Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Mar. 31, 2021 | Jun. 30, 2020 | |
Cover [Abstract] | |||
Entity Registrant Name | Pure Harvest Corporate Group, Inc. | ||
Entity Central Index Key | 0001351573 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2020 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filer | No | ||
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 | true | ||
Entity Ex Transition Period | false | ||
ICFR Auditor Attestation Flag | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 16,368,000 | ||
Entity Common Stock, Shares Outstanding | 65,224,568 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash | $ 856,844 | $ 1,665,247 |
Accounts receivable | 91,371 | 1,653 |
Interest receivable | 8,194 | |
Inventory | 1,047,690 | 70,091 |
Deferred rent | 113,778 | 93,333 |
Prepaids and other current assets | 235,335 | |
Total current assets | 2,345,018 | 1,838,518 |
Long-term assets | ||
Property, plant and equipment | 1,599,088 | 331,383 |
Accumulated depreciation | (469,315) | (287,249) |
Deferred rent, net of current portion | 26,446 | 132,223 |
Right of use asset | 537,393 | 184,685 |
Notes receivable and advances on pending acquisitions, net allowance of $33,000 and $33,000, respectively | 2,750,000 | 2,450,000 |
Goodwill | 1,550,225 | 141,453 |
Intangible assets | 2,399,524 | |
Other assets | 301,604 | 15,000 |
Total assets | 11,039,983 | 4,806,013 |
Current liabilities | ||
Accounts payable | 91,741 | 115,126 |
Accrued interest | 23,890 | |
Accrued expenses | 1,324,936 | 75,131 |
Royalty payable | 770 | |
Due to related parties | 116,667 | |
Notes payable | 431,919 | |
Convertible notes payable, net of discount of $146,967 and $41,695, respectively | 1,353,033 | 958,305 |
Related party convertible notes payable | 1,412,504 | |
Total current liabilities | 4,614,133 | 1,289,889 |
Long term liabilities | ||
Notes payable | 6,000 | |
Right of use liability | 293,971 | 133,554 |
Convertible notes payable, net of discount of $1,723,835 and $0, respectively | 226,165 | |
Derivative liabilities | 1,879,776 | |
Total liabilities | 7,020,045 | 1,423,443 |
Commitments and contingencies | ||
Stockholders' equity | ||
Preferred stock; $0.01 par value; 25,000,000 shares authorized; no shares issued and outstanding, respectively | ||
Common stock, $0.01 par value; 100,000,000 shares authorized, 64,117,846 and 37,716,330 shares issued and outstanding, respectively | 641,179 | 377,164 |
Additional paid-in capital | 11,111,799 | 4,391,587 |
Accumulated deficit | (7,733,040) | (1,386,181) |
Total stockholders' equity | 4,019,938 | 3,382,570 |
Total liabilities and stockholders' equity | $ 11,039,983 | $ 4,806,013 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Notes receivable and advances on pending acquisitions, allowance | $ 33,000 | $ 33,000 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares, issued | 64,117,846 | 37,716,330 |
Common stock, shares outstanding | 64,117,846 | 37,716,330 |
Convertible Notes Payable [Member] | ||
Convertible notes payable, discount current | $ 146,967 | $ 41,695 |
Convertible notes payable, discount noncurrent | $ 1,723,835 | $ 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
REVENUES | ||
Product sales and royalty income | $ 735,690 | $ 38,550 |
Cost of sales | 325,191 | 38,153 |
Gross profit | 410,499 | 397 |
OPERATING EXPENSES | ||
Advertising and promotion | 120,637 | 186,876 |
General and administrative expenses, including stock-based compensation of $766,024 and $133,000, respectively | 4,217,139 | 884,753 |
Research and development | 321,332 | |
Depreciation expense | 167,003 | 12,634 |
Total operating expenses | 4,826,111 | 1,084,263 |
Loss from operations | (4,415,612) | (1,083,866) |
Other income (expense): | ||
Interest expense | (1,486,924) | (26,195) |
Loss on extinguishment of notes payable | (336,500) | |
Day one loss and change in fair market value of derivative liabilities | (1,641,824) | |
Loss on equity method investment | (62,449) | |
Other income (expense) | 1,596,450 | (24,806) |
Total other income (expense) | (1,931,247) | (51,001) |
Loss before provision for income taxes | (6,346,859) | (1,134,867) |
Provision for income taxes | ||
NET LOSS | $ (6,346,859) | $ (1,134,867) |
Basic and diluted net loss per common share | $ (0.13) | $ (0.03) |
Basic and diluted weighted-average number of common shares outstanding | 49,216,927 | 33,096,662 |
Consolidated Statements of Op_2
Consolidated Statements of Operations (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Statement [Abstract] | ||
Stock-based compensation | $ 766,024 | $ 133,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (6,346,859) | $ (1,134,867) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 232,542 | 12,634 |
Stock-based compensation | 766,024 | 133,000 |
Common stock issued for services | 681,361 | |
Gain on increase in note receivable | (300,000) | |
Amortization of debt discount | 968,549 | 2,305 |
Loss on extinguishment of notes payable | 336,500 | |
Bargain purchase | (784,540) | |
Loss from equity method investment | (62,449) | |
Impairment of goodwill | 141,153 | |
Excess FMV of shares issued | 131,625 | |
Change in fair value of derivative liability | 1,641,824 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (96,985) | 21,149 |
Interest receivable on notes receivable | 8,194 | (8,194) |
Inventory | (130,641) | (6,151) |
Other assets | (10,000) | (15,000) |
Deferred rent | 85,332 | 54,444 |
Prepaid and other current assets | (215,315) | |
Accounts payable | 102,700 | 10,797 |
Accrued interest | 22,056 | 23,890 |
Accrued expense | 999,107 | 39,131 |
Royalty payable | (770) | 576 |
Right of use asset and liability | 2,122 | (51,131) |
Net cash used in operating activities | (2,074,208) | (917,417) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Notes receivable and advances of pending acquisitions | (2,528,702) | (55,797) |
Notes receivable | (2,450,000) | |
Purchase of machinery and equipment | (279,025) | (26,218) |
Net cash used in investing activities | (2,807,727) | (2,532,015) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Advances (payments) due from (to) related parties, net | (116,667) | 96,778 |
Proceeds from issuance of convertible notes payable | 2,450,000 | 1,000,000 |
Proceeds from notes payable | 1,786,000 | |
Repayment of notes payable | (1,755,801) | |
Proceeds from related party notes payable | 460,000 | |
Proceeds from sale of common stock | 1,250,000 | 3,995,400 |
Proceeds from sale of common stock to be issued | ||
Net cash provided by financing activities | 4,073,532 | 5,092,178 |
Change in cash and cash equivalents | (808,403) | 1,642,746 |
Cash and cash equivalents, beginning of period | 1,665,247 | 22,501 |
Cash and cash equivalents, end of period | 856,844 | 1,665,247 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | ||
Cash paid for income taxes | ||
Non-cash investing and financing activities: | ||
Discount on note payable due to common stock and warrants | 171,082 | |
Common stock issued for accrued interest | 52,294 | |
Common stock issued for business acquisitions | 1,861,678 | 85,626 |
Exchange of note receivable and accrued interest for business acquisition | 1,696,879 | |
Common stock and warrants issued in connection with note extensions | 429,524 | |
Discounts due to common stock and derivative liabilities | 2,602,427 | |
Common stock issued for conversion of related party notes payable | 30,000 | |
Accounts payable converted into a note payable | 159,753 | |
Beneficial conversion feature recorded on convertible debt | 44,000 | |
Common stock issued for conversion of note payable | 117,000 | |
Common stock issued in connection with operating lease | $ 280,000 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Deficit - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2018 | $ 315,234 | $ (201,539) | $ (251,314) | $ (137,619) | |
Balance, shares at Dec. 31, 2018 | 31,523,330 | ||||
Stock-based compensation | $ 2,800 | 130,200 | 133,000 | ||
Stock-based compensation, shares | 280,000 | ||||
Stock returned by former executives | $ (27,500) | 27,500 | |||
Stock returned by former executives, shares | (2,750,000) | ||||
Issuance of common stock for acquisition | $ 1,720 | 83,936 | 85,656 | ||
Issuance of common stock for acquisition, shares | 172,000 | ||||
Issuance of common stock to note holder | 117,000 | 117,000 | |||
Issuance of stock for lease | $ 4,000 | 276,000 | 280,000 | ||
Issuance of stock for lease, shares | 400,000 | ||||
Issuance of common stock to investor | $ 80,910 | 3,964,590 | 4,045,500 | ||
Issuance of common stock to investor, shares | 8,091,000 | ||||
Offering costs | (50,100) | (50,100) | |||
Beneficial conversion feature | 44,000 | 44,000 | |||
Net loss | (1,134,867) | (1,134,867) | |||
Balance at Dec. 31, 2019 | $ 377,164 | 4,391,587 | (1,386,181) | 3,382,570 | |
Balance, shares at Dec. 31, 2019 | 37,716,330 | ||||
Stock-based compensation | 84,663 | 84,663 | |||
Issuance of common stock for acquisition | $ 105,084 | 1,756,594 | 1,861,678 | ||
Issuance of common stock for acquisition, shares | 10,508,397 | ||||
Issuance of common stock to note holder | $ 45,413 | 2,052,294 | 2,097,707 | ||
Issuance of common stock to note holder, shares | 4,541,250 | ||||
Issuance of common stock for cash | $ 32,500 | 1,217,500 | 1,250,000 | ||
Issuance of common stock for cash, shares | 3,250,000 | ||||
Issuance of common stock for services | $ 72,524 | 608,837 | 681,361 | ||
Issuance of common stock for services, shares | 7,252,444 | ||||
Issuance of common stock for accrued interest | $ 1,244 | 51,050 | 52,294 | ||
Issuance of common stock for accrued interest, shares | 124,425 | ||||
Issuance of common stock and warrants for extension of notes payable | $ 5,000 | 424,524 | 429,524 | ||
Issuance of common stock and warrants for extension of notes payable, shares | 500,000 | ||||
Issuance of common stock for conversion of related party note | $ 750 | 29,250 | 30,000 | ||
Issuance of common stock for conversion of related party note, shares | 75,000 | ||||
Discount on convertible notes payable related party due to common stock issued and derivative liability | $ 1,500 | 67,500 | 69,000 | ||
Discount on convertible notes payable related party due to common stock issued and derivative liability, shares | 150,000 | ||||
Extinguishment of related party notes payable | 428,000 | 428,000 | |||
Net loss | (6,346,859) | (6,346,859) | |||
Balance at Dec. 31, 2020 | $ 641,179 | $ 11,111,799 | $ (7,733,040) | $ 4,019,938 | |
Balance, shares at Dec. 31, 2020 | 64,117,846 |
Organization and Description of
Organization and Description of Business | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Organization and Description of Business | NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS The Pure Harvest Corporate Group, Inc. (the “Company”), formerly Pure Harvest Cannabis Group, Inc., was formed as a Colorado corporation in April 2004. The Company changed its name to Pure Harvest Cannabis Group, Inc. in February 2019. The Company changed its name to Pure Harvest Corporate Group on June 8, 2020. On December 31, 2018, the Company acquired all of the outstanding common stock of Pure Harvest Cannabis Producers, Inc., (“PHCP”) in exchange for 17,906,016 (post-split) shares of the Company’s common stock. The transaction was accounted for as a reverse acquisition. As a result of the acquisition of PHCP, the Company now operates in various segments of the cannabis and hemp-CBD industries, focusing on health and wellness products and applying education, research and development, and technology to each sector. The Company’s new business also involves the acquisition and operation of licensed marijuana cultivation facilities, manufacturing facilities and dispensaries. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles. Going Concern The Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. Management plans to fund future operations by raising capital and or seeking joint venture opportunities. We may seek to sell additional equity or convertible securities that may result in dilution to our stockholders. If we raise additional funds through the issuance of convertible securities, these securities could have rights senior to those of our common stock and could contain covenants that restrict our operations. There can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all. If we raise additional funds through collaboration and licensing agreements with third parties, it may be necessary to relinquish valuable rights to our product candidates or future revenue streams or to grant licenses on terms that may not be favorable to us. Principles of Consolidation The Company evaluates the need to consolidate affiliates based on standards set forth in Accounting Standards Codification (“ASC”) 810 Consolidation (“ASC 810”). The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant consolidated transactions and balances have been eliminated in consolidation. Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated fair market value of assets and liabilities acquired under business combinations, useful lives and potential impairment of property and equipment, recoverability of goodwill, estimates of fair value of share-based payments and valuation of deferred tax assets. Cash and Cash Equivalents The Company considers all highly liquid temporary cash investments with an original maturity of six months or less to be cash equivalents. Accounts Receivable We record accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances and is charged to other income (expense) in the combined statements of operations. