for services		~~536~~239,~~908~~995			~~565~~536,~~569~~908
Common stock issued for acquisition of Medahub, Inc.		~~126,000~~-			-126,000
Common stock issued from employee stock plan		4866,~~109~~926			7548,~~415~~109
Common stock issued for interest expense		-			366,400
Original issue discount on convertible note payable		25,100			18,100
Original issue discount on convertible notes payable		18,100			-
Amortization of debt discount		9,000			6,000
Amortization of debt discount		6,000			20,950
Allowance of doubtful accounts		-			25,000
Allowance for doubtful accounts		25,000			-
Accrued interest on notes payable to related party		59,839			-
Derivative expense		196,518			-
Derivative expense (income)		467,930			196,518
Loss on sale of land and equipment		12,362			9,530
Loss on disposition of assets		8,464			12,362
Loss on sale of equipment to related party		-			17,450
(Increase) decrease in:
Accounts receivable		~~(138~~83,~~150~~509	)		(4138,~~640~~150	)
Inventories		13(2,~~707~~647	)		513,~~828~~707
Prepaid expenses and other current assets		~~2,359~~(530	)		462,~~968~~359
ROU asset - operating lease		29,655			-
Increase (decrease) in:
Accounts payable and accrued expenses		~~295~~115,~~592~~510			85295,~~530~~592
Net cash used by operating activities		(465,638	)		(566,271	)
Payable to related parties		10,268			-
Lease liability - operating lease		(29,655	)		-
Net cash used by operating activities		(340,168	)		(465,638	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment to related party for leasehold improvement		~~(6,000~~-	)		(296,~~064~~000	)
Acquisition of leasehold improvement with due to related party		-			29,064
Proceeds from sale of assets		-			38,361
Proceeds from sale of property		38,361			-
Acquisition of property and equipment		(55,928	)		(79,470	)
Acquisition of property and equipment		(79,470	)		(11,284	)
Net cash provided (used) by investing activities		(55,928	)		(47,109	)
Net cash provided (used) by investing activities		(47,109	)		(11,284	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from payable to related parties		39,344			78,494
Proceeds from issuance of common stock		91,200			70,000
Proceeds from issuance of common stock		70,000			-
Proceeds from payable to related parties		-			39,344
Proceeds from convertible notes payable		175,000			79,050
Proceeds from convertible note payable		242,000			175,000
Repayment on convertible note payable		-			(100,000	)
Payment on long-term debt		(4,358	)		(2,217	)
Proceeds from note payable to related party		-			405,000
Payments on lease liability - finance lease		(8,778	)		-
Payment on due to related parties		-			(30,500	)
Proceeds from issuance of notes payable to related party		54,000			254,000
Proceeds from advances from related party		-			130,050
Net cash provided by financing activities		374,064			536,127
Payment on long-term debt		(2,217	)		-
Net change in cash and cash equivalents		(22,032	)		23,380
Proceeds from issuance of notes payable to related party		254,000			-
Cash and cash equivalents, beginning of the year		51,797			28,417
Net cash provided by financing activities		536,127			562,094
Cash and cash equivalents, end of the year	$	29,765		$	51,797
Net change in cash and cash equivalents		23,380			(15,461	)
Cash and cash equivalents, beginning of the year		28,417			43,878
Cash and cash equivalents, end of the year	$	51,797		$	28,417
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	~~114~~-		$	~~5,000~~114
Cash paid for income taxes	$	-		$	-
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Common stock issued to related party for leasehold improvement	$	~~17,649~~-		$	-17,649
Acquisition of equipment with long-term debt	$	~~21,794~~-		$	-21,794
Common stock issued to settle related party accrued expense	$	446,625		$	-
Common stock issued to related party to settle accrued expenses	$	8,000		$	446,625
Common stock issued for acquisition of property				$	50,723
Common stock issued to related party to settle notes payable and accrued interest	$	122,984		$	-
Consolidation of notes payable to related party, including accrued interest				$	153,400
Common stock issued for conversion of convertible notes payable and related interest	$	220,150		$	-
Settlement of derivative liability from conversion of convertible notes payable	$	283,117		$	-
Acquisition of ROU asset - finance lease	$	182,041		$	-
Acquisition of ROU asset - operating lease	$	29,655		$	-

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

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

NOTE 1 - – THE COMPANY

Acacia Diversified Holdings, Inc. (“Acacia” or the “Company”), a Texas corporation, ~~has~~had four wholly-owned subsidiaries, MariJ Pharmaceuticals, Inc. (“MariJ Pharma”), a Florida corporation, Canna-Cures Research & Development Center, Inc. (“Canna-Cures”), a Florida corporation, and Eufloria Medical of Tennessee, Inc. (“EMT”), a company incorporated in the state of Tennessee. In July 2018, the Company also announced the completion of its acquisition of Medahub Operations Group, Inc. and Medahub, Inc., technology companies (“Medahub”) incorporated in the state of Florida, complete with a current compounding pharmacy license in Florida. The Medahub acquisition ~~allows~~allowed the Company to be fully HIPAA compliant and cloud based on an HL7 platform. The Company ~~can~~planned ~~now~~to offer licensing agreements for other cannabis companies wanting to be HIPAA compliant from left to right or seed to sale and doctor to patient.

The Company’s primary source of revenue iswas from the extraction of medicinal hemp oil, from a non-psychoactive cannabis plant. All extraction services ~~are~~were ~~currently~~ provided in states where such services ~~are~~were deemed legal. The Company's subsidiary EMT ~~has~~was ~~been~~ invited to be part of the hemp pilot program in Tennessee. This program ~~provides~~provided the Company the license to grow, manufacture, and dispense organic hemp oil in Tennessee. The Company ~~plans~~planned on participating in this pilot program through its new, wholly-owned subsidiary.

The Company also ~~opened~~had ~~its~~a retail store in Tennessee ~~this~~selling ~~year~~hemp infused products. Revenue generated from retail sales iswas not expected to be material to the Company based on current operating model.

~~NOTE~~On 2March 26, 2020, the Company announced in a current report on Form 8-k ~~GOING~~that ~~CONCERN~~its operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic spreading throughout the United States and the world and thus the Company’s business operations have been disrupted and it was unable to timely review and prepare the Company’s financial statements for the 2019 fiscal year. As such, the Company would be making use of the 45-day grace period provided by the SEC’s Order and available filing extension to delay filing of its Annual Report.

~~The~~On ~~Company~~March ~~has~~31, ~~not~~2020, ~~generated~~Richard ~~profit to date~~K. ~~The~~Pertile ~~Company~~resigned ~~expects~~his toposition ~~continue~~as toChairman ~~incur~~of ~~operating~~the ~~losses~~Board asof itDirectors, ~~proceeds~~Chief ~~with~~Executive ~~its~~Officer ~~extraction, growing~~ and ~~manufacturing~~Chief ~~activities~~Financial inOfficer ~~Tennessee~~for ~~and~~the ~~research~~Company. ~~and~~On ~~development~~the ~~activities~~same ~~and~~date, ~~continues~~the toCompany ~~navigate~~filed ~~through~~a ~~the~~current ~~regulatory~~report ~~process.~~on ~~The~~Form ~~Company~~8-k ~~expects~~to ~~general~~announce ~~and~~that ~~administrative~~it ~~costs~~issued toin ~~increase~~escrow 1,475,000 asshares of the Company’s ~~adds~~Series ~~personnel~~B ~~and~~Convertible ~~other~~Preferred ~~administrative~~Stock ~~expenses~~(the ~~associated~~“Preferred ~~with~~Stock”) ~~its~~to ~~current~~ORCIM ~~efforts.~~Financial ~~As such~~Holdings, ~~and~~LLC ~~without~~(“OFH”). ~~substantially~~Each ~~increasing~~share ~~revenue or finding new sources~~ of ~~capital,~~ the ~~Company~~Preferred ~~will~~Stock ~~find~~has itfifty ~~difficult~~(50) tovotes ~~continue~~per toshare ~~meet~~and ~~its~~may ~~obligations~~be asconverted ~~they~~into ~~come~~fifty ~~due~~(50) $0. ~~The~~001 ~~Company~~par ~~continues~~value tocommon ~~seek~~shares. ~~working~~As ~~capital~~of ~~but there~~March ~~can~~31, be2020, ~~no assurance that~~ the Company ~~will~~had be43,290,331 ~~successful~~shares inof its ~~efforts~~common tostock ~~raise~~issued ~~capital,~~and oroutstanding. ifThere it were ~~successful~~no inother ~~raising~~shares of any capital, ~~that~~stock itoutstanding ~~would~~except befor ~~successful~~the incommon ~~meeting~~stock ~~its~~and ~~business~~Preferred ~~plans~~Stock. ~~These~~ ~~factors~~As ~~raise~~the ~~substantial~~result ~~doubt~~of ~~as to~~ the ~~ability~~issuance of the ~~Company~~Preferred toStock ~~continue~~and, asupon asatisfaction ~~going~~of ~~concern. Management’s~~the ~~plans~~terms ~~include~~of ~~securing~~the ~~additional~~Acquisition ~~extraction~~Agreement, ~~contracts~~OFH ~~and~~would ~~increasing~~have ~~sales~~voting atcontrol ~~our~~over ~~retail~~the ~~store~~Company inwith ~~Tennessee~~73,750,000 ~~attempting~~votes toon ~~start~~all ~~new~~matters ~~businesses,~~submitted ~~finding~~to ~~additional~~stockholders ~~operational~~for ~~businesses~~a tovote. ~~buy,~~On ~~and~~May ~~attempting~~20, to2020, ~~raise~~the ~~funds~~conditions ~~from~~of the ~~public~~Acquisition ~~through~~Agreement anwere ~~equity~~satisfied ~~offering~~with of the ~~Company’s~~resignation ~~common~~of ~~stock.~~the ~~Management~~former ~~intends~~board toof ~~make~~directors ~~every~~of ~~effort~~the toCompany ~~identify~~ and ~~develop~~the ~~all~~change ~~these sources~~ of ~~funds,~~control ~~but~~became ~~there can be no assurance that Management’s plans will be successful~~effective.

~~The~~OFH ~~accompanying~~is ~~consolidated~~a ~~financial~~limited ~~statements~~liability ~~have~~company ~~been~~domiciled ~~prepared~~in onMaryland. aOFH ~~going~~is ~~concern~~controlled ~~basis,~~by ~~which~~Mr. ~~contemplates~~Jeffery ~~the~~D. ~~realization~~Bearden, ofwho ~~assets~~owns ~~and~~100% ~~the satisfaction~~ of ~~liabilities in~~ the ~~normal~~membership ~~course~~interests of ~~business~~OFH. The ~~Company~~Preferred ~~has~~Stock ~~incurred~~was ~~losses~~acquired ~~for~~by ~~all~~OFH ~~periods~~in ~~presented~~exchange ~~and~~for ~~has~~its aagreement ~~substantial~~to ~~accumulated~~assume ~~deficit.~~the Asdebt of ~~December~~the ~~31,~~Company ~~2018,~~in ~~these~~the ~~factors,~~approximate ~~among~~amount ~~others~~of $450,000. ~~raise~~The ~~substantial~~funds ~~doubt~~to ~~about~~satisfy the outstanding debt of the Company’s ~~ability~~were toacquired ~~continue~~by asOFH through a ~~going~~loan ~~concern~~from a hedge fund entity known as Geneva Capital.

