Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 09, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | CalEthos, Inc. | |
Entity Central Index Key | 0001174891 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | false | |
Entity Ex Transition Period | false | |
Entity Shell Company | true | |
Entity Common Stock, Shares Outstanding | 16,634,951 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2019 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 191,000 | |
Cash held by officer | 12,000 | |
Prepaid expenses | 2,000 | 2,000 |
Undeposited funds - common stock | 16,000 | 16,000 |
Total Current Assets | 209,000 | 30,000 |
Total Assets | 209,000 | 30,000 |
CURRENT LIABILITIES: | ||
Accounts payable | 303,000 | 180,000 |
Convertible promissory notes, net | 88,000 | |
Total Current Liabilities | 391,000 | 180,000 |
Total Liabilities | 391,000 | 180,000 |
STOCKHOLDERS' DEFICIT | ||
Preferred stock | ||
Common stock par value $0.001: 100,000,000 shares authorized; 16,634,951 shares issued and outstanding | 17,000 | 17,000 |
Additional paid-in capital | 8,626,000 | 7,660,000 |
Accumulated deficit | (8,825,000) | (7,827,000) |
Total Stockholders' Deficit | (182,000) | (150,000) |
Total Liabilities and Stockholders' Deficit | 209,000 | 30,000 |
Series A Convertible Preferred Stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 96,400,000 | 96,400,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 16,634,951 | 16,634,951 |
Common stock, shares outstanding | 16,634,951 | 16,634,951 |
Series A Convertible Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 3,600,000 | 3,600,000 |
Preferred stock, shares issued | 85,975 | 35,975 |
Preferred stock, shares outstanding | 85,975 | 35,975 |
Condensed Statements of Operati
Condensed Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
Revenues | ||||
Operating Expenses | ||||
Professional fees | 739,000 | 4,000 | 894,000 | 10,000 |
General and administrative expenses | 11,000 | 1,000 | 16,000 | 2,000 |
Operating expenses | 750,000 | 5,000 | 910,000 | 12,000 |
Loss from operations | (750,000) | (5,000) | (910,000) | (12,000) |
Other expenses - Interest | (67,000) | (88,000) | ||
Loss before provision for income taxes | (817,000) | (5,000) | (998,000) | (12,000) |
Provision for income taxes | ||||
Net loss | (817,000) | (5,000) | (998,000) | (12,000) |
Other comprehensive income (loss) | ||||
Comprehensive loss | $ (817,000) | $ (5,000) | $ (998,000) | $ (12,000) |
Net loss per share | $ (0.05) | $ (0.01) | $ (0.06) | $ (0.02) |
Weighted average common shares outstanding: | ||||
Basic and diluted | 16,634,951 | 630,207 | 16,634,951 | 630,207 |
Condensed Statement of Stockhol
Condensed Statement of Stockholders' Deficit (Unaudited) - USD ($) | Series A Convertible Preferred Stock [Member] | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2017 | $ 1,000 | $ 7,601,000 | $ (7,599,000) | $ 3,000 | ||
Balance, shares at Dec. 31, 2017 | 630,207 | |||||
Net loss | (8,000) | (8,000) | ||||
Balance at Mar. 31, 2018 | $ 1,000 | 7,601,000 | (7,607,000) | (5,000) | ||
Balance, shares at Mar. 31, 2018 | 630,207 | |||||
Balance at Dec. 31, 2017 | $ 1,000 | 7,601,000 | (7,599,000) | 3,000 | ||
Balance, shares at Dec. 31, 2017 | 630,207 | |||||
Net loss | (12,000) | |||||
Balance at Jun. 30, 2018 | $ 1,000 | 7,601,000 | (7,611,000) | (9,000) | ||
Balance, shares at Jun. 30, 2018 | 630,207 | |||||
Balance at Mar. 31, 2018 | $ 1,000 | 7,601,000 | (7,607,000) | (5,000) | ||
Balance, shares at Mar. 31, 2018 | 630,207 | |||||
Net loss | (4,000) | (5,000) | ||||
Balance at Jun. 30, 2018 | $ 1,000 | 7,601,000 | (7,611,000) | (9,000) | ||
Balance, shares at Jun. 30, 2018 | 630,207 | |||||
Balance at Dec. 31, 2018 | $ 17,000 | 7,660,000 | (7,827,000) | (150,000) | ||
Balance, shares at Dec. 31, 2018 | 35,975 | 16,634,951 | ||||
Proceeds for the sale of series A convertible preferred stock | $ 69,000 | $ 69,000 | ||||
Proceeds for the sale of series A convertible preferred stock, shares | 50,000 | |||||
Relative fair value of warrants issued with convertible promissory notes | 102,000 | 102,000 | ||||
Beneficial conversion feature associated with convertible promissory notes | $ 118,000 | $ 118,000 | ||||
Net loss | (181,000) | (181,000) | ||||
Balance at Mar. 31, 2019 | $ 17,000 | 7,949,000 | (8,008,000) | (42,000) | ||
Balance, shares at Mar. 31, 2019 | 85,975 | 16,634,951 | ||||
