Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 15, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | CANNAPHARMARX, INC. | |
Entity Central Index Key | 0001081938 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | No | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 32,436,999 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 | |
Entity Emerging Growth Company | true | |
Entity Small Business | true | |
Entity Ex Transition Period | false |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
ASSETS | ||
Cash | $ 203,474 | $ 464,118 |
Prepaid expenses | 18,240 | 134,689 |
Total current assets | 221,714 | 598,807 |
Construction in progress | 1,614,130 | 1,563,260 |
Investments | 11,264,438 | 0 |
Intangible assets | 1,878,219 | 1,871,000 |
Goodwill | 6,065,014 | 6,065,014 |
Total Assets | 21,043,515 | 10,098,081 |
Current liabilities | ||
Accounts payable and accrued expenses | 843,953 | 766,203 |
Accounts payable related party | 79,231 | 9,000 |
Accrued interest | 0 | 68,052 |
Mortgages payable | 486,395 | 476,450 |
Accrued legal settlement payable in cash | 190,000 | 190,000 |
Accrued expense - related party | 315,000 | 150,000 |
Notes payable - current | 0 | 2,210,975 |
Convertible notes | 0 | 2,072,000 |
Loan payable - related party | 19,758 | 19,758 |
Total current liabilities | 1,934,337 | 5,962,438 |
Notes payable - long-term | 6,830,669 | 4,421,942 |
Total Liabilities | 8,765,006 | 10,384,380 |
Stockholders' Equity | ||
Common stock, $0.0001 par value; 300,000,000 shares authorized, 32,436,999 and 18,942,506 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | 3,244 | 1,894 |
Treasury stock, 133,200 and -0- shares as of March 31, 2019 and December 31, 2018, respectively | (13) | 0 |
Additional paid-in capital | 50,169,968 | 36,642,276 |
Retained earnings (deficit) | (38,059,138) | (36,990,469) |
Accumulated other comprehensive income (loss) | (73,552) | 0 |
Total Stockholders' Equity (Deficit) | 12,278,509 | (286,299) |
Total Liabilities and Stockholders' Equity (Deficit) | 21,043,515 | 10,098,081 |
Series A Preferred Stock [Member] | ||
Stockholders' Equity | ||
Preferred stock value | 60,000 | 60,000 |
Series B Preferred Stock [Member] | ||
Stockholders' Equity | ||
Preferred stock value | $ 178,000 | $ 0 |
Consolidated Balance Sheets (_2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
Preferred shares, par value | $ 0.0001 | $ 0.0001 |
Preferred shares, authorized | 10,000,000 | 10,000,000 |
Preferred shares, issued | 60,000 | |
Preferred shares, outstanding | 60,000 | |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 100,000,000 | 100,000,000 |
Common stock, issued | 32,436,999 | 18,942,506 |
Common stock, outstanding | 32,436,999 | 18,942,506 |
Series A Preferred Stock [Member] | ||
Preferred shares, authorized | 60,000 | 60,000 |
Preferred shares, issued | 60,000 | 60,000 |
Preferred shares, outstanding | 60,000 | 60,000 |
Series B Preferred Stock [Member] | ||
Preferred shares, authorized | 3,000,000 | 0 |
Preferred shares, issued | 178,000 | 0 |
Preferred shares, outstanding | 178,000 | 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
Revenue | $ 0 | $ 0 |
Operating Expenses: | ||
General & administrative | 28,917 | 0 |
Acquisition expenses | 25,824 | 0 |
Amortization | 32,000 | 0 |
Stock-based compensation | 161,334 | 0 |
Travel and entertainment | 27,217 | 0 |
Rent - related party | 7,762 | 0 |
Professional fees | 154,901 | 0 |
Consulting fees | 238,968 | 0 |
Consulting fees - related parties | 270,000 | 0 |
Total operating expenses | 946,923 | 0 |
Income (loss) from operations | (946,923) | 0 |
Other income (expense) | ||
Interest expense | (121,771) | 0 |
Other income | 25 | 0 |
Total other income (expense) net | (121,746) | 0 |
Income (loss) before provision for income taxes | (1,068,669) | 0 |
Provision (credit) for income tax | 0 | 0 |
Net income (loss) | $ (1,068,669) | $ 0 |
Net income (loss) per share - (Basic and fully diluted) | $ (0.05) | $ 0 |
Weighted average number of shares outstanding | 21,977,298 | 17,960,741 |
Comprehensive loss: | ||
Net income (loss) | $ (1,068,669) | $ 0 |
Foreign currency translation adjustment | (73,552) | 0 |
Comprehensive income (loss) | $ (1,142,221) | $ 0 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash Flows From Operating Activities: | ||
Net income (loss) | $ (1,068,669) | $ 0 |
Adjustments to reconcile net income to net cash provided by (used for) operating activities | ||
Stock-based compensation expense | 161,334 | 0 |
Amortization of intangible assets | 32,000 | 0 |
Amortization of debt discount | 59,611 | 0 |
Changes in operating Assets & Liabilities | ||
(Increase)/decrease in prepaid expenses | 115,981 | 0 |
Accrued interest | 62,160 | 0 |
Accounts payable and accrued expenses | 77,750 | 0 |
Notes payable | 153,000 | 0 |
Note discount | (14,859) | 0 |
Mortgages payable | 9,945 | 0 |
Accounts payable related party | 70,231 | 0 |
Accrued expenes related party | 165,000 | 0 |
Net cash provided by (used for) operating activities | (176,516) | 0 |
Cash Flows From Investing Activities: | ||
Changes in intangible assets | (39,219) | 0 |
Capitalized mortgage interest and changes in construction in progress | (50,402) | 0 |
Net cash provided by (used for) investing activities | (89,621) | 0 |
Cash Flows From Financing Activities: | ||
Purchase of treasury stock | (98,955) | 0 |
Proceeds from preferred stock | 178,000 | 0 |
Net cash provided by (used for) financing activities | 79,045 | 0 |
Effect of exchange rates on cash and cash equivalents | (73,552) | 0 |
Net Increase (Decrease) In Cash | (260,644) | 0 |
Cash At The Beginning Of The Period | 464,118 | 0 |
Cash At The End Of The Period | 203,474 | 0 |
Non-cash disclosures | ||
Common stock issued related to investment in Great Northern Cannabis | 11,264,438 | 0 |
Common stock issued to convert convertible notes and accrued interest into equity | $ 2,203,213 | $ 0 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) - USD ($) | Series A Preferred Stock | Series B Preferred Stock | Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings / Accumulated Deficit | Other Comprehensive Income / Loss | Total |
Beginning balance, shares at Dec. 31, 2017 | 0 | 0 | 17,960,741 | 0 | ||||
Beginning balance, value at Dec. 31, 2017 | $ 0 | $ 0 | $ 1,796 | $ 0 | $ 32,930,067 | $ (33,896,163) | $ 0 | $ (964,300) |
Net loss | 0 | |||||||
Ending balance, shares at Mar. 31, 2018 | 0 | 0 | 17,960,741 | 0 | ||||
Ending balance, value at Mar. 31, 2018 | $ 0 | $ 0 | $ 1,796 | $ 0 | 32,930,067 | (33,896,163) | 0 | (964,300) |
Beginning balance, shares at Dec. 31, 2018 | 60,000 | 0 | 18,942,506 | 0 | ||||
Beginning balance, value at Dec. 31, 2018 | $ 60,000 | $ 0 | $ 1,894 | $ 0 | 36,642,275 | (36,990,469) | 0 | (286,299) |
Issuance of preferred stock, shares | 178,000 | |||||||
Issuance of preferred stock, value | $ 178,000 | 178,000 | ||||||
Conversion of convertible notes and accrued interest to common shares, shares | 5,505,530 | |||||||
Conversion of convertible notes and accrued interest to common shares, value | $ 551 | 2,201,662 | 2,202,213 | |||||
Issuance of common stock to purchase non-controlling interest in GNS | 7,988,963 | |||||||
Issuance of common stock to purchase non-controlling interest in GNS | $ 799 | 11,263,639 | 11,264,438 | |||||
Stock-based compensation related to warrant issuances | 161,333 | 161,333 | ||||||
Repurchase of shares from investor, shares | 133,200 | |||||||
Repurchase of shares from investor, value | $ (13) | (98,942) | (98,955) | |||||
Net loss | (1,068,669) | (73,552) | (1,142,221) | |||||
Ending balance, shares at Mar. 31, 2019 | 60,000 | 178,000 | 32,436,999 | 133,200 | ||||
Ending balance, value at Mar. 31, 2019 | $ 60,000 | $ 178,000 | $ 3,244 | $ (13) | $ 50,169,968 | $ (38,059,138) | $ (73,552) | $ 12,278,509 |
1. Nature of Operations and Sig