~~NOTE~~On 3March -31, ~~SUMMARY~~2020, OFMr. ~~SIGNIFICANT~~Larnell ~~ACCOUNTING~~C. ~~POLICIES~~Simpson, Jr., age 47, was appointed as a director for Acacia Diversified Holdings, Inc. (the “Company”). Mr. Simpson also was appointed to the position of Vice President.

~~BASIS~~On OFMay ~~PRESENTATION~~20, -2020, ~~The~~directors ~~Company~~Danny ~~prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) with December 31~~Gibbs, asNeil ~~its year-end~~B. ~~The~~ ~~consolidated~~Gholson ~~financial statements~~ and ~~notes~~Dr. ~~are~~Richard ~~the~~Paula ~~representations~~each ofresigned ~~the~~their ~~Company’s~~respective ~~management~~positions ~~who~~as ~~are~~a ~~responsible~~director for ~~their~~Acacia ~~integrity~~Diversified ~~and~~Holdings, ~~objectivity~~Inc.

~~PRINCIPLES~~NOTE OF2 ~~CONSOLIDATION~~ – The consolidated financial statements include the accounts of Acacia Diversified Holdings, Inc. and its wholly-owned subsidiaries, MariJ Pharmaceuticals, Inc, Canna-Cures Research & Development Center, Inc., Eufloria Medical of Tennessee, Inc., Medahub Operations Group, Inc. and Medahub, Inc. All significant intercompany accounts and transactions are eliminated in consolidation. GOING CONCERN

The Company has not generated profit to date. The Company expects to continue to incur operating losses. The Company expects to incur professional fees to maintain its reporting company status. Until such time that the Company is able to generate revenue and become profitable or find new sources of capital, the Company will find it difficult to continue to meet its obligations as they come due. There can be no assurance that the Company will be successful in its efforts to raise capital, or if it were successful in raising capital, that it would be successful in meeting its business plans. Management’s plans include attempting to raise funds from the public through an equity offering of the Company’s common stock and identifying and developing new opportunities. However, the recent COVID-19 pandemic has presented unprecedented challenges to businesses and the investing landscape around the world. Therefore, there can be no assurance that Management’s plans will be successful.

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses for all periods presented and has a substantial accumulated deficit. As of December 31, 2019, these factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION - The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) with December 31, as its year-end. The consolidated financial statements and notes are the representations of the Company’s management who are responsible for their integrity and objectivity.

PRINCIPLES OF CONSOLIDATION – The consolidated financial statements include the accounts of Acacia Diversified Holdings, Inc. and its wholly-owned subsidiaries, MariJ Pharmaceuticals, Inc, Canna-Cures Research & Development Center, Inc., Eufloria Medical of Tennessee, Inc., Medahub Operations Group, Inc. and Medahub, Inc. All significant intercompany accounts and transactions are eliminated in consolidation.

USE OF ESTIMATES - Preparing the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions about current, and for some estimates, future economic and market conditions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

RECLASSIFICATION - Certain accounts in the prior period's financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements.

MEDAHUB ACQUISITION - In July 2018, the Company announced the completion of its acquisition of Medahub Operations Group, Inc. and Medahub, Inc., technology companies (“Medahub”), which includes a current compounding pharmacy license in Florida. The Medahub acquisition allows the Company to be fully HIPAA compliant and cloud based on an HL7 platform. The Company can now offer licensing agreements for other cannabis companies wanting to be HIPAA compliant from left to right or seed to sale and doctor to patient. The Company issued 600,000 shares of its restricted common stock to the principal of Medahub as consideration of the acquisition, valued at $126,000.

CASH AND CASH EQUIVALENTS - The Company considers all short-term investments purchased with a maturity of three months or less to be cash equivalents. Credit risk associated with cash deposits are insured under FDIC up to $250,000 per depositor, per FDIC insured bank, per ownership category. At such time, as the Company’s cash deposits exceed FDIC limits, the Company will reassess their credit risk.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS – The Company’s accounts receivable represents amounts due from customers for extraction services performed. Allowance for uncollectible accounts receivable is estimated based on the aging of the accounts receivable and management estimate of uncollectible amounts. At December 31, ~~2018~~2019 and ~~2017~~2018, the Company provided for $~~25,000~~0 and $1725,~~450~~000, respectively, of allowance for doubtful accounts.

CONCENTRATION OF CUSTOMERS – ~~For~~During the year ended December 31, ~~2018~~2019, the Company’s ~~extraction~~revenues ~~revenue,~~were ~~which~~concentrated ~~accounted~~on ~~for~~two ~~80% of total revenue~~customers, ~~came~~Beyond ~~from~~Organic ~~two~~Nutritional ~~customers.~~and ~~These~~LMK ~~two~~Hemp, ~~customers~~who accounted for approximately 5970% and 2122%, ~~respectively,~~ of the total ~~revenue~~consolidated revenues, respectively. 98These two customers accounted for approximately 91% of the trade receivable balance at December 31, ~~2018~~2019 was due from two customers.

For the year ended December 31, 2017, the Company’s extraction revenue, which accounted for 93% of total revenue, came from three customers. These three customers accounted for approximately 33%, 28% and 32%, respectively, of total revenue. The entire trade receivable balance at December 31, 2017 was due from one customer.

INVENTORIES – Inventories are stated at the lower of cost or market. Cost is determined using the average cost method. The Company’s inventory consists of raw materials and finished goods. Cost of inventory includes cost of ingredients, labor, quality control and all other costs incurred to bring our inventories to condition ready to be sold.

DEFERRED FARM EXPENSE - The Company's subsidiary EMT grows hemp plants in both its indoor and outdoor facility. In accordance with Accounting Standards Codification 905 - Agriculture, all direct and indirect costs of growing the plants are accumulated until the time of harvest. These deferred cost cannot exceed the realizable value of the oil processed from the hemp plants. Crop costs such as soil preparation incurred before planting are deferred and allocated to the growing crop. Deferred farm expense is included as inventory costs.

PROPERTY AND EQUIPMENT – Property and equipment are stated at cost less accumulated depreciation. Major renewals and improvements are capitalized, while minor replacements, maintenance and repairs are charged to current operations. Depreciation is computed by applying the straight-line method over the estimated useful lives, which are generally two to seven years.

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

For the year ended December 31, 2018, the Company’s extraction revenue, which accounted for 80% of total revenue, came from two customers. These two customers accounted for approximately 59% and 21%, respectively, of total revenue. 98% of the trade receivable balance at December 31, 2018 was due from two customers.

INVENTORIES – Inventories are stated at the lower of cost or market. Cost is determined using the average cost method. The Company’s inventory consists of raw materials and finished goods. Cost of inventory includes cost of ingredients, labor, quality control and all other costs incurred to bring our inventories to condition ready to be sold.

DEFERRED FARM EXPENSE - The Company's subsidiary EMT grows hemp plants in both its indoor and outdoor facility. In accordance with Accounting Standards Codification 905 - Agriculture, all direct and indirect costs of growing the plants are accumulated until the time of harvest. These deferred cost cannot exceed the realizable value of the oil processed from the hemp plants. Crop costs such as soil preparation incurred before planting are deferred and allocated to the growing crop. Deferred farm expense is included as inventory costs.

DEBT DISCOUNT - During the year ended December 31, 2018, the Company incurred $18,100 of debt discount related to the issuance of two convertible promissory notes, as described in Note 9. The discount was recognized in its entirety as interest expense rather than amortized over the life of the convertible promissory note. The immediate recognition did not yield materially different result.

REVENUE RECOGNITION - In May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces numerous requirements in U.S. GAAP, including industry specific requirements, and provides a single revenue recognition model for recognizing revenue from contracts with customers. The Company adopted this standard effective January 1, 2018.

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

~~ADVERTISING~~The ~~COSTS~~ASU requires the use of a new five-step ~~Advertising~~model ~~costs~~to ~~are~~recognize ~~expensed~~revenue asfrom ~~incurred~~customer contracts. ~~Advertising~~ ~~expense~~The five-step ~~for~~model requires that the ~~years~~Company ~~ended~~(i) ~~December~~identify 31the contract with the customer, ~~2018~~(ii) ~~and~~identify ~~2017~~the ~~amounted~~performance toobligations ~~$10~~in the contract,~~989~~ ~~and~~(iii) $8determine the transaction price,~~516~~ including variable consideration to the extent that it is probable that a significant future reversal will not occur, ~~respectively~~(iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenues.

ADVERTISING COSTS - Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2019 and 2018 amounted to $5,743 and $10,989, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of cash and cash equivalents, accounts receivable, deposits, prepaid expenses, accounts payable and accrued expenses approximate fair value due to the short-term nature of these instruments. Accounts payable and accrued expenses included amounts due to vendors and service providers and accrued compensation to the Company’s officers.

FAIR VALUE ESTIMATES – The Company measures its options and warrants at fair value in accordance with Accounting Standards Codification 820 – Fair Value Measurement (“ASC 820”). The objective of ASC 820 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 specifies a valuation hierarchy based on whether the inputs to those valuation techniques are observable or unobservable.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions. These two types of inputs have created the following fair value hierarchy:

	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 all significant inputs and significant value drivers are observable in active markets; and
	Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when estimating fair value. No new options or warrants were issued during the years ended December 31, ~~2018~~2019 and ~~2017~~2018.

	Quoted Active Markets for Identified Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
	(Level 1)		(Level 2)		(Level 3)
December 31, 2019
Common stock issued for services		-	$	239,995		-	$	239,995
Common stock issued to settle accrued expense		-		8,000		-		8,000
Employee Stock Plan		-		66,926		-		66,926
Derivative liability		-		381,330		-		381,330
December 31, 2018
Common stock issued for services		-	$	536,908		-	$	536,908
Common stock issued for acquisition of Medahub, Inc.		-		126,000		-		126,000
Common stock issued to settle accrued expense		-		446,625		-		446,625
Employee Stock Plan		-		48,109		-		48,109
Common stock issued for property improvement		-		17,649		-		17,649
Derivative liability		-		196,518		-		196,518
December 31, 2017
Common stock issued for services		-	$	565,569		-	$	565,569
Common stock issued for interest		-		366,400		-		366,400
Employee Stock Plan		-		75,415		-		75,415
Common stock issued for property acquisition		-		50,723		-		50,723

All common stock issued for services are valued on the date of the agreements, using a ten day volume weighted average price.

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

~~COMPENSATED~~All ~~ABSENCES~~common -stock ~~The~~issued ~~Company has not accrued a liability~~ for ~~compensated~~services ~~absences~~are invalued ~~accordance~~on ~~with Accounting Standards Codifications 710 – Compensation – General, as~~ the ~~amount~~date of the ~~liability~~agreements, ~~cannot~~using bea ~~reasonably~~ten ~~estimated~~day atvolume ~~December~~weighted ~~31,~~average ~~2018 and 2017~~price.

~~LOSS~~COMPENSATED ~~PER~~ABSENCES ~~COMMON SHARE~~ - ~~Basic~~The ~~loss~~Company ~~per~~has ~~share~~not isaccrued ~~computed~~a byliability ~~dividing~~for ~~the~~compensated ~~net~~absences ~~loss~~in byaccordance ~~the~~with ~~weighted~~Accounting ~~average~~Standards ~~number~~Codifications of710 ~~common~~– ~~shares~~Compensation ~~outstanding~~– during the period. Diluted loss per share would include the weighted average common shares outstanding and potentially dilutive common share equivalents. Because of the net losses for all periods presentedGeneral, ~~the~~as ~~basic and diluted weighted average shares outstanding are~~ the ~~same~~amount ~~since including the additional shares would have an anti-dilutive effect on the loss per share. For this reason, common stock options and warrants to purchase 55,000 and 65,000 shares, respectively,~~ of ~~common stock were not included in~~ the ~~computation~~liability ofcannot ~~basic~~be ~~and~~reasonably ~~diluted~~estimated ~~weighted~~at ~~average common shares outstanding for the years ended~~ December 31, ~~2018~~2019 and ~~2017~~2018.