Balance at Dec. 31, 2018 | $ 17,000 | 7,660,000 | (7,827,000) | (150,000) | ||
Balance, shares at Dec. 31, 2018 | 35,975 | 16,634,951 | ||||
Net loss | (998,000) | |||||
Balance at Jun. 30, 2019 | $ 17,000 | 8,626,000 | 8,825,000 | (182,000) | ||
Balance, shares at Jun. 30, 2019 | 85,975 | 16,634,951 | ||||
Balance at Mar. 31, 2019 | $ 17,000 | $ 7,949,000 | $ (8,008,000) | $ (42,000) | ||
Balance, shares at Mar. 31, 2019 | 85,975 | 16,634,951 | ||||
Relative fair value of warrants issued with convertible promissory notes | 49,000 | 49,000 | ||||
Beneficial conversion feature associated with convertible promissory notes | $ 51,000 | $ 51,000 | ||||
Stock options issued for services | 577,000 | 577,000 | ||||
Net loss | (817,000) | (817,000) | ||||
Balance at Jun. 30, 2019 | $ 17,000 | $ 8,626,000 | $ 8,825,000 | $ (182,000) | ||
Balance, shares at Jun. 30, 2019 | 85,975 | 16,634,951 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities | ||
Net loss | $ (998,000) | $ (12,000) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Amortization of convertible promissory notes discounts | 88,000 | |
Fair value of equity based compensation | 577,000 | |
Changes in operating assets and liabilities: | ||
Accounts payable and accrued expenses | 123,000 | 9,000 |
Net cash used in operating activities | (210,000) | (3,000) |
Cash flows from investing activities | ||
Cash held by officer | 12,000 | |
Net cash provided by investing activities | 12,000 | |
Cash flows from financing activities | ||
Proceeds from the issuance of convertible promissory notes | 320,000 | |
Proceeds from the issuance of series A convertible preferred stock | 69,000 | |
Net cash provided by financing activities | 389,000 | |
Net increase (decrease) in cash | 191,000 | (3,000) |
Cash, beginning of period | 7,000 | |
Cash, end of period | 191,000 | 4,000 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | ||
Cash paid for income taxes | ||
Non-Cash investing and financing activities | ||
Relative fair value of warrants issued with convertible promissory notes | 151,000 | |
Beneficial conversion feature associated with convertible promissory notes | $ 169,000 |
Organization and Accounting Pol
Organization and Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Accounting Policies | Note 1 – Organization and Accounting Policies CalEthos, Inc. (the “Company”) (fka RealSource Residential, Inc.) was incorporated on March 20, 2002 under the laws of the State of Nevada. Since the second quarter of 2016, the Company has been a “shell” company, as defined in Rule 12b-2 under the Exchange Act. Change in Control On May 16, 2018, certain majority stockholders of the Company, including certain former directors and officers of the Company, entered into a stock purchase agreement dated May 16, 2018 (the “Control Purchase Agreement”) with RealSource Acquisition Group, LLC, a Utah limited liability company (“RealSource Acquisition”), whereby RealSource Acquisition agreed to purchase an aggregate of 11,006,356 shares (440,256 shares after giving effect to the Reverse Stock Split (see Note 3) (the “Control Shares”) of the Company’s issued and outstanding shares of common stock for an aggregate purchase price of $180,000. Immediately prior to the closing under the Control Purchase Agreement on September 12, 2018 (the “Closing Date”), RealSource Acquisition assigned its rights under the Control Purchase Agreement to M1 Advisors, LLC, a Delaware limited liability company (“M1 Advisors”), pursuant to a purchase agreement and assignment and assumption of contract rights dated as of August 28, 2018 between RealSource Acquisition and M1 Advisors. M1 Advisors paid RealSource Acquisition $80,000 as consideration for such assignment. Effective on the Closing Date, and in accordance with the amended and restated bylaws of the Company and the requirements of the Control Purchase Agreement, (a) each of Michael S. Anderson, Nathan W. Hanks and V. Kelly Randall resigned as directors of the Company, (b) Michael Campbell, the sole member of M1 Advisors, and Piers Cooper were elected to the Company’s board of directors, and (c) Mr. Hanks also resigned as president and chief executive officer of the Company, Mr. Randall also resigned as chief operating office and chief financial officer of the Company, Mr. Campbell was appointed the chief executive officer of the Company