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the contractual terms of the receivables, and our relationships with, and the economic status of, our customers. As of December 31, 2020 and 2019, an allowance for estimated, uncollectible accounts was determined to be unnecessary. Inventory Inventory is reported at the lower of cost or net realizable value on the first-in, first-out (FIFO) method. Our inventory is subject to obsolescence. Accordingly, quantities on hand are periodically monitored for items no longer being sold, which are written off. All inventory is stored at the manufacturer and maintained by them. Inventory consists of cannabis plants, process materials, finished cannabis goods, raw hemp materials, packaging and other materials and no inventory is deemed obsolete. As of December 31, 2020 and 2019, inventory consisted of the following: 2020 2019 Finished goods $ 505,613 $ 70,091 Work in progress 22,181 - Raw materials 519,896 - Total $ 1,047,690 $ 70,091 Machinery and Equipment Machinery and equipment is recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant furniture, fixtures, machinery and equipment categories are approximately five years. Leasehold improvements are the shorter or the asset life or the lease. Impairment of Long-Lived Assets and Intangible Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets, including intangible assets, may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If the Company determines that the carrying value of the asset is not recoverable, a permanent impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. There were no impairments recorded during the years ended December 31, 2020 and 2019. Goodwill Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. Goodwill is not amortized, but tested for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount. The Company performed its annual test on December 31, 2020 for which an impairment of $141,453 related to Gratus and Prolific’s goodwill was recorded as the Company expects to dispose of these entities. Equity Method and Non-marketable Equity Investments Equity investments for which we have significant influence, but not control, over the investee and are not the primary beneficiary of the investee’s activities are accounted for under the equity method. The Company’s share of gains and losses in equity method investments are recorded in investment and other income, net. The Company monitors equity method investments for events or circumstances that could indicate the investments are impaired, such as a deterioration in the investee’s financial condition and business forecasts and lower valuations in recently completed or anticipated financings, and recognize a charge to investment and other income, net for the difference between the estimated fair value and the carrying value. For equity method investments, we record impairment losses in earnings only when impairments are considered other-than-temporary. Lease Commitment The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease expense for variable lease components are recognized when the obligation is probable. Operating lease right of use (“ROU”) assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. The Company primarily leases buildings (real estate) which are classified as operating leases. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in the Company’s leases, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments. The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability) for the majority of the Company’s leases as the reasonably certain threshold is not met. Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to be payable under the exercise of the Company option to purchase the underlying asset if reasonably certain. Variable lease payments not dependent on a rate or index associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed as probable. Variable lease payments are presented as operating expenses in the Company’s statement of operations in the same line as expense arising from fixed lease payments. As of December 31, 2020 and 2019, management determined that there were no variable lease costs. Convertible Debt and Convertible Preferred Stock When the Company issues convertible debt or convertible preferred stock, it first evaluates the balance sheet classification of the convertible instrument in its entirety to determine whether the instrument should be classified as a liability under ASC 480, “Distinguishing Liabilities from Equity”, and second whether the conversion feature should be accounted for separately from the host instrument. A conversion feature of a convertible debt instrument or certain convertible preferred stock would be separated from the convertible instrument and classified as a derivative liability if the conversion feature, were it a standalone instrument, meets the definition of an “embedded derivative” in ASC 815, Derivatives and Hedging. Generally, characteristics that require derivative treatment include, among others, when the conversion feature is not indexed to the Company’s equity, as defined in ASC 815-40, or when it must be settled either in cash or by issuing stock that is readily convertible to cash. When a conversion feature meets the definition of an embedded derivative, it would be separated from the host instrument and classified as a derivative liability carried on the consolidated balance sheet at fair value, with any changes in its fair value recognized currently in the consolidated statements of operations. If a conversion feature does not meet the conditions to be separated and accounted for as an embedded derivative liability, the Company then determines whether the conversion feature is “beneficial”. A conversion feature would be considered beneficial if the conversion feature is “in the money” when the host instrument is issued or, under certain circumstances, later. If convertible debt contains a beneficial conversion feature (“BCF”), the amount of the proceeds allocated to the BCF reduces the balance of the convertible debt, creating a discount which is amortized over the debt’s term to interest expense in the consolidated statements of operations. Derivative Liabilities A derivative is an instrument whose value is “derived” from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts and for hedging activities. As a matter of policy, the Company does not invest in separable financial derivatives or engage in hedging transactions. However, the Company entered into certain debt financing transactions during 2020, as disclosed in Note 6, containing certain conversion features that have resulted in the instruments being deemed derivatives. The Company evaluates such derivative instruments to properly classify such instruments within equity or as liabilities in our financial statements. Our policy is to settle instruments indexed to our common shares on a first-in-first-out basis. The classification of a derivative instrument is reassessed at each reporting date. If the classification changes as a result of events during a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified. Instruments classified as derivative liabilities are remeasured using the Black-Scholes model at each reporting period (or upon reclassification), and the change in fair value is recorded on our consolidated statement of operations. Offering Costs The Company accounts for offering costs in accordance with FASB ASC 340, “Other Assets and Deferred Costs” Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders’ equity or as a reduction of debt upon the completion of an offering or to expense if the offering is not completed. Business Combinations The Company accounts for businesses it acquires in accordance with ASC Topic 805, “Business Combinations”, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. A bargain purchase is recorded if the net fair value of the assets acquired is in excess of the consideration provided. Acquisition-related expenses and transaction costs associated with business combinations are expensed as incurred. Revenue Recognition The Company records revenue under the adoption of ASC 606 by analyzing exchanges with its customers using a five-step analysis such as identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The Company’s policy is to record revenue as earned when a firm commitment, indicating sales quantity and price exists, delivery has taken place and collectability is reasonably assured. The Company records sales of finished products once the customer places the order and the product is shipped. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Provisions for discounts, returns, allowances, customer rebates and other adjustments are netted with gross sales. The Company accounts for such provisions during the same period in which the related revenues are earned. Provisions for discounts, returns, allowances, customer rebates and other adjustments are minimal and are recorded as a reduction of revenue Stock-Based Compensation The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model. Share based expense paid through direct stock grants is expensed over the vesting period or upon issuance for awards with no further service requirements. Income Taxes The Company is taxed as a C-Corporation, whereby it is subject to federal and state income taxes. The Company follows ASC 740, Income Taxes for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known. As of December 31, 2020 and 2019, the Company’s deferred tax assets consisted entirely of net operating losses to which there is a full valuation allowance applied. In addition, as of December 31, 2020 all tax years since 2016 are open for examination for which no current examinations are in progress. Fair Value of Financial Instruments The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB”) ASC 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The guidance also establishes a fair value hierarchy for measurements of fair value as follows: ● Level 1 - quoted market prices in active markets for identical assets or liabilities. ● Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities 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. ● Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amount of the Company’s financial instruments approximates their fair value as of December 31, 2020 and 2019, due to the short-term nature of these instruments. The Company’s derivative liabilities are considered a Level 2 liability. Net Loss per Share Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share”. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. For the years ended December 31, 2020 and 2019, dilutive instruments consisted of convertible notes payable, unvested restricted stock grants, warrants, options to purchase shares of the Company’s common stock, the effects of which to the Company’s net loss are anti-dilutive. Recent Accounting Pronouncements In December 2019, the FASB issued guidance that simplifies the accounting for income taxes by removing certain exceptions in existing guidance and improves consistency in application by clarifying and amending existing guidance. This guidance is effective for annual periods beginning after December 15, 2020, and interim periods within those annual periods, where the transition method varies depending upon the specific amendment. Early adoption is permitted, including adoption in any interim period. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period, and all amendments must be adopted in the same period. The Company has reviewed the provisions of the new standard, but it is not expected to have a significant impact on the Company. In January 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, which clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting under Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. This guidance is effective for the Company for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company has reviewed the provisions of the new standard, but it is not expected to have a significant impact on the Company. The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs issued to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements. |
Acquisitions
Acquisitions | 12 Months Ended |
Dec. 31, 2020 | |
Business Combinations [Abstract] | |