LOSS PER COMMON SHARE - Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share would include the weighted average common shares outstanding and potentially dilutive common share equivalents. Because of the net losses for all periods presented, the basic and diluted weighted average shares outstanding are the same since including the additional shares would have an anti-dilutive effect on the loss per share. For this reason, common stock options and warrants to purchase 20,000 and 55,000 shares, respectively, of common stock were not included in the computation of basic and diluted weighted average common shares outstanding for the years ended December 31, 2019 and 2018.

INCOME TAXES - The Company files federal and state income tax returns in accordance with the applicable rules of each jurisdiction. We account for income taxes under the asset and liability method in accordance with Accounting Standards Codification 740 - Income Taxes (“ASC 740”). The provision for income taxes includes federal, state and local income taxes currently payable, as well as deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable amounts in years in which those temporary differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. In accordance with ASC 740, we recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company currently has substantial net operating loss carryforwards. The Company has recorded a valuation allowance equal to the net deferred tax assets due to the uncertainty of the ultimate realization of the deferred tax assets.

CONTINGENCIES - Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is possible that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of range of possible loss if determinable and material, would be disclosed. ~~There was no known contingency at December 31, 2018.~~

As a result of a change in control on March 31, 2020, prior and current management of the Company are continuing their due diligent process and to assess whether contingent liabilities existed.

In the normal course of business, the Company also enters into various other guarantees and indemnities in its relationships with suppliers, service providers, customers and others. These guarantees and indemnifications do not materially impact the Company’s financial condition or results of operations, and indemnifications associated with the Company’s actions generally have no dollar limitations and currently cannot be quantified.

STOCK BASED COMPENSATION - The Company accounts for stock-based compensation under Accounting Standards Codification 718 - Compensation-Stock Compensation (“ASC 718”). ASC 718 requires that all stock-based compensation be recognized as expense in the financial statements and that such cost be measured at the fair value of the award at the grant date and recognized over the period during which an employee is required to provide services (requisite service period). An additional requirement of ASC 718 is that estimated forfeitures be considered in determining compensation expense. Estimating forfeitures did not have a material impact on the determination of compensation expense during the years ended December 31, ~~2018~~2019 and ~~2017~~2018.

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ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

The Company accounts for stock based awards based on the fair market value of the instrument using a 10-day volume weighted adjusted price (VWAP) and accounts for stock options issued using the Black-Scholes option pricing model and utilizing certain assumptions including the followings:

Expected volatility – Actual changes in the market value of stock are used to calculate the volatility assumption. An increase in the expected volatility will increase compensation expense.

NOTE 4 - – RELATED PARTY TRANSACTIONS

~~Note~~Notes Payable to Related Party

The Company entered into the following promissory notes payable with its CEO during the years ended December 31, ~~2018~~2019 and ~~2017~~2018:

Note Date	Note Amount		Accrued Interest			Total
January 2017 (1)	$	300,000	$	16,504		$	316,504
June 2017 (2)		105,000		2,048			107,048
June 2017 (3)		130,050		2,564			132,614
		535,050		21,116			556,166
Expenses owed to related party				2,234			2,234
		535,050		23,350			558,400
Consolidation of notes (1) through (3) on September 25, 2017		23,350		(23,350	)		-
Consolidated note balance at September 25, 2017		558,400		-			558,400
Accrued interest from September 26 through December 31, 2017		-		11,872			11,872
Balances as of December 31, 2017	$	558,400	$	11,872		$	570,272
Accrued interest on consolidated note for the year ended December 31, 2018	$	-	$	44,672		$	44,672
Balances as of December 31, 2018		558,400		56,544			614,944
March 2018 (4)		72,000		4,402			76,402
Accrued interest on consolidated note for the year ended December 31, 2019		-		44,672			44,672
April 2018 (5)		42,000		2,332			44,332
Balances as of December 31, 2019	$	558,400	$	101,216		$	659,616
August 2018 (6)		70,000		2,168			72,168
March 2018 (4)		-		-			-
November 2018 (7)		20,000		184			20,184
April 2018 (5)		-		-			-
December 2018 (8)		50,000		144			50,144
August 2018 (6)		70,000		7,769			77,769
		254,000		9,230			263,230
November 2018 (7)		20,000		1,784			21,784
Total notes payable and accrued interest due to related party at December 31, 2018	$	812,400	$	65,774		$	878,174
December 2018 (8)		50,000		4,142			54,142
May 2019 (9)		10,000		509			10,509
June 2019 (10)		25,000		1,134			26,134
December 2019 (11)		19,000		75			19,075
		194,000		15,413			209,413
Total notes payable and accrued interest due to related party at December 31, 2019	$	752,400	$	116,629		$	869,029

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

(1) In January 2017, the Company entered into a note agreement in the amount of $300,000 with the Company’s former CEO. The note bears interest at a rate of 8% per annum and specifies no due date. The Company accrued interest of $16,504 through September 25, 2017. Concurrently, the board of directors also approved issuance of 100,000 shares of the Company’s common stock as additional interest. These shares were accounted for as debt issuance costs, valued at $182,000. The costs were expensed at the commitment date of the note as interest expense since the note is a short term capital advance with no stated term. This note was convertible into the shares of the Company’s common stock at $0.50/share and the note holder did not exercise the conversion option.

(2) In June 2017, the Company entered into a note agreement in the amount of $105,000 with the Company’s former CEO for short term working capital advance. The note bears interest at a rate of 8% per annum and specifies no due date. The Company accrued interest and recorded interest expense of $2,048 through September 25, 2017. This note was convertible into the shares of the Company’s common stock at $0.50/share and the note holder did not exercise the conversion option.

(3) In June 2017, the Company received a short term working capital advance of $130,050 from its former CEO. The advance bears interest at a rate of 8% per annum and specifies no due date. The Company accrued interest and recorded interest expense of $2,564 through September 25, 2017.

On September 25, 2017, the board of directors approved the Company to enter into a consolidated note payable agreement with the Company’s former CEO to consolidate the above notes (1) and (2) and advances (3) received from its former CEO, including accrued interests on these notes. The total amount of the principle and interest consolidated was $558,400. This consolidated note payable bears 8% interest per annum and is due on demand. Interest expense on this note from September 25, 2017 to December 31, 2017 was $11,872 and $44,672 for each of the ~~year~~years ended December 31, 2019 and 2018. This note is secured by all of the Company's assets.

(4) In March 2018, the Company entered into three separate unsecured promissory note agreements with its CEO and his spouse, in the amounts of $12,000, $40,000 and $20,000, totaled $72,000. Each of these promissory notes bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 60 days from the date of the note. The Company accrued interest on these notes in the amount of $4,402 for the year ended December 31, 2018.

(5) In April 2018, the Company entered into two separate unsecured promissory note agreements with its CEO and his spouse, in the amounts of $10,000 and $32,000, totaled $42,000. Each of these promissory notes bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 60 days from the date of the note. The Company accrued interest on these notes in the amount of $2,332 for the year ended December 31, 2018.

In May 2018, the board of directors approved the Company to enter into a promissory note agreement with the Company's CEO and his spouse to consolidate notes (4) and (5). The total amount of the principle consolidated was $114,000. The amount of interest accrued from the note dates to the date of the consolidation was minimal and therefore was not included in the consolidation. The promissory note accrues interest at 8% from the date of consolidation and is due within 120 days of the note date.

(6) In August 2018, the Company entered into three separate unsecured promissory note agreements with its CEO and his spouse, in the amounts of $25,000, $25,000, and $20,000, totaled $70,000. Each of these promissory notes bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 60 days from the date of the note. The Company accrued interest on these notes in the amount of $5,600 and $2,168 for the ~~year~~years ended December 31, 2019 and 2018, respectively.

(7) In November 2018, the Company entered into an unsecured promissory note agreements with its CEO and his spouse, in the amounts of $20,000. The promissory note bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 30 days from the date of the note. The Company accrued interest on these notes in the amount of $1,600 and $184 for the ~~year~~years ended December 31, 2019 and 2018, respectively.

(8) In December 2018, the Company entered into an unsecured promissory note agreements with its CEO and his spouse, in the amounts of $50,000. The promissory note bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 90 days from the date of the note. The Company accrued interest on these notes in the amount of $4,000 and $144 for the ~~year~~years ended December 31, 2019 and 2018, respectively.

As a result, the total principle amount of notes payable to related party was $812,400 and $558,400, at December 31, 2018 and 2017, respectively.

F-13

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ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

(9) In May 2019, the Company entered into an unsecured promissory note agreement with its former CEO and his spouse, in the amount of $10,000. The promissory note bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 90 days from the date of the note. The Company accrued interest on these notes in the amount of $509 through December 31, 2019.

(10) In June 2019, the Company entered into an unsecured promissory note agreement with its former CEO and his spouse, in the amount of $25,000. The promissory note bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 90 days from the date of the note. The Company accrued interest on these notes in the amount of $1,134 through December 31, 2019.

(11) In December 2019, the Company entered into an unsecured promissory note agreement with its former CEO and his spouse, in the amount of $19,000. The promissory note bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 90 days from the date of the note. The Company accrued interest on these notes in the amount of $75 through December 31, 2019.

As a result, the total principle amount of notes payable to related party was $752,400 and $812,400, at December 31, 2019 and 2018, respectively. Accrued interest on these notes payable to related party was $116,629 and $65,774, at December 31, 2019 and 2018, respectively.

Payable to Related Parties

Payable to related parties consisted of the followings at December 31, ~~2018~~2019 and ~~2017~~2018:

	2018		2017
	2019		2018
Short term loan from related entity (1)	$	6159,~~500~~768	$	4161,~~994~~500
Storage and corporate housing and auto allowances owed to CEO (2)		5,000		10,000
Storage and corporate housing and auto allowances owed to former CEO (2)		9,000		5,000
Amount owed to a director (3)		-		29,064
	$	68,768	$	66,500
	$	66,500	$	81,058

(1) In 2017, the Company received a working capital advance of $74,348 from a related entity. These advances are non-interest bearing and were intended as short term capital advances. The remaining balances of $6159,~~500~~768 and $4161,~~994~~500 have been included in payable to related parties on the consolidated balance sheets as current liabilities at December 31, ~~2018~~2019 and ~~2017~~2018, respectively.

(2) On May 1, 2016, the Company entered into an employment agreement with its former CEO. The term of the employment is through December 31, 2019. The agreement ~~provides~~provided for a monthly storage and corporate housing allowance of $1,000 for a property owned by the former CEO and a monthly automobile allowance of $1,000.

In May 2018, the board of directors approved to discontinue payment of the storage and corporate housing allowance of $1,000 per month, retroactively to January 1, 2018. As a result, no expenses related to the storage and corporate housing allowance was recorded ~~during~~since ~~the~~January ~~year ended December 31~~1, 2018. The automobile allowance ~~remains~~remained unchanged at $1,000 per month.

In July 2018, the board of directors approved issuance of 85,000 shares of the Company's restricted common stock to the Company's former CEO to settle the storage and corporate housing allowance and automobile allowance in the amount of $17,000 accrued through July 2018. As a result, $59,000 and $105,000 remained owed to the Company’s former CEO at December 31, ~~2018~~2019 and ~~2017~~2018, respectively.