and Piers Cooper was appointed president of the Company. On the Closing Date, the Company entered into a series A preferred stock purchase agreement dated as of the Closing Date (the “Preferred Purchase Agreement”) with M1 Advisors, which is an entity controlled by Michael Campbell, the Company’s chief executive officer and a director of the Company at such time, Piers Cooper, the Company’s president and a director of the Company at such time, the members of RealSource Acquisition, and the other investors who were signatories thereto (collectively, the Purchasers”). Pursuant to the Preferred Purchase Agreement, the Company sold to the Purchasers an aggregate of 15,600,544 shares of the Company’s series A preferred stock, which has since been re-designated as Founder preferred stock (“Founder Preferred Stock”), for an aggregate purchase price of $16,000, or $0.001 per share. Of the Founder Preferred Stock purchased, 9,320,414 shares were purchased by M1 Advisors, 4,674,330 shares were purchased by Mr. Cooper and an aggregate of 1,195,000 shares were purchased by the members of RealSource Acquisition or their assigns. Immediately following the above transactions, an aggregate of 15,600,544 shares of Founder Preferred Stock and 630,207 shares of common stock was issued and outstanding. At such time, the shares of Founder Preferred Stock and common stock owned by M1 Advisors represented approximately 60.14% of the issued and outstanding shares of capital stock of the Company on a fully-diluted basis and the shares of Founder Preferred Stock owned by Mr. Cooper represented approximately 28.80% of the issued and outstanding shares of capital stock of the Company on a fully-diluted basis. The shares of Founder Preferred Stock acquired by M1 Advisors were purchased with funds that M1 Advisors borrowed from another entity controlled by Mr. Campbell. On December 20, 2018, all outstanding shares of Founder Preferred Stock was converted in to shares of the Company’s common stock on a one-for-one basis pursuant to the terms of the Founder Preferred Stock. Business Activity Following the change in control, as described above, the board of directors determined to establish the Company in the rapidly-growing cannabis industry, initially in the State of California. The primary activity of the Company’s management is to seek and investigate various opportunities in the California cannabis industry, and if such investigation warrants, acquire assets and create a business around them, acquire part or all of an operating cannabis business or invest in a joint venture with other more established companies already in the cannabis industry. The Company will not restrict its search to any specific business, segment of the cannabis industry or geographical location and the Company may participate in a business venture of virtually any kind or nature that the board of directors believe is beneficial to the Company and its shareholders. Financial Statement Presentation The accompanying unaudited condensed financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019. The balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2018. The notes to the unaudited condensed financial statements are presented on a going concern basis unless otherwise noted. Basis of Presentation The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. The Company has no established operations. The Company incurred a net loss of approximately $998,000 for the six months ended June 30, 2019 and had an accumulated deficit of approximately $8,825,000 as of June 30, 2019. The Company has financed its activities principally through debt and equity financing and shareholder contributions. Management expects to incur additional losses and cash outflows in the foreseeable future in connection with its operating activities. The Company’s condensed financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is subject to a number of risks similar to those of other similar stage companies, including dependence on key individuals; successful development, marketing and branding of products; uncertainty of product development and generation of revenues; dependence on outside sources of financing; risks associated with research and development; dependence on third-party suppliers and collaborators; protection of intellectual property; and competition with larger, better-capitalized