Acquisitions | NOTE 3 – ACQUISITIONS Prolific Nutrition and Gratus Living On September 6, 2019 the Company acquired all of the outstanding membership interests in Prolific Nutrition, LLC and Gratus Living, LLC (collectively “Prolific Nutrition”) for 172,000 shares of the Company’s restricted common stock. The Company valued the shares of common stock at $85,656 based upon the closing market price of the Company’s common stock on the date of acquisition. Prolific Nutrition and Gratus Living are Colorado-based hemp/CBD companies. As of December 31, 2020, Prolific Nutrition and Gratus Living have recorded no revenues from operations. Prolific Nutrition’s and Grotus Living’s results of operations have been included in the Company’s operating results for the period subsequent to the acquisition on September 30, 2019. Love Pharm, LLC On February 12, 2020, the Company entered into an Operating Agreement with Dr. James Rouse, MD regarding the ownership, operation, and management of Love Pharm, LLC. Love Pharm was recently organized in December 2019 to formulate, develop, manufacture, and brand hemp/CBD products for sale and distribution as well as to form a multi-channel media platform for public and patient education regarding the endocannabinoid system utilizing Dr. Rouse’s name, public image and his extensive experience and expertise in medicine and entrepreneurship. Under the Operating Agreement between the Company and Dr. Rouse, the Company owns 51% of Love Pharm and has a right of first refusal to purchase the remaining 49% of Love Pharm from Dr. Rouse. Additionally, Dr. Rouse will become the Company’s Chief Medical Advisor. Dr. Rouse will receive 400,000 shares of the Company’s common stock for services provided to the Company. See Note 7 for additional information regarding issuance of common stock to Dr. Rouse. As of the date of this filing Love Pharm has yet to commence operations. How Smooth It Is, Inc. On March 12, 2020, the Company entered into an agreement to acquire fifty-one percent (51%) of the outstanding membership interests in How Smooth It Is, Inc. (“HSII”) for $1,500,000 in cash and 7,000,000 shares of the Company’s restricted common stock. HSII is a state-licensed medical marijuana processor based in Riverdale, Michigan and plans to offer a wide range of cannabis-infused products including chocolate bars, gummies, beverages, and other Pure Harvest branded products. HSII is based in a 5,800 square foot facility and has the capability of extracting, processing and manufacturing an array of products containing THC and CBD. HSII has also submitted applications for four dispensary licenses in Riverdale, White Cloud, Alma and Mount Pleasant, MI. The acquisition of the 51% interest in HSII is subject to a number of conditions, including the approval of the Michigan Department of Licensing and Regulatory Affairs (LARA). The acquisition of HSII has been terminated, see Note 4 for additional information. Sofa King Medicinal Wellness Products, LLC On March 13, 2020, the Company entered into an agreement to acquire all of the outstanding membership interests in Sofa King Medicinal Wellness Products, LLC (“SKM”) for 3,000,000 shares of the Company’s common stock. The completion of the acquisition is subject to a number of conditions, including the approval of the acquisition by the Colorado Marijuana Enforcement Division (MED). SKM is a vertically integrated cannabis operator located in Dumont, CO. In August 2020, the acquisition of SKM was finalized as the appropriate licenses have been approved. The operations of SKM have been included within operations from the date of acquisition of August 11, 2020. Test Kitchen, Inc. On August 14, 2020, the Company acquired Test Kitchen, Inc. (“TK”) in August of 2020 for 50,000 shares of restricted stock. Test Kitchen, Inc., a newly formed Colorado-based company specializing in pharmacognosy research, has begun developing and formulating new products using cutting edge technology and proprietary delivery systems. Test Kitchen was founded on the belief in the power of full engagement of products to be combined with mind-body practices to unlock human potential and create predictable experiences. The operations of TK have been included within operations from the date of acquisition. Solar Cultivation Technologies On September 29, 2020, the Company acquired all of the assets of Solar Cultivation Technologies, Inc. (“SCT”), a Denver-based solar company focused on bringing solar to the cannabis industry in an effort to minimize the industry’s carbon footprint. This acquisition will allow the Company to implement SCT’s solar, storage, and intelligent distribution technology throughout its operations in addition to providing these technologies to other operators in the cannabis industry. The operations of SCT have been included within operations from the date of acquisition. In November 2020, the Company transferred SCT assets for an interest in a partnership, see Note 8 for additional information. EdenFlo, LLC On April 24, 2020, the Company acquired substantially all of the assets of EdenFlo, LLC (“EdenFlo”), a producer of CBD extracts and concentrates, for 7,000,000 shares of the Company’s common stock and the release of its obligation of a previous promissory note in the amount of $1,650,000, accrued interest of $46,879 and other advances made to EdenFlo to fund operations of $384,409. EdenFlo joins Prolific Nutrition and Love Pharm, LLC to secure and expand the Company’s position in the national Hemp/CBD industry. EdenFlo is a large-scale Colorado-based hemp-CBD producer and manufacturer of pure isolate and full-spectrum hemp. EdenFlo’s wholesale isolate is made from the highest quality ingredients, utilizing only the best extraction and distillation methods to ensure a final product of extreme purity. Their scientific procedures used for the remediation of THC provide the cleanest broad-spectrum (distillate) oil available in the cannabis extraction industry. The acquisition of EdenFlo will support the Company’s manufacturing operations by supplying the Company’s raw materials requirements for its branded products. Purchase Price and Allocations The transactions above were accounted for as business combinations in accordance with ASC Topic 805, Business Combinations. The Company has determined fair values of the assets acquired and liabilities assumed. These values were estimated by management as well as information obtained from a third party. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise because of the acquisitions. The goodwill is not deductible for tax purposes. The calculation of the purchase prices are as follows: EdenFlo, LLC SKM TK SCT Prolific and Gratus Notes receivable $ 1,650,000 $ - $ - $ - $ - Interest receivable 46,879 - - - - Additional advances 384,409 - - 476,507 - Fair market value of common stock issued 280,000 1,440,000 22,495 119,183 85,656 Cash (received) paid (2,398 ) - - - 55,497 $ 2,358,890 $ 1,440,000 $ 22,495 $ 595,690 $ 141,153 The Company has made a provisional allocation of the purchase price in regard to the acquisitions related to the assets acquired and the liabilities assumed as of the purchase dates. The following table summarizes the proforma effects of the acquisitions as if they had been occurred at the beginning of all periods presented. EdenFlo, LLC SKM TK SCT Prolific and Gratus Purchase Price Purchase Price Purchase Price Purchase Price Purchase Price Allocation Allocation Allocation Allocation Allocation Cash $ 2,398 $ 24,437 $ - $ 2,258 $ - Accounts receivable - - - 24,525 - Inventory 846,958 - - 11,102 - Prepaids and other current assets 8,585 - - 16,929 - Property and equipment 926,671 100,057 - 10,680 - Other assets 11,553 - - - - Licenses - 2,450,000 - - - Goodwill 1,522,725 - 22,495 599,196 141,153 Accounts payable and accrued liabilities - (36,653 ) - (69,000 ) - Loans payable - (313,301 ) - - - Loans payable - related party (960,000 ) - - - - Bargain purchase - (784,540 ) - - - $ 2,358,890 $ 1,440,000 $ 22,495 $ 595,690 $ 141,153 The Company has completed the valuations necessary to finalize the acquisition fair values of the assets acquired and liabilities assumed and related allocation of purchase price of these acquisitions. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the acquisitions noted above had occurred as of January 1, 2019. The unaudited pro forma financial information is not necessarily indicative of what the financial results actually would have been had the acquisition been completed on this date. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project the Company’s future financial results. The pro forma information does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the acquisitions: 2020 2019 Revenues $ 1,118,646 $ 935,242 Net loss $ (7,153,446 ) $ (1,525,135 ) EPS $ (0.13 ) $ (0.03 ) |
Notes Receivable
Notes Receivable | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Notes Receivable | NOTE 4 – NOTES RECEIVABLE In May and June 2019, the Company advanced $28,593 to two unrelated individuals in connection with potential acquisitions for the Company. The amounts were to be repaid, without interest, in October 2019. As of December 31, 2020 and 2019, the Company has continued collection efforts on these notes receivable but has provided an allowance of such due to the unlikelihood of closing the acquisitions or collecting on the notes receivable . In December 2019, the Company advanced $800,000 to How Smooth It Is, Inc., increased by $700,000 in January 2020, totaling $1,500,000 in connection with the potential acquisition of that entity by the Company. The note receivable was due June 1, 2020 and incurs interest at 6% per annum for sixty days and then is increased to 10% per annum thereafter. In March 2020, the Company entered into an acquisition agreement to acquire the entity for which the note receivable was used to offset a portion of the purchase price, see Note 3 for additional information. On April 9, 2020, the Company submitted the required applications to the Michigan Department of Licensing and Regulatory Affairs (LARA) to be approved and pre-qualified as a Processor to be added to the HSII license. Upon approval, PHCG will become 51% owners and can participate in revenue. The transaction will not close until the appropriate Michigan approvals are obtained. During the year ended December 31, 2020, the Company advanced HSIT an additional $247,845 for operations. The additional advances are not under a formal arrangement and thus do not incur interest and are due on demand. On March 12, 2020 the Company entered into an agreement to acquire fifty-one percent (51%) of the outstanding membership interests in How Smooth It Is, Inc. (“HSII”) for $3,000,000 in cash and 7,000,000 shares of the Company’s restricted common stock. On July 29, 2020 the Company terminated its agreement to acquire 51% of HSII. As a part of the termination agreement: ● The sole shareholder of HSII agreed to pay the Company $2,150,000 by August 7, 2020, and ● HSII agreed to manufacture up to 24 separate products for the Company (such as edibles and vaporizers) upon terms agreeable to both the Company and HSII. The products manufactured by HSII will be sold under Pure Harvest brands with the Company receiving royalties from the sale of the products. On December 31, 2020, the Company entered into an amended note receivable loan and security agreement for $2,750,000 with an initial maturity date of March 31, 2021. The note incurs interest at 8% per annum through the initial maturity date. As of the date of these financial statements the required monthly interest payments have been received. Under the agreement, if the loan isn’t repaid by March 31, 2021, as long as there have been no defaults, the loan will be extended to July 31, 2021. During the extended period, the interest rate increases to 12% per annum. In addition, with the extended period, the Company receives various royalties on products sold by the borrower for a period of three year commencing on April 1, 2021. On March 31, 2021, the note was extended to July 31, 2021 in accordance with the terms. The loan is secured by all the assets of HSII and all the shares of HSII held by the sole shareholder. In December 2019, the Company advanced $1,650,000 to EdenFlo, LLC in connection with the potential acquisition of that entity by the Company. The note receivable was due June 1, 2020 and incurs interest at 6% per annum for sixty days and then is increased to 10% per annum thereafter. In addition, the note receivable is secured by all the asset of EdenFlo, LLC and the amount loaned represents the expected cash portion to be paid in connection with the acquisition. See Note 3 for discussion regarding the acquisition of EdenFlo in April 2020. During the year ended December 31, 2020, the Company advanced SCT $476,507 for operations. The additional advances were not under a formal arrangement and thus do not incur interest and are due on demand. See Note 3 for discussion regarding the acquisition of SCT as these advanced were treated as additional consideration within the purchase price. |
Lease Agreements
