Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 10, 2021 | |
Document And Entity Information | ||
Entity Registrant Name | DIEGO PELLICER WORLDWIDE, INC | |
Entity Central Index Key | 0001559172 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity's Reporting Status Current | Yes | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity File Number | 333-189731 | |
Entity Interactive Data Current | Yes | |
Entity Incorporation, State or Country Code | DE | |
Entity Common Stock, Shares Outstanding | 223,465,734 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash | $ 198,101 | $ 327,864 |
Accounts receivable | 520,974 | 523,958 |
Prepaid expenses | 1,275 | 11,275 |
Total current assets | 720,350 | 863,097 |
Other receivables | 1,057,272 | 1,030,422 |
Security deposits | 90,000 | 90,000 |
Right of use assets | 951,324 | 1,062,592 |
Total assets | 2,818,946 | 3,046,111 |
Current liabilities: | ||
Accounts payable | 508,218 | 526,377 |
Accrued payable - related parties | 1,333,920 | 1,332,756 |
Accrued expenses | 902,788 | 931,825 |
Notes payable - related party | 140,958 | 140,958 |
Notes payable | 133,403 | 133,403 |
Convertible notes, net of discount and costs | 2,941,274 | 3,239,274 |
Derivative liabilities | 5,713,575 | 5,997,865 |
Lease liabilities | 270,021 | 327,685 |
Warrant liabilities | 4,918 | 476 |
Total current liabilities | 11,949,075 | 12,630,619 |
Notes payable - long term | 150,000 | 206,444 |
Lease liabilities, net of current portion | 668,309 | 715,488 |
Total liabilities | 12,767,384 | 13,552,551 |
Redeemable convertible preferred stock, Series C, par value $.00001 per share; 1,500,000 shares authorized, 293,700 and no shares issued and outstanding, net of discount of $282,737 and $0, respectively, | 13,155 | |
Deficiency in stockholders' equity: | ||
Preferred stock, Series A and B, par value $.0001 per share; 5,000,000 shares authorized, none issued and outstanding | ||
Common stock, par value $.000001 per share; 840,000,000 shares authorized, 222,327,908 and 217,271,495 shares issued and outstanding, respectively | 221 | 216 |
Additional paid-in capital | 45,261,664 | 44,554,119 |
Stock to be issued | 76,068 | 49,225 |
Accumulated deficit | (55,299,546) | (55,110,000) |
Total deficiency in stockholders' equity | (9,961,593) | (10,506,440) |
Total liabilities and deficiency in stockholders' equity | $ 2,818,946 | $ 3,046,111 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Common stock, par value | $ 0.000001 | $ 0.000001 |
Common stock, shares authorized | 840,000,000 | 840,000,000 |
Common stock, shares issued | 222,327,908 | 217,271,495 |
Common stock, shares outstanding | 222,327,908 | 217,271,495 |
Series A Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
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 | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Redeemable convertible preferred stock, Series C [Member] | ||
Preferred stock, par value | $ .00001 | $ 0.00001 |
Preferred stock, shares authorized | 1,500,000 | 1,500,000 |
Preferred stock, shares issued | 293,700 | 0 |
Preferred stock, shares outstanding | 293,700 | 0 |
Discount | $ 282,737 | $ 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenues | ||
Net rental revenue | $ 191,753 | $ 384,031 |
Rental expense | (159,027) | (290,793) |
Gross profit | 32,726 | 93,238 |
Operating expenses: | ||
General and administrative expenses | 198,251 | 267,003 |
Selling expense | 9,881 | 6,804 |
Loss from Operations | (175,406) | (180,569) |
Other income (expense) | ||
Interest income | 26,912 | 32,891 |
Forgiveness of debt income | 56,908 | |
Interest expense | (209,542) | (667,577) |
Lease termination payments | 33,851 | |
Extinguishment of debt | 389,550 | 1,932 |
Change in derivative liabilities | 698,449 | 302,004 |
Change in value of warrants | (4,442) | 97 |
Total other income (loss), net | 991,686 | (330,653) |
Provision for taxes | ||
Net income (loss) | 816,280 | (511,222) |
Deemed dividend on preferred stock | (1,005,826) | (58,456) |
Net loss attributable to common stockholders | $ (189,546) | $ (569,678) |
Loss per share - basic and diluted | $ 0 | $ 0 |
Weighted average common shares outstanding - basic and diluted | 219,506,975 | 122,673,197 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Deficit (Unaudited) - USD ($) | Redeemable Convertible Preferred Stock | Common Stock | Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Common Stock to be issued | Total |
Balance, beginning at Dec. 31, 2019 | $ 8,750 | $ 114 | $ 43,478,139 | $ (51,968,902) | $ 127,261 | $ (8,363,388) | |
Balance, beginning, shares at Dec. 31, 2019 | 140,000 | 113,926,332 | |||||
Issuance of common shares for services | 2,003 | 2,003 | |||||
Issuance of common shares for services, shares | |||||||
Issuance of common shares for services - related parties | 27,026 | 27,026 | |||||