companies. Ultimately, the attainment of profitable operations is dependent on future events, including obtaining adequate financing to fund its operations and generating a level of revenues adequate to support the Company’s cost structure. The Company will need to raise debt or equity financing in the future in order to continue its operations and achieve its growth targets. However, there can be no assurance that such financing will be available in sufficient amounts and on acceptable terms, when and if needed, or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including market demand for the Company’s products and services, the success of product development efforts, the timing of receipts for customer deposits, the management of working capital, and the continuation of normal payment terms and conditions for purchase of goods and services. The Company believes its cash balances and cash flow from operations will not be sufficient to fund its operations and growth for the next twelve months from the issuance date of these financial statements. If the Company is unable to substantially increase revenues, reduce expenditures, or otherwise generate cash flows from operations, then the Company will likely need to raise additional funding from investors or through other avenues to continue as a going concern. Debt Discounts The Company accounts for debt discounts originating in connection with conversion features that remain embedded in the related notes in accordance with ASC 470-20, Debt with Conversion and Other Options Recently Adopted Pronouncements Leases The Company adopted Accounting Standards Update (ASU) No. 2016-02, Leases |
Convertible Promissory Notes
Convertible Promissory Notes | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Convertible Promissory Notes | Note 2 – Convertible Promissory Notes In February, March and June 2019, the Company issued convertible promissory notes in the amounts of $110,000, $132,000 and $110,000, respectively (the “Notes”). The total proceeds were approximately $320,000, due to approximately $32,000 for an original issue discount. The Notes are non-interest bearing with the principal due and payable in February 2020 and June 2020. Any amount of unpaid principal on the date of maturity will accrue interest at rate of 10% per annum (default interest). The principal amount and all accrued interest are convertible into shares of the Company’s common stock, as of the date of issuance, at a rate of $1.00 per share (“Conversion Rate”). The conversion rate is adjustable if, at any time when any principal amount of the Notes remains unpaid or unconverted, the Company issues or sells any shares of the Company’s common stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith), which is less than the Conversion Rate in effect on the date of such issuance (or deemed issuance) of such shares of common stock (a “Dilutive Issuance”). Immediately upon a Dilutive Issuance, the Conversion Rate will be reduced to the amount of the consideration per share received by the Company in such Dilutive Issuance. Events of default include failure to issue conversion shares, the occurrence of a breach or default under any other agreement, instrument or document involving any indebtedness for borrowed money of more than $100,000 in the aggregate, bankruptcy filing, application for the appointment of a custodian, trustee or receiver, insolvency, the Company’s common stock delisted, or dissolution, winding up, or termination of the business of the Company. In connection with the issuance of the Notes, the Company issued to the purchasers of the Notes stock purchase warrants to purchase an aggregate of 176,000 shares of the Company’s common stock for a purchase price of $1.00 per share, subject to adjustments. In accordance with ASC 470 - Debt The Company determined that the conversion feature of the Notes would not be an embedded feature to be bifurcated and accounted for as a derivative in accordance with ASC 818-15 Derivatives and Hedging As of June 30, 2019, convertible promissory notes consisted of the following: Principal Amount $ 352,000 Original issue discount (24,000 ) Warrant discount (114,000 ) Conversion feature discount (126,000 ) Net balance $ 88,000 The discounts of approximately $264,000 will be amortized and expensed over the remaining contractual life of the convertible promissory notes. The amortization expense will be approximately $187,000 and 77,000 for the remaining six months of 2019 and for the year ending December 31, 2020, respectively. |