1. Nature of Operations and Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Nature of Operations and Significant Accounting Policies | NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Operations CannaPharmaRx, Inc. (the “Company”) is a Delaware corporation. In November 2018 it formed an Ontario corporation, Hanover CPMD Acquisition Corporation, to facilitate the acquisition described below. As of the date of this Report the Company owns interests in two Canadian cannabis grow operations that are in the process of being completed, provided that the Company is able to raise the funds necessary to allow for the same. If and when completed and applicable licenses issued for each property, the Company intends to engage in cannabis production for sale in Canada. History The Company was originally incorporated in the State of Colorado in August 1998 under the name “Network Acquisitions, Inc.” It changed its name to Cavion Technologies, Inc. in February 1999 and subsequently to Concord Ventures, Inc. in October 2006. On December 21, 2000, the Company filed for protection under Chapter 11 of the United States Bankruptcy Code. In connection with the filing, on February 16, 2001, the Company sold its entire business, and all of its assets, for the benefit of its creditors. After the sale, the Company still had liabilities of $8.4 million and was subsequently dismissed by the Court from the Chapter 11 reorganization, effective March 13, 2001, at which time the last of the Company’s then remaining directors resigned. On March 13, 2001, the Company had no business or other source of income, no assets, no employees or directors, outstanding liabilities of approximately $8.4 million and had terminated its duty to file reports under securities law. In February 2008, after filing of a Form 10 registration statement pursuant to the Securities Exchange Act of 1934, as amended, we were re-listed on the OTC Bulletin Board. In April 2010, the Company re-domiciled in Delaware under the name CCVG, Inc. (“CCVG”). Effective December 31, 2010, the Company completed an Agreement and Plan of Merger and Reorganization (the “Reorganization") which provided for the merger of two of the Company’s wholly-owned subsidiaries. As a result of this reorganization, the Company’s name became “Golden Dragon Inc.,” which became the surviving publicly quoted parent holding company. On May 9, 2014, the Company entered into a Share Purchase Agreement (the “ Share Purchase Agreement Canna Colorado In October 2014, the Company changed its legal name to “CannaPharmaRx, Inc.” As a result of the aforesaid transactions, the Company became an early-stage pharmaceutical company whose purpose was to advance cannabinoid research and discovery using proprietary formulation and drug delivery technology then under development. In April 2016, the Company ceased operations. Its then management resigned their respective positions with the Company, with the exception of Mr. Gary Herick, who remained as the Company’s sole officer and director. As a result, the Company has thereafter been considered a “shell” company as defined under the Securities Exchange Act of 1934, as amended. On November 19, 2018, the Company entered into a Securities Purchase Agreement with Alternative Medical Solutions, Inc., an Ontario, Canada corporation (“AMS”), its shareholders and Hanover CPMD Acquisition Corp. (“CPMD Hanover”) a newly formed subsidiary, wherein effective December 31, 2018, the Company acquired all of the issued and outstanding securities of AMS. AMS is a corporation organized under the laws of the Province of Ontario, Canada. It is a late stage marijuana licensed producer applicant in Canada. It is currently in the Pre-License Inspection and Licensing phase, which is Stage 5 of 6, with a fully approved license. Upon completion of the final construction of the facility, Health Canada will inspect the facility and relevant operating procedures to ensure it meets the standards that have been approved in the application. At the completion of the licensing stage. AMS expects to receive a license to begin cultivation of marijuana. There can be no assurances that the Company will receive this license. AMS own a 48,750 square foot marijuana grow facility built on a 6.7-acre parcel of land located in Hanover, Ontario, Canada. To date, exterior construction of the building has been completed. However, no interior construction has begun. Upon full completion, the facility is expected to contain up to 20 separate growing rooms which the Company believes will provide an annual production capacity of 9,500 kilos of marijuana (20,900 lbs.). Completion of the build-out of the facility is expected to take an estimated 20 weeks. Together with the remaining equipment needed to complete the facility the Company estimates that it will require approximately CAD$20.0 million in additional financing which the Company is seeking to raise via equity and debt. There can be no assurances that the Company will successfully raise the financing required to complete construction of the facility and begin cultivation. As a result of the completion of the acquisition of AMS, the Company believes that it no longer fits the definition of a shell company, as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act. It filed the required disclosure pursuant to the aforesaid Rule with the SEC in February 2019 and believes that it will no longer be considered a shell company on February 13, 2020. Management’s Representation of Interim Financial Statements The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements at December 31, 2018 and 2017, as presented in the Company’s Form 10-K filed on April 3, 2019 with the SEC. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (“ FASB Codification GAAP All figures are in U.S. dollars unless indicated otherwise. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported assets and expenses during the reporting period. The most significant estimates relate to investments, purchase price allocation of acquired assets, impairment of long-lived assets, intangibles and goodwill. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. Cash and Cash Equivalents The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At March 31, 2019 and December 31, 2018, the Company had cash equivalents totaled $203,474 and $464,118, respectively. Comprehensive Gain or Loss ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of March 31, 2019, and December 31, 2018, the Company determined that it had items that represented components of comprehensive income and, therefore, has included a statement of comprehensive income in the financial statements. Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible and other promissory notes are reviewed to determine whether they contain embedded derivative instruments that are required to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. Beneficial Conversion Features In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options” the Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt or preferred stock instruments that have conversion features at fixed rates that are in-the-money when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security. Foreign Currency Translation The functional currency and the reporting currency of CannapharmaRx’s US operations is United States dollars, (“USD”). The functional currency of the Company’s Canadian operations is Canadian dollars (“CAD”), Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods. Assets and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurred. The resulting translation adjustment is reflected as accumulated other comprehensive income, a separate component of stockholders' equity in the statement of stockholders' equity. These translation adjustments are reflected in accumulated other comprehensive income, a separate component of the Company's stockholders' equity. Harmonized Sales Tax The Harmonized Sales Tax (“HST”) is a combination of the Canadian Goods and Services Tax (“GST”) and Provincial Sales Tax (“PST”) that is applied to taxable goods and services. By fusing sales tax at the federal