Lease Agreements | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Lease Agreements | NOTE 5 – LEASE AGREEMENTS In May 2019, the Company entered into a lease agreement for property to be used as a marijuana retail store. The initial term of the lease is for a period of three years. The Company has an option to purchase the property at prices ranging between $1,400,000 and $1,600,000 at various dates prior to May 1, 2022. The Company issued the landlord 400,000 shares of its post-split common stock in consideration for the option to purchase the property for which was recorded as deferred rent and is being amortized to rent expense using the straight line method over the term of the lease. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 10 percent within the calculation. In April 2020, in connection with the EdenFlo asset acquisition, the Company assumed a lease for a marijuana retail store. At inception of the lease, the Company recorded a right of use asset and liability of $140,988. The Company used an effective borrowing rate of 10 percent within the calculation. The lease runs through September 2021. In May 2020, the Company entered into a lease for their corporate offices. The lease requires monthly payments ranging from $12,330 to $12,861 through the maturity of the lease in October 2023. At inception of the lease, the Company recorded a right of use asset and liability of $399,766. The Company used an effective borrowing rate of 10.35 percent within the calculation. The following are the expected lease payments as of December 31, 2020, including the total amount of imputed interest related: Years ending December 31: 2021 $ 330,749 2022 207,675 2023 128,606 Imputed interest (104,941 ) $ 562,089 Total rent expense for the years ended December 31, 2020 and 2019 was $339,415 and $163,466, respectively. |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 6 –NOTES PAYABLE Convertible Notes Payable During the year ended December 31, 2019, the Company issued a series of convertible notes with original principal balances of $1,000,000. The convertible notes had original maturity dates ranging from November 1, 2021 to December 1, 2021 and incur interest at 20% per annum. In July 2020, the due date of the convertible notes was extended to November 1, 2023. In addition, convertible notes are convertible upon issuance at a fixed price of $0.50 per common share. In connection with the issuance, the Company recorded a beneficial conversion feature of $44,000 resulting in a discount to the convertible notes. The discount is being amortized to interest expense using the straight-line method, due to the short-term nature of the convertible notes, over the term. During the year ended December 31, 2020 and 2019, the Company amortized $15,848 and $0, respectively, to interest expense. The remaining discount of $28,152 is expected to be amortized throughout 2021 to 2023. The convertible notes include other provisions such as first right of refusal on additional capital raises, authorization of holder to incur debts senior to the convertible notes, etc. Additionally, should the holder exercise the option to exercise, a warrant to purchase an additional share of common stock for which the terms are not defined in the agreement. Thus, the issuance of the warrant is contingent to which the Company has not accounted for. Should warrants be ultimately issued, the Company expects to record the fair value of such as additional interest expense. Convertible Notes Payable In August 2020, the Company entered into an agreement for borrowings up to $4.0 million. Upon closing, the Company received $1,950,000 and provided for a six-month interest reserve of $146,250. Additional amounts are advanced as varies milestones are reached. The borrowing incur interest at 15% per annum with principal and outstanding interest due three years from the date of issuance. The Company’s assets secure the borrowings. In addition, the borrowings have a variety of financial and non-financial covenants. In addition, the borrowings are convertible at the lesser of $2.00 or 75% of the average closing price of the Company’s common stock for the preceding 30 days. Additionally, for every dollar advanced under the borrowing, the holder receives two shares of common stock. As of December 31, 2020, the Company issued the holder 4,192,500 shares. The agreement also includes a variety of other provisions related to inventory sold with specific discounts, markups, etc. Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. The derivative liabilities are valued on the date the borrowings become convertible and revalued at each reporting period. During the year ended December 31, 2020, the Company recorded initial derivative liabilities of $1,756,636 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.36 our stock price on the date of grant of $0.45, expected dividend yield of 0%, expected volatility of 103.00%, risk free interest rate of 0.64% and expected term of 3.0 years. Upon initial valuation, the derivative liabilities, as well as the fair market value of the 4.2 million shares of common stock exceeded the face values of the convertible notes payable by [$1,886,625], which was recorded as a day one loss in derivative liability. On December 31, 2020, the derivative liabilities were revalued at $1,879,774 resulting in a loss of $123,139. The inputs to value the derivative liabilities were similar to those on the date of issuance. In connection with the derivative liabilities and common stock issued, the Company recorded a $1,950,000 discount. The discount is being amortized over the term of the borrowings using the straight-line method due to the short term nature. During the year ended December 31, 2020, the Company amortized $226,164 of the discount to interest expense. As of December 31, 2020, a discount of $1,634,080 remained for which will be amortized in periods from 2021 to 2023. Related Party Convertible Notes Payable On June 15, 2020, the Company borrowed $30,000 from an individual related to a significant member of management. The loan is evidenced by a promissory note which bears interest at 10% per year and is due and payable on October 8, 2020. At the option of the lender, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by $0.40. On the date of issuance, the conversion price of $0.40 was the closing market price of the Company’s common stock and thus a beneficial conversion feature wasn’t recorded. In September 2020, the note was converted into 75,000 shares of common stock. At various times in 2020, the Company has borrowed a total of $430,000 from an individual related to a director of the Company and a director of the Company. The loans are evidenced by a promissory notes which bears interest at 12% per year and are due and payable at dates ranging from December 10, 2020 to January 10, 2021. The proceeds were used for operations. At the option of the holders, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser of $0.30 or 80% of the ten day average closing price of the Company’s common stock immediately prior to the date of conversion. The holders also have the option to convert $900,000 owed to them from EdenFlo, LLC, as disclosed below, which debt was assumed the Company in connection with the acquisition of EdenFlo, at a price of $0.30 per share for a period of 12 months. Additionally, the holders were issued 215,000 shares of common stock in connection with the notes. On December 7, 2020, the loans were amended whereby the variable conversion price was removed. See below for additional accounting impact. Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. The derivative liabilities are valued on the date the convertible note payable become convertible and revalued at each reporting period. During the year ended December 31, 2020, the Company recorded initial derivative liabilities of $298,913 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.30 our stock price on the date of grant ranging from $0.40 - $0.49, expected dividend yield of 0%, expected volatility of 103.00%, risk free interest rate of 0.64% and expected terms of 0.5 years. Upon initial valuation, the derivative liabilities, as well as the fair market value of the 215,000 shares of common stock exceeded the face values of the convertible notes payable by $2,940, which was recorded as a day one loss in derivative liability. On December 7, 2020, the derivative liabilities were revalued at $540,475 resulting in a loss of $241,562. The value of the derivatives of $540,475 was recorded as a gain on extinguishment due to the modification of the exercise price. The inputs to value the derivative liabilities were similar to those on the date of issuance. In connection with the derivative liabilities and common stock issued, the Company recorded a $396,223 discount. The discount is being amortized over the term of the convertible note using the straight line method due to the short term nature. During the year ended December 31, 2020, the Company amortized $396,223 of the discount to interest expense. As of December 31, 2020, no discount remained. In connection with the EdenFlo asset acquisition, the Company assumed two notes payable with the former shareholders. Under the terms of the agreements $600,000 is payable on June 1, 2021 and does not incur interest and $300,000 is due on August 1, 2022 and does not incur interest. As disclosed above, both notes were modified to include a conversion feature at a price of $0.30 per share. The modification was treated as an extinguishment of the original note for which a loss on extinguishment of $448,000 was recorded. In connection with the SKM acquisition, the Company assumed four notes payable totaling $313,300 with the former membership. The notes do not incur interest and are due on demand. See Note 8 for information relating to loans from an Officer and Director of the Company. Notes Payable - $1.5 Million On March 6, 2020, the Company borrowed $1,500,000 from an unrelated third party. The loan is evidenced by a promissory note which bears interest at 8% per year. The note is due and payable as follows: ● $500,000, together with all accrued and unpaid interest, on April 13, 2020 ● $1,000,000, together with all accrued and unpaid interest, on May 6, 2020 Accrued interest will be paid in shares of the Company’s common stock based upon a 25% discount to the ten-day average closing price of the Company’s common stock immediately prior to May 6, 2020. Accrued interest will include 150,000 additional shares of the Company’s common stock and warrants to purchase 150,000 shares of the Company’s common stock. The warrants are exercisable at any time on or before January 1, 2025 at a price of $2.00 per share. The first payment of $500,000 was made on a timely basis. On issuance, the Company valued the 150,000 shares of common stock and the 150,000 warrants for common stock and recorded the relative fair market of $116,707 as a discount to the note payable. The Company is amortizing the discount over the term of the note payable using the straight-line method due to the short term of the note. During the six months ended June 30, 2020, the Company amortized $92,256 to interest expense. On April 20, 2020, the holder of the Note agreed to extend the due date for the $1,000,000 payment from May 6, 2020 to June 15, 2020. In consideration for extending the repayment date for the second amount to June 15, 2020, the Company issued to the note holder 200,000 shares of its common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. A late payment penalty of $5,000 per day will be due if the $1,000,000 is not paid by June 15, 2020. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $157,784. On June 9, 2020, the holder of the Note agreed to further extend the due date for the $1,000,000 payment to July 15, 2020. In consideration for extending the repayment date, the Company issued to the note holder an additional 200,000 shares of the Company’s common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $170,470. On July 14, 2020, the holder of the Note agreed to further extend the due date for the $1,000,000 payment to August 15, 2020. In consideration for extending the repayment date, the Company issued to the note holder an additional 100,000 shares of the Company’s common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $120,721. The note was paid in full in August 2020. In addition, during the year ended December 31, 2020, the Company issued 124,425 shares of common stock in satisfaction of $52,293 in accrued interest. Note Payable - $200,000 On October 9, 2020, the Company borrowed $200,000 from an unrelated third party. The note incurred interest at 12% per annum and was due by November 9, 2020. The note was repaid. As further consideration, the Company issued 100,000 shares of its restricted common stock to the lender. The Company recorded the fair market value of the shares as a discount of $40,000 to the note for which all was amortized to interest expense during the year ended December 31, 2020. Note Payable - $173,705 On November 1, 2020, the Company entered into an agreement to convert accounts payable of $173,705 into a note payable. The note incurred interest at 8% per annum and is payable in monthly payments. Note Payable - $500,000 On November 17, 2020, the Company borrowed $500,000 from an unrelated third party. The note incurs interest at 8% per annum and matures on January 31, 2020. At the option of the lender, the loan and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser of 75% of the ten day average closing price of the Company’s common stock immediately prior to the date of conversion or $0.50. Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. The derivative liabilities are valued on the date the borrowings become convertible and revalued at each reporting period. During the year ended December 31, 2020, the Company recorded initial derivative liabilities of $287,454 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.24 our stock price on the date of grant of $0.37, expected dividend yield of 0%, expected volatility of 103.00%, risk free interest rate of 0.21% and expected term of 0.25 years. On December 31, 2020, the derivative liabilities were revalued at $134,303 resulting in a gain of $153,151. The inputs to value the derivative liabilities were similar to those on the date of issuance. In connection with the derivative liabilities and common stock issued, the Company recorded a $287,454 discount. The discount is being amortized over the term of the borrowings using the straight-line method due to the short term nature. During the year ended December 31, 2020, the Company amortized $168,639 of the discount to interest expense. As of December 31, 2020, a discount of $118,815 remained for which will be amortized in early 2021. |
Stockholders' Deficit