During the ~~year~~years ended December 31, 2019 and 2018, expenses related to the automobile allowances totaled $12,000. ~~During~~each ~~the~~ year ~~ended December 31, 2017, expenses related to the housing and automobile allowances totaled $24,000~~.

(3) During the year ended December 31, 2017, a director of the Company incurred time and expenses related to improving the retail space located in Tennessee. These costs have been recorded as property and equipment in the Company’s consolidated balance sheets. At December 31, 2017, the Company owed this director $29,064, of which $17,649 was paid after December 31, 2017 through issuance of 36,018 shares of the Company’s common stock to the director and the remaining amount of $11,416 was paid in cash.

Other Related Party Transactions

In ~~March~~May 2017, the Company’s ~~board~~and EMT entered into an agreement to purchase a parcel of land in Tennessee and an Industrial Hemp Grower License issued by the Tennessee Department of Agriculture from one of the Company’s directors. ~~approved~~The ~~issuance~~purchase price of 50the transaction was 80,000 shares of the Company’s restricted common stock. toThese ashares ~~director~~were ~~for~~valued ~~his~~at ~~service~~$1.60 inper ashare, ~~financing~~or ~~transaction~~$128,000, ~~and~~on the ~~equity~~commitment date. The purchase ~~agreement~~price ~~described~~consisted inof ~~Notes~~land 8preparation and ~~10.~~cleanup ~~The~~costs, ~~Company~~and ~~determined~~compensation ~~that~~to ~~16,000~~a ~~shares~~director offor his effort in preparing the ~~total~~Company ~~number~~for ofoperations ~~shares~~in ~~represent~~Tennessee. ~~non-cash~~The ~~debt~~Company ~~issuance~~also ~~costs~~performed ~~directly~~excavation ~~related~~and toclearing of the ~~convertible~~land, ~~notes~~installing ~~financing~~driveway and ~~the~~culvert ~~remaining~~and ~~34,000~~completing ~~shares~~the ~~represent~~survey ~~compensation~~for ~~costs~~excavation. ~~directly~~In ~~related~~May to2018, the ~~equity~~Company ~~purchase~~sold ~~agreement~~this ~~with~~property ~~this~~for ~~investor.~~$38,361 ~~The~~to 50an unrelated party,~~000~~ ~~shares~~resulting ~~were~~in ~~valued~~a atloss of $8212,~~500~~362.

In May 2017, the Company and EMT entered into an agreement to purchase a parcel of land in Tennessee and an Industrial Hemp Grower License issued by the Tennessee Department of Agriculture from one of the Company’s directors. The purchase price of the transaction was 80,000 shares of the Company’s restricted common stock. These shares were valued at $1.60 per share, or $128,000, on the commitment date. EMT allocated the purchase price among the assets acquired based on their fair values as follow:

Land purchase price	$	26,194
Land preparation and cleanup		15,000
Industrial Hemp Grower License		-
Compensation		86,806
Total Purchase Price	$	128,000

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

~~The~~In ~~Company~~May ~~determined~~2018, the ~~value~~Company's offormer ~~the~~CEO ~~land~~personally ~~based~~financed on the purchase, ~~price~~with ~~paid by~~ the ~~director~~Company's inboard ~~December 2016. There has been no significant changes in the value~~ of ~~the~~directors' ~~land since that time. The Company estimated land preparation and cleanup costs at $15~~approval,~~000.~~ ~~The director applied for and paid~~ a ~~fee~~piece of ~~$264~~property toin ~~obtain~~Tennessee ~~the~~for ~~license. The Company was not able to determine~~ the ~~value~~benefit of the ~~license~~Company. ~~since~~The ~~the~~property ~~license~~consists ~~was granted as part~~ of ~~the~~a ~~hemp~~14 ~~pilot~~acre ~~program~~farm ~~in Tennessee~~ and ~~the~~an ~~Company~~indoor ~~has~~growing ~~not generated any cash flows from this license~~area. The Company's ~~entered~~former ~~into~~CEO ~~this~~personally ~~agreement~~funded ~~with its director, in lieu of~~ the ~~state~~purchase ofprice ~~Tennessee, as a result~~ of the ~~state’s~~property ~~residency~~at ~~requirement to enter into the program in Tennessee. As a result~~$185,000 ~~this director is also a registered agent~~ and aclosing ~~director of EMT, a Tennessee corporation~~costs. The ~~remaining~~board ~~purchase price~~ of ~~$86,806~~directors ~~represented~~also ~~compensation~~granted ~~to this director for his effort in preparing~~ the Company ~~for operations in Tennessee. During~~ the ~~year~~right ~~ended~~to ~~December~~purchase ~~31, 2017, this director also incurred expenses in excavating and clearing of~~ the ~~land,~~farm ~~installing~~from ~~driveway and culvert and completing~~ the ~~survey for excavation. The board of directors approved issuance of the~~ Company’'s ~~common~~former ~~stock~~CEO toat ~~compensate~~his ~~this~~cost ~~director~~plus ~~for his expenses~~6.09% Asinterest awhen ~~result,~~ the Company ~~recorded~~has ~~its~~sufficient ~~commitment~~cash flows to ~~issue~~do ~~15,520 shares of its common stock valued at $0~~so.61 ~~per~~At ~~share, for a total of $9,529, which is included as part of~~ the ~~cost~~time of the ~~land. Accordingly~~filing, the ~~total~~Company ~~recorded~~had ~~cost~~not ofexercised ~~the~~such ~~Tennessee land acquisition is $50,723~~right.

InThe ~~May~~board ~~2018,~~of directors also approved for the Company ~~sold~~to enter into an agreement to lease this property atfrom ~~$38~~the Company's former CEO,~~361~~ toeffective June 1, 2018. The term of the lease was for one year with an ~~unrelated~~automatic ~~party,~~renewal ~~resulting~~term inof aone ~~loss~~year. The lease required the Company to pay all expenses related to the acquisition and operation of the property, including but not limited to the Company's former CEO's personal incremental borrowing costs, repairs and maintenance, real estate taxes, licenses and permits, etc. For the years ended December 31, 2019 and 2018, the Company incurred $1236,~~362~~953 and $29,152, respectively, in operating expenses for this property.

~~During~~NOTE ~~the~~5 year ended December 31, 2017, the Company issued 20,000 shares of the Company’s common stock to each of its three directors for serving on the Company’s board during 2017 and 2016. The total of 60,000 shares were valued at $99,000. There was no cash compensation paid to the directors for their service on the board.– INVENTORIES

~~In May 2018, the Company's CEO personally financed the purchase, with the Company's board of directors' approval, a piece of property in Tennessee for the benefit of the Company.~~ The ~~property consists of a 14 acre farm and an indoor growing area. The~~ Company'’s ~~CEO~~inventories ~~personally~~consisted ~~funded the purchase price~~ of the ~~property~~followings at ~~$185,000~~December and closing costs. The board of directors also granted the Company the right to purchase the farm from the Company's CEO at his cost plus 6.09% interest when the Company has sufficient cash flows to do so. At the time of the filing31, ~~the~~2019 ~~Company~~and ~~has not exercised such right.~~ 2018:

The board of directors also approved for the Company to enter into an agreement to lease this property from the Company's CEO, effective June 1, 2018. The term of the lease is for one year with an automatic renewal term of one year. The lease requires the Company to pay all expenses related to the acquisition and operation of the property, including but not limited to the Company's CEO's personal incremental borrowing costs, repairs and maintenance, real estate taxes, licenses and permits, etc. For the year ended December 31, 2018, the Company incurred $29,152 in operating expenses for this property.

	2019		2018
Raw materials	$	32,294	$	23,810
Finished goods (isolates, tinctures and capsules, etc.)		13,903		12,605
Deferred farm expense		-		7,135
	$	46,197	$	43,550

NOTE 56 – PROPERTY -AND ~~INVENTORIES~~EQUIPMENT

The Company’s inventories consisted of the followings at December 31, 2018 and 2017:

	2018		2017
Raw materials	$	23,810	$	46,880
Finished goods (isolates, tinctures and capsules, etc.)		12,605		10,377
Deferred farm expense		7,135		-
	$	43,550	$	57,257

NOTE 6 - PROPERTY AND EQUIPMENT

Property and equipment are stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method at rates intended to depreciate the costs of assets over their estimated useful lives. Upon retirement or sale of property and equipment, the cost of the disposed assets and related accumulated depreciation is removed from the accounts and any resulting gain or loss is credited or charged to selling, general and administrative expenses. Expenditures for normal repairs and maintenance are charged to expense as incurred.

Additions and expenditures for improving or rebuilding existing assets that extend the useful life are capitalized. Leasehold improvements made either at the inception of the lease or during the lease term are amortized over the shorter of their economic lives or the lease term including any renewals that are reasonably assured.

Property and equipment consisted of the followings at December 31, 2019 and 2018:

	2019			2018
Computer equipment	$	7,582		$	7,582
Website		7,000			7,000
Extraction, farm and lab equipment		609,568			609,664
Leasehold and farm improvement		143,503			106,659
Total property and equipment		767,653			730,905
Less accumulated depreciation		(417,144	)		(277,343	)
Net property and equipment	$	350,509		$	453,562

Depreciation expense for the years ended December 31, 2019 and 2018 totaled $150,517 and $104,560, respectively.

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

~~Property~~NOTE ~~and~~7 – ACCOUNTS ~~equipment~~PAYABLE ~~consisted~~AND ofACCRUED ~~the followings at December 31, 2018 and 2017:~~EXPENSES

	2018			2017
Computer equipment	$	7,582		$	7,582
Website		7,000			5,000
Extraction, farm and lab equipment		609,664			559,257
Land		-			50,723
Leasehold and farm improvement		106,659			34,152
Total property and equipment		730,905			656,714
Less accumulated depreciation		(277,343	)		(172,783	)
Net property and equipment	$	453,562		$	483,931

Accounts payable and accrued expenses consisted of the followings at December 31, 2019 and 2018:

Depreciation expense for the years ended December 31, 2018 and 2017 totaled $104,560 and $78,457, respectively.

	2019		2018
Accounts payable to vendors	$	114,110	$	83,037
Payroll taxes payable		63,621		46,832
Accrued salaries and bonuses		207,062		153,542
Accrued interest on convertible notes payable		11,472		6,394
	$	396,265	$	289,805

NOTE 78 – RIGHT-OF-USE ~~ACCOUNTS~~ASSETS ~~PAYABLE~~ AND ~~ACCRUED~~LEASE ~~EXPENSES~~LIABILITIES

~~Accounts~~Short ~~payable~~term ~~and accrued expenses consisted of the followings at December 31, 2018 and 2017:~~lease

	2018		2017
Accounts payable to vendors	$	83,037	$	95,444
Payroll taxes payable		46,832		24,727
Accrued salaries and bonuses		153,542		320,667
Accrued interest on convertible notes payable		6,394		-
	$	289,805	$	440,838

The Company recognizes its office lease in Florida with an initial term of 12 months or less as a short-term lease. Lease payments associated with short-term lease are expensed as incurred in operating lease expense and are not included in our calculation of right-of-use assets or lease liabilities. Operating lease expense related to short-term lease was $11,877 and $11,361 for the years ended December 31, 2019 and 2018, respectively.