level with sales tax at the provincial level, the participating provinces harmonized both taxes into a single federal-provincial sales tax. HST is a consumption tax paid by the consumer at the point of sale (POS). The vendor or seller collects the tax proceeds from consumers by adding the HST rate to the cost of goods and services. They then remit the total collected tax to the government at the end of the year. The HST is in effect in five of the ten Canadian provinces: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island. The HST is collected by the Canada Revenue Agency (CRA), which remits the appropriate amounts to the participating provinces. The HST may differ across these five provinces, as each province will set its own PST rates within the HST. In provinces and territories which have not enacted the HST, the CRA collects only the 5% goods and services tax. The current rate in Ontario is 13%. Capital Assets- Construction In Progress As of March 31, 2019 and December 31, 2018, the Company had $1,614,130 and $1,563,260 in construction in progress, respectively, comprised entirely of the construction in progress relating to the building acquired with the acquisition of AMS. Depreciation expenses total $-0- and $-0- for the periods ended March 31, 2019, and December 31, 2018, respectively. Stock Purchase Warrants The Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. During the three-month period ended March 31, 2019 and the year ended December 31, 2018 the Company issued 178,000 and -0- respectively that were part of a Unit offering of common stock and warrants. The Company has allocated a fair market value of $178,000 to these warrants for the period ended March 31, 2019. See Note 14. Stockholders Equity. Stock-Based Compensation The Company has adopted ASC Topic 718, (Compensation—Stock Compensation) Goodwill and Intangible Assets Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist of a marijuana license with a useful life of 15 years. Goodwill and indefinite-lived assets are not amortized but are subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans, and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform an impairment test prior to scheduled annual impairment tests. The Company performed its annual fair value assessment on December 31, 2018, on its subsidiaries with material goodwill and intangible asset amounts on their respective balance sheets and determined that no impairment exists. Long-Lived Assets The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances have indicated that an asset may not be recoverable. The long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value. The Company evaluated the recoverability of its long-lived assets on March 31, 2019, and at December 31, 2018, respectively on its subsidiaries with material amounts on their respective balance sheets and determined that no impairment exists. Fair Values of Assets and Liabilities The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. Level 1: Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. Level 3: Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. As of March 31, 2019, have classified our $11,264,438 investment in GN, as a non-marketable equity security in a private company, as a Level 3 asset. Financial Instruments The estimated fair value for financial instruments was determined at discrete points in time based on relevant market information. These estimates involve uncertainties and could not be determined with exact precision. The fair value of the Company’s financial instruments, which include cash, prepaid expenses, accounts payable and the related party loan, each approximate their carrying value due either to their short length to maturity or interest rates that approximate prevailing market rates. Income Taxes The Company accounts for income taxes under the liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Cost Method Investment Our cost method investment consists of an investment in a private company in which we do not have the ability to exercise significant influence over its operating and financial activities. The investment is tested for impairment quarterly. Income (Loss) Per Share Income (loss) per share is presented in accordance with Accounting Standards Update (“ ASU Earning per Share EPS Business Segments The Company’s activities during the three-months ended March 31, 2019 and the year ended December 31, 2018, comprised a single segment. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. As an emerging growth company the Company has until December 15, 2019 to adopt ASC 842. The Company is currently evaluating the impact on its consolidated financial statements. Management has reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations. |
2. Going Concern and Liquidity
2. Going Concern and Liquidity | 3 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern and Liquidity | NOTE 2. GOING CONCERN AND LIQUIDITY As of March 31, 2019 and December 31, 2018, the Company had $203,474 and $464,118 in cash on hand respectively, and no revenue-producing business or other sources of income. Additionally, as of March 31, 2019, the Company had outstanding liabilities totaling $8,765,006 and $221,714 in short term liquid assets. In the Company’s financial statements for the fiscal years ended December 31, 2018 and 2017, the Reports of the Independent Registered Public Accounting Firm include an explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going concern. These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Based on the Company’s current financial projections, it believes it does not have sufficient existing cash resources to fund its current limited operations. It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that these events will be satisfactorily completed or at terms acceptable to the Company. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by the Company to successfully implement these plans would have a material adverse effect on its business, including the possible inability to continue operations. |
3. Prepaid Expenses
3. Prepaid Expenses | 3 Months Ended |
Mar. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid Expenses | NOTE 3. PREPAID EXPENSES The following table sets forth the components of the Company’s prepaid expenses at March 31, 2019 and December 31, 2018: March 31, 2019 December 31, 2018 Prepaid stock purchase (a) $ – $ 98,955 Prepaid interest (b) 18,240 35,734 Total $ 18,240 $ 134,689 (a) Represents money held in escrow to purchase 133,200 shares of the Company’s Common stock held by the Sellers of AMS pursuant to the terms of the Securities Purchase Agreement for the acquisition of AMS. These shares were purchased on January 1, 2019 (b) Represents three and six months, respectively, of prepaid interest on a mortgage assumed by the Company under the terms of the acquisition of AMS. |
4. Investment
4. Investment | 3 Months Ended |
Mar. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment | NOTE 4. INVESTMENT On February 25, 2019, the Company acquired 3,712,500 shares and 2,500,000 Warrants to purchase 2,500,000 shares of Common Stock at a price of CAD$1.00 of GN Ventures, Ltd, Alberta, Canada, f/k/a Great Northern Cannabis, Ltd. (“GN”), in exchange for an aggregate of 7,988,963 shares of the Company’s Common Stock from a former shareholder of GN, who is currently the Company’s Chief Executive Officer. These shares and warrants, when exercised, will represent approximately 18% and 11%, respectively, of the issued and outstanding stock of GN. On the date of the purchase, the Company’s Common Stock was trading at $1.41 which values the purchase at $11,264,438. For balance sheet purposes the Company has treated this purchase as a long term asset using the cost method because the purchase consists of an investment in a private company in which the Company does not have the ability to exercise significant influence over GN’s operating and financial activities. Additionally, the Company conducted an impairment test at March 31, 2019, and determined that no impairment existed. |
