Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 09, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | DIEGO PELLICER WORLDWIDE, INC | |
Entity Central Index Key | 1,559,172 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 20,513,249 | |
Trading symbol | DPWW | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 110,125 | $ 158,702 |
Accounts receivable | 190,031 | 170,677 |
Other receivable | 334,184 | 0 |
Prepaid expenses | 59,850 | 21,621 |
Inventory | 5,000 | 32,945 |
Total current assets | 699,190 | 383,945 |
Property and equipment, net | 209,393 | 409,128 |
Security deposits | 270,000 | 320,000 |
Total assets | 1,178,583 | 1,113,073 |
Current liabilities: | ||
Accounts payable | 549,463 | 626,258 |
Accrued payable - related party | 439,120 | 449,064 |
Accrued expenses | 293,204 | 207,558 |
Notes payable - related party | 140,958 | 307,312 |
Notes payable | 395,903 | 133,403 |
Convertible notes, net of discount and costs | 689,782 | 468,116 |
Deferred rent | 221,640 | 251,878 |
Deferred revenue | 53,000 | 53,000 |
Derivative liabilities | 5,130,804 | 4,106,521 |
Warrant liabilities | 12,081 | 192,350 |
Total current liabilities | 7,925,955 | 6,795,460 |
Deferred revenue | 221,500 | 262,000 |
Total liabilities | 8,147,455 | 7,057,460 |
Deficiency in stockholders' equity: | ||
Preferred stock, Series A and B, par value $.0001 per share; 5,000,000 shares authorized, none issued and outstanding | 0 | 0 |
Common stock, par value $.000001 per share; 42,000,000 shares authorized, 19,134,588 and 7,128,849 shares issued, respectively | 19 | 7 |
Additional paid-in capital | 39,685,478 | 34,422,474 |
Stock to be issued | 100,875 | 2,397,218 |
Accumulated deficit | (46,755,244) | (42,764,086) |
Total deficiency in stockholders' equity | (6,968,872) | (5,944,387) |
Total liabilities and deficiency in stockholders' equity | $ 1,178,583 | $ 1,113,073 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Common stock, par value | $ .000001 | $ .000001 |
Common stock, shares authorized | 42,000,000 | 42,000,000 |
Common stock, shares issued | 19,134,588 | 7,128,849 |
Series A Preferred Stock [Member] | ||
Preferred stock, par value | $ .0001 | $ .0001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Series B Preferred Stock [Member] | ||
Preferred stock, par value | $ .0001 | $ .0001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenues | ||||
Net rental revenue | $ 405,662 | $ 297,428 | $ 1,068,462 | $ 1,152,425 |
Rental expense | (289,155) | (191,556) | (843,010) | (828,677) |
Gross profit | 116,507 | 105,872 | 225,452 | 323,748 |
Operating expenses: | ||||
General and administrative expenses | 629,421 | 871,217 | 1,837,240 | 3,439,038 |
Selling expense | 19,616 | 37,855 | 42,955 | 71,744 |
Depreciation expense | 150,572 | 108,710 | 428,602 | 348,209 |
Loss from operations | (683,102) | (911,910) | (2,083,345) | (3,535,243) |
Other income (expense) | ||||
Licensing revenue | 13,500 | 13,500 | 40,500 | 40,500 |
Other income (expense) | 104 | 5,978 | 2,938 | 51,808 |
Interest expense | (847,741) | (1,230,865) | (1,880,808) | (1,965,863) |
Loss on debt issuance | (2,883,659) | (2,883,659) | ||
Write off account receivable | (23,966) | (23,966) | ||
Impairment loss | (82,478) | |||
Extinguishment of debt | 18,165 | 1,450,856 | 47,918 | (4,156,980) |
Change in derivative liabilities | (603,021) | (3,310,838) | 2,608,996 | (2,316,219) |
Change in value of warrants | 7,810 | (67,868) | 180,268 | (379,084) |
Total other income (loss) | (4,318,808) | (3,139,237) | (1,907,813) | (8,808,316) |
Nrt income (loss) | $ (5,001,910) | $ (4,051,147) | $ (3,991,158) | $ (12,343,559) |
Income (loss) per share - basic and diluted | $ (0.30) | $ (1.49) | $ (0.31) | $ (4.80) |
Weighted average common shares outstanding - basic and diluted | 16,534,512 | 2,710,410 | 12,681,249 | 2,574,172 |
Condensed Consolidated Statem_2
Condensed Consolidated Statement of Cash Flow (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (3,991,158) | $ (12,343,559) |
Adjustments to reconcile net income (loss) to net | ||
Depreciation | 428,602 | 348,208 |
Impairment | 82,478 | |
Change in fair value of derivative liability | (2,608,996) | 2,316,219 |
Change in value of warrants | (180,268) | 379,084 |
Amortization of discount | 1,663,917 | 1,289,247 |
Amortization of debt costs | 46,461 | |
Extinguishment of debt | (47,918) | 4,156,980 |
Loss on debt issuance | 2,883,659 | |
Stock based compensation | 1,097,350 | 2,094,733 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (19,354) | (25,355) |
Inventory | 27,945 | 17,049 |
Prepaid expenses | (38,229) | 404,019 |
Deferred rent receivable | (20,867) | |
Other assets | (284,184) | |
Accounts payable | (29,541) | (350,256) |
Accrued liability - related parties | 108,276 | 373,877 |
Accrued expenses | (117,754) | 381,097 |
Deferred rent | (30,238) | (30,775) |
Deferred revenue | (40,500) | (40,500) |
Cash used in operating activities | (1,131,930) | (968,321) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (125,000) | |
Cash used in investing activities | (125,000) | |
Cash flows from financing activities: | ||
Debt costs | (16,000) | |
Proceeds from notes payable | 250,000 | |
Proceeds from convertible notes payable | 903,750 | 1,278,500 |
Repayments of convertible notes payable | (75,269) | |
Repayments of notes payable | (129,050) | |
Proceeds from sale of common stock | 20,872 | |
Cash provided by financing activities | 1,083,353 | 1,149,450 |
Net increase (decrease) in cash | (48,577) | 56,129 |
Cash, beginning of period | 158,702 | 51,333 |
Cash, end of period | 110,125 | 107,462 |
Cash paid for interest | ||
Cash paid for taxes | ||
Supplemental schedule of noncash financial activities: | ||
Stock issued for debt settlement | 50,000 | |
Notes converted to stock | 696,815 | 3,031,843 |
Accrued interest converted to stock | 64,785 | 122,311 |
Value of common stock to be issued for conversion of notes and accrued interest | 1,508,909 | 6,655,028 |
Value of derivative liability extinguished upon conversion of notes and accrued interest | 845,752 | 5,509,516 |
Accounts payable and accrued expenses paid with common stock | 165,474 | |
Leasehold improvements paid by tenant | 228,866 | |
Debt issuance costs deducted from proceeds of notes | $ 35,250 |
Organization and Operations
Organization and Operations | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Operations | Note 1 – Organization and Operations History On March 13, 2015, Diego Pellicer Worldwide, Inc. (the Company) (f/k/a Type 1 Media, Inc.) closed on a merger and share exchange agreement by and among (i) the Company, and (ii) Diego Pellicer World-wide 1, Inc., a Delaware corporation, (“Diego”), and (iii) Jonathan White, the majority shareholder of the Company. Diego was merged with and into the Company with the Company to continue as the surviving corporation in the merger. The Company succeeded to and assumed all the rights, assets, liabilities, debts, and obligations of Diego. Prior to the merger, 3,135,000 shares of Type 1 Media, Inc. were issued and outstanding. The principal owners of the Company agreed to transfer their 2,750,000 issued and outstanding shares to a third party in consideration for $169,000 and cancellation of their 2,750,000 shares. The remaining issued and outstanding shares are still available for trading in the marketplace. At the time of the merger, Type 1 Media, Inc. had no assets or liabilities. Accordingly, the business conducted by Type 1 prior to the merger is not being operated by the combined entity post-merger. At the closing of the merger, Diego common stock issued and outstanding immediately prior to the closing of the