Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 31, 2021 | |
Cover [Abstract] | ||
Entity Registrant Name | CalEthos, Inc. | |
Entity Central Index Key | 0001174891 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
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 Shell Company | true | |
Entity Common Stock, Shares Outstanding | 12,960,621 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 6,000 | $ 123,000 |
Prepaid expenses | 2,000 | 2,000 |
Total Current Assets | 8,000 | 125,000 |
Total Assets | 8,000 | 125,000 |
CURRENT LIABILITIES: | ||
Accounts payable and accrued expenses | 423,000 | 363,000 |
Convertible promissory notes, net | 631,000 | 323,000 |
Total Current Liabilities | 1,054,000 | 686,000 |
Total Liabilities | 1,054,000 | 686,000 |
STOCKHOLDERS' DEFICIT | ||
Preferred stock, value | ||
Common stock par value $0.001: 100,000,000 shares authorized; 16,634,951 shares issued and outstanding | 17,000 | 17,000 |
Additional paid-in capital | 8,741,000 | 8,750,000 |
Stock subscription receivable | (2,000) | (2,000) |
Accumulated deficit | (9,802,000) | (9,326,000) |
Total Stockholders' Deficit | (1,046,000) | (561,000) |
Total Liabilities and Stockholders' Deficit | 8,000 | 125,000 |
Series A Convertible Preferred Stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock, value |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
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 | 85,975 |
Preferred stock, shares outstanding | 85,975 | 85,975 |
Preferred stock, liquidation preference, value | $ 119,000 | $ 119,000 |
Condensed Statements of Operati
Condensed Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Revenues | ||
Operating Expenses | ||
Professional fees | 132,000 | 155,000 |
General and administrative expenses | 42,000 | 5,000 |
Operating expenses | 174,000 | 160,000 |
Loss from operations | (174,000) | (160,000) |
Other expenses | ||
Financing cost | (164,000) | (21,000) |
Loss on extinguishment of series A convertible preferred stock | (138,000) | |
Total other expenses | (302,000) | (21,000) |
Loss before provision for income taxes | (476,000) | (181,000) |
Provision for income taxes | ||
Net loss | (476,000) | (181,000) |
Other comprehensive income (loss) | ||
Comprehensive loss | $ (476,000) | $ (181,000) |
Net loss per share | $ (0.03) | $ (0.01) |
Weighted average number of shares outstanding - basic and diluted | 16,634,951 | 16,634,951 |
Condensed Statements of Stockho
Condensed Statements of Stockholders' Deficit (Unaudited) - USD ($) | Series A Convertible Preferred Stock [Member] | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Stock Subscription Receivable [Member] | Accumulated Deficit [Member] | Total |
Beginning Balance at Dec. 31, 2018 | $ 17,000 | $ 7,660,000 | $ (7,827,000) | $ (150,000) | |||
Beginning 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) | |||||
Ending Balance at Mar. 31, 2019 | $ 17,000 | 7,949,000 | (8,008,000) | (42,000) | |||
Ending Balance, shares at Mar. 31, 2019 | 85,975 | 16,634,951 | |||||
Beginning Balance at Dec. 31, 2019 | $ 17,000 | 8,750,000 | (2,000) | (9,326,000) | (561,000) | ||
Beginning Balance, shares at Dec. 31, 2019 | 85,975 | 16,634,951 | |||||
Conversion of series A convertible preferred Stock to convertible promissory notes | (119,000) | (119,000) | |||||
Conversion of series A convertible preferred Stock to convertible promissory notes, shares | (85,975) | ||||||
Fair value of warrants issued with the conversion of series A convertible preferred stock | 52,000 | 52,000 | |||||
Debt premium on issuance of convertible promissory notes for conversion of series A convertible preferred stock | 58,000 | 58,000 | |||||
Net loss | (476,000) | (476,000) | |||||
Ending Balance at Mar. 31, 2020 | $ 17,000 | $ 8,741,000 | $ (2,000) | $ (9,802,000) | $ (1,046,000) | ||
Ending Balance, shares at Mar. 31, 2020 | 16,634,951 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities | ||
Net loss | $ (476,000) | $ (181,000) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Amortization of convertible promissory note discounts | 161,000 | 21,000 |
Loss on extinguishment of convertible preferred stock | 86,000 | |
Fair value of warrants issued for extinguishment of preferred stock | 52,000 | |
Changes in operating assets and liabilities: | ||
Accounts payable and accrued expenses | 60,000 | 39,000 |
Net cash used in operating activities | (117,000) | (121,000) |
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 | 220,000 | |
Proceeds from the issuance of series A convertible preferred stock | 69,000 | |
Net cash provided by financing activities | 289,000 | |
Net increase (decrease) in cash | (117,000) | 180,000 |