Stockholders' Deficit | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Stockholders' Deficit | NOTE 7 – STOCKHOLDERS’ DEFICIT Stock-Based Compensation 2019 Issuances Effective January 1, 2019, the Company entered into agreements to issue a total of 1,600,000 shares of common stock to two officers. The shares were to vest over a one-year period commencing on January 1, 2019. The Company valued the common stock at $760,000, using the closing market price of the Company’s common stock on the date of the agreement. The Company was expensing the value of the common stock over the vesting period which mirrors the service period. During the six months ended June 30, 2019, the Company recognized $190,000 of stock-based compensation. On July 30, 2019, the two officers referred to above resigned as officers and directors of the Company. In connection with their resignations, Mr. Lamadrid agreed to return to the Company 1,750,000 shares, and Mr. Scott agreed to return to the Company 1,200,000 shares of the Company’s common stock. These shares, upon their return to the Company, were cancelled and now represent authorized but unissued shares. In January 2019, the Company authorized the issuance of 140,000 shares of common stock to a consultant for services rendered. The Company valued the common stock at $133,000, using the closing market price of the Company’s common stock on the date of the agreement. The Company expensed the value of the common stock upon issuance as there were no additional performance criteria. 2020 Issuances The Company has entered into various employment and advisory agreements for which shares of common stock are issued with a variety of vesting provisions. The Company typically determines the fair market value of these awards on the date of grant and expensing that value over the vesting period which mirrors the service period. In May 2020, the Company entered into two-year employment agreements with Matthew Gregarek, the Company’s Chairman and Chief Executive Officer, David Burcham, the Company’s President, and Daniel Garza, the Company’s Chief Marketing Officer. Among various other salary and bonus terms, the agreements also provide for the award of shares of the Company’s restricted common stock and options to purchase shares of the Company’s common stock. Under these agreements, a total of 6,300,000 fully vested shares of common stock were granted upon execution of the agreements. An additional 1,300,000 shares of common stock were awarded that vested on April 1, 2021. The agreements also provide for the future grant of additional shares of common stock should the individuals remain employed following the April 1, 2021 expiration date. During the year ended December 31, 2020, the Company has recognized stock-based compensation of $299,657 in connection with the employment and other agreements noted above. In addition, under these arrangements a total of 9.4 million shares of common stock are issuable upon final vesting. The remaining stock-based compensation of $76,234 will be recognized over the remaining service periods as follows: $61,986 during the year ending December 31, 2021 and $14,248 during the year ending December 31, 2022. During the year ended December 31, 2020, the Company entered into agreements with consultants for which provided investor awareness, research materials and other services. Under the terms of the agreements, the Company issued 724,444 shares of common stock which was initially valued at $320,400 based upon the closing market price of the Company’s common stock on the date of the agreement. The Company recorded expense of $187,067 within general and administrative expense for the year ended December 31, 2020. The remaining $133,333 has been recorded as a prepaid and will be expensed throughout 2021. Options In May 2020, effective April 1, 2020, the individuals noted above were also granted a total of 5,750,000 options to purchase shares of the Company’s common stock. These options will vest in tranches at various dates through May 1, 2021 with escalating exercise prices ranging from $0.50 to $7.50 and are exercisable for ten years. These options were valued at $40,790 using a Black-Scholes Options Pricing Model. For the year ended December 31, 2020, the Company recorded $37,006 as stock-based compensation. The remaining expense outstanding through May 1, 2021 is $3,784. The fair value of the options is estimated using a Black-Scholes Options Pricing Model with the following assumptions: Exercise price per share $ 3.40 Expected life (years) 2.97 Risk-free interest rate 0.64 % Expected volatility 135 % Offering of Common Stock and Warrants In February 2019, the Company commenced a private offering of its common stock for up to $10 million in proceeds. The Company is offering up to 20 million shares of common stock at a purchase price of $0.50 per share. In addition, for each share purchased the investor will receive a warrant to purchase one additional share of common stock at a price of $2.00 per share. The warrants expire on December 31, 2021 or sooner at the Company’s option, if the Company’s stock trades for a price of $3.00 per share for 10 days with an average volume of 100,000 shares per day. During the year ended December 31, 2020, the Company received $150,000 related to the sale of 300,000 shares of common stock and warrants. On October 23, 2020, the Company sold 2,750,000 shares of its common stock to a private investor for $1,000,000 in proceeds. Common Stock and Warrants Issued with Notes Payable See Note 6 for issuance of shares in connection with note agreements. |
Equity Method Investment
Equity Method Investment | 12 Months Ended |
Dec. 31, 2020 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity Method Investment | NOTE 8 – EQUITY METHOD INVESTMENT On November 12, 2020, the Company contributed SCT’s assets valued at $530,000 less the cash consideration provided by DC Energy Group, LLC of $200,000 for a 40% interest in DC Energy Group, LLC, an entity which is focused on low energy lamination. The investment is included within other assets on the accompanying consolidated balance sheet. The investment is accounted for using the equity method. Condensed financial information for the partnership is as follows: Condensed balance sheet as of December 31, 2020: Current assets $ 507,486 Non-current assets 321,901 Total assets $ 829,387 Current liabilities $ 157,467 Non-current liabilities - Partners’ capital 671,920 Total liabilities and partners’ capital $ 829,387 Condensed statement of operations for the year ended December 31, 2020: Revenues $ 50,000 Net loss $ (158,080 ) Company’s interest in net loss $ (62,449 ) |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 9 – INCOME TAXES As of December 31, 2020 and 2019, deferred taxes consisted of the following: 2020 2019 Deferred taxes: NOL Carryover $ 763,192 $ 222,759 Accrued Liabilities 267,995 14,791 Depreciation (36,700 ) - Net Deferred tax assets 994,487 237,550 Valuation allowance (994,487 ) (237,550 ) Net deferred tax asset $ - $ - The following is the provision for income taxes for the years ended December 31, 2020 and 2019. 2020 2019 Deferred tax expense: State $ 145,581 45,682 Federal 565,674 191,868 Valuation allowance (756,937 ) (237,550 ) Total $ - - As of December 31, 2020 and 2019, the Company has recorded a full valuation allowance on the deferred tax assets. As of December 31, 2020, the Company had net operating loss carry forwards for Federal and State income tax purposes of approximately $2.9 million. The California state net operating loss will begin to expire in 2032. The difference between the statutory tax rate and the effect tax rate is primarily due to permanent differences and the valuation allowance. The Company has filed all its United States Federal and State tax returns. The Company has identified the United States Federal tax returns as its “major” tax jurisdiction. The United States Federal return year 2017 through 2020 are still subject to tax examination by the United States Internal Revenue Service. The Company is subject to examination by State Tax Boards for the years ended 2016 through 2020. The Company currently does not have any ongoing tax examinations. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 10 – RELATED PARTY TRANSACTIONS As of December 31, 2020 and 2019, the Company has $0 and $116,667, respectively, due to related parties. These amounts generally consist of accrued salaries and various expense reimbursements. See Note 7 for shares and options issued to management under employment contracts. In connection with the employment contracts, the Company accrued total deferred salaries and bonuses of $406,750 and $225,000 as of December 31, 2020, respectively. See Note 6 for discussion related to related party convertible notes payable. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 11 – SUBSEQUENT EVENTS The Company has evaluated subsequent events through the filing date of these consolidated financial statements and has disclosed that there are no other events that are material to the financial statements to be disclosed. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles. |
Going Concern | Going Concern The Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. Management plans to fund future operations by raising capital and or seeking joint venture opportunities. We may seek to sell additional equity or convertible securities that may result in dilution to our stockholders. If we raise additional funds through the issuance of convertible securities, these securities could have rights senior to those of our common stock and could contain covenants that restrict our operations. There can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all. If we raise additional funds through collaboration and licensing agreements with third parties, it may be necessary to relinquish valuable rights to our product candidates or future revenue streams or to grant licenses on terms that may not be favorable to us. |
Principles of Consolidation | Principles of Consolidation The Company evaluates the need to consolidate affiliates based on standards set forth in Accounting Standards Codification (“ASC”) 810 Consolidation (“ASC 810”). The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant consolidated transactions and balances have been eliminated in consolidation. |
Use of Estimates | Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated fair market value of assets and liabilities acquired under business combinations, useful lives and potential impairment of property and equipment, recoverability of goodwill, estimates of fair value of share-based payments and valuation of deferred tax assets. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid temporary cash investments with an original maturity of six months or less to be cash equivalents. |
Accounts Receivable | Accounts Receivable We record accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances and is charged to other income (expense) in the combined statements of operations. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the contractual terms of the receivables, and our relationships with, and the economic status of, our customers. As of December 31, 2020 and 2019, an allowance for estimated, uncollectible accounts was determined to be unnecessary. |
Inventory | Inventory Inventory is reported at the lower of cost or net realizable value on the first-in, first-out (FIFO) method. Our inventory is subject to obsolescence. Accordingly, quantities on hand are periodically monitored for items no longer being sold, which are written off. All inventory is stored at the manufacturer and maintained by them. Inventory consists of cannabis plants, process materials, finished cannabis goods, raw hemp materials, packaging and other materials and no inventory is deemed obsolete. As of December 31, 2020 and 2019, inventory consisted of the following: 2020 2019 Finished goods $ 505,613 $ 70,091 Work in progress 22,181 - Raw materials 519,896 - Total $ 1,047,690 $ 70,091 |
Machinery and Equipment | Machinery and Equipment Machinery and equipment is recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant furniture, fixtures, machinery and equipment categories are approximately five years. Leasehold improvements are the shorter or the asset life or the lease. |
Impairment of Long-Lived Assets and Intangible Assets | Impairment of Long-Lived Assets and Intangible Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets, including intangible assets, may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If the Company determines that the carrying value of the asset is not recoverable, a permanent impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. There were no impairments recorded during the years ended December 31, 2020 and 2019. |
Goodwill | Goodwill Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. Goodwill is not amortized, but tested for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount. The Company performed its annual test on December 31, 2020 for which an impairment of $141,453 related to Gratus and Prolific’s goodwill was recorded as the Company expects to dispose of these entities. |
Equity Method and Non-marketable Equity Investments | Equity Method and Non-marketable Equity Investments Equity investments for which we have significant influence, but not control, over the investee and are not the primary beneficiary of the investee’s activities are accounted for under the equity method. The Company’s share of gains and losses in equity method investments are recorded in investment and other income, net. The Company monitors equity method investments for events or circumstances that could indicate the investments are impaired, such as a deterioration in the investee’s financial condition and business forecasts and lower valuations in recently completed or anticipated financings, and recognize a charge to investment and other income, net for the difference between the estimated fair value and the carrying value. For equity method investments, we record impairment losses in earnings only when impairments are considered other-than-temporary. |