merger was exchanged for the right to receive one share of the surviving corporation for each share of Diego. An aggregate of 1,081,613 common shares of the surviving corporation were issued to the holders of Diego in exchange for their common shares representing approximately 74% of the combined entity. The merger has been accounted for as a reverse merger and recapitalization in which Diego is treated as the accounting acquirer and Diego Pellicer Worldwide, Inc. is the surviving corporation. Business Operations The Company leases real estate to licensed marijuana operators providing complete turnkey growing space, processing space, recreational and medical retail sales space and related facilities to licensed marijuana growers, processors, dispensary and recreational store operators. Additionally, the Company plans to explore ancillary opportunities in the regulated marijuana industry as well as offering for wholesale distribution branded non-marijuana clothing and accessories. Until Federal law allows, the Company will not grow, harvest, process, distribute or sell marijuana or any other substances that violate the laws of the United States of America or any other country. |
Significant and Critical Accoun
Significant and Critical Accounting Policies and Practices | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant and Critical Accounting Policies and Practices | Note 2 – Significant and Critical Accounting Policies and Practices The management of the Company is responsible for the selection and use of appropriate accounting policies. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles. Basis of Presentation The accompanying condensed consolidated financial statements of Diego Pellicer Worldwide, Inc. were prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all disclosures required for financial statements prepared in conformity with U.S. GAAP. This Form 10-Q relates to the three and nine months ended September 30, 2018 (the “Current Quarter”) and the three and nine months ended September 30, 2017 (the “Prior Quarter”). The Company’s annual report on Form 10-K for the year ended December 31, 2017 includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this Form 10-Q. All material adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods have been reflected. The results for the current quarter are not necessarily indicative of the results to be expected for the full year. Principles of Consolidation The financial statements include the accounts of Diego Pellicer Worldwide, Inc., and its wholly-owned subsidiary Diego Pellicer World-wide 1, Inc. Intercompany balances and transactions have been eliminated in consolidation. Reclassifications Certain prior year amounts were reclassified to conform to the manner of presentation in the current period. These reclassifications had no effect on the Company’s balance sheet, net loss or stockholders’ equity. Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include valuing equity securities and derivative financial instruments issued in financing transactions and share based payment arrangements, determining the fair value of the warrants received for a licensing agreement, the collectability of accounts receivable and deferred taxes and related valuation allowances. Certain estimates, including evaluating the collectability of accounts receivable, could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could influence our estimates that could cause actual results to differ from our estimates. The Company intends to re-evaluate all its accounting estimates at least quarterly based on these conditions and record adjustments when necessary. Fair Value Measurements The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. Fair Value of Financial Instruments As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2018 and December 31, 2017. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. Cash The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation, and the National Credit Union Share Insurance Fund, up to $250,000. The Company’s accounts at these institutions may, at times, exceed the federal insured limits. The Company has not experienced any losses in such accounts. Revenue recognition The Company has adopted the new revenue recognition guidelines in accordance with ASC 606, Revenue from Contracts with Customers The Company analyzes its contracts to assess that they are within the scope and in accordance with ASC 606. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, whether for goods and services or licensing, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. Thus, during the initial term of the lease, management has a policy of partial rent forbearance when the tenant first opens the facility to assure that the tenant has the opportunity for success. Management may be required to exercise considerable judgment in estimating revenue to be recognized. When the collectability is reasonably assured, in accordance with ASC Topic 840 “Leases” as amended and interpreted, minimum annual rental revenue is recognized for rental revenues on a straight-line basis over the term of the related lease. When management concludes that the Company is the owner of tenant improvements, management records the cost to construct the tenant improvements as a capital asset. In addition, management records the cost of certain tenant improvements paid for or reimbursed by tenants as capital assets when management concludes that the Company is the owner of such tenant improvements. For these tenant improvements, management records the amount funded or reimbursed by tenants as deferred revenue, which is amortized as additional rental income over the term of the related lease. When management concludes that the tenant is the owner of tenant improvements for accounting purposes, management records the Company’s contribution towards those improvements as a lease incentive, which is amortized as a reduction to rental revenue on a straight-line basis over the term of the lease. The Company records rents due from the tenants on a current basis. The Company has deferred collection of such rents until the tenants receive the proper governmental licenses to begin operation. Prior to 2017, management had reserved these deferred amounts due to the unlikelihood of collection. Leases as Lessor The Company currently leases properties to licensed cannabis operators for locations that meet the regulatory criteria applicable by the respective regulatory jurisdiction for the sale, production, and development of cannabis products. The Company evaluates the lease to determine its appropriate classification as an operating or capital lease for financial reporting purposes. The Company leases are currently all classified as operating leases. Minimum base rent is recorded on a straight-line basis over the lease term after an initial period during which the tenant is establishing the business and during which the Company may forbear some or all of the rent. The Company is more likely than not to forbear some or all of the rental income which it considers uncollectable during the tenant’s initial ramp-up period (see Revenue Recognition Leases as Lessee The Company recognizes rent expense on a straight-line basis over the non-cancelable lease term and certain option renewal periods where failure to exercise such options would result in an economic penalty in such amount that renewal appears, at the inception of the lease, to be reasonably assured. Deferred rent is presented on current liabilities section on the consolidated balance sheets. Income Taxes Income taxes are provided for using the liability method of accounting in accordance with the Income Taxes Topic of the FASB ASC. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized and when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The computation of limitations relating to the amount of such tax assets, and the determination of appropriate valuation allowances relating to the realizing of such assets, are inherently complex and require the exercise of judgment. As additional information becomes available, the Company continually assesses the carrying value of their net deferred tax assets. Common Stock Purchase Warrants and Other Derivative Financial Instruments The Company classifies as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC Topic 815-40 “Contracts in Entity’s Own Equity.” The Company classifies as assets or liabilities any contracts that require net-cash settlement including a requirement to net cash settle the contract if an event occurs and if that event is outside our control or give the counterparty a choice of net-cash settlement or settlement in shares. The Company assesses classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. Stock-Based Compensation The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. The Company calculates the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. Income (loss) per common share The Company utilizes ASC 260, “Earnings Per Share” for calculating the basic and diluted loss per share. In accordance with ASC 260, the basic and diluted loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per share is computed similar to basic loss per share except that the denominator is adjusted for the potential dilution that could occur if stock options, warrants, and other convertible securities were exercised or converted into common stock. Potentially dilutive securities are not included in the calculation of the diluted loss per share if their effect would be anti-dilutive. The Company has 60,158,160 and 3,054,490 common stock equivalents at September 30, 2018 and 2017, respectively. For the three month periods ended September 30, 2018 and 2017 and for the nine month period ended June 30, 2017, the potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share. Legal and regulatory environment The cannabis industry is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not limited to, matters such as licensure, accreditation, and different taxation between federal and state. Federal government activity may increase in the future with respect to companies involved in the cannabis industry concerning possible violations of federal statutes and regulations. Management believes that the Company is in compliance with local, state and federal regulations, While no regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation, as well as regulatory actions unknown or unasserted at this time. Recent accounting pronouncements. In July 2018, the FASB issued ASU 2018-10 Leases (Topic 842), Codification Improvements Leases (Topic 842), Targeted Improvements . . Leases (Topic 842) In July 2018, the FASB issued ASU 2018-09, Codification Improvements. Compensation-Stock Compensation-Income Taxes, Compensation-Stock Compensation-Income Taxes, In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, Equity - Equity-Based Payments to Non-Employees In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This standard amends Accounting Standards Codification 740, Income Taxes (ASC 740) to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the Tax Reform Act) pursuant to Staff Accounting Bulletin No. 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance. As described in the footnotes to the Annual Report on Form 10-K, the Company’s accounting for the tax effects of enactment of the Tax Reform Act is being assessed; however, in certain cases, as described below, we made a reasonable estimate of the effects on our existing deferred tax balances and valuation allowance. The Company determined that the $62.9 million recorded in connection with the re-measurement of certain deferred tax assets and liabilities, and corresponding valuation allowance was a provisional amount and a reasonable estimate at December 31, 2017. The Company has not completed the accounting with regard to the tax effects associated with an intra-entity transfer of certain intellectual property rights with the enactment of Tax Reform Act. Our accounting for the intra-entity transfer reflects the utilization of net operating losses on the basis of the laws in effect before the Tax Reform Act. The Company is evaluating the impact under Tax Reform Act on the Company's global business structure. In all aspects, the Company will continue to make and refine calculations as additional analysis is completed. The Company expects to complete the accounting assessment during the one year measurement period provided by SAB 118. In February 2016, the Financial Accounting Standards Board (FASB) issued guidance that requires a lessee to recognize assets and liabilities arising from leases on the balance sheet. Previous GAAP did not require lease assets and liabilities to be recognized for most leases. Additionally, companies are permitted to make an accounting policy election not to recognize lease assets and liabilities for leases with a term of 12 months or less. For both finance leases and operating leases, the lease liability should be initially measured at the present value of the remaining contractual lease payments. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee will not significantly change under this new guidance. This new guidance is effective for the company as of the first quarter of fiscal year 2020. The Company is evaluating the effect that this ASU will have on its financial statements and related disclosures. The Company believes that other recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented. |
Going Concern
Going Concern | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | Note 3 – Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses since inception, its current liabilities exceed its current assets by $7,226,765, and has an accumulated deficit of $46,755,244 at September 30, 2018. These factors, among others raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company believes that it has sufficient cash on hand and cash generated by real estate leases to sustain operations provided that management and board members continue to agree to be paid company stock in exchange for accrued compensation. Through September 30, 2018, management and board members have accepted stock for accrued compensation at the same discount that has been extended to the convertible noteholders of fifty percent. There are other future noncash charges in connection with financing such as a change in derivative liability that will affect income but have no effect on cash flow. Although the Company has been successful raising additional capital, there is no assurance that the company will sell additional shares of stock or borrow additional funds. The Company’s inability to raise additional cash could have a material adverse effect on its financial position, results of operations, and its ability to continue in existence. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management believes that the Company’s future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that the Company will be able to generate sufficient cash from operations, sell additional shares of stock or borrow additional funds. However, cash generated from lease revenues is currently exceeding lease costs, but is insufficient to cover operating expenses. |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Note 4 – Property and Equipment As of September 30, 2018 and December 31, 2017, fixed assets and the estimated lives used in the computation of depreciation are as follows: Estimated Useful Lives September 30, 2018 December 31, 2017 Leasehold improvements 10 years 1,082,280 853,413 Less: Accumulated depreciation and amortization (872,887 ) (444,285 ) Property and equipment, net $ 209,393 $ 409,128 |