Cash, beginning of period | 123,000 | |
Cash, end of period | 6,000 | 180,000 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | ||
Cash paid for income taxes | ||
Non-Cash investing and financing activities | ||
Conversion of series A preferred stock to convertible promissory notes | 147,000 | |
Fair value of warrants issued with the conversion of series A convertible preferred stock | 52,000 | |
Debt premium on issuance of convertible promissory notes for conversion of series A convertible preferred stock | 58,000 | |
Relative fair value of warrants issued with convertible promissory notes | 102,000 | |
Beneficial conversion feature associated with convertible promissory notes | $ 118,000 |
Organization and Accounting Pol
Organization and Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
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 months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020. The balance sheet as of December 31, 2019 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, 2019. 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 $476,000 for the three months ended March 31, 2020 and had an accumulated deficit of approximately $9,802,000 as of March 31, 2020. 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 Earnings Per Share We use ASC 260, “ Earnings Per Share There were 1,690,214 common share equivalents at March 31, 2020 and 484,000 common share equivalents at March 31, 2019. For the three months ended March 31, 2020 and 2019, these potential shares were excluded from the shares used to calculate diluted. These securities were not included in the computation of diluted net earnings per share as their effect would have been antidilutive. Recent Accounting Pronouncements Changes to accounting principles are established by the Financial Accounting Standards Board’s (“FASB”) in the form of Accounting Standards Update (“ASU”) to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, cash flows, or presentation thereof. The Company reviewed all recently issued pronouncement in 2021, but not yet effective, and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on the Company’s financial condition or the results of its operations. |
Accounts Payable and Accrued Li
Accounts Payable and Accrued Liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Payables and Accruals [Abstract] | |
Accounts Payable and Accrued Liabilities | Note 2 – Accounts Payable and Accrued Liabilities The following table summarizes the Company’s accounts payable and accrued expense balances as of the date indicated: March 31, 2020 December 31, 2019 Trade payables $ 224,000 $ 187,000 Accrued liabilities 196,000 176,000 Accrued interest 3,000 − Accounts payable and accrued expenses $ 423,000 $ 363,000 |
Convertible Promissory Notes
Convertible Promissory Notes | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Convertible Promissory Notes | Note 3 – Convertible Promissory Notes During the period ended March 31, 2020, the Company issued convertible promissory notes in the amount of $146,000 (the “Notes”). The Notes were issued in exchange for the 85,975 shares of series A convertible preferred stock. The Notes are non-interest bearing with the principal due and payable starting on February 28, 2021. 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, any money judgment, writ or similar process entered or filed against the Company or any of its property or other assets for more than $100,000, 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 (the “Warrants”) to purchase an aggregate of 73,000 shares of the Company’s common stock for a purchase price of $1.50 per share, subject to adjustments. In accordance with ASC 470 - Debt, the Company has accounted for the issuance of the Notes as an extinguishment of the series A preferred stock. Under extinguishment accounting, the difference between the fair value of the Notes and book basis of the series A preferred stock of $86,000 was accounted for as a loss on extinguishment. Also, the fair value of the Warrants of $52,000 was recorded as a loss on extinguishment. The difference between the fair value of the Notes and the face value of the notes of $58,000 was recorded as additional paid on capital. As of March 31, 2020, the amortization expense was approximately $161,000. 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 March 31, 2020 and 2019, convertible promissory notes consisted of the following 2020 2019 Principal amount $ 653,000 $ 506,000 Original issue discount (2,000 ) (19,000 ) Warrant discount (10,000 ) (79,000 ) Conversion feature discount (10,000 ) (85,000 ) Net balance $ 631,000 $ 323,000 Interest expense on default convertible notes amounting to $3,000 and $0 for the three months ended March 31, 2020 and 2019, respectively. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