~~NOTE 8 -~~Operating ~~CONVERTIBLE NOTE PAYABLE ISSUED IN 2017~~lease

~~In March~~The ~~2017, the~~ Company entered into a ~~financing~~lease agreement to lease its retail space in Tennessee in October 2017 with ana ~~investor~~lease ~~whereby~~term of 24 months. The lease contained a renewal option to extend the term for two additional years. The lease expired on November 30, 2019 and the Company ~~would~~notified ~~issue~~the ~~unsecured~~landlord ~~convertible~~that ~~note~~it ~~agreements~~would tonot renew the ~~investor~~lease. inRent for the ~~aggregate~~first ~~principal~~twelve ~~amount~~months ofwas $~~400~~2,~~000~~500 atper ~~10%~~month ~~discount.~~and ~~The~~$2,550 ~~financing~~for ~~would~~the benext ~~funded~~twelve inmonths. ~~tranches,~~In ~~each~~applying ~~with~~ASC 842, the ~~issuance~~Company ofuses a ~~separate~~lease ~~convertible~~term ~~note~~of ~~agreement~~24 bymonths and an incremental borrowing rate of 5.99% which was the ~~Company~~borrowing rate on a finance lease (discussed below).

On March 31, 2017, the Company issued the first convertible note agreement (“first note”) in the principal amount of $100,000 at 10% discount. The first note matures on March 31, 2019 and is convertible into the Company’s common stock at a conversion price of $1.60 per share if no event of default has occurred and is converted prior to 180 days after the issuance date. If an event of default has occurred or the date of conversion is 180 days after the issuance date, the conversion price will be the lesser of $1.60 per share, or 70% of the second lowest closing bid price of the Company’s common stock for the 20 trading days immediately preceding the date of the conversion. In connection with the issuance of the first note, the Company paid $2,500 of commitment fee to the investor, $2,500 legal fees, and a finder's fee of $5,950. Therefore, the Company received net proceeds of $79,050 at closing.

Right of use (ROU) asset - operating lease obtained in exchange for lease liability - operating lease
	$	29,355
Amortization of ROU asset - operating lease		(29,355	)
ROU asset - operating lease at December 31, 2019	$	0

Lease liability - operating lease on adoption date	$	29,655
Payments on lease liability - operating lease		(29,655	)
Lease liability - operating lease on December 31, 2019	$	0

This entire lease liability matured on November 30, 2019

Operating lease expense for the year ended December 31, 2019	$	28,125
Weighted average remaining lease term		-
Weighted average discount rate		5.99	%

~~The~~Finance Company’s board of directors approved issuance of 50,000 shares of the Company’s common stock to a director for his service as a consultant for the transaction. The Company determined that 16,000 shares of the total number of shares represent non-cash debt issuance costs directly related to the convertible notes financing and the remaining 34,000 shares represent compensation costs directly related to the sale of the Company’s common stock to this investor (see Note 10). As a result, the debt discount of $10,000, commitment fee of $2,500, legal fee of $2,500, commission to a third party consultant of $5,950 and the non-cash debt issuance costs of $26,400, totaling $47,350, were recorded as a direct reduction from the carrying value of the principal amount in the consolidated balance sheet at the time of the agreement. These costs were amortized as interest expense immediately upon issuance because the first note was immediately convertible by the note holder. The principle amount of $100,000 was repaid in June 2017 together with interest expense of $5,000.lease

In May 2018, the Company's former CEO personally financed the purchase, with the Company's board of directors' approval, a piece of property in Tennessee for the benefit of the Company. The property consisted of a 14 acre farm and an indoor growing area. The Company's ~~did~~former ~~not~~CEO ~~receive~~personally ~~additional~~funded ~~funding~~the ~~from~~purchase price of the ~~investor~~property at $185,000 and ~~therefore~~closing costs. The board of directors also granted the Company the right to purchase the farm from the Company's former CEO at his cost plus 6.09% interest when the Company had sufficient cash flows to do so. At the time of the filing, nothe ~~additional~~Company ~~convertible~~did ~~note~~not ~~agreement~~exercise ~~was~~such ~~issued~~right.

F-16

Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

~~NOTE~~The 9board ~~- CONVERTIBLE~~of ~~NOTES~~directors ~~PAYABLE~~also ~~ISSUED~~approved INfor the Company to enter into a lease to lease this property from the Company's former CEO, effective June 1, 2018. ~~AND~~The ~~DERIVATIVE~~term ~~LIABILITY~~ of the lease was for one year with an automatic renewal term of one year. The lease also contained an option for the Company to purchase the property from the Company's former CEO. The lease required the Company to pay all expenses related to the acquisition and operation of the property, including but not limited to the Company's former CEO's personal incremental borrowing costs, repairs and maintenance, real estate taxes, licenses and permits, utilities, etc.

OnIn ~~August~~applying ~~22,~~ASC ~~2018,~~842 the Company issued a convertible promissory note ("Note 1") for $140,800. Note 1 was discounted at $128,000 and the Company received net proceeds of $125,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 8% per annum, and principal and accrued interest is due on ~~the~~adoption ~~maturity~~ date ~~of August 22~~, ~~2019. The conversion option price associated with~~ the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company ~~bifurcated~~considered the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $148,211. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The derivative liability was valued at $138,218 at December 31, 2018. followings:

On October 8, 2018, the Company issued a convertible promissory note ("Note 2") for $58,300. Note 2 was discounted at $53,000 and the Company received net proceeds of $50,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 8% per annum, and principal and accrued interest is due on the maturity date of October 8, 2019. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $57,272. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The derivative liability was valued at $58,300 at December 31, 2018.

	1.	The lease is with a related party of the Company.
	2.	Although the initial lease term is for one year, the Company is reasonably certain to acquire the property from the related party.

~~Liability~~3. ~~measured~~Contrary atto ~~fair~~leases ~~value~~with onfixed alease ~~recurring~~payments, ~~basis~~this bylease ~~level~~requires ~~within~~ the ~~fair~~Company ~~value~~to ~~hierarchy~~pay asall expenses related to the acquisition and operations of ~~December~~the 31property which are variable. Although the Company can exclude variable lease payments in applying ASC 842, ~~2018~~the islease asprovides ~~follows:~~ the necessary cash flows for the related party to service his debt. Therefore, the Company estimates future incremental borrowing costs to be incurred by the related party when measuring the initial finance lease liability. This amounts to approximately $1,600 per month.

~~Fair~~4. ~~Value~~The ~~Measurement~~related party's debt term was 15 years at ~~December~~a ~~31,~~borrowing ~~2018~~rate ~~(1)~~of ~~Using~~5.99%

	Note 1 - Level 2		Note 2 - Level 2		Total
Liability:
Derivative liability	$	138,218	$	58,300	$	196,518
Total liability	$	138,218	$	58,300	$	196,518

The Company considered the most objective measure of the right-of-use asset to be the purchase price paid by the related party for the property. The purchase price is then allocated among land and improvement and the Company amortizes the improvement over the estimated useful life of 10 years.

(1) The Company did not have any assets or liabilities measured at fair value using Level 1 or 3 of the fair value hierarchy as of December 31, 2018.

ROU asset - finance lease - land	$	37,530
ROU asset - finance lease - improvement		148,787
ROU asset - finance lease obtained in exchange for lease liability - finance lease		186,317
Cumulative effect adjustment to ROU asset - finance lease on adoption date		(8,679	)
Amortization of ROU asset - finance lease		(14,879	)
ROU asset - finance lease at December 31, 2019	$	162,760

Lease liability - finance lease on adoption date	$	186,318
Cumulative effect adjustment to ROU lease liability - finance lease on adoption date		(4,277	)
Payments on lease liability - finance lease		(8,778	)
Lease liability - finance lease on December 31, 2019	$	173,263

~~The~~Interest ~~Company’s~~expense ~~derivative~~related ~~liabilities~~to ~~are~~lease ~~classified~~liability ~~within Level 2 of the fair value hierarchy. The Company utilizes the Black~~-~~Scholes~~ ~~valuation~~finance ~~model~~lease towas ~~value the derivative liabilities utilizing observable inputs such as the Company’s common stock price~~$10,385 ~~the~~for ~~conversion price of~~ the ~~conversion~~year ~~option,~~ended ~~and~~December ~~expected volatility~~31, ~~which is based on historical volatility~~2019. ~~The Black-Scholes valuation model employs the market approach in determining fair value.~~

The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis during the year ended December 31, 2018:

Amounts of lease liability - finance lease matures over the next five years:
Twelve Months Ended December 31,
2020	$	9,008
2021		9,547
2022		10,119
2023		10,725
2024 and thereafter		133,863
	$	173,263

Variable lease expense was $39,111 for the year ended December 31, 2019.
Weighted average remaining lease term	13 years
Weighted average discount rate		5.99	%

	Note 1			Note 2		Total
Balance at December 31, 2017	$	-		$	-	$	-
Variable conversion feature in convertible notes payable		148,211			57,272		205,482
Change in fair value		(9,993	)		1,028		(8,965	)
Balance at December 31, 2018	$	138,218		$	58,300	$	196,518

F-17

Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

NOTE 109 -– CONVERTIBLE ~~STOCKHOLDERS’~~NOTES ~~(DEICIT)~~PAYABLE AND DERIVATIVE LIABILITY

~~Common~~On ~~Stock~~August 22, 2018, the Company issued a convertible promissory note ("Note 1") for $140,800. Note 1 was discounted at $128,000 and the Company received net proceeds of $125,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 10% per annum, and principal and accrued interest is due on the maturity date of August 22, 2019. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $148,211. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The Company recognized $58,503 and $138,218 as derivative expense for the years ended December 31, 2019 and 2018, respectively. At December 31, 2018, the derivative liability was valued at $138,218. During 2019, the note holder converted principle in the amount of $140,800 and accrued interest in the amount of $6,400 into the Company's common stock. This resulted in the issuance of 4,899,785 shares of the Company's common stock being issued to the note holder. As a result of the conversion, the derivative liability was extinguished at December 31, 2019.

~~The~~On October 8, 2018, the Company ~~has~~issued ~~been~~a ~~authorized~~convertible topromissory ~~issue~~note ~~150~~("Note 2") for $58,~~000~~300. Note 2 was discounted at $53,000 ~~shares~~and ofthe ~~common~~Company ~~stock~~received net proceeds of $50,000 after incurring $~~.001~~3,000 ~~par~~of ~~value~~debt issuance costs. ~~Each~~ ~~share~~The ofnote ~~issued~~bears an interest rate at 10% per annum, and ~~outstanding~~principal ~~common~~and ~~stock~~accrued ~~shall~~interest ~~entitle~~is due on the ~~holder~~maturity ~~thereof~~date toof ~~fully~~October ~~participate~~8, in2019. ~~all~~The ~~shareholder~~conversion ~~meetings,~~option price associated with the note has a 25% discount to ~~cast~~the ~~one~~market ~~vote~~price of the stock. The market price is based on ~~each~~the ~~matter~~average ~~with~~of ~~respect~~the two lowest trading prices during a ten day period prior to ~~which~~conversion. ~~shareholders~~The ~~have~~note is convertible at any time. As a result of the ~~right~~variable feature associated with the conversion option, pursuant to ~~vote~~ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to ~~share~~determine ~~ratably~~the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $57,272. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in ~~all~~this ~~dividends~~value as additional derivative expense. The Company recognized $14,250 and ~~other~~$58,300 ~~distributions~~as ~~declared~~derivative expense for the years ended December 31, 2019 and ~~paid~~2018, ~~with~~respectively. ~~respect~~At toDecember 31, 2018, the derivative liability was valued at $58,300. During 2019, the note holder converted principle in the amount of $58,300 and accrued interest in the amount of $2,650 into the Company's common stock. This resulted in the issuance of 3,146,716 shares asof ~~well~~the asCompany's incommon stock being issued to the ~~net~~note ~~assets~~holder. As a result of the ~~corporation~~conversion, ~~upon~~the ~~liquidation~~derivative orliability ~~dissolution~~was extinguished at December 31, 2019.