Related Party
Related Party | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party | Note 5 – Related Party As of September 30, 2018 and December 31, 2017, the Company has accrued fees to related parties in the amount of $439,120 and $449,064, respectively. For the three months ended September 30, 2018 and 2017, total cash-based compensation to related parties was $177,099 and $196,799, respectively. For the three months ended September 30, 2018 and 2017, total share-based compensation to related parties was $228,832 and $483,140, respectively. For the nine months ended September 30, 2018 and 2017, total cash-based compensation to related parties was $557,954 and $501,995, respectively. For the nine months ended September 30, 2018 and 2017, total share-based compensation to related parties was $874,471 and $2,010,853 respectively. These amounts are included in general and administrative expenses in the accompanying financial statements. During the nine months ended September 30, 2018, we issued 669,082 shares of common stock for payment of a related party note in the amount of $166,354, plus accrued interest of $21,658. At September 30, 2018, the Company owed Mr. Throgmartin $140,958 pursuant to a promissory note dated August 12, 2016. This note accrued interest at the rate of 8% per annum and payable upon the earlier date of (i) the second anniversary date of the promissory notes, (ii) the date all of the current investor notes, in the outstanding aggregate principal and accrued interest amount of approximately $1,480,000 at June 30, 2016, have been paid in full and the Company has achieved gross revenues of at least $3,000,000 over any consecutive 12-month period. The balance of related party notes was $140,958 and $307,312 at September 30, 2018 and December 31, 2017, respectively. |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable | Note 6 – Notes Payable On August 31, 2015, the Company issued a note in the amount of $126,000 with third parties for use as operating capital. The note was amended to include accrued interest on October 31, 2016 and extended the maturity date to October 31, 2018. As of September 30, 2018 and December 31, 2017 the outstanding principal balance of the note was $133,403. On April 2, 2016, the Company issued a note in the amount of $262,500 for use as operating capital. Proceeds from the note were $250,000. The note bears interest at 8% per year and matures on November 29, 2018. |
Convertible Notes Payable
Convertible Notes Payable | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable | Note 7 – Convertible Notes Payable The Company has issued several convertible notes which are outstanding. The note holders shall have the right to convert principal and accrued interest outstanding into shares of common stock at a discounted price to the market price of our common stock. The conversion feature was recognized as an embedded derivative and was valued using a Black Scholes model that resulted in a derivative liability of $5,130,804 at September 30, 2018. In connection with the issuance of certain of these notes, the Company also issued warrants to purchase its common stock. The Company allocated the proceeds of the notes and warrants based on the relative fair value at inception. Several convertible note holders elected to convert their notes to stock during the nine months ended September 30, 2018. The table below provides a reconciliation of the beginning and ending balances for the liabilities measured using fair significant unobservable inputs (Level 3) for the nine months ended September 30, 2018: Convertible notes Discount Convertible Note Net of Discount Derivative Liabilities Balance, December 31, 2017 971,454 503,339 468,116 4,106,521 Issuance of convertible notes 3,242,734 3,208,525 34,209 4,900,329 Conversion of convertible notes (830,145 ) (175,000 ) (655,144 ) (1,267,049 ) Repayment of convertible notes (75,269 ) (75,269 ) Change in fair value of derivatives — — — (2,608,997 ) Amortization — (917,870 ) 917,870 — Balance September 30, 2018 $ 3,308,774 $ 2,618,994 $ 689,782 $ 5,130,804 During the nine months ended September 30, 2018, $830,145 of notes and $69,037 of accrued interest was converted into 6,673,717 shares of common stock. A gain on extinguishment of debt of $47,918 has been recorded related to these conversions. On July 17, 2018, the Company entered into a certain Equity and Debt Restructure Agreement with two, long-time investors in the Company (the “Restructure Agreement”). Pursuant to the material terms of the Restructure Agreement, the investors agreed to return and cancel their collective 2,774,093 restricted Company common shares, which had been received from the prior conversion of their older convertible notes, in exchange for the Company’s issue to them of recast convertible promissory notes. Accordingly, on the same date, these investors were each issued a First Priority Secured Promissory Note (the “Note” or “Notes”), in the principal amount of $1,683,557.77 and $545,606.96, respectively. In connection with this transaction, one of these investors agreed to loan the Company an additional $700,000. To date the Company has received $200,000 cash proceeds of the additional $700,000 loan. Fair value of 2,774,093 restricted Company common shares were determined in the amount of $443,855 using market price and fair value of the embedded conversion feature were determined in the amount of $3,527,513 using Black Sholes Merton Option Model. As the result of the transaction, the Company recorded $2,883,658 in financing costs, and $2,429,275 as debt discount. The following assumptions were used in calculations of the Black Scholes model for the periods ended September 30, 2018 and December 31, 2017. September 30, 2018 December 31, 2017 Risk-free interest rates 1.89 - 2.33 % 1.28-1.76 % Expected life (years) 0.03 - 2.00 years 0.02-1.23 year Expected dividends 0 % 0 % Expected volatility 100 - 233 % 211-354 Diego Pellicer Worldwide, Inc. Common Stock fair value $ 0.11 $ 1.60 |
Stockholders' Equity (Deficit)
Stockholders' Equity (Deficit) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Stockholder's Equity (Deficit) | Note 8 – Stockholders’ Equity (Deficit) On January 14, 2018, the Company’s Board of Directors approved an amendment to our Certificate of Incorporation to increase the number of authorized shares of common stock from 195,000,000 to 495,000,000 shares. On June 25, 2018, the Company’s Board of Directors approved an amendment to our Certificate of Incorporation to increase the number of authorized shares of common stock from 495,000,000 to 840,000,000 shares. In addition the Board of Directors approved a 20 for 1 reverse split of the outstanding common shares of the Company. Subsequent to September 30, 2018 and on October 29, 2018, the Company effected a 20 for 1 reverse stock split on its shares of common stock. The par value and number of authorized shares of the common and preferred stock were not adjusted as a result of the reverse stock split. Unless otherwise noted, impacted amounts and share information included in the financial statements and notes thereto have been retroactively adjusted for the stock split as if such stock split occurred on the first day of the first period