Lease Commitment | Lease Commitment The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease expense for variable lease components are recognized when the obligation is probable. Operating lease right of use (“ROU”) assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. The Company primarily leases buildings (real estate) which are classified as operating leases. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in the Company’s leases, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments. The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability) for the majority of the Company’s leases as the reasonably certain threshold is not met. Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to be payable under the exercise of the Company option to purchase the underlying asset if reasonably certain. Variable lease payments not dependent on a rate or index associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed as probable. Variable lease payments are presented as operating expenses in the Company’s statement of operations in the same line as expense arising from fixed lease payments. As of December 31, 2020 and 2019, management determined that there were no variable lease costs. |
Convertible Debt and Convertible Preferred Stock | Convertible Debt and Convertible Preferred Stock When the Company issues convertible debt or convertible preferred stock, it first evaluates the balance sheet classification of the convertible instrument in its entirety to determine whether the instrument should be classified as a liability under ASC 480, “Distinguishing Liabilities from Equity”, and second whether the conversion feature should be accounted for separately from the host instrument. A conversion feature of a convertible debt instrument or certain convertible preferred stock would be separated from the convertible instrument and classified as a derivative liability if the conversion feature, were it a standalone instrument, meets the definition of an “embedded derivative” in ASC 815, Derivatives and Hedging. Generally, characteristics that require derivative treatment include, among others, when the conversion feature is not indexed to the Company’s equity, as defined in ASC 815-40, or when it must be settled either in cash or by issuing stock that is readily convertible to cash. When a conversion feature meets the definition of an embedded derivative, it would be separated from the host instrument and classified as a derivative liability carried on the consolidated balance sheet at fair value, with any changes in its fair value recognized currently in the consolidated statements of operations. If a conversion feature does not meet the conditions to be separated and accounted for as an embedded derivative liability, the Company then determines whether the conversion feature is “beneficial”. A conversion feature would be considered beneficial if the conversion feature is “in the money” when the host instrument is issued or, under certain circumstances, later. If convertible debt contains a beneficial conversion feature (“BCF”), the amount of the proceeds allocated to the BCF reduces the balance of the convertible debt, creating a discount which is amortized over the debt’s term to interest expense in the consolidated statements of operations. |
Derivative Liabilities | Derivative Liabilities A derivative is an instrument whose value is “derived” from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts and for hedging activities. As a matter of policy, the Company does not invest in separable financial derivatives or engage in hedging transactions. However, the Company entered into certain debt financing transactions during 2020, as disclosed in Note 6, containing certain conversion features that have resulted in the instruments being deemed derivatives. The Company evaluates such derivative instruments to properly classify such instruments within equity or as liabilities in our financial statements. Our policy is to settle instruments indexed to our common shares on a first-in-first-out basis. The classification of a derivative instrument is reassessed at each reporting date. If the classification changes as a result of events during a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified. Instruments classified as derivative liabilities are remeasured using the Black-Scholes model at each reporting period (or upon reclassification), and the change in fair value is recorded on our consolidated statement of operations. |
Offering Costs | Offering Costs The Company accounts for offering costs in accordance with FASB ASC 340, “Other Assets and Deferred Costs” Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders’ equity or as a reduction of debt upon the completion of an offering or to expense if the offering is not completed. |
Business Combinations | Business Combinations The Company accounts for businesses it acquires in accordance with ASC Topic 805, “Business Combinations”, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. A bargain purchase is recorded if the net fair value of the assets acquired is in excess of the consideration provided. Acquisition-related expenses and transaction costs associated with business combinations are expensed as incurred. |
Revenue Recognition | Revenue Recognition The Company records revenue under the adoption of ASC 606 by analyzing exchanges with its customers using a five-step analysis such as identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The Company’s policy is to record revenue as earned when a firm commitment, indicating sales quantity and price exists, delivery has taken place and collectability is reasonably assured. The Company records sales of finished products once the customer places the order and the product is shipped. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Provisions for discounts, returns, allowances, customer rebates and other adjustments are netted with gross sales. The Company accounts for such provisions during the same period in which the related revenues are earned. Provisions for discounts, returns, allowances, customer rebates and other adjustments are minimal and are recorded as a reduction of revenue |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model. Share based expense paid through direct stock grants is expensed over the vesting period or upon issuance for awards with no further service requirements. |
Income Taxes | Income Taxes The Company is taxed as a C-Corporation, whereby it is subject to federal and state income taxes. The Company follows ASC 740, Income Taxes for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known. As of December 31, 2020 and 2019, the Company’s deferred tax assets consisted entirely of net operating losses to which there is a full valuation allowance applied. In addition, as of December 31, 2020 all tax years since 2016 are open for examination for which no current examinations are in progress. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB”) ASC 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The guidance also establishes a fair value hierarchy for measurements of fair value as follows: ● Level 1 - quoted market prices in active markets for identical assets or liabilities. ● Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities 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. ● Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amount of the Company’s financial instruments approximates their fair value as of December 31, 2020 and 2019, due to the short-term nature of these instruments. The Company’s derivative liabilities are considered a Level 2 liability. |
Net Loss Per Share | Net Loss per Share Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share”. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. For the years ended December 31, 2020 and 2019, dilutive instruments consisted of convertible notes payable, unvested restricted stock grants, warrants, options to purchase shares of the Company’s common stock, summarized below. The effects of which to the Company’s net loss are anti-dilutive. 2020 2019 Restricted stock 3,100,000 - Options 5,750,000 - Warrants 26,432,516 26,432,516 Convertible notes payable 10,120,637 2,000,000 Total 45,403,153 28,432,516 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In December 2019, the FASB issued guidance that simplifies the accounting for income taxes by removing certain exceptions in existing guidance and improves consistency in application by clarifying and amending existing guidance. This guidance is effective for annual periods beginning after December 15, 2020, and interim periods within those annual periods, where the transition method varies depending upon the specific amendment. Early adoption is permitted, including adoption in any interim period. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period, and all amendments must be adopted in the same period. The Company has reviewed the provisions of the new standard, but it is not expected to have a significant impact on the Company. In January 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, which clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting under Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. This guidance is effective for the Company for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company has reviewed the provisions of the new standard, but it is not expected to have a significant impact on the Company. The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs issued to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Inventory | As of December 31, 2020 and 2019, inventory consisted of the following: 2020 2019 Finished goods $ 505,613 $ 70,091 Work in progress 22,181 - Raw materials 519,896 - Total $ 1,047,690 $ 70,091 |
Schedule of Loss Antidilutive | The effects of which to the Company’s net loss are anti-dilutive. 2020 2019 Restricted stock 3,100,000 - Options 5,750,000 - Warrants 26,432,516 26,432,516 Convertible notes payable 10,120,637 2,000,000 Total 45,403,153 28,432,516 |
Acquisitions (Tables)
Acquisitions (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Business Combinations [Abstract] | |
Schedule of Purchase Price Calculation | The calculation of the purchase prices are as follows: EdenFlo, LLC SKM TK SCT Prolific and Gratus Notes receivable $ 1,650,000 $ - $ - $ - $ - Interest receivable 46,879 - - - - Additional advances 384,409 - - 476,507 - Fair market value of common stock issued 280,000 1,440,000 22,495 119,183 85,656 Cash (received) paid (2,398 ) - - - 55,497 $ 2,358,890 $ 1,440,000 $ 22,495 $ 595,690 $ 141,153 |
Summary of Acquisition Related Preliminary Purchase Price | The Company has made a provisional allocation of the purchase price in regard to the acquisitions related to the assets acquired and the liabilities assumed as of the purchase dates. The following table summarizes the proforma effects of the acquisitions as if they had been occurred at the beginning of all periods presented. EdenFlo, LLC SKM TK SCT Prolific and Gratus Purchase Price Purchase Price Purchase Price Purchase Price Purchase Price Allocation Allocation Allocation Allocation Allocation Cash $ 2,398 $ 24,437 $ - $ 2,258 $ - Accounts receivable - - - 24,525 - Inventory 846,958 - - 11,102 - Prepaids and other current assets 8,585 - - 16,929 - Property and equipment 926,671 100,057 - 10,680 - Other assets 11,553 - - - - Licenses - 2,450,000 - - - Goodwill 1,522,725 - 22,495 599,196 141,153 Accounts payable and accrued liabilities - (36,653 ) - (69,000 ) - Loans payable - (313,301 ) - - - Loans payable - related party (960,000 ) - - - - Bargain purchase - (784,540 ) - - - $ 2,358,890 $ 1,440,000 $ 22,495 $ 595,690 $ 141,153 |
Schedule of Pro-Forma Information | The Company has completed the valuations necessary to finalize the acquisition fair values of the assets acquired and liabilities assumed and related allocation of purchase price of these acquisitions. 2020 2019 Revenues $ 1,118,646 $ 935,242 Net loss $ (7,153,446 ) $ (1,525,135 ) EPS $ (0.13 ) $ (0.03 ) |
Lease Agreements (Tables)
Lease Agreements (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Schedule of Expected Lease Payments | The following are the expected lease payments as of December 31, 2020, including the total amount of imputed interest related: Years ending December 31: 2021 $ 330,749 2022 207,675 2023 128,606 Imputed interest (104,941 ) $ 562,089 |
Stockholders' Deficit (Tables)
Stockholders' Deficit (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Schedule of Fair Value Black-Scholes Options Pricing | The fair value of the options is estimated using a Black-Scholes Options Pricing Model with the following assumptions: Exercise price per share $ 3.40 Expected life (years) 2.97 Risk-free interest rate 0.64 % Expected volatility 135 % |
Equity Method Investment (Table
Equity Method Investment (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Schedule of Condensed Financial Information | Condensed balance sheet as of December 31, 2020: Current assets $ 507,486 Non-current assets 321,901 Total assets $ 829,387 Current liabilities $ 157,467 Non-current liabilities - Partners’ capital 671,920 Total liabilities and partners’ capital $ 829,387 Condensed statement of operations for the year ended December 31, 2020: Revenues $ 50,000 Net loss $ (158,080 ) Company’s interest in net loss $ (62,449 ) |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Deferred Tax Assets | As of December 31, 2020 and 2019, deferred taxes consisted of the following: 2020 2019 Deferred taxes: NOL Carryover $ 763,192 $ 222,759 Accrued Liabilities 267,995 14,791 Depreciation (36,700 ) - Net Deferred tax assets 994,487 237,550 Valuation allowance (994,487 ) (237,550 ) Net deferred tax asset $ - $ - |