Issuance of common shares for services - related parties, shares | |||||||
Common stock issued upon conversion of notes payable and accrued interest | $ 14 | $ 169,723 | $ 169,737 | ||||
Common stock issued upon conversion of notes payable and accrued interest, shares | 13,767,631 | ||||||
Series C preferred stock issued for cash, net of costs and discounts | 55,800 | ||||||
Series C preferred stock issued for cash, net of costs and discounts, shares | |||||||
Accrued dividends and accretion of conversion feature on Series C preferred stock | $ 19,588 | $ (19,588) | $ (19,588) | ||||
Fair value of warrants and options granted for services | 40,595 | 40,595 | |||||
Deemed dividends related to conversion feature of Series C preferred stock | (38,868) | (38,868) | |||||
Net income | (511,222) | (511,222) | |||||
Balance, ending at Mar. 31, 2020 | $ 28,338 | $ 128 | 43,688,457 | (52,538,580) | 156,290 | (8,693,705) | |
Balance, ending, shares at Mar. 31, 2020 | 195,800 | 127,693,963 | |||||
Balance, beginning at Dec. 31, 2020 | $ 216 | 44,554,119 | (55,110,000) | 49,225 | (10,506,440) | ||
Balance, beginning, shares at Dec. 31, 2020 | 217,271,495 | ||||||
Issuance of common shares for services | 1,915 | 2,000 | 3,915 | ||||
Issuance of common shares for services, shares | 30,000 | ||||||
Issuance of common shares for services - related parties | 24,843 | 24,843 | |||||
Issuance of common shares for services - related parties, shares | |||||||
Common stock issued upon conversion of notes payable and accrued interest | $ 5 | $ 705,630 | $ 705,635 | ||||
Common stock issued upon conversion of notes payable and accrued interest, shares | 5,026,413 | ||||||
Series C preferred stock issued for cash, net of costs and discounts | |||||||
Series C preferred stock issued for cash, net of costs and discounts, shares | 293,700 | ||||||
Accrued dividends and accretion of conversion feature on Series C preferred stock | $ 13,155 | $ (13,155) | $ (13,155) | ||||
Deemed dividends related to conversion feature of Series C preferred stock | (992,671) | (992,671) | |||||
Net income | 816,280 | 816,280 | |||||
Balance, ending at Mar. 31, 2021 | $ 13,155 | $ 221 | $ 45,261,664 | $ (55,299,546) | $ 76,068 | $ (9,961,593) | |
Balance, ending, shares at Mar. 31, 2021 | 293,700 | 222,327,908 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flow (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 816,280 | $ (511,222) |
Adjustments to reconcile net income (loss) to net cash used in operating activities | ||
Change in fair value of derivative liability | (698,449) | (302,004) |
Change in value of warrants | 4,442 | (97) |
Amortization of debt related costs | 584,071 | |
Noncash finance cost | 2,000 | |
Expense related to additional derivative liability | 118,027 | |
Extinguishment of debt | (389,550) | (1,932) |
Stock based compensation | 28,758 | 69,624 |
Forgiveness of debt | (56,908) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,984 | (74,323) |
Prepaid expenses | 10,000 | 4,000 |
Other receivables | (26,850) | (209,258) |
Accounts payable | (18,159) | (13,603) |
Accrued liability - related parties | 1,164 | 29,300 |
Accrued expenses | 3,073 | 70,638 |
Lease liabilities | 6,425 | (18,915) |
Cash used by operating activities | (196,763) | (373,721) |
Cash flows from investing activities | ||
Cash flows from financing activities: | ||
Proceeds from convertible notes payable | 100,000 | |
Repayments of convertible notes payable, net | (200,000) | (2,500) |
Proceeds from sale of preferred stock, net | 267,000 | 50,000 |
Cash provided by financing activities | 67,000 | 147,500 |
Net decrease in cash | (129,763) | (226,221) |
Cash, beginning of period | 327,864 | 317,446 |
Cash, end of period | 198,101 | 91,225 |
Cash paid for interest | 70,000 | |
Cash paid for taxes | ||
Supplemental schedule of noncash financial activities: | ||
Notes converted to stock | 100,000 | 89,000 |
Derivative liability related to convertible notes and convertible Preferred C shares | 1,377,698 | |
Accrued interest converted to stock | 6,256 | 6,282 |
Value of common stock issued for conversion of notes and accrued interest | 705,635 | |
Value of derivative liability extinguished upon conversion of notes and preferred stock and payment of notes | 963,539 | 101,764 |
Debt discount attributable to preferred stock | 267,000 | |
Accrued interest extinguished with note payment | 25,390 | |
Common stock payable authorized for services | 26,843 | 29,029 |
Debt discount extinguished with note conversion | 25,377 | |
Accrued dividends and accretion of conversion feature on Series C preferred stock | (13,155) | (19,588) |
Deemed dividends related to conversion feature of Series C preferred stock | $ 992,671 | $ 38,868 |
Organization and Operations
Organization and Operations | 3 Months Ended |
Mar. 31, 2021 | |