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 the following reportable non-adjusting events: Subsequent to March 31, 2020, the Company issued six (6) additional Notes for total cash proceeds of $60,000. On January 5, 2021, Piers Cooper (“Mr. Cooper”), our President and a member of our Board of Directors, resigned as an officer and director of our company (“Termination Agreement”). As part of the Termination Agreement, Mr. Cooper’s agreed to return 3,674,330 shares of the Company’s common stock (“Cancelled Shares”). The Cancelled shares were to be returned within thirty days of Mr. Cooper’s execution of the Termination Agreement, which was January 5, 2021. The Cancelled Shares were returned and cancelled on April 19, 2021. In January 2021, the Company issued a promissory note for cash amounting to $15,000 with 8% annual interest per year and a maturity date of March 31, 2022. Interest will be computed starting January 11, 2021 and payable at maturity date together with the principal amount. In the event of default, the interest rate of the note shall increase to 10% per annum and computed on the basis of the actual number of days elapsed and a 365-day year. In February 2021, the Company issued a promissory note for cash amounting to $25,000 with 10% annual interest per year and a maturity date of February 19, 2022. The principal and accrued interest is payable in a single instalment on or before the maturity date. In the event of default, the interest rate of the note shall increase to 15% per annum and computed on the basis of the actual number of days elapsed and a 365-day or 366-day year. In February 2021, the Company signed a new consulting agreement that granted one of its shareholders an option to purchase 750,000 shares of the Company’s common stock at $0.001 per share for the consultancy work provided from August 2020 to February 2021. The options were fully vested on the date of issuance. In March 2021, the Company issued a convertible promissory note in the amount of $55,000 (the “Note”). The total proceeds were approximately $50,000, due to approximately $5,000 for an original issue discount. The Note is non-interest bearing with the principal due and payable starting in March 2022. 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, any money judgment, writ or similar process entered or filed against the Company or any of its property or other assets for more than $100,000, 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 (the “Warrants”) to purchase an aggregate of 27,500 shares of the Company’s common stock for a purchase price of $1.50 per share, subject to adjustments. In March 2021, the CEO agreed to forgive approximately $68,000 due to him. In March 2021, the CFO agree to reduce amount due to him from approximately $127,000 to $30,000. For the reduction of $97,000, the Company will issue 75,000 shares of common stock. The remaining liability of $30,000 will be paid in cash. In April 2021, the Company issued a promissory note for cash amounting to $8,550 with 0% annual interest per year if paid at a maturity date of July 5, 2021. In the event of default, the interest rate of the note shall increase to 8% per annum and computed on the basis of the actual number of days elapsed and a 365-day or 366-day year. In April 2021, an option holder exercised two options for 385,000 and 750,000 shares of the Company's common stock at an exercise price of $0.001 for both options. The shares for the options have yet to be issued. In April 2021, the Company issued a promissory note for cash amounting to $50,000 with 10% annual interest per year and a maturity date of April 22, 2022. The principal and accrued interest is payable in a single instalment on or before the maturity date. In the event of default, the interest rate of the note shall increase to 15% per annum and computed on the basis of the actual number of days elapsed and a 365-day or 366-day year. |
Organization and Accounting P_2
Organization and Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
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 months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020. The balance sheet as of December 31, 2019 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, 2019. 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 $476,000 for the three months ended March 31, 2020 and had an accumulated deficit of approximately $9,802,000 as of March 31, 2020. 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 |