Stockholders' Deficit
Stockholders' Deficit | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
Stockholders' Deficit | Note 3 – Stockholders’ Deficit Issuance of Series A Preferred Stock In January 2018, the Company issued and sold an aggregate of 50,000 shares of Series A Preferred Stock for an aggregate purchase price of $69,000, or $1.38 per share. Issuance of Stock Options The Company entered into three separate consulting agreements with provisions for the issuance of options under the Company’s 2019 Stock Options Plan to purchase 685,000, 250,000 and 15,000 shares of the Company’s common stock. The Options have a life of three years from the vesting date and an exercise price of $0.001 per share with the following vesting terms: Option to purchase 685,000 shares i. 385,000 shares vest upon the signing of the consulting agreement; and ii. 300,000 shares vest on the first anniversary of the date on which the consultant serves as the Vice President of Capital Markets of the Company as a full-time employee. Option to purchase 250,000 i. 50,000 shares vest upon the completion of the Company’s first Retail Showcase Store; ii. 100,000 shares vest on the first anniversary date on which the consultant serves as the Vice President of Retail Store Development of the Company as full-time employee; and iii. 100,000 shares to vest 1/12 th Option to purchase 15,000 shares i. 15,000 shares to vest upon the completion of the Company’s first Retail Showcase Store. The options granted to the consultants are considered to be performance based awards to be vested once the individuals are considered to be employees of the Company. Each of the consultants has the option to become a full-time employee when the Company has received a minimum of $5,000,000 in debt or equity financing for the Company’s operations (the “Financing”). This is the time that the Company would begin to operate and use the Holders services. Until the Financing occurs, the Company will be in the predevelopment stage of its intended business model. Of the options awarded, 385,000 stock option was granted and vested on April 1, 2019. For the three and six months ended June 30, 2019, the compensation expense, classified as professional fees in the statement of operations, was $577,000, which was calculated using the Black-Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance: volatility of 324%, fair value of common stock $1.50, term of option 3 years, risk free rate of 2.29% and dividend rate of $0. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 4 – Subsequent Events The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were no reportable subsequent events to be disclosed, except those already disclosed above. |
Organization and Accounting P_2
Organization and Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Change in Control | Change in Control On May 16, 2018, certain majority stockholders of the Company, including certain former directors and officers of the Company, entered into a stock purchase agreement dated May 16, 2018 (the “Control Purchase Agreement”) with RealSource Acquisition Group, LLC, a Utah limited liability company (“RealSource Acquisition”), whereby RealSource Acquisition agreed to purchase an aggregate of 11,006,356 shares (440,256 shares after giving effect to the Reverse Stock Split (see Note 3) (the “Control Shares”) of the Company’s issued and outstanding shares of common stock for an aggregate purchase price of $180,000. Immediately prior to the closing under the Control Purchase Agreement on September 12, 2018 (the “Closing Date”), RealSource Acquisition assigned its rights under the Control Purchase Agreement to M1 Advisors, LLC, a Delaware limited liability company (“M1 Advisors”), pursuant to a purchase agreement and assignment and assumption of contract rights dated as of August 28, 2018 between RealSource Acquisition and M1 Advisors. M1 Advisors paid RealSource Acquisition $80,000 as consideration for such assignment. Effective on the Closing Date, and in accordance with the amended and restated bylaws of the Company and the requirements of the Control Purchase Agreement, (a) each of Michael S. Anderson, Nathan W. Hanks