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. 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. The properties generating rents in 2021 and 2020 are as follows: Purpose Size City State Retail store (recreational and medical) 3,300 sq. Denver CO Cultivation warehouse – terminated October 2020 18,600 sq. Denver CO Cultivation warehouse 14,800 sq. Denver CO The Company’s three properties in Denver, CO (one terminated in October 2020) are leased to Royal Asset Management, LLC (“RAM”). RAM opened the Diego Denver branded flagship store in February 2017. This store is known as “Diego Colorado”. The retail facilities have shown steady growth in sales since opening. For the other two properties subleased (one terminated in October 2020), RAM uses these properties for its cultivation facilities in Denver, CO. Production at these facilities began in late 2016. The Company is currently exploring the acquisition of this entity, and the parties are in negotiations (see Note 4). In October 2020, the master lease and sublease associated with the 18,600 sq. cultivation warehouse in Denver were terminated (see Note 4). |
Significant and Critical Accoun
Significant and Critical Accounting Policies and Practices | 3 Months Ended |
Mar. 31, 2021 | |
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 and for the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results of operations and that 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 consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and presented in accordance with accounting principles generally accepted in the United States of America (US GAAP). The accompanying consolidated balance sheet at December 31, 2020, has been derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related notes to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the U.S. Securities and Exchange Commission (“SEC”) on the opinion of management, all material adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been made to the condensed consolidated financial statements. The condensed consolidated financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed consolidated financial statements not misleading as required by Regulation S-X Rule 10-01. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any future periods. 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. 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, the collectability of accounts receivable and other receivables (See Note 4), valuation of right of use assets and lease liabilities 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 and 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 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 March 31, 2021 and December 31, 2020. 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. The following table reflects assets and liabilities that are measured at fair value on a recurring basis (in thousands): As of March 31, 2021 Fair Value Measurement Using Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 5,714 $ 5,714 Stock warrant liabilities — — 5 5 $ — $ — $ 5,719 $ 5,719 As of December 31, 2020 Fair Value Measurement Using Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 5,998 $ 5,998 Stock warrant liabilities — — 1 1 $ — $ — $ 5,999 $ 5,999 Derivative liabilities and stock warrant liabilities were valued using the Binomial Option Pricing Model in calculating the embedded conversion features for the three months ended March 31, 2021 and the year ended December 31, 2020. 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. There were no uninsured balances at March 31, 2021. Uninsured balances were approximately $73,000 at December 31, 2020. Revenue recognition In accordance with ASC 842, Leases, 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 management concludes that the Company is the owner of tenant improvements, the Company records the cost to construct the tenant improvements as a capital asset. In addition, the Company 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, the Company 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, we record 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 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. Advertising During the three months ended March 31, 2021 and 2020, advertising expense was $9,881 and $6,804, respectively. 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 common 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 132,973,796 and 926,023,386 common stock equivalents at March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021 and 2020, these 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 and, 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. The Company believes 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 | 3 Months Ended |
Mar. 31, 2021 | |