presented. Certain amounts in the notes to the financial statements may be slightly different than previously reported due to rounding of fractional shares as a result of the reverse stock split. During the nine months ended September 30, 2018: Holders of convertible notes converted $830,145 of notes and $69,037 of accrued interest into 6,673,717 shares of common stock valued at $1,938,819. Additionally, 3,884 shares, valued at $13,983, for the conversion of notes, were authorized but not issued as of September 30, 2018. Shares authorized but unissued at December 31, 2017 totaling 24,488 shares were issued during 2018. We issued 40,500 common shares as security for the payment of convertible notes. The shares, valued at $26,730 are held in escrow, are refundable and are recorded in a contra equity account. We sold 41,500 shares of common stock and received proceeds of $20,872. Of these shares, 5,000 valued at $2,648, were not issued as of September 30, 2018. We issued 16,804 shares of common stock that were sold in 2017 and classified as shares to be issued at December 31, 2017. We issued 2,108,587 shares of common stock, valued at $301,253 as share-based compensation to related parties. Additionally, 280,693 shares, valued at $130,868, were authorized to be issued for related party services, but were not issued as of September 30, 2018. We issued 1,023,367 shares of common stock that were authorized as share-based compensation to related parties in 2017 and classified as shares to be issued at December 31, 2017. We issued 361,275 shares of common stock, valued at $70,680, for services. Additionally, 22,306 shares, valued at $4,232 for services, were authorized but not issued as of September 30, 2018. We issued 98,417 shares of common stock that were authorized as share-based compensation in 2017 and classified as shares to be issued at December 31, 2017. We issued 669,082 shares of common stock for payment of a related party note in the amount of $166,354, plus accrued interest of $21,658. We issued an excess 273,245 shares of common stock to a related party; these shares are in the process of being cancelled. We issued 75,000 shares of common stock, valued at $47,254, to settle accounts payable to a consultant. We issued 125,000 shares of common stock, valued at $20,500, for an inducement of extension of sublease. As a condition of management employment, the Board of Directors approved employment agreements with three key executives. This agreement provided that additional shares will be granted each year at February 1 over the term of the agreement should their shares as a percentage of the total shares outstanding fall below prescribed ownership percentages. The CEO received an annual grant of additional shares each year to maintain his ownership percentage at 10% of the outstanding stock. The other two executives receive a similar grant to maintain each executive’s ownership percentage at 7.5% of the outstanding stock. At September 30, 2018, there is $392,998 accrued for the annual grants, representing 1,849,091 shares. The Company recorded compensation expense of $544,647 for the nine months ended September 30, 2018. The Company issued 748,896 shares that were accrued during 2018. The Company issued 1,161,065 shares of common stock that were accrued in 2017 and classified as shares to be issued at December 31, 2017. Common stock warrant activity The Company has determined that certain of its warrants are subject to derivative accounting. The table below provides a reconciliation of the beginning and ending balances for the warrant liabilities measured using fair significant unobservable inputs (Level 3) for the nine months ended September 30, 2018: Balance at December 31, 2017 $ 192,350 Issuance of warrants — Change in fair value during period (180,269 ) Balance at September 30, 2018 $ 12,081 The following assumptions were used in calculations of the Black Scholes model for the periods ended September 30, 2018 and December 31, 2017. September 30, 2018 December 31, 2017 Annual dividend yield 0 % 0 % Expected life (years) 1.67 - 8.9 years 3 - 10 Risk-free interest rate 2.52 - 3.05 % 1.50 – 2.40 % Expected volatility 188 - 230 % 177 - 284 % Common stock option activity During the nine months ended September 30, 2018, the Company recorded total option expense of $238,599. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 9 – Subsequent Events. Subsequent to September 30, 2018, the Company issued 1,378,661 shares of common stock for the conversion of convertible notes and accrued interest. |
Significant and Critical Acco_2
Significant and Critical Accounting Policies and Practices (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements of Diego Pellicer Worldwide, Inc. were prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all disclosures required for financial statements prepared in conformity with U.S. GAAP. This Form 10-Q relates to the three and nine months ended September 30, 2018 (the “Current Quarter”) and the three and nine months ended September 30, 2017 (the “Prior Quarter”). The Company’s annual report on Form 10-K for the year ended December 31, 2017 includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this Form 10-Q. All material adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods have been reflected. The results for the current quarter are not necessarily indicative of the results to be expected for the full year. |
Principles of Consolidation | Principles of Consolidation The financial statements include the accounts of Diego Pellicer Worldwide, Inc., and its wholly-owned subsidiary Diego Pellicer World-wide 1, Inc. Intercompany balances and transactions have been eliminated in consolidation. |
Reclassifications | Reclassifications Certain prior year amounts were reclassified to conform to the manner of presentation in the current period. These reclassifications had no effect on the Company’s balance sheet, net loss or stockholders’ equity. |
Use of Estimates | Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include valuing equity securities and derivative financial instruments issued in financing transactions and share based payment arrangements, determining the fair value of the warrants received for a licensing agreement, the collectability of accounts receivable and deferred taxes and related valuation allowances. Certain estimates, including evaluating the collectability of accounts receivable, could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could influence our estimates that could cause actual results to differ from our estimates. The Company intends to re-evaluate all its accounting estimates at least quarterly based on these conditions and record adjustments when necessary. |
Fair Value Measurements | Fair Value Measurements The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2018 and December 31, 2017. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. |
Cash | Cash The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation, and the National Credit Union Share Insurance Fund, up to $250,000. The Company’s accounts at these institutions may, at times, exceed the federal insured limits. The Company has not experienced any losses in such accounts. |