Earnings Per Share | Earnings Per Share We use ASC 260, “ Earnings Per Share There were 1,690,214 common share equivalents at March 31, 2020 and 484,000 common share equivalents at March 31, 2019. For the three months ended March 31, 2020 and 2019, these potential shares were excluded from the shares used to calculate diluted. These securities were not included in the computation of diluted net earnings per share as their effect would have been antidilutive. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Changes to accounting principles are established by the Financial Accounting Standards Board’s (“FASB”) in the form of Accounting Standards Update (“ASU”) to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, cash flows, or presentation thereof. The Company reviewed all recently issued pronouncement in 2021, but not yet effective, and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on the Company’s financial condition or the results of its operations. |
Accounts Payable and Accrued _2
Accounts Payable and Accrued Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Payables and Accruals [Abstract] | |
Schedule of Accounts Payable and Accrued Liabilities | The following table summarizes the Company’s accounts payable and accrued expense balances as of the date indicated: March 31, 2020 December 31, 2019 Trade payables $ 224,000 $ 187,000 Accrued liabilities 196,000 176,000 Accrued interest 3,000 − Accounts payable and accrued expenses $ 423,000 $ 363,000 |
Convertible Promissory Notes (T
Convertible Promissory Notes (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Convertible Promissory Notes | As of March 31, 2020 and 2019, convertible promissory notes consisted of the following 2020 2019 Principal amount $ 653,000 $ 506,000 Original issue discount (2,000 ) (19,000 ) Warrant discount (10,000 ) (79,000 ) Conversion feature discount (10,000 ) (85,000 ) Net balance $ 631,000 $ 323,000 |
Organization and Accounting P_3
Organization and Accounting Policies (Details Narrative) - USD ($) | May 16, 2018 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 |
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 | ||
Common stock, shares issued | 16,634,951 | 16,634,951 | ||
Net loss | $ (476,000) | $ (181,000) | ||
Accumulated deficit | $ (9,802,000) | $ (9,326,000) | ||
Common share equivalents | 1,690,214 | 484,000 | ||
Preferred Purchase Agreement [Member] | ||||
Aggregate purchasers shares | 15,600,544 | |||
Purchase price of shares | $ 16,000 | |||
Purchase price per share | $ 0.001 | |||
Common stock, shares outstanding | 630,207 | |||
Common stock, shares issued | 630,207 | |||
Preferred Purchase Agreement [Member] | Founder Preferred Stock [Member] | ||||
Preferred stock, shares outstanding | 15,600,544 | |||
Preferred stock, shares issued | 15,600,544 | |||
Preferred Purchase Agreement [Member] | M1 Advisors [Member] | ||||
Aggregate purchasers shares | 9,320,414 | |||
Percentage of shares issued and outstanding | 60.14% | |||
Preferred Purchase Agreement [Member] | Mr. Cooper [Member] | ||||
Aggregate purchasers shares | 4,674,330 | |||
Percentage of shares issued and outstanding | 28.80% | |||
Preferred Purchase Agreement [Member] | Members of RealSource Acquisition [Member] | ||||
Aggregate purchasers shares | 1,195,000 |
Accounts Payable and Accrued _3
Accounts Payable and Accrued Liabilities - Schedule of Accounts Payable and Accrued Liabilities (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Payables and Accruals [Abstract] | ||
Trade payables | $ 224,000 | $ 187,000 |
Accrued liabilities | 196,000 | 176,000 |
Accrued interest | 3,000 | |
Accounts payable and accrued expenses | $ 423,000 | $ 363,000 |
Convertible Promissory Notes (D
Convertible Promissory Notes (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Debt instruments, interest rate | 10.00% | ||
Debt instruments, conversion price | $ 1 | ||
Debt instrument, convertible amount | $ 100,000 | ||
Issuance of warrants to purchase of common stock | 73,000 | ||
Issuance of warrant price per share | $ 1.50 | ||
Fair value of warrant amount | $ 52,000 | ||
Additional paid in capital | 8,741,000 | $ 8,750,000 | |
Amortization expenses | 161,000 | ||
Interest expense | 164,000 | $ 21,000 | |
Convertible Promissory Notes [Member] | |||
Conversion of stock, value of issued instrument | 146,000 | ||
Interest expense | 3,000 | ||
Notes [Member] | |||
Additional paid in capital | $ 58,000 | ||
Series A Convertible Preferred Stock [Member] | |||
Conversion of stock, shares converted | 85,975 | ||
Interest expense | $ 0 | ||
Series A Preferred Stock [Member] | |||
Loss on extinguishment of debt | $ 86,000 |
Convertible Promissory Notes -