5. Construction in Progress
5. Construction in Progress | 3 Months Ended |
Mar. 31, 2019 | |
Real Estate [Abstract] | |
Construction in Progress | NOTE 5. CONSTRUCTION IN PROGRESS As of March 31, 2019 and December 31, 2018, the Company had $1,614,130 and $1,563,260 respectively, in construction in progress. The facility acquired as part of the AMS acquisition is a 48,750 square foot marijuana grow facility built on a 6.7-acre parcel of land located in Hanover, Ontario, Canada. To date, exterior construction of the building has been completed, however, no interior construction has begun. Upon full completion, the facility will contain up to 20 separate growing rooms which the Company believes will provide an annual production capacity of 9,500 kilos of marijuana (20,900 lbs.). The Company does not have any other property or equipment. For construction in progress assets, no depreciation is recorded until the asset is placed in service. When construction is completed, the asset should be reclassified as building, building improvements, or land improvement and should be capitalized and depreciated. Construction in progress includes all costs related to the construction of a medical cannabis facility. Cost also includes soft costs such as loan fees and interest and consulting fees and related expenses. The facility is not available for use and therefore not being amortized. |
6. Business Combination
6. Business Combination | 3 Months Ended |
Mar. 31, 2019 | |
Business Combinations [Abstract] | |
Business Combination | NOTE 6. BUSINESS COMBINATION Description of acquisition On November 19, 2018, the Company entered into a Securities Purchase Agreement with AMS, wherein effective December 31, 2018, the Company acquired all of the issued and outstanding securities of AMS. Fair Value of Consideration Transferred and Recording of Assets Acquired The following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired, and liabilities assumed including an amount for goodwill: Consideration Paid: Cash and cash equivalents $ 726,747 Common stock, 981,765 shares of CannapharmaRX common stock 1,612,600 Promissory note net of $697,083 discount 6,632,917 Fair value of total consideration $ 8,972,264 Recognized amount of identifiable assets acquired, and liabilities assumed: Construction in progress $ 1,563,260 Accrued liabilities (50,560 ) Mortgage payable (476,450 ) Intangible assets 1,871,000 Goodwill 6,065,014 $ 8,972,264 |
7. Goodwill and Intangible Asse
7. Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | NOTE 7. GOODWILL AND INTANGIBLE ASSETS As of March 31, 2019 and December 31, 2018, the Company had $6,065,014 in goodwill and $1,878,219 in intangible assets, compared to $6,065,014 and $1,871,000 respectively. The goodwill and intangible assets arose as a result of the acquisition of AMS. Based on a valuation study performed on the acquisition, the Company determined that the marijuana license in process at AMS had a value of $1,871,000 which will be amortized over a fifteen-year period or approximately $124,733 per year. Since AMS is located in Canada and subject to foreign exchange fluctuations the value of the intangible asset may vary from period to period based upon the exchange rate. The Company recorded amortization expense of $32,000 and $-0- respectively, for the periods ended March 31, 2019 and December 31, 2018. |
8. Accounts Payable and Accrued
8. Accounts Payable and Accrued Expenses | 3 Months Ended |
Mar. 31, 2019 | |
Payables and Accruals [Abstract] | |
Accounts Payable and Accrued Expenses | NOTE 8. ACCOUNT PAYABLE AND ACCRUED LIABILITIES Accounts payables are recognized initially at the transaction price and subsequently measured at the undiscounted amount of cash or other consideration expected to be paid. Accrued expenses are recognized based on the expected amount required to settle the obligation or liability. The following table sets forth the components of the Company’s accrued liabilities at March 31, 2019 and December 31, 2018. March 31, 2019 December 31, 2018 Accounts payable and accrued expenses $ 843,953 $ 766,203 Accrued interest (a) – 68,052 Mortgages payable (b) 486,395 476,450 Accrued legal settlement (c) 190,000 190,000 Total accounts payable and accrued liabilities $ 1,520,348 $ 1,500,705 (a) Represents interest accrued on the outstanding convertible notes -see Note 11 (b) Pursuant to the acquisition of AMS, the Company assumed the mortgage on the construction in progress. The mortgage is an interest only instrument at an interest rate of 15% due and payable on December 31, 2019 (c) The Company had previously been party to an action filed by Gary M. Cohen, a former officer and director of the Company in 2014. In March 2015, the Company entered into a Settlement Agreement with Mr. Cohen wherein the Company agreed to repurchase 2,250,000 shares of its Common Stock from Mr. Cohen in consideration for $350,000. Mr. Cohen passed away while there was a remaining balance of $190,000 remaining to be paid in accordance with the Settlement Agreement. The Company has taken the position that his death has discharged any obligation the Company might have to make the balance of the payments. The Company has not received any demand for payment or otherwise been involved in any attempt to collect this balance for a period of greater than two years prior to the date of this Report. |
9. Related Party Transactions
9. Related Party Transactions | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 9. RELATED PARTY TRANSACTIONS The following table sets forth the components of the Company’s related party liabilities at March 31, 2019 and December 31, 2018. March 31, 2019 December 31, 2018 Accounts payable related party $ 98,989 $ 28,758 Accrued expense - related party 315,000 150,000 Total accounts payable and accrued liabilities $ 413,989 $ 178,758 As of December 31, 2018, there was $150,000 due to two former directors, which was accrued salaries arising out of services provided in 2015 and 2016. Management is currently in discussions with these individuals to settle this obligation. During the quarter ended March 31, 2019, the Company accrued $15,000 in consulting fees and $150,000 bonuses to its directors and officers. Included in the $98,989 related party payable is $67,231 in payable due to our chief executive officer related to expense he paid on behalf of the Company to purchase AMS on December 31, 2019 From April 1, 2018 through March 2019 the Company’s principal place of business was located at 2 Park Plaza, Suite 1200 – B. Irvine, CA 92614. This space was provided to the Company by a company to which Mr. Nicosia, one of the Company’s directors, serves as Chief Executive Officer. Monthly rent was $1,000. However, the Company did not make any rent payment and accrued on those amounts payable. Effective in March 2019, the Company changed its principal place of business to Suite 206 1180 Sunset Drive, Kelowna, BC, Canada Z1Y 9W6, which the Company has rented pursuant to an oral sublease from PLC International Investments Inc, a company owned and controlled by Dominic Colvin, the Company’s current CEO, President and a director. This location consists of approximately 500 sq. feet. The Company pays a monthly rent of $1,500 (CAD) and believe this location will be sufficient for current business purposes. |
10. Convertible Notes