Revenue Recognition | Revenue recognition The Company has adopted the new revenue recognition guidelines in accordance with ASC 606, Revenue from Contracts with Customers The Company analyzes its contracts to assess that they are within the scope and in accordance with ASC 606. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, whether for goods and services or licensing, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. Thus, during the initial term of the lease, management has a policy of partial rent forbearance when the tenant first opens the facility to assure that the tenant has the opportunity for success. Management may be required to exercise considerable judgment in estimating revenue to be recognized. When the collectability is reasonably assured, in accordance with ASC Topic 840 “Leases” as amended and interpreted, minimum annual rental revenue is recognized for rental revenues on a straight-line basis over the term of the related lease. When management concludes that the Company is the owner of tenant improvements, management records the cost to construct the tenant improvements as a capital asset. In addition, management records the cost of certain tenant improvements paid for or reimbursed by tenants as capital assets when management concludes that the Company is the owner of such tenant improvements. For these tenant improvements, management records the amount funded or reimbursed by tenants as deferred revenue, which is amortized as additional rental income over the term of the related lease. When management concludes that the tenant is the owner of tenant improvements for accounting purposes, management records the Company’s contribution towards those improvements as a lease incentive, which is amortized as a reduction to rental revenue on a straight-line basis over the term of the lease. The Company records rents due from the tenants on a current basis. The Company has deferred collection of such rents until the tenants receive the proper governmental licenses to begin operation. Prior to 2017, management had reserved these deferred amounts due to the unlikelihood of collection. |
Leases as Lessor | Leases as Lessor The Company currently leases properties to licensed cannabis operators for locations that meet the regulatory criteria applicable by the respective regulatory jurisdiction for the sale, production, and development of cannabis products. The Company evaluates the lease to determine its appropriate classification as an operating or capital lease for financial reporting purposes. The Company leases are currently all classified as operating leases. Minimum base rent is recorded on a straight-line basis over the lease term after an initial period during which the tenant is establishing the business and during which the Company may forbear some or all of the rent. The Company is more likely than not to forbear some or all of the rental income which it considers uncollectable during the tenant’s initial ramp-up period (see Revenue Recognition |
Leases as Lessee | Leases as Lessee The Company recognizes rent expense on a straight-line basis over the non-cancelable lease term and certain option renewal periods where failure to exercise such options would result in an economic penalty in such amount that renewal appears, at the inception of the lease, to be reasonably assured. Deferred rent is presented on current liabilities section on the consolidated balance sheets. |
Income Taxes | Income Taxes Income taxes are provided for using the liability method of accounting in accordance with the Income Taxes Topic of the FASB ASC. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized and when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The computation of limitations relating to the amount of such tax assets, and the determination of appropriate valuation allowances relating to the realizing of such assets, are inherently complex and require the exercise of judgment. As additional information becomes available, the Company continually assesses the carrying value of their net deferred tax assets. |
Common Stock Purchase Warrants and Other Derivative Financial Instruments | Common Stock Purchase Warrants and Other Derivative Financial Instruments The Company classifies as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC Topic 815-40 “Contracts in Entity’s Own Equity.” The Company classifies as assets or liabilities any contracts that require net-cash settlement including a requirement to net cash settle the contract if an event occurs and if that event is outside our control or give the counterparty a choice of net-cash settlement or settlement in shares. The Company assesses classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. |
Stock-Based Compensation | Stock-Based Compensation The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. The Company calculates the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. |
Income (Loss) Per Common Share | Income (loss) per common share The Company utilizes ASC 260, “Earnings Per Share” for calculating the basic and diluted loss per share. In accordance with ASC 260, the basic and diluted loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per share is computed similar to basic loss per share except that the denominator is adjusted for the potential dilution that could occur if stock options, warrants, and other convertible securities were exercised or converted into common stock. Potentially dilutive securities are not included in the calculation of the diluted loss per share if their effect would be anti-dilutive. The Company has 60,158,160 and 3,054,490 common stock equivalents at September 30, 2018 and 2017, respectively. For the three month periods ended September 30, 2018 and 2017 and for the nine month period ended June 30, 2017, the potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share. |
Legal and Regulatory Environment | Legal and regulatory environment The cannabis industry is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not limited to, matters such as licensure, accreditation, and different taxation between federal and state. Federal government activity may increase in the future with respect to companies involved in the cannabis industry concerning possible violations of federal statutes and regulations. Management believes that the Company is in compliance with local, state and federal regulations, While no regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation, as well as regulatory actions unknown or unasserted at this time. |
Recent Accounting Pronouncements | Recent accounting pronouncements. In July 2018, the FASB issued ASU 2018-10 Leases (Topic 842), Codification Improvements Leases (Topic 842), Targeted Improvements . . Leases (Topic 842) In July 2018, the FASB issued ASU 2018-09, Codification Improvements. Compensation-Stock Compensation-Income Taxes, Compensation-Stock Compensation-Income Taxes, In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, Equity - Equity-Based Payments to Non-Employees In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This standard amends Accounting Standards Codification 740, Income Taxes (ASC 740) to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the Tax Reform Act) pursuant to Staff Accounting Bulletin No. 