Schedule of Provision for Income Taxes | The following is the provision for income taxes for the years ended December 31, 2020 and 2019. 2020 2019 Deferred tax expense: State $ 145,581 45,682 Federal 565,674 191,868 Valuation allowance (756,937 ) (237,550 ) Total $ - - |
Organization and Description _2
Organization and Description of Business (Details Narrative) | 12 Months Ended |
Dec. 31, 2018shares | |
Pure Harvest Cannabis Producers, Inc [Member] | Post-split [Member] | |
Number of common stock shares acquired | 17,906,016 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | ||
Machinery and equipment, depreciation methods | straight-line method | |
Estimated useful life of machinery and equipment | 5 years | |
Impairment of long-Lived Assets and intangible assets | ||
Impairment of goodwill | 141,153 | |
Variable lease costs |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Inventory (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Accounting Policies [Abstract] | ||
Finished goods | $ 505,613 | $ 70,091 |
Work in progress | 22,181 | |
Raw materials | 519,896 | |
Total | $ 1,047,690 | $ 70,091 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Schedule of Loss Antidilutive (Details) - shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Antidilituve loss | 28,432,516 | 45,403,153 |
Restricted Stock [Member] | ||
Antidilituve loss | 3,100,000 | |
Option [Member] | ||
Antidilituve loss | 5,750,000 | |
Warrant [Member] | ||
Antidilituve loss | 26,432,516 | 26,432,516 |
Convertible Notes Payable [Member] | ||
Antidilituve loss | 10,120,637 | 2,000,000 |
Acquisitions (Details Narrative
Acquisitions (Details Narrative) | Aug. 14, 2020shares | Apr. 24, 2020USD ($)shares | Mar. 13, 2020shares | Mar. 12, 2020USD ($)ft²shares | Feb. 12, 2020shares | Sep. 06, 2019shares | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Apr. 09, 2020 |
Ownership percentage | 51.00% | ||||||||
Stock issued during period acquisition, value | $ | $ 1,861,678 | $ 85,656 | |||||||
How Smooth It Is, Inc. [Member] | |||||||||
Ownership percentage | 51.00% | ||||||||
Payment to acquire membership interests | $ | $ 1,500,000 | ||||||||
Area of land | ft² | 5,800 | ||||||||
Sofa King Medicinal Wellness Products, LLC [Member] | |||||||||
Number of shares issued for membership interests | 3,000,000 | ||||||||
Test Kitchen Inc [Member] | |||||||||
Number of shares issued for membership interests | 50,000 | ||||||||
EdenFlo, LLC [Member] | |||||||||
Stock issued during period acquisition, shares | 7,000,000 | ||||||||
Stock issued during period acquisition, value | $ | $ 1,650,000 | ||||||||
Accrued interest | $ | 46,879 | ||||||||
Other advances fund operations | $ | $ 384,409 | ||||||||
Operating Agreement [Member] | Dr. James Rouse [Member] | |||||||||
Ownership percentage | 51.00% | ||||||||
Purchase right, percentage | 49.00% | ||||||||
Number of shares issued for services provided | 400,000 | ||||||||
Restricted Stock [Member] | How Smooth It Is, Inc. [Member] | |||||||||
Number of shares issued for membership interests | 7,000,000 | ||||||||
Prolific Nutrition [Member] | |||||||||
Number of shares issued for membership interests | 85,656 | ||||||||
Prolific Nutrition [Member] | Restricted Stock [Member] | |||||||||
Number of shares issued for membership interests | 172,000 |
Acquisitions - Schedule of Purc
Acquisitions - Schedule of Purchase Price Calculation (Details) | Dec. 31, 2020USD ($) |
Notes receivable | |
Interest receivable | |
Additional advances | |
Fair market value of common stock issued | 85,656 |
Cash (received) paid | 55,497 |
Total | 141,153 |
EdenFlo, LLC [Member] | |
Notes receivable | 1,650,000 |
Interest receivable | 46,879 |
Additional advances | 384,409 |
Fair market value of common stock issued | 280,000 |
Cash (received) paid | (2,398) |
Total | 2,358,890 |
SKM [Member] | |
Notes receivable | |
Interest receivable | |
Additional advances | |
Fair market value of common stock issued | 1,440,000 |
Cash (received) paid | |
Total | 1,440,000 |
TK [Member] | |
Notes receivable | |
Interest receivable | |
Additional advances | |
Fair market value of common stock issued | 22,495 |
Cash (received) paid | |
Total | 22,495 |
SCT [Member] | |
Notes receivable | |
Interest receivable | |
Additional advances | 476,507 |
Fair market value of common stock issued | 119,183 |
Cash (received) paid | |
Total | $ 595,690 |
Acquisitions - Summary of Acqui
Acquisitions - Summary of Acquisition Related Preliminary Purchase Price (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Cash | ||
Accounts receivable | ||
Inventory | ||
Prepaids and other current assets | ||
Property and equipment | ||
Other assets | ||
Licenses | ||
Goodwill | 1,550,225 | $ 141,453 |
Accounts payable and accrued liabilities | ||
Loans payable | ||
Loans payable - related party | ||
Bargain purchase | ||
Assets acquired and liabilities noncontrolling interest | 141,153 | |
EdenFlo, LLC [Member] | ||
Cash | 2,398 | |
Accounts receivable | ||
Inventory | 846,958 | |
Prepaids and other current assets | 8,585 | |
Property and equipment | 926,671 | |
Other assets | 11,553 | |
Licenses | ||
Goodwill | 1,522,725 | |
Accounts payable and accrued liabilities | ||
Loans payable | ||
Loans payable - related party | (960,000) | |
Bargain purchase | ||
Assets acquired and liabilities noncontrolling interest | 4,514,890 | |
SKM [Member] | ||
Cash | 24,437 | |
Accounts receivable | ||
Inventory | ||
Prepaids and other current assets | ||
Property and equipment | 100,057 | |
Other assets | ||
Licenses | 2,450,000 | |
Goodwill | ||
Accounts payable and accrued liabilities | (36,653) | |
Loans payable | (313,301) | |
Loans payable - related party | ||
Bargain purchase | (784,540) | |
Assets acquired and liabilities noncontrolling interest | 1,440,000 | |
TK [Member] | ||
Cash | ||
Accounts receivable | ||
Inventory | ||
Prepaids and other current assets | ||
Property and equipment | ||
Other assets | ||
Licenses | ||
Goodwill | 22,495 | |
Accounts payable and accrued liabilities | ||
Loans payable | ||
Loans payable - related party | ||
Bargain purchase | ||
Assets acquired and liabilities noncontrolling interest | 22,495 | |
SCT [Member] | ||
Cash | 2,258 | |
Accounts receivable | 24,525 | |
Inventory | 11,102 | |
Prepaids and other current assets | 16,929 | |
Property and equipment | 10,680 | |
Other assets | ||
Licenses | ||
Goodwill | 599,196 | |
Accounts payable and accrued liabilities | (69,000) | |
Loans payable | ||
Loans payable - related party | ||
Bargain purchase | ||
Assets acquired and liabilities noncontrolling interest | $ 595,690 |
Acquisitions - Schedule of Pro-
Acquisitions - Schedule of Pro-Forma Information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Business Combinations [Abstract] | ||
Revenues | $ 1,118,646 | $ 935,242 |
Net loss | $ (7,153,446) | $ (1,525,135) |
EPS | $ (0.13) | $ (0.03) |
Notes Receivable (Details Narra
Notes Receivable (Details Narrative) - USD ($) | Dec. 31, 2020 | Apr. 24, 2020 | Mar. 12, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Aug. 07, 2020 | Jul. 29, 2020 | Jun. 15, 2020 | Apr. 09, 2020 | Jan. 31, 2020 | Sep. 30, 2019 | May 31, 2019 |
Notes receivable | $ 2,750,000 | $ 2,750,000 | $ 2,450,000 | |||||||||
Debt interest rate | 10.00% | |||||||||||
Ownership interest percentage | 51.00% | |||||||||||
Note Receivable Loan and Security Agreement [Member] | ||||||||||||
Debt maturity date | Mar. 31, 2021 | |||||||||||
Debt interest rate | 8.00% | 8.00% | ||||||||||
Debt instrument, face amount | $ 2,750,000 | $ 2,750,000 | ||||||||||
Debt instrument, description | Under the agreement, if the loan isn't repaid by March 31, 2021, as long as there have been no defaults, the loan will be extended to July 31, 2021. During the extended period, the interest rate increases to 12% per annum. In addition, with the extended period, the Company receives various royalties on products sold by the borrower for a period of three year commencing on April 1, 2021. On March 31, 2021, the note was extended to July 31, 2021 in accordance with the terms. The loan is secured by all the assets of HSII and all the shares of HSII held by the sole shareholder. | |||||||||||
How Smooth Inc [Member] | ||||||||||||
Notes receivable | $ 1,500,000 | |||||||||||
Advances to related party | $ 800,000 | $ 700,000 | ||||||||||
Debt maturity date | Jun. 1, 2020 | |||||||||||
Debt interest rate | 10.00% | |||||||||||
How Smooth Inc [Member] | Sixty Days [Member] | ||||||||||||
Debt interest rate | 6.00% | |||||||||||
EdenFlo, LLC [Member] | ||||||||||||
Advances to related party | $ 1,650,000 | |||||||||||
Debt maturity date | Jun. 1, 2020 | |||||||||||
Debt interest rate | 10.00% | |||||||||||
Other advances fund operations | $ 384,409 | |||||||||||
EdenFlo, LLC [Member] | Sixty Days [Member] | ||||||||||||
Debt interest rate | 6.00% | |||||||||||
Two Unrelated Individuals [Member] | ||||||||||||
Notes receivable | $ 28,593 | $ 28,593 | ||||||||||
HSIT [Member] | ||||||||||||
Advances to related party | $ 247,845 | 247,845 | ||||||||||
HSIT [Member] | ||||||||||||
Ownership interest percentage | 51.00% | |||||||||||
HSII [Member] | ||||||||||||
Ownership interest percentage | 51.00% | |||||||||||
Payment to acquire membership interests | $ 3,000,000 | |||||||||||
Note payable | $ 2,150,000 | |||||||||||
HSII [Member] | Restricted Stock [Member] | ||||||||||||
Number of shares issued for membership interests | 7,000,000 | |||||||||||
SCT [Member] | ||||||||||||
Other advances fund operations | $ 476,507 |
Lease Agreements (Details Narra
Lease Agreements (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |||
May 31, 2020 | May 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Apr. 30, 2020 | |
Lease term | 3 years | ||||
Number of commitment fee shares | 400,000 | ||||
Effective borrowing rate | 10.35% | 10.00% | 10.00% | ||
Right of use asset | $ 399,766 | $ 537,393 | $ 184,685 | $ 140,988 | |
Lease liability | $ 399,766 | ||||
Lease maturity date | Oct. 31, 2023 | ||||
Rent expenses | $ 339,415 | $ 163,466 | |||
Minimum [Member] | |||||
Property purchase price | $ 1,400,000 | ||||
Monthly lease payments | $ 12,330 | ||||
Maximum [Member] | |||||
Property purchase price | $ 1,600,000 | ||||
Monthly lease payments | $ 12,861 |
Lease Agreements - Schedule of
Lease Agreements - Schedule of Expected Lease Payments (Details) | Dec. 31, 2020USD ($) |
Leases [Abstract] | |
2021 | $ 330,749 |
2022 | 207,675 |
2023 | 128,606 |
Imputed interest | (104,941) |
Total | $ 562,089 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) | Dec. 07, 2020USD ($) | Nov. 17, 2020USD ($)Integer$ / shares | Oct. 09, 2020USD ($)shares | Jul. 14, 2020USD ($)$ / sharesshares | Jun. 15, 2020USD ($)$ / sharesshares | Jun. 09, 2020USD ($)$ / sharesshares | Apr. 20, 2020USD ($)$ / sharesshares | Mar. 06, 2020USD ($)Integer$ / sharesshares | Sep. 30, 2020shares | Aug. 31, 2020USD ($)$ / shares | Jul. 31, 2020USD ($) | Dec. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | Nov. 02, 2020USD ($) |
Debt interest rate | 10.00% | |||||||||||||
Conversion price per share | $ / shares | $ 0.40 | |||||||||||||
Amortization of interest expense | $ 15,848 | $ 0 | ||||||||||||
Debt discount | $ 28,152 | |||||||||||||
Debt discount description | The remaining discount of $28,152 is expected to be amortized throughout 2021 to 2023. | |||||||||||||
Number of common stock issued | shares | 215,000 | |||||||||||||
Amortized discount on interest expense | $ 968,549 | 2,305 | ||||||||||||
Short term borrowing | $ 30,000 | |||||||||||||
Extinguishment loss | (336,500) | |||||||||||||
Payment of notes payable | 1,755,801 | |||||||||||||
Issuance of common stock for accrued interest | 52,294 | |||||||||||||
Sofa King Medicinal Wellness Products, LLC [Member] | ||||||||||||||
Notes payable | 313,300 | |||||||||||||
EdenFlo Asset Acquisition [Member] | ||||||||||||||
Extinguishment loss | $ 448,000 | |||||||||||||
Individual related to Director [Member] | ||||||||||||||
Debt interest rate | 12.00% | |||||||||||||
Short term borrowing | $ 430,000 | |||||||||||||
Director [Member] | ||||||||||||||
Debt interest rate | 12.00% | |||||||||||||
Short term borrowing | $ 430,000 | |||||||||||||
The Holder [Member] | ||||||||||||||
Debt interest rate | 80.00% | |||||||||||||
Conversion price per share | $ / shares | $ 0.30 | |||||||||||||
Unrelated Third Party [Member] | ||||||||||||||
Convertible notes principal balance amount | $ 900,000 | |||||||||||||
Debt interest rate | 8.00% | |||||||||||||
Short term borrowing | $ 1,500,000 | |||||||||||||
Note Holder [Member] | ||||||||||||||
Convertible notes mature dates | Aug. 15, 2020 | Jul. 15, 2020 | Jun. 15, 2020 | |||||||||||
Number of common stock issued | shares | 100,000 | 200,000 | 200,000 | |||||||||||
Extinguishment loss | $ 120,721 | $ 170,470 | $ 157,784 | |||||||||||
Notes payable | $ 1,000,000 | $ 1,000,000 | $ 1,000,000 | |||||||||||
Warrants to purchase common stock | shares | 200,000 | 200,000 | 200,000 | |||||||||||
Warrant exercisable date | Jan. 1, 2025 | Jan. 1, 2025 | Jan. 1, 2025 | |||||||||||
Warrants exercise price | $ / shares | $ 2 | $ 2 | $ 2 | |||||||||||
Payment of notes payable | $ 1,000,000 | |||||||||||||
Debt instrument maturity date description | Payment from May 6, 2020 to June 15, 2020. | |||||||||||||
Penalty payment | $ 5,000 | |||||||||||||
Measurement Input, Exercise Price [Member] | ||||||||||||||
Derivative liability, stock price | $ / shares | $ 0.30 | |||||||||||||
Measurement Input, Expected Dividend Rate [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 0 | |||||||||||||
Measurement Input, Price Volatility [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 103 | |||||||||||||
Measurement Input, Risk Free Interest Rate [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 0.64 | |||||||||||||