10. Convertible Notes | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Convertible Notes | NOTE 10. CONVERTIBLE NOTES As of March 31, 2019 and December 31, 2018, the balance of convertible notes was $-0- and $2,072,000, respectively In July 2018, the Company commenced an offering of up to $2 million of one-year maturity convertible notes (“Notes”). The maximum amount under the Offering was subsequently increased to $2,500,000. These Notes carry both a voluntary conversion feature and an automatic conversion feature as described below. The Notes carried an interest rate of 12% and are convertible into shares of the Company’s Common Stock. Automatic conversion feature If the Company issues equity securities (“Equity Securities”) in a transaction or series of related transactions resulting in aggregate gross proceeds to the Company of at least $5,000,000, including conversion of the Notes and any other indebtedness, or issuance of Equity Securities in connection with any business combination, including a merger or acquisition (a “Qualified Financing”), then the Notes, and any accrued but unpaid interest thereon, will automatically convert into the equity securities issued pursuant to the Qualified Financing at a conversion price equal to the lesser of (i) 50% of the per share price paid by the purchasers of such equity securities in the Qualified Financing or (ii) $0.40 per share. Voluntary conversion feature If these Notes have not been previously converted pursuant to a Qualified Financing, then, upon Holders election prior to the Maturity Date or effective upon the Maturity Date, the Holder may elect to convert their Notes into shares of the Company’s Common Stock at a conversion price equal to the lesser of (i) 50% of the market price for the Company’s Common Stock as of the Maturity Date or (ii) $0.40 per share. Through the period ended December 31, 2018, the Company received $2,072,000 in proceeds from the sale of convertible notes to 35 accredited investors. The Company did not receive any proceeds from investors from investors for the sale of convertible notes for the period ended March 31, 2019. During the three-month period ended March 31, 2019, the Company entered into a Qualified Financing with its minority purchase of GN stock and warrants described in Note 4 “Investment”. As a result, on March 31, 2019 the convertible notes amounting to $2,072,000 along with $130,212 of accrued interest were converted, pursuant to the automatic conversion terms described above, to equity at a price of $0.40 per share, or a total of 5,505,530 shares. |
11. Notes Payable
11. Notes Payable | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 11. NOTES PAYABLE Pursuant to the terms of the of the Securities Purchase Agreement with AMS the Company issued a non-interest bearing CAD $10,000,000 ($7,330,000 USD) promissory note secured only by the shares acquired in AMS. Principal payments under the Promissory Note are due quarterly commencing upon AMS receiving a license to cultivate and are computed based upon 50% of AMS' cash flow, defined as EBITDA less all capital expenditures, taxes incurred, non-recurring items and other non-cash items for the relevant fiscal quarter, including the servicing of all senior debt payment obligations of the company. The Promissory Note matures the earlier of two years from the date AMS receives a license to cultivate or December 31, 2021, whichever is later. The Company performed a valuation study as part of the AMS acquisition. The valuation study determined that the Promissory Note should be valued at $6,632,917 since it was non-interest bearing. As a result, the Company recorded a note discount of $697,083. The note discount will be amortized to interest expense over the three-year term of the Promissory Note. Interest expense amounted to $59,611 for the period ended March 31, 2019. No interest expense was recorded in 2018 since the acquisition occurred on December 31, 2018. The following tables set forth the components of the Company’s, secured note as of March 31, 2019 and December 31, 2018: March 31, December 31, Principal value of Promissory Note $ 7,483,000 $ 7,330,000 Loan discounts (652,331 ) (697,083 ) Promissory Note, long term net of discount $ 6,830,669 $ 6,632,917 |
12. Income Taxes
12. Income Taxes | 3 Months Ended |
Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 12. INCOME TAXES As of March 31, 2019, the Company has approximately $9,200,000 of federal net operating loss carryforwards. The federal net operating loss carryforwards begin to expire in 2030. State net operating loss carryforwards begin to expire in 2034. Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s net operating loss carryforwards could be subject to annual limitations against taxable income in future periods which could substantially limit the eventual utilization of such carryforwards. The Company has not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore no determination has been made whether the net operating loss carryforward is subject to any Internal Revenue Code Section 382 limitation. To the extent there is a limitation there could be a substantial reduction in the deferred tax asset with an offsetting reduction in the valuation allowance. As of March 31, 2019, the Company has no unrecognized income tax benefits. The tax years from 2014 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities. |
13. Commitments and Contingenci
13. Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 13. COMMITMENTS AND CONTINGENCIES From April 1, 2018 through March 2019 the Company’s principal place of business was located at 2 Park Plaza, Suite 1200 – B. Irvine, CA 92614. This space was provided to the Company by a company to which Mr. Nicosia, one of the Company’s directors, serves as Chief Executive Officer. Monthly rent was $1,000. However, the Company did not make any rent payment and accrued those amounts as accounts payable. In March 2019, the Company temporarily moved its principal place of business to Suite 206 1180 Sunset Drive, Kelowna, BC, Canada Z1Y 9W6, which the Company rented pursuant to an oral sublease from PLC International Investments Inc, a company owned and controlled by Dominic Colvin, the Company’s current CEO, President and a director. This location consisted of approximately 500 sq. feet. The Company paid a monthly rent of $1,500 (CAD). Effective March 22, 2019, the Company entered into a lease agreement to lease three offices at 888 3St SW, Calgary, Alberta, Canada, T2P 5C5. The lease may be terminated by either party on 30 days’ notice. Rent is $4,000 CAD per month. |
14. Stockholders' Equity
14. Stockholders' Equity | 3 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 14. STOCKHOLDERS’ EQUITY Preferred Stock The Company is authorized to issue up to 10,000,000 shares of one or more series of Preferred Stock, par value of $0.0001 per share. The Board of Directors may, without stockholder approval, determine the dividend rates, redemption prices, preferences on liquidation or dissolution, conversion rights, voting rights, and any other preferences. Series A Preferred Stock In April 2018, the Company issued 60,000 shares of its Series A Convertible Preferred Stock at a price of $1.00 per share to certain investors who then became members of management and the board of directors. Each share of Series A Convertible Preferred Stock is convertible into 1,250 shares of Common Stock and vote on an as-converted basis. The rights and designations of these Preferred Shares include the following: · entitles the holder thereof to 1,250 votes on all matters submitted to a vote of the shareholders; · The holders of outstanding Series A Convertible Preferred Stock shall only be entitled to receive dividends upon declaration by the Board of Directors of a dividend payable on the Company’s Common Stock, whereupon the holders of the Series A Convertible Preferred Stock shall receive a dividend on the number of shares of Common Stock into which each share of Series A Convertible Preferred Stock is convertible; · Each Series A Preferred Share is convertible into 1,250 shares of Common Stock; · not redeemable. The beneficial conversion (“BCF”) feature attributed to the purchase of Preferred Stock was deemed to have no value on the date of purchase for the following reasons: Ø There was no public trading market for the Convertible Preferred Stock, and none is expected to develop in the future. Ø Any shares of Common Stock underlying the Preferred Stock to be issued upon conversion would