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 $11,228,725 at March 31, 2021, and it has an accumulated deficit of $55,299,546 at March 31, 2021. These factors raise substantial doubt about its ability to continue as a going concern over the next twelve months. 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. There are other future noncash charges in connection with financings 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. |
Accounts Receivables and Other
Accounts Receivables and Other Receivables | 3 Months Ended |
Mar. 31, 2021 | |
Common shares issued for security payment of convertible notes, value | |
Accounts Receivables and Other Receivables | Note 4 – Accounts Receivables and Other Receivables As disclosed in Note 1, the Company subleases two properties in Colorado to Royal Asset Management at March 31, 2021. At March 31, 2021 and December 31, 2020, the Company had outstanding receivables from the subleases totaling $520,974 and $523,958, respectively, and during the three months ended March 31, 2021 and 2020 the Company’s subleases with RAM accounted for 100% of the Company’s revenues. In addition to the receivables from the subleases, the Company has agreed to provide RAM and affiliates of RAM up to an aggregate amount of $1,030,000 in financing. These notes accrue interest at the rates ranging from 12% to 18% per annum. As of March 31, 2021 and December 31, 2020, the outstanding balance of these notes receivable total $1,057,272 and $1,030,422, respectively, including accrued interest of $327,272 and $300,422, respectively. The notes are secured by a UCC filing and also $400,000 of the balance is personally guaranteed by the managing member of RAM. Our position is subordinate to the CEO’s note described in Note 6. We have recorded interest income of $26,850 and $32,846 during the three months ended March 31, 2021 and 2020, respectively. If we do consummate any agreement to acquire Royal Asset Management, part of the purchase price will be paid through receivables that are owed to us (see below). On September 9, 2020, we closed on a Membership Interest Purchase Agreement dated September 4, 2020, and obtained the right to acquire a 15.13% membership interest in Blue Bronco, LLC. The purchase of the 15.13% interest in Blue Bronco LLC is subject to the approval of the Colorado Marijuana Enforcement Division. Necessary approval by governing authorities is expected to be received in the second quarter of 2021. Accrued interest receivable of approximately $68,000 will be applied to the purchase of the membership interest upon approval of the purchase by the Colorado Marijuana Enforcement Division. Lease Termination On October 1, 2020, the master and sublease associated with the 18,600 sq. cultivation warehouse in Denver were terminated. In connection with that termination, we entered into a Sublease Termination Agreement (“Termination Agreement”) with RAM and an affiliate of RAM Venture Product Consulting, LLC (“VPC”). Pursuant to this agreement, RAM acknowledged a debt of deferred rent to the Company in the amount of $1,418,480 and VPC acknowledged a debt of deferred rent to the Company in the amount of $64,344. RAM and VPC executed promissory notes for these amounts, respectively. The notes accrue interest on the unpaid balance at a rate equal to the Applicable Federal Rate for mid-term obligations as published by the Internal Revenue Service. No payment under the promissory notes will be due to the Company until the earlier of (i) the date on which RAM and the Company consummate a change of control event, which is defined as: the acquisition of RAM by the Company or an affiliated entity by means of any transaction or series of related transactions to which RAM is a party (including, without limitation, any membership interest acquisition, reorganization, merger or consolidation, (generally, a “Merger”), or, (ii) the date one (1) business day following the earlier of (x) at any time, receipt by the Company from RAM or VPC of a written notice stating such party no longer desires to pursue the Merger, or (y) beginning eighteen (18) months after the date of this Agreement, receipt by RAM or VPC from the Company of a written notice stating that the Company no longer desires to pursue the Merger (the “Maturity Date”). We have recorded the promissory notes as long term notes receivable of $1,482,824 at March 31, 2021. Due to the uncertainty of the collectability, we have also recorded a long term deferred credit in the same amount. We will record income under the deferred rent notes as payments are received or deemed collectible. This asset and related credit have been netted on the accompanying condensed consolidated balance sheet. Additionally, in connection with the termination of the sublease, RAM will continue to pay the remaining future sublease premium payments due to the company on the Denver sublease (the “Future Rent Debt”) beginning on the termination date, and until the earlier of the Maturity Date or June 30, 