and V. Kelly Randall resigned as directors of the Company, (b) Michael Campbell, the sole member of M1 Advisors, and Piers Cooper were elected to the Company’s board of directors, and (c) Mr. Hanks also resigned as president and chief executive officer of the Company, Mr. Randall also resigned as chief operating office and chief financial officer of the Company, Mr. Campbell was appointed the chief executive officer of the Company and Piers Cooper was appointed president of the Company. On the Closing Date, the Company entered into a series A preferred stock purchase agreement dated as of the Closing Date (the “Preferred Purchase Agreement”) with M1 Advisors, which is an entity controlled by Michael Campbell, the Company’s chief executive officer and a director of the Company at such time, Piers Cooper, the Company’s president and a director of the Company at such time, the members of RealSource Acquisition, and the other investors who were signatories thereto (collectively, the Purchasers”). Pursuant to the Preferred Purchase Agreement, the Company sold to the Purchasers an aggregate of 15,600,544 shares of the Company’s series A preferred stock, which has since been re-designated as Founder preferred stock (“Founder Preferred Stock”), for an aggregate purchase price of $16,000, or $0.001 per share. Of the Founder Preferred Stock purchased, 9,320,414 shares were purchased by M1 Advisors, 4,674,330 shares were purchased by Mr. Cooper and an aggregate of 1,195,000 shares were purchased by the members of RealSource Acquisition or their assigns. Immediately following the above transactions, an aggregate of 15,600,544 shares of Founder Preferred Stock and 630,207 shares of common stock was issued and outstanding. At such time, the shares of Founder Preferred Stock and common stock owned by M1 Advisors represented approximately 60.14% of the issued and outstanding shares of capital stock of the Company on a fully-diluted basis and the shares of Founder Preferred Stock owned by Mr. Cooper represented approximately 28.80% of the issued and outstanding shares of capital stock of the Company on a fully-diluted basis. The shares of Founder Preferred Stock acquired by M1 Advisors were purchased with funds that M1 Advisors borrowed from another entity controlled by Mr. Campbell. On December 20, 2018, all outstanding shares of Founder Preferred Stock was converted in to shares of the Company’s common stock on a one-for-one basis pursuant to the terms of the Founder Preferred Stock. |
Business Activity | Business Activity Following the change in control, as described above, the board of directors determined to establish the Company in the rapidly-growing cannabis industry, initially in the State of California. The primary activity of the Company’s management is to seek and investigate various opportunities in the California cannabis industry, and if such investigation warrants, acquire assets and create a business around them, acquire part or all of an operating cannabis business or invest in a joint venture with other more established companies already in the cannabis industry. The Company will not restrict its search to any specific business, segment of the cannabis industry or geographical location and the Company may participate in a business venture of virtually any kind or nature that the board of directors believe is beneficial to the Company and its shareholders. |
Financial Statement Presentation | Financial Statement Presentation The accompanying unaudited condensed financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019. The balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2018. The notes to the unaudited condensed financial statements are presented on a going concern basis unless otherwise noted. |