~~During~~On June 13, 2019, the ~~year~~Company ~~ended~~issued ~~December~~a 31convertible promissory note ("Note 3") for $93,500. ~~2018~~Note 3 was discounted at $85,000 and the Company ~~issue~~received 4net proceeds of $82,~~273~~000 after incurring $3,~~643~~000 ~~shares~~of debt issuance costs. The note bears an interest rate at 10% per annum, and principal and accrued interest is due on the maturity date of ~~its~~June ~~restricted~~13, ~~common~~2020. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $151,264. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as ~~follows:~~additional derivative expense. The Company recognized $125,776 as derivative expense for the year ended December 31, 2019. The derivative liability was valued at $111,928 at December 31, 2019.

1On July 12, 2019, the Company issued a convertible promissory note ("Note 4") for $91,300. 2Note 4 was discounted at $83,000 ~~shares~~and the Company received net proceeds of $80,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 10% per annum, and principal and accrued interest is due on the maturity date of July 12, 2020. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ~~consultant~~ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $117,886. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The Company recognized $129,833 as derivative expense for ~~services~~the ~~rendered~~year ended December 31, 2019. The derivative liability was valued at $1129,~~420~~833 at December 31, 2019.

2. 15,000 shares to the Company's SEC counsel for services rendered, valued at $10,650.

3. 1,000,000 shares to a consultant as payment on a consulting contract, valued at $485,600. In February 2018, the Company filed a Form S-8 with the SEC to register these shares.

4. 10,000 shares each of the three directors, total 30,000 shares for their service to the Company, valued at a total of $10,239.

5. 7,500 shares to employees from the restricted stock plan valued at $37,069.

6. 36,018 shares to a company owned by an independent director for leasehold improvements at the Tennessee store, valued at $17,649 on commitment date. The Company reduced related party payable when the shares were issued.

7. 600,000 shares to the principal of Medahub for services performed, valued at $126,000.

8. 2,233,125 shares to the Company's CEO to settle accrued salary, bonus and expenses in the amount of $446,625.

9. 200,000 shares to a non-employee director for cash value of $70,000.

10. 50,000 shares to a consultant for services rendered, valued at $11,000; and

11. 20,000 shares to each of our four directors and our corporate secretary, total 100,000 shares, for services rendered, valued at a total of $18,000.

During the year ended December 31, 2017, the Company issued 608,166 shares of its restricted common stock as follows:

1. 10,000 shares to each director for services rendered for fiscal year 2016 and 10,000 shares for services to be rendered for fiscal year 2017, total 60,000 shares, valued at $99,000;

2. 17,646 shares to a consultant for investors relations services, valued at $30,000;

3. 50,000 shares to the Company’s SEC legal counsel for services performed, valued at $82,500;

4. 10,000 shares to an employee for services performed, valued at $12,800;

5. 110,000 shares to an investor and its affiliate as offering costs, valued at $184,800;

6. 50,000 shares to a director for consulting services rendered in the convertible note and equity purchase agreement transactions, valued at $82,500;

7. 100,000 shares issued as debt issuance cost to CEO for related party advances, valued at $182,000;

8. 100,000 shares issued as interest expense to CEO for related party advances, valued at $158,000;

9. 15,000 shares to a consultant for continuing services, valued at $23,400; and

10. 80,000 shares to a director as other considerations and to purchase and prepare assets acquired by the Company’s subsidiary, valued at $128,000.

11. 15,520 shares to a director for expenses incurred related to land excavation and clean up, valued at $9,529.

F-18

Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

~~Warrants~~On October 10, 2019, the Company issued a convertible promissory note ("Note 5") for $91,300. Note 5 was discounted at $83,000 and ~~Options~~the Company received net proceeds of $80,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 10% per annum, and principal and accrued interest is due on the maturity date of October 10, 2020. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $128,642. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The Company recognized $139,569 as derivative expense for the year ended December 31, 2019. The derivative liability was valued at $139,569 at December 31, 2019.

AtLiability ~~its~~measured ~~meeting~~at offair ~~directors~~value on ~~February~~a 1,recurring ~~2007,~~basis ~~the Company’s board of directors approved the Acacia Automotive, Inc. 2007 Stock Incentive Plan1 (the “Plan”), which was approved~~ by ~~our~~level ~~stockholders~~within ~~on November 2, 2007, reserving 1,000,000 shares to be issued there under in~~ the ~~form~~fair ofvalue ~~common~~hierarchy stock or common stock purchase options. On July 26, 2012, our shareholders voted to update and extend the Acacia Automotive, Inc. 2007 Stock Incentive Plan, renaming it the Acacia Diversified Holdings, Inc. 2012 Stock Incentive Plan. Warrants, which may be included as ~~equity compensation if used in other manners, are not a component~~ of ~~the Plan. On June 29, 2015 shareholders holding a majority of the shares of the Company voted to discontinue the Company’s stock incentive plans. At~~ December 31, ~~2018~~2019 ~~and~~is ~~2017,~~as ~~50,000 and 65,000 options, respectively, still remained outstanding.~~follows:

The Company did not issue any common stock purchase warrants or options during the years ended December 31, 2018 and 2017. The following tables represent stock options and warrants activities for the years ended December 31, 2018 and 2017.

	Fair Value Measurement at December 31, 2019 (1) Using Level 2
	Note 3		Note 4		Note 5		Total
Liability:
Derivative liability	$	111,928	$	129,833	$	139,569	$	381,330
Total liability	$	111,928	$	129,833	$	139,569	$	381,330

~~Stock~~Liability ~~Options~~measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2018 is as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Yrs)		Aggregate Intrinsic Value
	Fair Value Measurement at December 31, 2018 (1) Using Level 2
Outstanding at December 31, 2016		75,000		$	0.41		2.71	$	82,000
	Note 1			Note 2		Total
Granted		-
Liability:
Exercised		-
Derivative liability	$	138,218		$	58,300	$	196,518
Forfeited or cancelled		(10,000	)	$	0.80
Total liability	$	138,218		$	58,300	$	196,518
Outstanding at December 31, 2017		65,000		$	0.35		2.00	$	16,050
Granted		-
Exercised		-
Forfeited or cancelled		(15,000	)	$	0.50		-		-
Outstanding at December 31, 2018		50,000		$	0.30		1.30	$	2,100
Exercisable at December 31, 2018		50,000		$	0.30		1.30	$	2,100

* Of(1) ~~the~~The ~~50,000~~Company ~~options~~did ~~still~~not ~~active~~have asany ofassets ~~December~~or ~~31,~~liabilities ~~2018:~~measured ~~(i)~~at ~~30,000~~fair ~~expire~~value atusing ~~11-6-2019;~~Level ~~and~~1 ~~(ii)~~or 203 of the fair value hierarchy as of December 31,~~000~~ ~~expire~~2019 atand ~~12-23-2020~~2018.

~~Stock~~The ~~Warrants~~Company’s derivative liabilities are classified within Level 2 of the fair value hierarchy. The Company utilizes the Black-Scholes valuation model to value the derivative liabilities utilizing observable inputs such as the Company’s common stock price, the conversion price of the conversion option, and expected volatility, which is based on historical volatility. The Black-Scholes valuation model employs the market approach in determining fair value.

At December 31, 2018 and 2017, there were no outstanding and exercisable stock purchase warrants. There were no warrants granted, exercised, forfeited or expired during the years ended December 31, 2018 and 2017.

Equity Purchase Agreement

In March 2017, the Company entered into an equity purchase agreement (“agreement”) with an investor whereby the investor will purchase up to $5,000,000 of the Company’s common stock over a period of 24 months from the effective date of the Company’s Registration Statement. The investor will purchase the Company’s common stock at a 10% discount. Pursuant to the agreement, the Company issued to the investor, and its affiliate, 110,000 shares of its common stock as commitment fee. These shares are valued at $184,800 at the commitment date and are deemed direct incremental costs associated with the offering. Subsequent to filing the Registration Statement, the Company withdrew its filing, and therefore, these costs are expensed as general and administrative expense.

F-19

Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

The ~~Company’s~~following ~~board~~is ~~of directors approved issuance of 50,000 shares of the Company’s common stock to~~ a ~~director~~reconciliation ~~for his service as a consultant~~ of the ~~transaction.~~beginning ~~The~~and ~~Company~~ending ~~determined~~balances ~~that 34,000 shares of the total number of shares approved~~ for ~~issuance~~liabilities ~~represent compensation~~measured ~~costs directly related the sale of the Company’s common stock to this investor. These shares are valued~~ at ~~$56,100~~fair value on ~~commitment~~a ~~date~~recurring ~~are~~basis ~~deemed~~during ~~direct incremental costs associated with~~ the ~~offering.~~years ~~Subsequent~~ended toDecember ~~filing the Registration Statement~~31, ~~the~~2019 ~~Company withdrew its filing,~~ and ~~therefore, these costs are expensed as general and administrative expense.~~2018:

Restricted Stock Awards to Key Employees

	Note 1			Note 2			Note 3			Note 4		Note 5		Total
Balance at December 31, 2017
Variable conversion feature in convertible notes payable	$	148,211		$	57,272		$	-		$	-	$	-	$	205,483
Change in fair value		(9,993	)		1,028			-			-		-		(8,965	)
Balance at December 31, 2018	$	138,218		$	58,300		$	-		$	-	$	-	$	196,518
Variable conversion feature in convertible notes payable		-			-			151,264			117,886		128,642		397,792
Change in fair value		58,502			14,250			(25,489	)		11,947		10,927		70,137
Conversion of derivative liability to equity from note conversion		(196,720	)		(72,550	)		(13,847	)		-		-		(283,117	)
Balance at December 31, 2019	$	-		$	-		$	111,928		$	129,833	$	139,569	$	381,330

InNOTE March 2017, the board of directors approved issuance of 100,000 shares of the Company’s restricted common stock to its key employees. The award for the employees are subject to a four or five-year vesting requirements, i.e. the requisite service period. The shares are issued as the vesting restriction lapses. The Company valued these shares at fair value on commitment date which is the date on which the employee accepted the award and recorded stock based compensation expense over the requisite service period. There was no restricted stock awards granted during the year ended December 31, 2018. During the year ended December 31, 2017, the board of directors approved issuance of 10~~,000~~ ~~shares of the Company~~– STOCKHOLDERS’s common stock to one of the key employees as the vesting requirement was met. These shares were valued at $12,800 on commitment date. Stock based compensation expense for these awards for the year ended December 31, 2017 was $62,615.(DEICIT)

~~NOTE~~Preferred ~~11 - INCOME TAXES~~Stock

AsThe ofCompany's ~~December~~board ~~31,~~of ~~2018~~directors ~~and~~is ~~2017~~authorized by the ~~Company~~Article ~~had~~of ~~net~~Incorporation ~~operating~~to ~~loss~~issue ~~carryforwards~~2,000,000 shares of ~~approximately~~preferred stock at $120.001 par value,~~357~~ in one or more series. In August 2019,~~000~~ the Company's board of directors designated and ~~$11~~authorized the issuance of 1,~~507~~475,000, ~~respectively,~~shares ~~which~~of Series B Convertible Preferred Stock (the “Preferred Stock”). Each share of series B preferred stock will ~~expire~~have ~~beginning~~50 atvotes per share and may be converted into 50 $0.001 par value common stock. The holders of series B preferred stock are entitled to receive, when and if as declared by the ~~end~~board of ~~2019~~directors, cumulative dividends payable in cash. A ~~valuation~~The ~~allowance~~holders ~~has~~of ~~been~~series ~~provided~~B ~~for~~preferred stock are also given preference over common stock holders in the ~~deferred~~event ~~tax~~of ~~asset~~any asvoluntary itor isinvoluntary ~~uncertain~~liquidation, ~~whether~~dissolution or winding up of the Company ~~will~~and ~~have~~subject ~~future~~and ~~taxable~~subordinate ~~income~~to the rights of secured creditors of the Company.