2024, notwithstanding the termination of the Subleases. However, no payment under the Future Rent Debt agreement will be due to the Company until the Maturity Date, at which time the entire Future Rent Debt shall be due and payable in full, except for any month in which RAM earns $725,000 of gross sales revenue, including taxes, at its Alameda location, in which case RAM shall pay the Future Rent Debt for the following month to the Company on or before the 5th day of the following month, and such amount will not accrue as a Future Rent Debt. RAM shall continue to accrue debt to the company, assessed on the first day of each month, according to the schedule below: Monthly Payments Accrued October 1, 2020 to June 30, 2021 $ 11,284 July 1, 2021 to June 30, 2022 11,622 July 1, 2022 to June 30, 2023 11,971 July 1, 2023 to June 30, 2024 12,330 We will record income pursuant to the Future Rent Debt as payments are received based on the Company’s analysis of collectability including, but not limited to, the potential application toward the purchase price. During 2021, we received three months of payments and have recorded $33,851 as Lease Termination Payments in the Statement of Operations. |
Other Assets
Other Assets | 3 Months Ended |
Mar. 31, 2021 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets | Note 5 – Other Assets Security deposits: |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 6 – Related Party Transactions As of March 31, 2021 and December 31, 2020, the Company has accrued compensation to its CEO and director and to its CFO aggregating $323,997 and $289,897, respectively. As of March 31, 2021 and December 31, 2020, accrued payable due to former officers was $1,009,922 and $1,042,859, respectively. For each of the three month periods ended March 31, 2021 and 2020, total cash-based compensation to related parties was $90,000. For the three months ended March 31, 2021 and 2020, total share-based compensation to related parties was $24,843 and $67,621, respectively. These amounts are included in general and administrative expenses in the accompanying financial statements. From 2017 to 2019, Mr. Gonfiantini, CEO, personally and through his Company, Crystal Bay Financial LLC, loaned an aggregate amount of $1,020,000 to Royal Asset Management. These notes accrue interest at 17% - 18% per annum, and require monthly payment approximately from $5,000 to $20,000. These notes are personally guaranteed by the managing member of Royal Asset Management, and are secured by certain equipment and other tangible properties of Royal Asset Management. Among these notes, $500,000 note was also secured by the medical marijuana licenses held by Royal Asset Management. At March 31, 2021 and December 31, 2020, the Company owed Mr. Throgmartin, former CEO (See Note 10), $140,958 pursuant to a promissory note dated August 12, 2016. This note accrues interest at the rate of 8% per annum and was past the maturity date at March 31, 2021, however the Company has not yet received a default notice. Accrued interest on the note was $52,181 and $49,401 at March 31, 2021 and December 31, 2020, respectively. |
Notes Payable
Notes Payable | 3 Months Ended |
Mar. 31, 2021 | |
Notes Payable [Abstract] | |
Notes Payable | Note 7 – Notes Payable On August 31, 2015, the Company issued a note in the amount of $126,000 to a third party for use as operating capital. The note was amended to include accrued interest on October 31, 2016 and extend the maturity date to October 31, 2018. As of March 31, 2021 and December 31, 2020 the outstanding principal balance of the note was $133,403, and accrued interest on the note was $71,746 and $70,101 at March 31, 2021 and December 31, 2020, respectively. As of March 31, 2021 the note was past the maturity date, however the Company has not yet received a default notice. On April 22, 2020, the Company was granted a loan from Numerica Credit Union, in the aggregate amount of $56,444, pursuant to the Paycheck Protection Program, (the “PPP”) under Division A, Title I of the CARES Act. The loan, which was in the form of a note dated April 22, 2020 issued by the Borrower, was scheduled to mature on April 22, 2022 and bore interest at a rate of 1.0% per annum, payable monthly commencing October 22, 2020. There have not been any payments made towards this loan, as the full amount of the loan and accrued interest was forgiven in full during February 2021 and the Company recorded income of $56,908. On June 30, 2020, the Company was granted a loan from the Small Business Association, in the aggregate amount of $150,000, pursuant to the Economic Injury Disaster Loan, (the “EIDL”) under Division A, Title I of the CARES Act. The loan, which is in the form of a note dated June 30, 2020 issued by the Borrower, matures on June 30, 2050 and bears interest at a rate of 3.75% per annum, payable monthly commencing June 30, 2021. |