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance. As described in the footnotes to the Annual Report on Form 10-K, the Company’s accounting for the tax effects of enactment of the Tax Reform Act is being assessed; however, in certain cases, as described below, we made a reasonable estimate of the effects on our existing deferred tax balances and valuation allowance. The Company determined that the $62.9 million recorded in connection with the re-measurement of certain deferred tax assets and liabilities, and corresponding valuation allowance was a provisional amount and a reasonable estimate at December 31, 2017. The Company has not completed the accounting with regard to the tax effects associated with an intra-entity transfer of certain intellectual property rights with the enactment of Tax Reform Act. Our accounting for the intra-entity transfer reflects the utilization of net operating losses on the basis of the laws in effect before the Tax Reform Act. The Company is evaluating the impact under Tax Reform Act on the Company's global business structure. In all aspects, the Company will continue to make and refine calculations as additional analysis is completed. The Company expects to complete the accounting assessment during the one year measurement period provided by SAB 118. In February 2016, the Financial Accounting Standards Board (FASB) issued guidance that requires a lessee to recognize assets and liabilities arising from leases on the balance sheet. Previous GAAP did not require lease assets and liabilities to be recognized for most leases. Additionally, companies are permitted to make an accounting policy election not to recognize lease assets and liabilities for leases with a term of 12 months or less. For both finance leases and operating leases, the lease liability should be initially measured at the present value of the remaining contractual lease payments. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee will not significantly change under this new guidance. This new guidance is effective for the company as of the first quarter of fiscal year 2020. The Company is evaluating the effect that this ASU will have on its financial statements and related disclosures. The Company believes that other recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented. |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | As of September 30, 2018 and December 31, 2017, fixed assets and the estimated lives used in the computation of depreciation are as follows: Estimated Useful Lives September 30, 2018 December 31, 2017 Leasehold improvements 10 years 1,082,280 853,413 Less: Accumulated depreciation and amortization (872,887 ) (444,285 ) Property and equipment, net $ 209,393 $ 409,128 |
Convertible Notes Payable (Tabl
Convertible Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Liabilities Measured using Fair Significant Unobservable Inputs (Level 3) | The table below provides a reconciliation of the beginning and ending balances for the liabilities measured using fair significant unobservable inputs (Level 3) for the nine months ended September 30, 2018: Convertible notes Discount Convertible Note Net of Discount Derivative Liabilities Balance, December 31, 2017 971,454 503,339 468,116 4,106,521 Issuance of convertible notes 3,242,734 3,208,525 34,209 4,900,329 Conversion of convertible notes (830,145 ) (175,000 ) (655,144 ) (1,267,049 ) Repayment of convertible notes (75,269 ) (75,269 ) Change in fair value of derivatives — — — (2,608,997 ) Amortization — (917,870 ) 917,870 — Balance September 30, 2018 $ 3,308,774 $ 2,618,994 $ 689,782 $ 5,130,804 |
Schedule of Assumptions used Black Scholes Model | The following assumptions were used in calculations of the Black Scholes model for the periods ended September 30, 2018 and December 31, 2017. September 30, 2018 December 31, 2017 Risk-free interest rates 1.89 - 2.33 % 1.28-1.76 % Expected life (years) 0.03 - 2.00 years 0.02-1.23 year Expected dividends 0 % 0 % Expected volatility 100 - 233 % 211-354 Diego Pellicer Worldwide, Inc. Common Stock fair value $ 0.11 $ 1.60 |
Stockholder's Equity (Deficit)
Stockholder's Equity (Deficit) (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Schedule of Warrant Liabilities Measured using Fair Significant Unobservable Inputs (Level 3) | The table below provides a reconciliation of the beginning and ending balances for the warrant liabilities measured using fair significant unobservable inputs (Level 3) for the nine months ended September 30, 2018: Balance at December 31, 2017 $ 192,350 Issuance of warrants — Change in fair value during period (180,269 ) Balance at September 30, 2018 $ 12,081 |
Schedule of Fair Value on Assumptions | The following assumptions were used in calculations of the Black Scholes model for the periods ended September 30, 2018 and December 31, 2017. September 30, 2018 December 31, 2017 Annual dividend yield 0 % 0 % Expected life (years) 1.67 - 8.9 years 3 - 10 Risk-free interest rate 2.52 - 3.05 % 1.50 – 2.40 % Expected volatility 188 - 230 % 177 - 284 % |
Organization and Operations (De
Organization and Operations (Details Narrative) - Type 1 Media, Inc [Member] | 9 Months Ended |
Sep. 30, 2018USD ($)shares | |
Number of shares issued and outstanding prior merger | 3,135,000 |
Number of shares agreed to issued and outstanding by principal owner | $ | $ 2,750,000 |
Consideration for agreed shares | $ | $ 169,000 |
Number of shares cancellation during the period | 2,750,000 |
Exchanged for right to receive share | 1 |
Stock issued during period convertible securities | 1,081,613 |
Percentage of combined entity | 74.00% |
Significant and Critical Acco_3
Significant and Critical Accounting Policies and Practices (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Common Stock Equivalents [Member] | ||
Common stock equivalents | 60,158,160 | 3,054,490 |
Maximum [Member] | ||
Cash insured by FDIC | $ 250,000 |
Going Concern (Details Narrativ
Going Concern (Details Narrative) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Working capital deficit | $ 7,226,765 | |
Accumulated deficit | $ 46,755,244 | $ 42,764,086 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Leasehold Improvements | $ 1,082,280 | $ 853,413 |
Less: Accumulated depreciation and amortization | (872,887) | (444,285) |
Property and equipment, net | $ 209,393 | $ 409,128 |
Leasehold Improvements [Member] | ||
Property and equipment estimated useful lives | 10 years |
Related Party (Details Narrativ
Related Party (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Sep. 30, 2016 | Apr. 02, 2016 | |
Accrued fees - related parties | $ 439,120 | $ 439,120 | $ 449,064 | ||||
Cash based compensation - related parties | 177,099 | $ 196,799 | 557,954 | $ 501,995 | |||
Share based compensation - related parties | 228,832 | 483,140 | $ 874,471 | 2,010,853 | |||
Debt instruments conversion into shares | 6,673,717 | ||||||
Debt instruments conversion into shares, value | $ 830,145 | ||||||
Debt instrument interest rate | 8.00% | ||||||
Gross revenues | 116,507 | $ 105,872 | 225,452 | $ 323,748 | |||
Notes payable related parties | 140,958 | $ 140,958 | $ 307,312 | ||||
Related Party Note [Member] | |||||||
Debt instruments conversion into shares | 669,082 | ||||||
Debt instruments conversion into shares, value | $ 166,354 | ||||||
Mr. Throgmartin [Member] | |||||||
Accrued interest | $ 1,480,000 | ||||||
Debt instrument face amount | $ 140,958 | $ 140,958 | |||||
Debt instrument interest rate | 8.00% | 8.00% | |||||
Gross revenues | $ 3,000,000 | ||||||
Related Party [Member] | |||||||
Accrued interest | $ 21,658 | 21,658 | |||||
Convertible Notes [Member] | |||||||
Debt instruments conversion into shares, value | $ 890,774 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | Apr. 02, 2016 | Aug. 31, 2015 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 |
Note maturity date | Nov. 29, 2018 | ||||
Note payable | $ 395,903 | $ 133,403 | |||
Proceeds from operating capital | $ 262,500 | ||||
Proceeds from notes payable | $ 250,000 | $ 250,000 | |||
Debt instruments interest rate | 8.00% | ||||
Third Parties [Member] | |||||
Note payable principal amount | $ 126,000 | ||||
Note maturity date | Oct. 31, 2018 |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Jul. 17, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Derivative liability | $ 5,130,804 | $ 4,106,521 | ||
Conversion of convertible notes | 830,145 | |||