OnAs ~~December~~a ~~22,~~result ~~2017~~of a change in control, ~~the~~ ~~U.S.~~on ~~government~~March ~~enacted~~31, ~~comprehensive~~2020, ~~tax~~the ~~legislation~~Company ~~commonly~~issued ~~referred~~in toescrow as1,475,000 shares of the ~~Tax~~Company’s ~~Cuts~~Series ~~and~~B ~~Jobs~~Convertible ~~Act~~Preferred Stock (the “~~Tax~~Preferred ~~Act~~Stock”) to ORCIM Financial Holdings, LLC (“OFH”). ~~The~~Each ~~Tax Act~~share ~~reduces~~of the ~~corporate~~Preferred ~~tax~~Stock ~~rate~~has ~~to 21%~~fifty (50) votes per share and may be converted into fifty (50) $0.001 par value common shares. As of March 31, ~~effective January~~2020, 1the Company had 43,290,331 ~~2018~~shares of its common stock issued and outstanding. ~~Consequently,~~ weThere ~~have~~were ~~computed~~no ~~the~~other ~~provision~~shares ~~for~~of ~~income~~any ~~taxes~~capital stock outstanding except for the ~~year~~common ~~ended~~stock ~~December~~and ~~31,~~Preferred ~~2018~~Stock. ~~using~~As athe ~~tax~~result ~~rate~~of the issuance of ~~21%~~the Preferred Stock and, ~~recorded~~upon $1satisfaction of the terms of the Acquisition Agreement,~~425~~ OFH would have voting control over the Company with 73,~~999 adjustment~~750,000 votes on all matters submitted to stockholders for a vote. On May 20, 2020, the ~~deferred~~conditions ~~tax~~of ~~provision~~the ~~for~~Acquisition Agreement were satisfied with the ~~year~~resignation ~~ended December~~of ~~31,~~the ~~2017~~former board of directors of the Company and the change of control became effective.

AOFH ~~reconciliation~~is a limited liability company domiciled in Maryland. OFH is controlled by Mr. Jeffery D. Bearden, who owns 100% of the ~~benefit~~membership ~~(expense)~~interests ~~for~~of ~~income~~OFH. ~~taxes~~The ~~with~~Preferred ~~amounts~~Stock ~~determined~~was acquired by ~~applying~~OFH ~~the~~in ~~statutory~~exchange ~~federal~~for ~~income~~its ~~rate~~agreement to assume the debt of ~~21%~~ the Company in ~~2018~~the ~~and~~approximate ~~2017~~amount of $450,000. The funds to satisfy the ~~respective~~outstanding ~~losses~~debt ~~before~~of ~~income~~the ~~taxes~~Company iswere acquired by OFH through a loan from a hedge fund entity known as ~~follows:~~ Geneva Capital.

	2018			2017
Net (Loss)	$	(1,712,703	)	$	(1,833,728	)
Benefit (expense) for income taxes computed using the statutory rate of 21%		359,668			385,083
Non-deductible expense		(181,168	)		(212,526	)
Remeasurement of deferred income taxes due to tax reform		-			(1,425,999	)
Change in valuation allowance		(178,500	)		1,253,442
Provision for income taxes	$	-		$	-

Significant components of the Company's deferred tax liabilities and assets at December 31, 2018 and 2017 are as follows:

	2018			2017
Total deferred tax assets – net operating losses	$	2,594,970		$	2,416,470
Deferred tax liabilities
Depreciation		-			-
Net deferred tax assets		2,594,970			2,416,470
Valuation allowance		(2,594,970	)		(2,416,470	)
	$	-		$	-

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

AsCommon of December 31, 2018, open Federal income tax years subject to examination include the tax years ended December 31, 2017 through 2015. At December 31, 2018, net operating loss (“NOL”) carryforwards expiring through 2037 were as follows:Stock

Expiring December 31,	Amount of NOL Expiring
2019	$	6,166,000
2026		408,000
2027		693,000
2028		771,000
2029		197,000
2030		32,000
2031		415,000
2033		692,000
2034		106,000
2036		1,493,000
2037		534,000
	$	11,507,000

The Company has been authorized to issue 150,000,000 shares of common stock, $.001 par value. Each share of issued and outstanding common stock shall entitle the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to common stock, as well as in the net assets of the corporation upon liquidation or dissolution.

NOL from tax years with no expiration date		Amount of NOL
2018		$	850,000

During the year ended December 31, 2019, the Company issue 17,769,918 shares of its restricted common stock as follows:

~~The~~● ~~net~~1,202,000 ~~change~~shares into consultants for services rendered, valued at $72,122. ● 4,196,825 shares to the ~~valuation~~Company's ~~allowance~~CEO isand asCOO ~~follow:~~for services rendered, valued at $167,873. ● 40,000 shares issued to employees and a director from the restricted stock plan valued at $66,926. ● 8,296,501 shares issued to the convertible notes holder who elected to convert principle and accrued interest, totaled $503,267, into the Company's common stock. ● 760,000 shares to investors for $91,200 of working capital. ● 200,000 shares issued to the Company's former CEO to settle accrued expenses valued at $8,000. ● 3,074,592 shares issued to the Company's former CEO to settle notes payable and accrued interest in the amount of $122,984.

Change in valuation allowance
2018	$	(2,594,970	)
2017		(2,416,470	)
	$	(178,500	)

During the year ended December 31, 2018, the Company issue 4,273,643 shares of its restricted common stock as follows:

~~NOTE~~● 12 2,000 shares to a consultant for services rendered, valued at $1,420. ● 15,000 shares to the Company's SEC counsel for services rendered, valued at $10,650. ● 1,000,000 shares to a consultant as payment on a consulting contract, valued at $485,600. In February 2018, the Company filed a Form S-8 ~~LEASES~~with ~~AND~~the ~~COMMITMENTS~~SEC to register these shares. ● 10,000 shares each of the three directors, total 30,000 shares for their service to the Company, valued at a total of $10,239. ● 7,500 shares to employees from the restricted stock plan valued at $37,069. ● 36,018 shares to a company owned by an independent director for leasehold improvements at the Tennessee store, valued at $17,649 on commitment date. The Company reduced related party payable when the shares were issued. ● 600,000 shares to the principal of Medahub for services performed, valued at $126,000. ● 2,233,125 shares to the Company's CEO to settle accrued salary, bonus and expenses in the amount of $446,625. ● 200,000 shares to a non-employee director for cash value of $70,000. ● 50,000 shares to a consultant for services rendered, valued at $11,000; and ● 20,000 shares to each of our four directors and our corporate secretary, total 100,000 shares, for services rendered, valued at a total of $18,000.

~~The~~Warrants ~~Company rents administrative space in Clearwater, Florida at $965 per month on a month to month basis~~ and ~~rents retail space in Nashville, Tennessee at $2,500 per month beginning in December 2017 for the first twelve months and at $2,250 per month for the next twelve months.~~Options

OnAt ~~May~~its meeting of directors on February 1, ~~2016~~2007, the Company’s ~~entered~~board ~~into~~of andirectors ~~employment~~approved ~~agreement~~the ~~with~~Acacia ~~its~~Automotive, ~~CEO~~Inc. ~~The~~2007 ~~term~~Stock ofIncentive Plan1 (the ~~employment~~“Plan”), iswhich ~~through~~was ~~December~~approved 31by our stockholders on November 2, ~~2019.~~2007, ~~The~~reserving ~~salary~~1,000,000 ~~for~~shares ~~our~~to ~~CEO~~be ~~for~~issued there under in the ~~years~~form ~~2018~~of common stock or common stock purchase options. On July 26, 2012, our shareholders voted to update and ~~2017~~extend ~~was~~the ~~$195~~Acacia Automotive,~~000~~ ~~each~~Inc. ~~year plus~~2007 ~~annual~~Stock ~~bonus~~Incentive atPlan, ~~35%~~renaming ofit the ~~salary~~Acacia Diversified Holdings, Inc. ~~Any~~2012 ~~salary~~Stock ~~and~~Incentive ~~bonus~~Plan. ~~increases~~Warrants, ~~must~~which may be ~~reviewed~~included ~~and~~as ~~approved~~equity bycompensation ~~the~~if ~~Company’s~~used ~~board~~in other manners, are not a component of ~~directors~~the Plan. ~~The~~On ~~agreement~~June ~~provides~~29, ~~for~~2015 ashareholders ~~monthly~~holding ~~storage~~a ~~and~~majority ~~corporate~~of ~~housing~~the ~~allowance~~shares of ~~$1,000~~the ~~for~~Company avoted ~~property~~to ~~owned~~discontinue by the ~~CEO~~Company’s ~~and~~stock aincentive ~~monthly~~plans. ~~automobile~~At ~~allowance~~December of31, $12019 and 2018, 20,000 and 50,000 options, respectively, still remained outstanding.

In August 2016, the Company entered into a licensing agreement to use exclusively a brand name for its products for five years. Pursuant to the terms of the agreement, the Company issued 2,000 shares of its restricted common stock to the brand owner and 2,000 shares at the end of each of the next four years. During the years ended December 31, 2018 and 2017 was $1,420 and $3,620, respectively. There remains 6,000 shares to be issued to the brand owner.

In May 2018, the board of directors approved to discontinue payment of the storage and corporate housing allowance of $1,000 per month, retroactively to January 1, 2018. As a result, no expenses related to the storage and corporate housing allowance was recorded during the year ended December 31, 2018. The automobile allowance remains unchanged at $1,000 per month. As such, the Company is committed to an annual expenditures of $12,000 for the year ended December 31, 2019.

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

~~During~~The Company did not issue any common stock purchase warrants or options during the years ended December 31, ~~2018~~2019 and ~~2017,~~2018. The ~~expenses~~following ~~related~~tables torepresent ~~the~~stock ~~housing~~options and ~~automobile~~warrants ~~allowances~~activities ~~totaled~~for ~~$12,000~~the ~~and~~years ~~$24~~ended December 31,~~000,~~ ~~respectively~~2019 and 2018.

~~Rent~~Stock ~~expense for the above leases and commitments for the years ended December 31, 2018 and 2017 were approximately $42,040 and $46,200, respectively.~~Options

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Yrs)		Aggregate Intrinsic Value
Outstanding at December 31, 2017		65,000		$	0.35		2.00	$	16,050
Granted		-
Exercised		-
Forfeited or cancelled		(15,000	)	$	0.50
Outstanding at December 31, 2018		50,000		$	0.10		0.30	$	2,100
Granted		-
Expired		(30,000	)	$	0.10
Forfeited or cancelled
Outstanding at December 31, 2019*		20,000		$	0.60		0.98	$	-
Exercisable at December 31, 2019*		20,000		$	0.60		0.98	$	-

~~The~~* These ~~Company’s~~options ~~commitment~~expire toat ~~these expenditures for the year ending December 31, 2019 are as follow:~~12-23-2020.