Convertible Notes Payable
Convertible Notes Payable | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable | Note 8 – Convertible Notes Payable The Company has issued several convertible notes which are outstanding. The note holders 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 features were recognized as embedded derivatives and are valued using a Binomial Option Pricing Model that resulted in a derivative liability of $5,326,730 and $5,997,865 at March 31, 2021 and December 31, 2020, respectively. All notes accrue interest at 10% and the notes had all matured at March 31, 2021. In connection with the issuance of certain of these notes, the Company also issued warrants to purchase its common stock. Several convertible note holders elected to convert their notes to stock during the three months ended March 31, 2021 and 2020. The tables below provide the note payable activity for the three months ended March 31, 2021 and 2020, and also a reconciliation of the beginning and ending balances for the derivative liabilities measured using Level 3 fair value inputs for the three months ended March 31, 2021 and 2020: Convertible Discount Convertible Derivative Balance, December 31, 2020 $ 3,239,274 $ — $ 3,239,274 $ 5,997,865 Issuance of convertible notes 2,000 — 2,000 115,160 Conversion of convertible notes (100,000 ) — (100,000 ) (661,087 ) Repayment of convertible notes (200,000 ) — (200,000 ) (302,452 ) Change in fair value of derivatives — — — 177,244 Amortization — — — — Balance March 31, 2021 $ 2,941,274 $ — $ 2,941,274 $ 5,326,730 Convertible Discount Convertible Derivative Balance, December 31, 2019 $ 3,266,775 $ 914,245 $ 2,352,530 $ 4,834,190 Issuance of convertible notes 103,000 103,000 — 232,013 Conversion of convertible notes (89,000 ) (25,377 ) (63,623 ) (97,838 ) Repayment of convertible notes (2,500 ) — (2,500 ) (3,925 ) Change in fair value of derivatives — — — (315,692 ) Amortization — (452,058 ) 452,058 — Balance March 31, 2020 $ 3,278,275 $ 539,810 $ 2,738,465 $ 4,648,748 During the three months ended March 31, 2021, $100,000 of notes was converted into 4,444,444 shares of common stock with a value of $697,779. A gain on extinguishment of debt of $59,999 and reduction of derivative liabilities of $657,778 have been recorded related to these conversions. During the three months ended March 31, 2021, $6,256 of accrued interest was converted into 581,969 shares of common stock with a value of $7,856. A gain on extinguishment of debt of $1,709 and reduction of derivative liabilities of $3,309 have been recorded related to these conversions. During the three months ended March 31, 2021, we repaid an aggregate of $200,000 of note principal. A gain on extinguishment of debt of $177,116 and reduction of derivative liabilities of $177,116 have been recorded related to these payments. During the three months ended March 31, 2021, we paid an aggregate of $70,000 in settlement of accrued interest in the amount of $95,390. A gain on extinguishment of debt of $150,726 and reduction of derivative liabilities of $125,336 have been recorded related to these payments. During the three months ended March 31, 2021, we recorded noncash additions to convertible notes aggregating $2,000. As of March 31, 2021, convertible notes in the aggregate principal amount of $2,941,274 were past their maturity dates; however the Company has not yet received any default notices. No default or penalty was paid or required to be paid. The following assumptions were used in the Binomial Option Pricing Model in calculating the embedded conversion features and current liabilities for the three months ended March 31, 2021 and 2020: March 31, March 31, Risk-free interest rates 0.02 – 0.09 % 0.11 – 1.58 % Expected life (years) 0.25 0.25 – 1.0 Expected dividends 0 % 0 % Expected volatility 164 – 544 % 179 – 214 % |
Stockholder's Equity (Deficit)
Stockholder's Equity (Deficit) | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Stockholder's Equity (Deficit) | Note 9 – Stockholders’ Equity (Deficit) Series C Preferred Stock On February 24, 2021, the Company sold 179,850 of its Series C Convertible Preferred Shares, with an annual accruing dividend of 10%, to Geneva Roth Remark Holdings, Inc. (“Geneva”), for $163,500 pursuant to a Series C Preferred Purchase Agreement with Geneva. The Company may redeem the Series C Shares at various increased prices at time intervals up to the 6-month anniversary of the closing and must redeem any outstanding shares on the 24-month anniversary. Geneva may convert the Series C Shares into our common shares, commencing on the 6-month anniversary of the closing at a 30% discount to the public market price. The Company recorded a derivative liability associated with Series C Preferred Shares of $1,082,441, valued using a Binomial Option Pricing Model. On March 16, 2021, the