Convertible Promissory Notes - Schedule of Convertible Promissory Notes (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 |
Net balance | $ 631,000 | $ 323,000 | |
Convertible Promissory Notes [Member] | |||
Principal Amount | 653,000 | $ 506,000 | |
Original issue discount | (2,000) | (19,000) | |
Warrant discount | (10,000) | (79,000) | |
Conversion feature discount | (10,000) | (85,000) | |
Net balance | $ 631,000 | $ 323,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Jan. 05, 2021 | May 31, 2021 | Apr. 30, 2021 | Mar. 31, 2021 | Feb. 28, 2021 | Jan. 31, 2021 | Mar. 31, 2020 | Mar. 31, 2019 | May 21, 2021 |
Debt instrument, interest rate | 10.00% | ||||||||
Proceeds from issuance of convertible debt | $ 220,000 | ||||||||
Debt instruments conversion price per share | $ 1 | ||||||||
Issuance of warrants to purchase of common stock | 73,000 | ||||||||
Issuance of warrant price per share | $ 1.50 | ||||||||
Chief Financial Officer [Member] | Common Stock [Member] | Forecast [Member] | |||||||||
Stock issued during the period, shares | 75,000 | ||||||||
Subsequent Event [Member] | Option [Member] | |||||||||
Option exercise price | $ 0.001 | ||||||||
Subsequent Event [Member] | New Consulting Agreement [Member] | Common Stock [Member] | |||||||||
Stock option granted | 750,000 | ||||||||
Shares issued price per share | $ 0.001 | ||||||||
Subsequent Event [Member] | Piers Cooper [Member] | |||||||||
Stock issued during the period, cancelled | 3,674,330 | ||||||||
Subsequent Event [Member] | Chief Executive Officer [Member] | |||||||||
Debt forgiven by officer, amount | $ 68,000 | ||||||||
Subsequent Event [Member] | Chief Financial Officer [Member] | |||||||||
Debt forgiven by officer, amount | $ 97,000 | ||||||||
Due to officers | $ 30,000 | $ 127,000 | |||||||
Subsequent Event [Member] | Holder One [Member] | Option [Member] | |||||||||
Stock option exercised | 385,000 | ||||||||
Subsequent Event [Member] | Holder Two [Member] | Option [Member] | |||||||||
Stock option exercised | 750,000 | ||||||||
Subsequent Event [Member] | 6 Additional Notes [Member] | |||||||||
Proceeds from notes | $ 60,000 | ||||||||
Subsequent Event [Member] | Promissory Notes [Member] | |||||||||
Debt instrument, face amount | $ 8,550 | $ 25,000 | $ 15,000 | ||||||
Debt instrument, interest rate | 0.00% | 10.00% | 8.00% | ||||||
Debt instrument, maturity date | Jul. 5, 2021 | Feb. 19, 2022 | Mar. 31, 2022 | ||||||
Debt instrument, description | Company issued a promissory note for cash amounting to $8,550 with 0% annual interest per year if paid at a maturity date of July 5, 2021. In the event of default, the interest rate of the note shall increase to 8% per annum and computed on the basis of the actual number of days elapsed and a 365-day or 366-day year. | The principal and accrued interest is payable in a single installment on or before the maturity date. In the event of default, the interest rate of the note shall increase to 15% per annum and computed on the basis of the actual number of days elapsed and a 365-day or 366-day year. | Interest will be computed starting January 11, 2021 and payable at maturity date together with the principal amount. In the event of default, the interest rate of the note shall increase to 10% per annum and computed on the basis of the actual number of days elapsed and a 365-day year. | ||||||
Subsequent Event [Member] | Convertible Promissory Note [Member] | |||||||||
Debt instrument, interest rate | 10.00% | ||||||||
Convertible promissory note issued during period | $ 55,000 | ||||||||
Proceeds from issuance of convertible debt | 50,000 | ||||||||
Original issue discount | $ 5,000 | ||||||||
Debt instrument maturity date, description | The Note is non-interest bearing with the principal due and payable starting in February 2022. | ||||||||
Debt instruments conversion price per share | $ 1 | ||||||||
Indebtedness for borrowed money maximum limit | $ 100,000 | ||||||||
Subsequent Event [Member] | Convertible Promissory Note [Member] | Warrant [Member] | |||||||||
Issuance of warrants to purchase of common stock | 27,500 | ||||||||
Issuance of warrant price per share | $ 1.50 | ||||||||
Subsequent Event [Member] | Promissory Note [Member] | |||||||||
Debt instrument, face amount | $ 50,000 | ||||||||
Debt instrument, interest rate | 10.00% | ||||||||
Debt instrument, maturity date | Apr. 22, 2022 | ||||||||
Debt instrument, description | The principal and accrued interest is payable in a single installment on or before the maturity date. In the event of default, the interest rate of the note shall increase to 15% per annum and computed on the basis of the actual number of days elapsed and a 365-day or 366-day year. |