Tennessee retail space lease	$	30,600
Consulting fee		6,000
CEO automobile allowance		12,000
	$	48,600

Stock Warrants

~~The~~At ~~board~~December ~~of directors also approved for the Company to enter into an agreement to lease farm property from the Company's CEO~~31, ~~effective~~2019 ~~June~~and 12018, ~~2018.~~there ~~The~~were ~~term~~no ofoutstanding ~~the~~and ~~lease~~exercisable isstock ~~for~~purchase ~~one year with an automatic renewal term of one year~~warrants. ~~The~~There ~~lease~~were ~~requires~~no ~~the~~warrants ~~Company to pay all expenses related to the acquisition and operation of the property~~granted, ~~including but not limited to the Company's CEO's personal incremental borrowing costs~~exercised, ~~repairs~~forfeited ~~and~~or ~~maintenance,~~expired ~~real~~during ~~estate taxes, licenses and permits, etc. For~~ the ~~year~~years ended December 31, ~~2018,~~2019 ~~the~~and ~~Company incurred $29,152 in operating expenses for this property~~2018.

~~NOTE~~Restricted 13Stock -Awards ~~RECENT~~to ~~ACCOUNTING~~Key ~~PRONOUNCEMENTS~~Employees

In ~~February~~March ~~2016~~2017, the ~~FASB~~board ~~issued~~of ~~ASU~~directors ~~2016-02, Leases,~~approved ~~which~~issuance ~~aims~~of to100,000 ~~make~~shares ~~leasing~~of ~~activities~~the ~~more~~Company’s ~~transparent~~restricted ~~and~~common ~~comparable~~stock ~~and~~to ~~requires~~its ~~substantially~~key ~~all~~employees. ~~leases~~The beaward ~~recognized~~for bythe ~~lessees~~employees onare ~~their~~subject ~~balance~~to ~~sheet~~a asfour aor ~~right~~five-~~of-use~~year ~~asset~~vesting ~~and~~requirements, ~~corresponding~~i.e. ~~lease~~the ~~liability,~~requisite ~~including~~service ~~leases~~period. ~~currently~~The ~~accounted~~shares ~~for~~are issued as ~~operating~~the ~~leases~~vesting restriction lapses. ~~This~~The ~~ASU~~Company isvalued ~~effective~~these ~~for~~shares ~~all~~at ~~interim~~fair ~~and~~value ~~annual~~on ~~reporting~~commitment ~~periods~~date ~~beginning~~which ~~after~~is ~~December~~the ~~15,~~date ~~2018,~~on ~~with~~which ~~early~~the ~~adoption~~employee ~~permitted.~~accepted ~~The~~the ~~Company~~award isand ~~currently~~recorded ~~evaluating~~stock ~~the~~based ~~impact~~compensation ~~that~~expense over the ~~adoption~~requisite ofservice ~~ASU~~period. Stock ~~2016-02~~based ~~will~~compensation ~~have~~expense onfor ~~its~~these ~~consolidated~~awards ~~financial~~for ~~statements~~the years ended December 31, 2019 and ~~related~~2018 ~~disclosures~~was $66,926 and $48,109, respectively.

InNOTE June 2018, the FASB issued ASU 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.11 ~~The~~– INCOME ~~Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements and related disclosures.~~TAXES

~~NOTE~~As 14of -December ~~SUBSEQUENT~~31, ~~EVENTS~~2019 and 2018 the Company had net operating loss carryforwards of approximately $7,027,000 and $12,357,000, respectively, which will expire beginning at the end of 2020. A valuation allowance has been provided for the deferred tax asset as it is uncertain whether the Company will have future taxable income.

The Company evaluated subsequent events through the date the financial statements were issued, and determined that there were no other material events to disclose, other than the followings:

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019 AND ~~2017~~2018

OnA ~~February~~reconciliation ~~1, 2019, the Company entered into a common stock purchase agreement with an investor who committed to purchasing $1,000,000~~ of the ~~Company's~~benefit ~~common stock. The agreement will end on the earlier of~~ (1expense) ~~the~~for ~~date~~income ontaxes ~~which~~with ~~the~~amounts ~~investor~~determined ~~has~~by ~~purchased~~applying the ~~Company's~~statutory ~~common~~federal ~~stock~~income ~~equal~~rate ~~to the committed amount~~ of ~~$1,000,000,~~21% in ~~(2) 180 business days after the registration statement has been declared effective, (3) September 20,~~ 2019, orand ~~(4)~~2018 ~~written notice of termination by the Company~~ to the ~~investor~~respective ~~upon~~losses abefore ~~material~~income ~~breach~~taxes ~~of the agreement by the investor. The purchase price of the common stock~~ is 85% of the average of the two lowest closing prices of the common stock for the previous five business days. The agreement requires the Company to file a registration statement with the SEC within 30 calendar days from the date of commencement of this transaction, covering the resale of the shares as directed by the investor. The Company filed Form S-1 Registration Statement, covering the shares within this agreement on February 14, 2019. As of the date the financial statements were issued, the investor has not purchased any shares.follows:

On March 5, 2019, our convertible note holder (See Note 9) elected to convert $15,000 of principle balance of Note 1 at $0.0945 per share, resulting in 158,730 shares issued as a result of the conversion. On March 19, 2019, our convertible note holder (See Note 9) elected to convert $15,000 of principle balance of Note 1 at $0.0951 per share, resulting in 157,729 shares issued as a result of the conversion. On March 27, 2019, our convertible note holder (see Note 9) elected to convert $15,000 of principle balance of Note 1 at $0.0795 per share, resulting in 188,679 shares issued as a result of the conversion.

	2019			2018
Net (Loss)	$	(1,588,928	)	$	(1,712,703	)
Benefit (expense) for income taxes computed using the statutory rate of 21%		333,675			359,668
Non-deductible expense		(142,614	)		(181,168	)
Change in estimated NOL carryforward		(1,299,432	)		-
Change in valuation allowance		1,108,372			(178,500	)
Provision for income taxes	$	-		$	-

Significant components of the Company's deferred tax liabilities and assets at December 31, 2019 and 2018 are as follows:

	2019			2018
Total deferred tax assets – net operating losses	$	1,486,598		$	2,594,970
Deferred tax liabilities
Depreciation		-			-
Net deferred tax assets		1,486,598			2,594,970

Valuation allowance		(1,486,598	)		(2,594,970	)
	$	-		$	-

As of December 31, 2019, open Federal income tax years subject to examination include the tax years ended December 31, 2018 through 2016. At December 31, 2019, net operating loss (“NOL”) carryforwards expiring through 2037 were as follows:

Expiring December 31,	Amount of NOL Expiring
2026	$	408,000
2027		693,000
2028		771,000
2029		197,000
2030		32,000
2031		415,000
2033		692,000
2034		106,000
2036		1,493,000
2037		534,000
	$	5,341,000

NOL from tax years with no expiration date	Amount of NOL
2019	$	836,000
2018	$	850,000
	$	1,686,000

The net change in the valuation allowance is as follow:

Change in valuation allowance
2019	$	(1,486,598	)
2018		(2,594,970	)
	$	1,108,372

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019 AND 2018

NOTE 12 – LEASES AND COMMITMENTS

The Company rented administrative space in Clearwater, Florida at $965 per month on a month to month basis and rents retail space in Nashville, Tennessee at $2,500 per month beginning in December 2017 for the first twelve months and at $2,250 per month for the next twelve months. The retail space lease ended in November 2019. Rent expense for these leases for the years ended December 31, 2019 and 2018 were $40,124 and $42,040, respectively.

On May 1, 2016, the Company entered into an employment agreement with its former CEO. The term of the employment was through December 31, 2019. The salary for our former CEO for the years 2019 and 2018 was $195,000 each year plus annual bonus at 35% of the salary. Any salary and bonus increases must be reviewed and approved by the Company’s board of directors. The agreement provided for a storage and corporate housing allowance of $1,000 per month, retroactively to January 1, 2018 and a monthly automobile allowance to our former CEO of $1,000. In May 2018, the board of directors approved to discontinue payment of the storage and corporate housing allowance, retroactively to January 1, 2018. As a result, no expenses related to the storage and corporate housing allowance was recorded since January 1, 2018. The automobile allowance remains unchanged at $1,000 per month. As such, the Company was committed to an annual expenditures of $12,000 for the year ended December 31, 2019. During the years ended December 31, 2019 and 2018, expenses related to the automobile allowances totaled $12,000 for each year. At December 31, 2019, the Company owed its former CEO $75,000 of unpaid salary, $52,500 of accrued bonus and $9,000 of unpaid automobile allowance. The employment agreement was renewed through June 30, 2020 at an annual salary of $150,000 and continued to provide for a monthly automobile allowance of $1,000. The agreement also provided for severance payment to the former CEO in the event of a change in control.

On May 1, 2016, the Company entered into an employment agreement with its former COO. The term of the employment was through December 31, 2019. The salary for our former COO for the years 2019 and 2018 was $116,833 and $105,000, respectively, plus annual bonus at 35% of the salary. Any salary and bonus increases must be reviewed and approved by the Company’s board of directors. At December 31, 2019, the Company owed its former COO $20,717 of unpaid salary and $79,562 of accrued bonus. The employment agreement was renewed through June 30, 2020 at an annual salary of $96,000. The agreement also provided for severance payment to the former COO in the event of a change in control.

In August 2016, the Company entered into a licensing agreement to use exclusively a brand name for its products for five years. Pursuant to the terms of the agreement, the Company issued 2,000 shares of its restricted common stock to the brand owner and 2,000 shares at the end of each of the next four years. During the years ended December 31, 2019 and 2018, these shares were valued at $3,184 and $1,420, respectively. There remains 4,000 shares to be issued to the brand owner.

NOTE 13 – RECENT ACCOUNTING PRONOUNCEMENTS

We regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing standards and changes in their interpretation, we might be required to change our accounting policies, particularly concerning revenue recognition, the capitalized incremental costs to obtain a customer contract and lease accounting, to alter our operational policies and to implement new or enhance existing systems so that they reflect new or amended financial reporting standards, or to restate our published financial statements. Such changes may have an adverse effect on our business, financial position, and operating results, or cause an adverse deviation from our revenue and operating profit target, which may negatively impact our financial results.

Accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

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Table of Contents

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019 AND 2018

NOTE 14 – SUBSEQUENT EVENTS

The Company evaluated subsequent events through the date the financial statements were issued, and determined that there were no other material events to disclose, other than the followings:

Subsequent to December 31, 2019, the holder of our convertible notes converted two of the notes in their entirety into 12,835,957 shares of the Company’s common stock.

In January 2020, the Company’s former CEO provided a short term advance in the amount of $18,000 for working capital. The Company repaid the advance to the former CEO in the same month.

In February 2020, the Company entered into an unsecured promissory note agreement with a former director of the Company, in the amount of $25,000. The promissory note bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 30 days from the date of the notes.

In March 2020, the Company entered into two unsecured promissory notes agreements with its former CEO and his spouse, in the amounts of $2,500 and $7,428. The promissory notes bear interest at a rate of 8% per annum. The principle balance and accrued interest is due 30 days from the date of the notes.

On May 20, 2020, directors Danny Gibbs, Neil B. Gholson and Dr. Richard Paula each resigned their respective positions as a director for Acacia Diversified Holdings, Inc.

F-25

Filing Compare · Acacia Diversified Holdings, Inc.