not be eligible for any exemption from registration pursuant to Rule 144 for a period of one (1) year from the date which the Company ceases being deemed a shell company. Ø Currently, there is a very limited trading market for the Company's Common Stock. Ø The Company had no business activity for the prior twenty-four (24) month period; Ø The Company has limited assets and substantial liabilities. Therefore, therefore the BCF related to the Preferred Shares was considered to have no value on the date of issuance. There were 60,000 shares of Series A Preferred Stock issued and outstanding as of March 31, 2019 and December 31, 2018, respectively. Series B Preferred Stock In February 2019, the Company commenced an offering of up to $3 million in principal amount of Units at a price of $1.00 per Unit, each Unit consisting of one share of Series “B” Convertible Preferred Stock, each Convertible Preferred Share convertible into one share of the Company’s Common Stock at the election of the holder and one Common Stock Purchase Warrant exercisable to purchase one share of Common Stock at an exercise price of $2.00 per share, which offering is to be offered only to “accredited investors,” as that term is defined in Rule 501 of Regulation D. As of March 31, 2019 the Company had accepted $178,000 in subscriptions in this offering. There were 178,000 and -0- shares of Series B Convertible Preferred Stock issued and outstanding as of March 31, 2019 and December 31, 2018, respectively. Common Stock The Company is authorized to issue 300,000,000 shares of Common Stock, par value $0.0001 per share. As of March 31, 2019, and December 31, 2018, 32,436,999 and 18,942,506 shares of Common Stock were issued and outstanding, respectively. In January 2019, the Company closed a private offering of 12% Convertible Debentures where it accepted subscriptions in the aggregate amount of $2,072,000 from 35 accredited investors, as that term is defined in Rule 501 of Regulation D. Each Convertible Debenture is convertible into shares of Common Stock at the lesser of $0.40 or 50% of the closing market price on the date a business combination valued at greater than $5,000,000 is completed., The Company used the proceeds from this offering for the purchase of AMS, as well as working capital, including costs associated with the preparation of over three years of reports that had not been filed with the SEC. During the three-month period ended March 31, 2019, the Company entered into a Qualified Financing with its minority purchase of GN stock and warrants described in Note 4 “Investment”. As a result, on March 31, 2019 the convertible notes amounting to $2,072,000 along with $130,212 of accrued interest were converted, pursuant to the automatic conversion terms described above, to equity at a price of $0.40 per share, or a total of 5,505,530 shares. Stock Options During the period ended March 31, 2019 and December 31, 2018, the Company did not record any stock-based compensation expense related to stock options. As of March 31, 2019, there were options outstanding to purchase 750,000 shares of the Company’s Common Stock at an exercise price of $1.00 per share. These stock options expire on November 1, 2024. Stock Purchase Warrants The following table reflects all outstanding and exercisable warrants on March 31, 2019 and December 31, 2018: Number of Warrants Outstanding Weighted Average Exercise Price Average Remaining Contractual Life (Years) Warrants outstanding, January 1, 2018 – $ – – Warrants issued 350,000 0.57 2.875 Warrants exercised – – – Warrant forfeited – – – Warrants outstanding, December 31, 2018 350,000 $ 0.57 2.875 Warrants issued 678,000 $ 1.39 2.01 Warrants outstanding March 31, 2019 1,028,000 $ 1.14 2.19 Stock purchase warrants are exercisable for a period of two-three years from the date of issuance. During the three months ended March 31, 2019 the Company issued to sets of warrants. 500,000 two year warrants were issued to an individual at an exercise price of $1.00 per share. These warrants were valued at $847,369 and will be expensed over a two year period at the rate of $105,921 per quarter which commenced on January 1, 2019. Additionally, in connection with the issuance of Series B preferred stock described above, the Company issued 178,000 warrants as part of a unit purchase of common stock for $1.00. These warrants carry a strike price of $2.00 exercisable for three years. Under the guidelines of ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a “Company’s Own Stock, Distinguishing Liabilities from Equity”, the Company allocated a relative fair value of $178,000 to these warrants. The value of the stock purchase warrants for the periods ended March 31, 2019 and December 31, 2018 was determined using the following Black-Scholes methodology: Expected dividend yield (1) 0.00% Risk-free interest rate range (2) 1.92-2.91% Volatility range (3) 405.60-442.92% Expected life (in years) 2.00- 3.00 ______________ (1) The Company has no history or expectation of paying cash dividends on its Common Stock. (2) The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. (3) The volatility of the Company’s Common Stock is based on trading activity for the previous three year period ended at each stock purchase warrant contract date. |
15. Subsequent Events
15. Subsequent Events | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 15 SUBSEQUENT EVENTS During the period subsequent to March 31, 2019 the Company sold an additional 10,000 Units, each Unit consisting of one share of Series B Convertible Preferred Stock and a Common Stock Purchase Warrant exercisable to purchase one share of Common Stock at an exercise price of $2.00. |
1. Nature of Operations and S_2
1. Nature of Operations and Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentaion | Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (“ FASB Codification GAAP All figures are in U.S. dollars unless indicated otherwise. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported assets and expenses during the reporting period. The most significant estimates relate to investments, purchase price allocation of acquired assets, impairment of long-lived assets, intangibles and goodwill. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At March 31, 2019 and December 31, 2018, the Company had cash equivalents totaled $203,474 and $464,118, respectively. |
Comprehensive Gain or Loss | Comprehensive Gain or Loss ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of March 31, 2019, and December 31, 2018, the Company determined that it had items that represented components of comprehensive income and, therefore, has included a statement of comprehensive income in the financial statements. |
Derivative Financial Instruments | Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible and other promissory notes are reviewed to determine whether they contain embedded derivative instruments that are required to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. |
Beneficial Conversion Features | Beneficial Conversion Features In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options” the Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt or preferred stock instruments that have conversion features at fixed rates that are in-the-money when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security. |
Foreign Currency Translation | Foreign Currency Translation The functional currency and the reporting currency of CannapharmaRx’s US operations is United States dollars, (“USD”). The functional currency of the Company’s Canadian operations is Canadian dollars (“CAD”), Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods. Assets and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurred. The resulting translation adjustment is reflected as accumulated other comprehensive income, a separate component of stockholders' equity in the statement of stockholders' equity. These translation adjustments are reflected in accumulated other comprehensive income, a separate component of the Company's stockholders' equity. |