Basis of Presentation | Basis of Presentation The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. The Company has no established operations. The Company incurred a net loss of approximately $998,000 for the six months ended June 30, 2019 and had an accumulated deficit of approximately $8,825,000 as of June 30, 2019. The Company has financed its activities principally through debt and equity financing and shareholder contributions. Management expects to incur additional losses and cash outflows in the foreseeable future in connection with its operating activities. The Company’s condensed financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is subject to a number of risks similar to those of other similar stage companies, including dependence on key individuals; successful development, marketing and branding of products; uncertainty of product development and generation of revenues; dependence on outside sources of financing; risks associated with research and development; dependence on third-party suppliers and collaborators; protection of intellectual property; and competition with larger, better-capitalized companies. Ultimately, the attainment of profitable operations is dependent on future events, including obtaining adequate financing to fund its operations and generating a level of revenues adequate to support the Company’s cost structure. The Company will need to raise debt or equity financing in the future in order to continue its operations and achieve its growth targets. However, there can be no assurance that such financing will be available in sufficient amounts and on acceptable terms, when and if needed, or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including market demand for the Company’s products and services, the success of product development efforts, the timing of receipts for customer deposits, the management of working capital, and the continuation of normal payment terms and conditions for purchase of goods and services. The Company believes its cash balances and cash flow from operations will not be sufficient to fund its operations and growth for the next twelve months from the issuance date of these financial statements. If the Company is unable to substantially increase revenues, reduce expenditures, or otherwise generate cash flows from operations, then the Company will likely need to raise additional funding from investors or through other avenues to continue as a going concern. |
Debt Discounts | Debt Discounts The Company accounts for debt discounts originating in connection with conversion features that remain embedded in the related notes in accordance with ASC 470-20, Debt with Conversion and Other Options |
Recently Adopted Pronouncements | Recently Adopted Pronouncements Leases The Company adopted Accounting Standards Update (ASU) No. 2016-02, Leases |
Convertible Promissory Notes (T
Convertible Promissory Notes (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Convertible Promissory Notes | As of June 30, 2019, convertible promissory notes consisted of the following: Principal Amount $ 352,000 Original issue discount (24,000 ) Warrant discount (114,000 ) Conversion feature discount (126,000 ) Net balance $ 88,000 |
Organization and Accounting P_3
Organization and Accounting Policies (Details Narrative) - USD ($) | May 16, 2018 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 |
Aggregate purchasers shares | 11,006,356 | |||||||
Number of shares after reserve stock split | 440,256 | |||||||
Purchase price of shares | $ 180,000 | |||||||
Payment made as consideration | $ 80,000 | |||||||
Preferred stock, shares outstanding | ||||||||
Preferred stock, shares issued | ||||||||
Common stock, shares outstanding | 16,634,951 | 16,634,951 | 16,634,951 | |||||
Common stock, shares issued | 16,634,951 | 16,634,951 | 16,634,951 | |||||
Net loss | $ (817,000) | $ (181,000) | $ (5,000) | $ (8,000) | $ (998,000) | $ (12,000) | ||
Accumulated deficit | $ (8,825,000) | $ (8,825,000) | $ (7,827,000) | |||||
Preferred Purchase Agreement [Member] | ||||||||
Aggregate purchasers shares | 15,600,544 | |||||||
Number of shares after reserve stock split | 0.001 | |||||||
Purchase price of shares | $ 16,000 | |||||||
Purchase price per share | $ 0.001 | $ 0.001 | ||||||
Common stock, shares outstanding | 630,207 | 630,207 | ||||||
Common stock, shares issued | 630,207 | 630,207 | ||||||
Preferred Purchase Agreement [Member] | Founder Preferred Stock [Member] | ||||||||
Preferred stock, shares outstanding | 15,600,544 | 15,600,544 | ||||||
Preferred stock, shares issued | 15,600,544 | 15,600,544 | ||||||
Preferred Purchase Agreement [Member] | M1 Advisors [Member] | ||||||||
Aggregate purchasers shares | 9,320,414 | |||||||
Percentage of shares issued and outstanding | 60.14% | 60.14% | ||||||
Preferred Purchase Agreement [Member] | Mr. Cooper [Member] | ||||||||
Aggregate purchasers shares | 4,674,330 | |||||||
Percentage of shares issued and outstanding | 28.80% | 28.80% | ||||||