Company sold an additional 113,850 shares for $103,500 and recorded a derivative of $177,231. The Series C Preferred Stock is classified as temporary equity due to the fact that the shares are redeemable at the option of the holder. There were 293,700 shares outstanding at March 31, 2021, with an associated derivative liability of $386.845. The tables below provide the preferred stock activity for the three months ended March 31, 2021 and 2020, and also a reconciliation of the beginning and ending balances for the derivative liabilities measured using Level 3 fair value inputs for the three months ended March 31, 2021 and 2020: Preferred Discount Preferred Derivative Balance , December 31, 2020 $ — — — — Issuance of Series C Preferred shares 293,700 293,700 — 1,259,672 Accretion of discount — (10,963 ) 10,963 — Accretion of dividend on Series C preferred stock 2,192 — 2,192 2,866 Change in fair value of derivatives — — — (875,693 ) Balance March 31, 2021 $ 295,892 $ 282,737 $ 13,155 $ 386,845 Preferred Discount Preferred Derivative Balance , December 31, 2019 $ 140,000 $ 131,250 $ 8,750 $ 190,131 Issuance of Series C Preferred shares 55,800 55,800 — 88,868 Accretion of discount — (14,809 ) 14,809 — Accretion of dividend on Series C preferred stock 4,779 — 4,779 — Change in fair value of derivatives — — — 13,688 Balance March 31, 2020 $ 200,579 $ 172,241 $ 28,338 $ 292,687 The following assumptions were used in the Binomial Option Pricing Model in calculating the embedded conversion features and current liabilities for the three months ended March 31, 2021 and 2020: 2021 2020 Risk-free interest rates 0.12 – 0.16 % 0.23 – 0.71 % Expected life (years) 1.9 – 2.0 1.7 – 2.0 Expected dividends 0 % 0 % Expected volatility 188 – 196 % 246 – 251 % Common Stock 2021 Transactions During the three months ended March 31, 2021, $100,000 of notes and $6,256 of accrued interest and fees were converted into 5,026,413 shares of common stock with a value of $705,635. During the three months ended March 31, 2021, 606,769 shares of common stock, valued at $24,843, were accrued for related party services. At March 31, 2021 and December 31, 2020, shares to be issued for related party services were 2,338,456 and 1,731,687, respectively, and the value of shares to be issued at March 31, 2021 and December 31, 2020 was $38,207 and $13,364, respectively. During the three months ended March 31, 2021, 31,696 shares of common stock, valued at $2,000, were accrued for services. At March 31, 2021 and December 31, 2020, shares to be issued for services were 1,137,553 and 1,105,857, respectively, and the value of shares to be issued at March 31, 2021 and December 31, 2020 was $16,000 and $14,000, respectively. At March 31, 2021 and December 31, 2020, shares to be issued for debt conversions were 31,960, and the value of shares to be issued was $21,861. During the three months ended March 31, 2021, we issued 30,000 shares of common stock, valued at $1,915, for consulting services. 2020 Transactions During the three months ended March 31, 2020, $89,000 of notes, $6,282 of accrued interest and $210 additional fee was converted into 13,767,631 shares of common stock. As of March 31, 2020, 35,844 shares, valued at $35,844 for debt conversion were authorized, but not issued as of March 31, 2020. As March 31, 2020, 406,160 shares, valued at $13,601 for services were authorized, but not issued as of March 31, 2020. These were classified as shares to be issued at March 31, 2020. As March 31, 2020, 4,951,781 shares, valued at $106,842 for related party services were authorized, but not issued as of March 31, 2020. These were classified as shares to be issued at March 31, 2020. 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 three months ended March 31, 2021 and 2020: Three Months ended March 31, 2021 2020 Balance at beginning of year $ 476 $ 967 Additions to derivative instruments — — Loss (gain) on change in fair value of derivative liability 4,442 (97 ) Balance at end of year $ 4,918 $ 870 11 The following assumptions were used in the Binomial Option Pricing Model in calculating the embedded conversion features and current liabilities for the three months ended March 31, 2021 and 2020: March 31, 2021 March 31, 2020 Annual dividend yield 0 % 0 % Expected life (years) 1.75 – 6.13 0.42 – 8.13 Risk-free interest rate 0.16 – 1.16 % 1.56 – 2.40 % Expected volatility 198 – 243 % 165 – 318 % |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 10 – COMMITMENTS AND CONTINGENCIES Leases The Company leases property under operating leases. Property leases include retail and warehouse space with fixed rent payments and lease terms ranging from three to five years. The Company is obligated to pay the lessor for maintenance, real estate taxes, insurance and other operating expenses on certain property leases. These expenses are variable and are not