Harmonized Sales Tax | Harmonized Sales Tax The Harmonized Sales Tax (“HST”) is a combination of the Canadian Goods and Services Tax (“GST”) and Provincial Sales Tax (“PST”) that is applied to taxable goods and services. By fusing sales tax at the federal level with sales tax at the provincial level, the participating provinces harmonized both taxes into a single federal-provincial sales tax. HST is a consumption tax paid by the consumer at the point of sale (POS). The vendor or seller collects the tax proceeds from consumers by adding the HST rate to the cost of goods and services. They then remit the total collected tax to the government at the end of the year. The HST is in effect in five of the ten Canadian provinces: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island. The HST is collected by the Canada Revenue Agency (CRA), which remits the appropriate amounts to the participating provinces. The HST may differ across these five provinces, as each province will set its own PST rates within the HST. In provinces and territories which have not enacted the HST, the CRA collects only the 5% goods and services tax. The current rate in Ontario is 13%. |
Capital Assets - Construction in Progress | Capital Assets- Construction In Progress As of March 31, 2019 and December 31, 2018, the Company had $1,614,130 and $1,563,260 in construction in progress, respectively, comprised entirely of the construction in progress relating to the building acquired with the acquisition of AMS. Depreciation expenses total $-0- and $-0- for the periods ended March 31, 2019, and December 31, 2018, respectively. Stock Purchase Warrants The Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. |
Stock Purchase Warrants | Stock Purchase Warrants The Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. During the three-month period ended March 31, 2019 and the year ended December 31, 2018 the Company issued 178,000 and -0- respectively that were part of a Unit offering of common stock and warrants. The Company has allocated a fair market value of $178,000 to these warrants for the period ended March 31, 2019. See Note 14. Stockholders Equity. |
Stock-Based Compensation | Stock-Based Compensation The Company has adopted ASC Topic 718, (Compensation—Stock Compensation) |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist of a marijuana license with a useful life of 15 years. Goodwill and indefinite-lived assets are not amortized but are subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans, and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform an impairment test prior to scheduled annual impairment tests. The Company performed its annual fair value assessment on December 31, 2018, on its subsidiaries with material goodwill and intangible asset amounts on their respective balance sheets and determined that no impairment exists. |
Long-Lived Assets | Long-Lived Assets The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances have indicated that an asset may not be recoverable. The long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value. The Company evaluated the recoverability of its long-lived assets on March 31, 2019, and at December 31, 2018, respectively on its subsidiaries with material amounts on their respective balance sheets and determined that no impairment exists. |
Fair Values of Assets and Liabilities | Fair Values of Assets and Liabilities The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. Level 1: Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. Level 3: Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. As of March 31, 2019, have classified our $11,264,438 investment in GN, as a non-marketable equity security in a private company, as a Level 3 asset. |
Financial Instruments | Financial Instruments The estimated fair value for financial instruments was determined at discrete points in time based on relevant market information. These estimates involve uncertainties and could not be determined with exact precision. The fair value of the Company’s financial instruments, which include cash, prepaid expenses, accounts payable and the related party loan, each approximate their carrying value due either to their short length to maturity or interest rates that approximate prevailing market rates. |
Cost method investment | Cost Method Investment Our cost method investment consists of an investment in a private company in which we do not have the ability to exercise significant influence over its operating and financial activities. The investment is tested for impairment quarterly. |
Income (Loss) Per Share | Income (Loss) Per Share Income (loss) per share is presented in accordance with Accounting Standards Update (“ ASU Earning per Share EPS |
Business Segments | Business Segments The Company’s activities during the three-months ended March 31, 2019 and the year ended December 31, 2018, comprised a single segment. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. As an emerging growth company the Company has until December 15, 2019 to adopt ASC 842. The Company is currently evaluating the impact on its consolidated financial statements. Management has reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations. |
6. Business Combination (Tables
6. Business Combination (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Business Combinations [Abstract] | |
Schedule of business acquisition consideration allocated | Consideration Paid: Cash and cash equivalents $ 726,747 Common stock, 981,765 shares of CannapharmaRX common stock 1,612,600 Promissory note net of $697,083 discount 6,632,917 Fair value of total consideration $ 8,972,264 Recognized amount of identifiable assets acquired, and liabilities assumed: Construction in progress $ 1,563,260 Accrued liabilities (50,560 ) Mortgage payable (476,450 ) Intangible assets 1,871,000 Goodwill 6,065,014 $ 8,972,264 |
8. Accounts Payable and Accru_2
8. Accounts Payable and Accrued Expenses (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Payables and Accruals [Abstract] | |
Schedule of accounts payable and accrued liabilities | March 31, 2019 December 31, 2018 Accounts payable and accrued expenses $ 843,953 $ 766,203 Accrued interest (a) – 68,052 Mortgages payable (b) 486,395 476,450 Accrued legal settlement (c) 190,000 190,000 Total accounts payable and accrued liabilities $ 1,520,348 $ 1,500,705 (a) Represents interest accrued on the outstanding convertible notes -see Note 11 (b) Pursuant to the acquisition of AMS, the Company assumed the mortgage on the construction in progress. The mortgage is an interest only instrument at an interest rate of 15% due and payable on December 31, 2019 (c) The Company had previously been party to an action filed by Gary M. Cohen, a former officer and director of ther Company in 2014. In March 2015, the Company entered into a Settlement Agreement with Mr. Cohen wherein the Company agreed to repurchase 2,250,000 shares of its Common Stock from Mr. Cohen in consideration for $350,000. Mr. Cohen passed away while there was a remaining balance of $190,000 remaining to be paid in accordance with the Settlement Agreement. The Company has taken the position that his death has discharged any obligation the Company might have to make the balance of the payments. The Company has not received any demand for payment or otherwise been involved in any attempt to collect this balance for a period of greater than two years prior to the date of this Report. |
9. Related Party Transactions (
9. Related Party Transactions (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Schedule of related party transactions | March 31, 2019 December 31, 2018 Accounts payable related party $ 98,989 $ 28,758 Accrued expense - related party 315,000 150,000 Total accounts payable and accrued liabilities $ 413,989 $ 178,758 |
11. Notes Payable (Tables)
11. Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable | March 31, December 31, Principal value of Promissory Note $ 7,483,000 $ 7,330,000 Loan discounts (652,331 ) (697,083 ) Promissory Note, long term net of discount $ 6,830,669 $ 6,632,917 |
14. Stockholders' Equity (Table
14. Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
Warrant activity | Number of Warrants Outstanding Weighted Average Exercise Price Average Remaining Contractual Life (Years) Warrants outstanding, January 1, 2018 – $ – – Warrants issued 350,000 0.57 2.875 Warrants exercised – – – Warrant forfeited – – – Warrants outstanding, December 31, 2018 350,000 $ 0.57 2.875 Warrants issued 678,000 $ 1.39 2.01 Warrants outstanding March 31, 2019 1,028,000 $ 1.14 2.19 |
Assumptions used | Expected dividend yield (1) 0.00% Risk-free interest rate range (2) 1.92-2.91% Volatility range (3) 405.60-442.92% Expected life (in years) 3.00 ______________ (1) The Company has no history or expectation of paying cash dividends on its Common Stock. (2) The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. (3) The volatility of the Company’s Common Stock is based on trading activity for the previous three year period ended at each stock purchase warrant contract date. |
1. Nature of Operations and S_3
1. Nature of Operations and Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Cash equivalents | $ 203,474 | $ 464,118 |
Construction in progress | 1,614,130 | 1,563,260 |
Depreciation expense | $ 0 | $ 0 |
2. Going Concern and Liquidity
2. Going Concern and Liquidity (Details Narrative) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Cash | $ 203,474 | |
Liabilities | 8,765,006 | $ 10,384,380 |
Short term liquid assets | $ 221,714 |
3. Prepaid Expenses (Details)
3. Prepaid Expenses (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid stock purchase | $ 0 | $ 98,955 |
Prepaid interest | 18,240 | 35,734 |
Prepaid expenses | $ 18,240 | $ 134,689 |
4. Investment (Details Narrativ
4. Investment (Details Narrative) - GN Ventures [Member] | 2 Months Ended |
Feb. 25, 2019USD ($)shares | |
Stock received | 3,712,500 |
Warrants received | 2,500,000 |
Stock issued for acquisition | 7,988,963 |
Consideration transferred | $ | $ 11,264,438 |
5. Construction in Progress (De
5. Construction in Progress (Details Narrative) | Mar. 31, 2019USD ($)ft² | Dec. 31, 2018USD ($) |
Construction in progress | $ 1,614,130 | $ 1,563,260 |
Square feet of building | ft² | 48,750 | |
Hanover Facility [Member] | ||
Construction in progress | $ 1,563,260 |
6. Business Combination (Detail
6. Business Combination (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Mar. 31, 2019 | |
Recognized amount of identifiable assets acquired, and liabilities assumed: | ||
Goodwill | $ 6,065,014 | $ 6,065,014 |
AMS [Member] | ||
Consideration Paid: | ||
Cash and cash equivalents | 726,747 | |
Common stock, 981,765 shares of CannapharmaRX common stock | 1,612,600 | |
Promissory note net of $697,083 discount | 6,632,917 | |
Fair value of total consideration | 8,972,264 | |
Recognized amount of identifiable assets acquired, and liabilities assumed: | ||
Construction in progress | 1,563,260 | |
Accrued liabilities | (50,560) | |
Mortgage payable | (476,450) | |
Intangible assets | 1,871,000 | |
Goodwill | 6,065,014 | $ 6,065,014 |
Recognized amount of identifiable assets acquired, and liabilities assumed | $ 8,972,264 |
7. Goodwill and Intangible As_2
7. Goodwill and Intangible Assets (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Goodwill | $ 6,065,014 | $ 6,065,014 | |
Intangible asset | 1,878,219 | 1,871,000 | |
Amortization expense | 32,000 | $ 0 | 0 |
AMS [Member] | |||
Goodwill | 6,065,014 | 6,065,014 | |
Intangible asset | $ 1,878,219 | $ 1,871,000 | |
AMS [Member] | Marijuana license [Member] | |||
Amortization period | 15 years | ||
Future amortization per year | $ 124,733 |
8. Accounts Payable and Accru_3
8. Accounts Payable and Accrued Expenses (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | ||
Accounts payable and accrued expenses | $ 843,953 | $ 766,203 |
Accrued interest | 0 | 68,052 |
Mortgages payable | 486,395 | 476,450 |
Accrued legal settlement | 190,000 | 190,000 |
Total accounts payable and accrued expenses | $ 1,520,348 | $ 1,500,705 |
9. Related Party Transactions_2
9. Related Party Transactions (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Related Party Transactions [Abstract] | ||
Accounts payable related party | $ 98,989 | $ 28,758 |
Accrued expense related party | 315,000 | 150,000 |
Total accounts payable and accrued liabilities | $ 413,989 | $ 178,758 |
9. Related Party Transactions_3
9. Related Party Transactions (Details Narrative) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Two Former Directors [Member] | ||
Due to related parties | $ 150,000 | $ 150,000 |
10. Convertible Notes (Details
10. Convertible Notes (Details Narrative) - Convertible Notes Payable [Member] - USD ($) | 3 Months Ended | 6 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Convertible note balances | $ 0 | $ 2,072,000 |
Proceeds from sale of convertible notes | 0 | $ 2,072,000 |
Debt converted, amount converted | 2,072,000 | |
Debt converted, interest converted | $ 130,212 | |
Debt converted, shares issued | 5,505,530 |
11. Notes Payable (Details)
11. Notes Payable (Details) - USD ($) | May 15, 2019 | Dec. 31, 2018 |
Debt Disclosure [Abstract] | ||
Principal value of Promissory Note | $ 7,483,000 | $ 7,330,000 |
Loan discounts | (652,331) | (697,083) |
Promissory Note, long term net of discount | $ 6,830,669 | $ 6,632,917 |
11. Notes Payable (Details Narr
11. Notes Payable (Details Narrative) - 12 months ended Dec. 31, 2018 | USD ($) | CAD ($) |
Debt face amount | $ 7,330,000 | |
Promissory note carrying amount | 6,632,917 | |
Interest expense | $ 0 | |
Canada, Dollars | ||
Debt face amount | $ 10,000,000 |
12. Income Taxes (Details Narra
12. Income Taxes (Details Narrative) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Net operating loss carryforwards | $ 9,200,000 |
Operating loss carryforward begining expiration date | Dec. 31, 2030 |
Unrecognized tax benefits | $ 0 |
State [Member] | |
Operating loss carryforward begining expiration date | Dec. 31, 2034 |
14. Stockholders' Equity (Detai
14. Stockholders' Equity (Details - Warrant activity) - Warrant [Member] - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Number of Warrants Outstanding | ||
Warrants outstanding, beginning balance | 350,000 | 0 |
Warrants issued | 678,000 | 350,000 |
Warrants exercised | 0 | |
Warrants forfeited | 0 | |
Warrants outstanding, ending balance | 1,028,000 | 350,000 |
Weighted Average Exercise Price | ||
Warrants outstanding, beginning balance | $ 0.57 | |
Warrants issued | 1.39 | 0.57 |
Warrants exercised | ||
Warrants forfeited | ||
Warrants outstanding, ending balance | $ 1.14 | $ 0.57 |
Average Remaining Contractual Life | ||
Warrants outstanding | 2 years 2 months 8 days | 2 years 10 months 6 days |
Warrants issued | 2 years 4 days | 2 years 10 months 6 days |
14. Stockholders' Equity (Det_2
14. Stockholders' Equity (Details - Warrant assumptions) - Warrant [Member] | 3 Months Ended |
Mar. 31, 2019 | |
Expected dividend yield | 0.00% |
Risk-free interest rate - minimum | 1.92% |
Risk-free interest rate - maximum | 2.91% |
Volatility - minimum | 405.60% |
Volatility - maximum | 442.92% |
Expected life | 3 years |
14. Stockholders' Equity (Det_3
14. Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Proceeds from Preferred stock subscribed | $ 178,000 | $ 0 | |
Stock based compensation | 161,334 | $ 0 | |
Options [Member] | |||
Stock based compensation | 0 | $ 0 | |
Options outstanding | 750,000 | ||
Option exercise price | $ 1 | ||
Private Placement [Member] | Convertible Debentures [Member] | |||
Proceeds from convertible debt | 2,072,000 | ||
Debt converted, amount converted | 2,072,000 | ||
Debt converted, interest converted | $ 130,212 | ||
Debt converted, shares issued | 505,530 | ||
Series B Preferred Stock [Member] | |||
Proceeds from Preferred stock subscribed | $ 178,000 |