Accrued interest | $ 69,037 | |||
Debt instruments conversion into shares | 6,673,717 | |||
Gain on extinguishment of debt | $ (47,918) | $ 4,156,980 | ||
Financing costs | 2,883,658 | |||
Debt discount | $ 2,429,275 | |||
Equity and Debt Restructure Agreement [Member] | Investors [Member] | ||||
Number of restricted common shares cancelled | 2,774,093 | |||
Fair value of restricted common shares | $ 443,855 | |||
Fair value of embedded conversion feature | 3,527,513 | |||
Equity and Debt Restructure Agreement [Member] | First Investors [Member] | ||||
Principal amount | 1,683,558 | |||
Loan | 700,000 | |||
Proceeds from loan | 200,000 | |||
Equity and Debt Restructure Agreement [Member] | Second Investors [Member] | ||||
Principal amount | $ 545,606 |
Convertible Notes Payable - Sch
Convertible Notes Payable - Schedule of Liabilities Measured using Fair Significant Unobservable Inputs (Level 3) (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Issuance of convertible notes | $ 903,750 | $ 1,278,500 |
Conversion of convertible notes | (830,145) | |
Repayment of convertible notes | (75,269) | |
Convertible Notes [Member] | ||
Balance, beginning | 971,454 | |
Issuance of convertible notes | 3,242,734 | |
Conversion of convertible notes | (830,145) | |
Repayment of convertible notes | (75,269) | |
Change in fair value of derivatives | ||
Amortization | ||
Balance, ending | 3,308,774 | |
Discount [Member] | ||
Balance, beginning | 503,339 | |
Issuance of convertible notes | 3,208,525 | |
Conversion of convertible notes | (175,000) | |
Change in fair value of derivatives | ||
Amortization | (917,870) | |
Balance, ending | 2,618,994 | |
Convertible Note Net of Discount [Member] | ||
Balance, beginning | 468,116 | |
Issuance of convertible notes | 34,209 | |
Conversion of convertible notes | (655,144) | |
Repayment of convertible notes | (75,269) | |
Change in fair value of derivatives | ||
Amortization | 917,870 | |
Balance, ending | 689,782 | |
Derivative Liabilities [Member] | ||
Balance, beginning | 4,106,521 | |
Issuance of convertible notes | 4,900,329 | |
Conversion of convertible notes | (1,267,049) | |
Change in fair value of derivatives | (2,608,997) | |
Amortization | ||
Balance, ending | $ 5,130,804 |
Convertible Notes Payable - S_2
Convertible Notes Payable - Schedule of Assumptions used Black Scholes Model (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Diego Pellicer Worldwide, Inc. Common Stock fair value | $ 0.11 | $ 1.60 |
Expected Dividends [Member] | ||
Fair value assumptions, percentage | 0.00% | 0.00% |
Minimum [Member] | Risk Free Interest Rates [Member] | ||
Fair value assumptions, percentage | 1.89% | 1.28% |
Minimum [Member] | Expected Life [Member] | ||
Fair value assumptions, term | 11 days | 7 days |
Minimum [Member] | Expected Volatility [Member] | ||
Fair value assumptions, percentage | 100.00% | 211.00% |
Maximum [Member] | Risk Free Interest Rates [Member] | ||
Fair value assumptions, percentage | 2.33% | 1.76% |
Maximum [Member] | Expected Life [Member] | ||
Fair value assumptions, term | 2 years | 1 year 2 months 23 days |
Maximum [Member] | Expected Volatility [Member] | ||
Fair value assumptions, percentage | 233.00% | 354.00% |
Stockholder's Equity (Deficit_2
Stockholder's Equity (Deficit) (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | 12 Months Ended | ||
Oct. 29, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Jun. 25, 2018 | Jan. 14, 2018 | |
Common stock shares authorized | 42,000,000 | 42,000,000 | |||
Number of shares issued for conversion of notes, value | $ 830,145 | ||||
Debt converted into share | 6,673,717 | ||||
Accrued interest | $ 69,037 | ||||
Number of unissued shares during period, value | $ 2,648 | $ 24,488 | |||
Number of common stock issued, shares | 41,500 | 16,804 | |||
Stock issued during period, value, new issues | $ 20,872 | ||||
Number of unissued shares during period | 100,000 | ||||
Stock issued during period, shares, share-based compensation, gross | 2,108,587 | 98,417 | |||
Stock issued during period, value, share-based compensation | $ 301,253 | ||||
Number of common stock issued for services, shares | 361,275 | ||||
Number of common stock issued for services | $ 70,680 | ||||
Shares authorized for services but not issued, shares | 22,306 | ||||
Shares authorized for services but not issued, value | $ 4,232 | ||||
Ownership interest | 10.00% | ||||
Accrued value annual grant | $ 392,998 | ||||
Shares available for future grants | 1,849,091 | ||||
Net credit of compensation | $ 544,647 | ||||
Number of common stock accrued during period | 748,896 | 1,161,065 | |||
Stock option expenses | $ 238,599 | ||||
Stock issued for inducement of extension of sublease, share | 125,000 | ||||
Stock issued for inducement of extension of sublease, Value | $ 20,500 | ||||
Convertible Notes [Member] | |||||
Number of shares issued for conversion of notes, value | 890,774 | ||||
Held in escrow | 26,730 | ||||
Related Party Note [Member] | |||||
Accrued interest | $ 21,658 | ||||
Number of common stock issued, shares | 13,381,637 | ||||
Stock issued during period, value, new issues | $ 166,354 | ||||
Related Party Note [Member] | |||||
Number of shares issued for conversion of notes, value | $ 166,354 | ||||
Debt converted into share | 669,082 | ||||
Related Party [Member] | |||||
Stock issued during period, shares, share-based compensation, gross | 1,023,367 | ||||
Holder [Member] | |||||
Number of shares issued for conversion of notes, value | $ 830,145 | ||||
Debt converted into share | 6,673,717 | ||||
Accrued interest | $ 69,037 | ||||
Common stock, shares authorized but not issued, shares | 3,884 | ||||
Common stock, shares authorized but not issued, value | $ 13,983 | ||||
Consultant [Member] | |||||
Number of shares issued to settle accounts payable, shares | 75,000 | ||||
Number of shares issued to settle accounts payable | $ 47,254 | ||||
Related Party [Member] | |||||
Stock issued during period, shares, share-based compensation, gross | 280,693 | ||||
Stock issued during period, value, share-based compensation | $ 130,868 | ||||
Stock issued during period of cancellation, shares | 273,245 | ||||
Board of Directors[Member] | Maximum [Member] | |||||
Common stock shares authorized | 840,000,000 | 495,000,000 | |||
Board of Directors[Member] | Minimum [Member] | |||||
Common stock shares authorized | 495,000,000 | 195,000,000 | |||
Subsequent Event [Member] | |||||
Reverse Stock split | 20 for 1 |
Stockholder's Equity (Deficit_3
Stockholder's Equity (Deficit) - Schedule of Warrant Liabilities Measured using Fair Significant Unobservable Inputs (Level 3) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Change in fair value during period | $ (7,810) | $ 67,868 | $ (180,268) | $ 379,084 |
Fair Value, Inputs, Level 3 [Member] | ||||
Balance at December 31, 2017 | 192,350 | |||
Issuance of warrants | ||||
Change in fair value during period | (180,269) | |||
Balance at June 30, 2018 | $ 12,081 | $ 12,081 |
Stockholder's Equity (Deficit_4
Stockholder's Equity (Deficit) - Schedule of Fair Value on Assumptions (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Annual dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Expected life (years) | 1 year 8 months 2 days | 3 years |
Risk-free interest rate | 2.52% | 1.50% |
Expected volatility | 200.00% | 177.00% |
Maximum [Member] | ||
Expected life (years) | 8 years 10 months 25 days | 10 years |
Risk-free interest rate | 2.85% | 2.40% |
Expected volatility | 230.00% | 284.00% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | 1 Months Ended |
Oct. 14, 2018shares | |
Subsequent Event [Member] | |
Common stockConverted into debt | 1,378,661 |