Measurement Input, Expected Term [Member] | ||||||||||||||
Derivative liability, measurement input term | 6 months | |||||||||||||
Common Stock [Member] | ||||||||||||||
Number of common stock issued | shares | 8,091,000 | |||||||||||||
Issuance of common stock for accrued interest | $ 1,244 | |||||||||||||
Issuance of common stock for accrued interest, shares | shares | 124,425 | |||||||||||||
Minimum [Member] | Measurement Input, Share Price [Member] | ||||||||||||||
Derivative liability, stock price | $ / shares | $ 0.40 | |||||||||||||
Maximum [Member] | Measurement Input, Share Price [Member] | ||||||||||||||
Derivative liability, stock price | $ / shares | $ 0.49 | |||||||||||||
Convertible Notes Payable [Member] | ||||||||||||||
Convertible notes principal balance amount | $ 1,000,000 | |||||||||||||
Convertible notes mature dates | Nov. 1, 2023 | |||||||||||||
Debt interest rate | 15.00% | 20.00% | ||||||||||||
Conversion price per share | $ / shares | $ 2 | $ 0.50 | ||||||||||||
Beneficial conversion feature | $ 44,000 | |||||||||||||
Amortization of interest expense | $ 146,250 | |||||||||||||
Debt maximum borrowing capacity | 4,000,000 | |||||||||||||
Proceeds from issuance of debt | $ 1,950,000 | |||||||||||||
Closing price percentage | 75.00% | |||||||||||||
Shares owed to holders | shares | 4,192,500 | |||||||||||||
Derivative liabilities | $ 1,756,636 | |||||||||||||
Loss on derivative liability | $ 1,886,625 | |||||||||||||
Number of common stock issued | shares | 4,200,000 | |||||||||||||
Amortized amount | $ 1,950,000 | |||||||||||||
Amortized discount on interest expense | 226,164 | |||||||||||||
Amortized discount | 1,634,080 | |||||||||||||
Convertible Notes Payable [Member] | Revalued [Member] | ||||||||||||||
Derivative liabilities | 1,879,774 | |||||||||||||
Loss on derivative liability | $ 123,139 | |||||||||||||
Convertible Notes Payable [Member] | Measurement Input, Exercise Price [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 0.36 | |||||||||||||
Convertible Notes Payable [Member] | Measurement Input, Share Price [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 0.45 | |||||||||||||
Convertible Notes Payable [Member] | Measurement Input, Expected Dividend Rate [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 0 | |||||||||||||
Convertible Notes Payable [Member] | Measurement Input, Price Volatility [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 103 | |||||||||||||
Convertible Notes Payable [Member] | Measurement Input, Risk Free Interest Rate [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 0.64 | |||||||||||||
Convertible Notes Payable [Member] | Measurement Input, Expected Term [Member] | ||||||||||||||
Derivative liability, measurement input term | 3 years | |||||||||||||
Convertible Notes Payable [Member] | Minimum [Member] | ||||||||||||||
Convertible notes mature dates | Nov. 1, 2021 | |||||||||||||
Convertible Notes Payable [Member] | Maximum [Member] | ||||||||||||||
Convertible notes mature dates | Dec. 1, 2021 | |||||||||||||
Related Party Convertible Notes Payable [Member] | ||||||||||||||
Derivative liabilities | $ 298,913 | |||||||||||||
Loss on derivative liability | $ 2,940 | |||||||||||||
Number of common stock issued | shares | 215,000 | |||||||||||||
Amortized amount | $ 396,223 | |||||||||||||
Amortized discount on interest expense | 396,223 | |||||||||||||
Amortized discount | ||||||||||||||
Number of shares issued upon debt conversion | shares | 75,000 | |||||||||||||
Revalued derivative liability | $ 540,475 | |||||||||||||
Gain on derivative liability | 241,562 | |||||||||||||
Extinguishment loss | $ 540,475 | |||||||||||||
Related Party Convertible Notes Payable [Member] | Minimum [Member] | ||||||||||||||
Convertible notes mature dates | Dec. 10, 2020 | |||||||||||||
Related Party Convertible Notes Payable [Member] | Maximum [Member] | ||||||||||||||
Convertible notes mature dates | Jan. 10, 2021 | |||||||||||||
Notes Payable One [Member] | ||||||||||||||
Convertible notes mature dates | Apr. 13, 2020 | |||||||||||||
Amortized amount | $ 287,454 | |||||||||||||
Amortized discount on interest expense | 168,639 | |||||||||||||
Amortized discount | 118,815 | |||||||||||||
Revalued derivative liability | 134,303 | |||||||||||||
Gain on derivative liability | 153,151 | |||||||||||||
Notes payable | $ 500,000 | |||||||||||||
Notes Payable One [Member] | EdenFlo Asset Acquisition [Member] | ||||||||||||||
Convertible notes principal balance amount | $ 600,000 | |||||||||||||
Convertible notes mature dates | Jun. 1, 2021 | |||||||||||||
Conversion price per share | $ / shares | $ 0.30 | |||||||||||||
Notes Payable Two [Member] | ||||||||||||||
Convertible notes mature dates | May 6, 2020 | |||||||||||||
Notes payable | $ 1,000,000 | |||||||||||||
Notes Payable Two [Member] | EdenFlo Asset Acquisition [Member] | ||||||||||||||
Convertible notes principal balance amount | $ 300,000 | |||||||||||||
Convertible notes mature dates | Aug. 1, 2022 | |||||||||||||
Conversion price per share | $ / shares | $ 0.30 | |||||||||||||
Notes Payable [Member] | ||||||||||||||
Amortization of interest expense | $ 92,256 | |||||||||||||
Derivative liabilities | $ 287,454 | |||||||||||||
Debt instrument trading price days | 25.00% | |||||||||||||
Debt instrument trading days | Integer | 10 | |||||||||||||
Number of additional shares included in accrued interest | shares | 150,000 | |||||||||||||
Warrants to purchase common stock | shares | 150,000 | |||||||||||||
Warrant exercisable date | Jan. 1, 2025 | |||||||||||||
Warrants exercise price | $ / shares | $ 2 | |||||||||||||
Payment of notes payable | $ 500,000 | |||||||||||||
Fair value of discount on note payable | $ 116,707 | |||||||||||||
Notes Payable [Member] | Measurement Input, Exercise Price [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 0.24 | |||||||||||||
Notes Payable [Member] | Measurement Input, Share Price [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 0.37 | |||||||||||||
Notes Payable [Member] | Measurement Input, Expected Dividend Rate [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 0 | |||||||||||||
Notes Payable [Member] | Measurement Input, Price Volatility [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 103 | |||||||||||||
Notes Payable [Member] | Measurement Input, Risk Free Interest Rate [Member] | ||||||||||||||
Derivative liability, measurement input, percentage | 0.21 | |||||||||||||
Notes Payable [Member] | Measurement Input, Expected Term [Member] | ||||||||||||||
Derivative liability, measurement input term | 2 months 30 days | |||||||||||||
Note Payable - $200,000 [Member] | ||||||||||||||
Convertible notes mature dates | Nov. 9, 2020 | |||||||||||||
Debt interest rate | 12.00% | |||||||||||||
Amortized discount on interest expense | $ 40,000 | |||||||||||||
Notes payable | $ 200,000 | |||||||||||||
Note Payable - $200,000 [Member] | Lender [Member] | Restricted Stock [Member] | ||||||||||||||
Stock issued during the period restricted stock | shares | 100,000 | |||||||||||||
Note Payable - $173,705 [Member] | ||||||||||||||
Debt interest rate | 8.00% | |||||||||||||
Notes payable | $ 173,705 | |||||||||||||
Note Payable - $500,000 [Member] | ||||||||||||||
Convertible notes mature dates | Jan. 31, 2020 | |||||||||||||
Debt interest rate | 8.00% | |||||||||||||
Conversion price per share | $ / shares | $ 0.50 | |||||||||||||
Notes payable | $ 500,000 | |||||||||||||
Debt instrument trading price days | 75.00% | |||||||||||||
Debt instrument trading days | Integer | 10 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) - USD ($) | Oct. 23, 2020 | Jun. 15, 2020 | Jul. 30, 2019 | Jan. 02, 2019 | May 31, 2020 | Feb. 28, 2019 | Jan. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2022 |
Value of common stock shares issued | $ 84,663 | $ 133,000 | ||||||||
Stock-based compensation | 190,000 | |||||||||
Value of common stock shares issued for services | 681,361 | |||||||||
Share Based Compensation | 37,006 | |||||||||
General and administrative expense | 4,217,139 | 884,753 | ||||||||
Number of granted common stock | 5,750,000 | |||||||||
Options expiration period | 10 years | |||||||||
Fair value of stock options | $ 40,790 | |||||||||
Proceeds from issuance of common stock | 1,250,000 | $ 3,995,400 | ||||||||
Number of offering shares of common stock | 215,000 | |||||||||
Common Stock and Warrants [Member] | ||||||||||
Consideration received on sale of stock | $ 150,000 | |||||||||
Sale of common stock and warrants | 300,000 | |||||||||
Private Offering [Member] | ||||||||||
Proceeds from issuance of common stock | $ 10,000,000 | |||||||||
Number of offering shares of common stock | 20,000,000 | |||||||||
Sale of stock price per share | $ 0.50 | |||||||||
Number of warrants issued to purchase common stock | 1 | |||||||||
Warrant exercise price | $ 2 | |||||||||
Warrant expiration date | Dec. 31, 2021 | |||||||||
Common stock trade price per share | $ 3 | |||||||||
Average volume shares per day | 100,000 | |||||||||
Through May 1, 2021 [Member] | ||||||||||
Unrecognized stock-based compensation | $ 3,784 | |||||||||
Minimum [Member] | ||||||||||
Stock option exercise price | $ 0.50 | |||||||||
Maximum [Member] | ||||||||||
Stock option exercise price | $ 7.50 | |||||||||
Two-year Employment Agreements [Member] | ||||||||||
Number of common stock issued | 6,300,000 | |||||||||
Shares vesting period | 2 years | |||||||||
Number of common stock awarded | 1,300,000 | |||||||||
Vesting period, description | Vested on April 1, 2021 | |||||||||
Future granted share expiration date | Apr. 1, 2021 | |||||||||
Employment And Other Agreements [Member] | ||||||||||
Share Based Compensation | $ 299,657 | |||||||||
Number of shares of common stock are issuable upon final vesting | 9,400,000 | |||||||||
Unrecognized stock-based compensation | $ 76,234 | |||||||||
Two Agreements [Member] | ||||||||||
Number of common stock issued | 724,444 | |||||||||
Value of common stock shares issued | $ 320,400 | |||||||||
Unrecognized stock-based compensation | 61,986 | |||||||||
General and administrative expense | 187,067 | |||||||||
Remaining prepaid expenses | $ 133,333 | |||||||||
Two Agreements [Member] | Forecast [Member] | ||||||||||
Unrecognized stock-based compensation | $ 14,248 | |||||||||
Two Officers [Member] | ||||||||||
Number of common stock issued | 1,600,000 | |||||||||
Shares vesting period | 1 year | |||||||||
Value of common stock shares issued | $ 760,000 | |||||||||
Mr. Lamadrid [Member] | ||||||||||
Number of common stock returned | 1,750,000 | |||||||||
Mr. Scott [Member] | ||||||||||
Number of common stock returned | 1,200,000 | |||||||||
Consultant [Member] | ||||||||||
Number of common stock services | 140,000 | |||||||||
Value of common stock shares issued for services | $ 133,000 | |||||||||
Private Investor [Member] | ||||||||||
Number of common stock issued | 2,750,000 | |||||||||
Proceeds from issuance of common stock | $ 1,000,000 |
Stockholders' Deficit - Schedul
Stockholders' Deficit - Schedule of Fair Value Black-Scholes Options Pricing (Details) | 12 Months Ended |
Dec. 31, 2020$ / shares | |
Equity [Abstract] | |
Exercise price per share | $ 3.40 |
Expected life (years) | 2 years 11 months 19 days |
Risk-free interest rate | 0.64% |
Expected volatility | 135.00% |
Equity Method Investment (Detai
Equity Method Investment (Details Narrative) - USD ($) | Nov. 12, 2020 | Apr. 09, 2020 |
Equity method investment assets | $ 530,000 | |
Equity method investment, ownership percentage | 51.00% | |
DC Energy Group, LLC [Member] | ||
Equity method investment assets | $ 200,000 | |
Equity method investment, ownership percentage | 40.00% |
Equity Method Investment - Sche
Equity Method Investment - Schedule of Condensed Financial Information (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Current assets | $ 2,345,018 | $ 1,838,518 | |
Total assets | 11,039,983 | 4,806,013 | |
Current liabilities | 4,614,133 | 1,289,889 | |
Partners' capital | 4,019,938 | 3,382,570 | $ (137,619) |
Total liabilities and partners' capital | 11,039,983 | 4,806,013 | |
Revenues | 735,690 | 38,550 | |
Net loss | (6,346,859) | $ (1,134,867) | |
DC Energy Group, LLC [Member] | |||
Current assets | 507,486 | ||
Non-current assets | 321,901 | ||
Total assets | 829,387 | ||
Current liabilities | 157,467 | ||
Non-current liabilities | |||
Partners' capital | 671,920 | ||
Total liabilities and partners' capital | 829,387 | ||
Revenues | 50,000 | ||
Net loss | (158,080) | ||
Company's interest in net loss | $ (62,449) |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Income Tax Disclosure [Abstract] | |
Operating loss carry forwards for Federal and State | $ 2,900,000 |
Operating loss description | The California state net operating loss will begin to expire in 2032. |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Income Tax Disclosure [Abstract] | ||
Deferred taxes: NOL Carryover | $ 763,192 | $ 222,759 |
Deferred taxes: Accrued Liabilities | 267,995 | 14,791 |
Deferred taxes: Depreciation | (36,700) | |
Net Deferred tax assets | 994,487 | 237,550 |
Valuation allowance | (994,487) | (237,550) |
Net deferred tax asset |
Income Taxes - Schedule of Prov
Income Taxes - Schedule of Provision for Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Deferred tax expense: State | $ 145,581 | $ 45,682 |
Deferred tax expense: Federal | 565,674 | 191,868 |
Deferred tax expense: Valuation allowance | (756,937) | (237,550) |
Total |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Related Party Transactions [Abstract] | ||
Due to related parties | $ 0 | $ 116,667 |
Accrued deferred salaries | 406,750 | |
Accrued bonuses | $ 225,000 |