Preferred Purchase Agreement [Member] | Members of RealSource Acquisition [Member] | ||||||||
Aggregate purchasers shares | 1,195,000 |
Convertible Promissory Notes (D
Convertible Promissory Notes (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | Mar. 31, 2019 | Feb. 28, 2019 | |
Convertible promissory note issued during period | $ 110,000 | $ 110,000 | $ 132,000 | $ 110,000 | |
Proceeds from issuance of convertible debt | 320,000 | ||||
Original issue discount | $ 32,000 | $ 32,000 | |||
Debt instrument maturity date, description | The Notes are non-interest bearing with the principal due and payable in February 2020 and June 2020. | ||||
Debt instruments interest rate percentage | 10.00% | 10.00% | |||
Debt instruments conversion price per share | $ 1 | $ 1 | |||
Indebtedness for borrowed money maximum limit | $ 100,000 | $ 100,000 | |||
Issuance of warrants to purchase of common stock | 176,000 | 176,000 | |||
Issuance of warrant price per share | $ 1 | $ 1 | |||
Fair value of warrant amount | $ 151,000 | ||||
Beneficial conversion of warrants | 169,000 | ||||
Amortization of expenses | $ 67,000 | 88,000 | |||
Convertible Promissory Notes [Member] | |||||
Amortized debt discount expenses | 264,000 | ||||
Convertible Promissory Notes [Member] | Remaining Six Months of 2019 [Member] | |||||
Amortized debt discount expenses | 187,000 | ||||
Convertible Promissory Notes [Member] | December 31, 2020 [Member] | |||||
Amortized debt discount expenses | $ 77,000 |
Convertible Promissory Notes -
Convertible Promissory Notes - Schedule of Convertible Promissory Notes (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Net balance | $ 88,000 | |
Promissory Notes [Member] | ||
Principal Amount | 352,000 | |
Original issue discount | (24,000) | |
Warrant discount | (114,000) | |
Conversion feature discount | (126,000) | |
Net balance | $ 88,000 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) - USD ($) | Apr. 02, 2019 | Jan. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2019 |
Proceeds from stock option exercised | $ 385,000 | $ 5,000,000 | ||
Compensation expense | $ 577,000 | $ 577,000 | ||
Options, fair value assumptions, expected volatility rate | 324.00% | |||
Fair value of common stock | $ 1.50 | |||
Options, Fair value assumptions, expected term | 3 years | |||
Options, Fair value assumptions, risk free interest rate | 2.29% | |||
Options, Fair value assumptions, expected dividend rate | 0.00% | |||
Consulting Agreement One [Member] | 2019 Stock Options Plan [Member] | ||||
Number of stock options issued during period | 685,000 | |||
Options, exercise price | $ 0.001 | $ 0.001 | ||
Consulting Agreement One [Member] | 2019 Stock Options Plan [Member] | Signing of the Consulting Agreement [Member] | ||||
Number of stock options issued during period | 385,000 | |||
Consulting Agreement One [Member] | 2019 Stock Options Plan [Member] | Consultant Serves as the Vice president of Capital Markets [Member] | ||||
Number of stock options issued during period | 300,000 | |||
Consulting Agreement Two [Member] | 2019 Stock Options Plan [Member] | ||||
Number of stock options issued during period | 250,000 | |||
Options, exercise price | 0.001 | $ 0.001 | ||
Consulting Agreement Two [Member] | 2019 Stock Options Plan [Member] | Consultant Serves as the Vice president of Capital Markets [Member] | ||||
Number of stock options issued during period | 100,000 | |||
Consulting Agreement Two [Member] | 2019 Stock Options Plan [Member] | Completion of First Retail Showcase Store [Member] | ||||
Number of stock options issued during period | 50,000 | |||
Consulting Agreement Two [Member] | 2019 Stock Options Plan [Member] | 1/12th Per Month Thereafter [Member] | ||||
Number of stock options issued during period | 100,000 | |||
Consulting Agreement Three [Member] | 2019 Stock Options Plan [Member] | ||||
Number of stock options issued during period | 15,000 | |||
Options, exercise price | $ 0.001 | $ 0.001 | ||
Consulting Agreement Three [Member] | 2019 Stock Options Plan [Member] | Completion of First Retail Showcase Store [Member] | ||||
Number of stock options issued during period | 15,000 | |||
Series A Preferred Stock [Member] | ||||
Number of series A preferred stock issued | 50,000 | |||
Number of series A preferred stock issued, value | $ 69,000 | |||
Shares price per share | $ 1.38 |