included in the measurement of the lease asset or lease liability. These expenses are recognized as variable lease expense when incurred. The Company records the lease asset and lease liability at the present value of lease payments over the lease term. The leases typically do not provide an implicit rate; therefore, the Company uses its estimated incremental borrowing rate at the time of lease commencement to discount the present value of lease payments. The Company’s discount rate for operating leases at March 31, 2021 was 12%. Leases often include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. Lease expense is recognized on a straight-line basis over the lease term to the extent that collection is considered probable. As a result the Company been recognizing rents as they become payable. Our weighted-average remaining lease term is 3.47 years. As of March 31, 2021, the maturities of operating leases liabilities are as follows (in thousands): Operating Leases 2021 293 2022 270 2023 270 2024 270 2025 45 Total 1,148 Less: amount representing interest (210 ) Present value of future minimum lease payments 938 Less: current obligations under leases 270 Long-term lease obligations $ 668 Rent expense is recognized on a straight-line basis over the life of the lease. Rent expense consists of the following: Three months ended March 31, 2021 2020 Operating lease costs $ 111,268 $ 249,225 Variable rent costs 47,759 41,568 Total rent expense $ 159,027 $ 290,793 As of March 31, 2021, the aggregate remaining minimal annual lease payments under these operating leases plus NNN were as follows: (in thousands): 2021 $ 223 2022 197 2023 222 2024 250 2025 46 Total $ 938 Other information related to leases is as follows: Three Months ended Other information: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 104,843 Weighted-average remaining lease term - operating leases 3.47yr Weighted-average discount rate - operating leases 12 % The Company recognized sublease income of $191,753 and $384,031 during the three months ended March 31, 2021 and 2020, respectively. These two leases have three months and 3.8 year terms with optional extension, expiration dates range from July 2021 to June 2025, and monthly base rent approximately $22,000-$25,000 plus variable NNN. As of March 31, 2021, the maturities of expected base sublease income are as follows (in thousands): Operating Leases 2021 $ 396 2022 346 2023 346 2024 346 2025 and beyond 58 Total $ 1,492 COVID-19 On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency in response to a new strain of a coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the global situation and its effects on the Company’s industry, financial condition, liquidity, and operations. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2021. However, if the pandemic continues, it may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity in fiscal year 2021. Employment Agreements As a condition of their employment, the Board of Directors approved employment agreements with three key executives. These agreements provided that additional shares will be granted each year over the term of the agreements should their shares as a percentage of the total shares outstanding fall below prescribed ownership percentages. Nello Gonfiantini III, who became the Company’s CEO in October 2019 receives an annual grant of additional shares each year to maintain his ownership percentage at 10% of the outstanding stock. The Company’s CFO received a similar grant each to maintain his ownership percentage at 2% of the outstanding stock. During the three months ended March 31, 2021, the Company accrued compensation expense of approximately $25,000 on 606,769 shares of common stock under these agreements. During the three months ended March 31, 2020, the Company accrued compensation expense of approximately $27,000 on 1,652.116 shares of common stock. As of March 31, 2021 and December 31, 2020, the ending balance of accrued compensation was $38,207 and $13,364, respectively. The number of shares accrued to be issued was 2,338,456 at March 31, 2021. Departure of Executive Officer On January 30, 2019, the Company executed a Separation Agreement and Release with David Thompson, its former Senior Vice President- Finance, finalizing his departure from the Company as an employee. Pursuant to its material terms, the Company agreed to pay Mr. Thompson aggregate cash payments of $206,250, based upon the Company’s receipt of certain gross sales receipts derived from its Alameda Store in Colorado, and certain stock grants based upon the Company’s outstanding common shares as of February 1, 2019, including a stock grant of 53,717 restricted common shares for accrued salary and 122,934 restricted common shares in exchange for his approximate 122,000 of stock options. During the three months ended March 31, 2021 and 2020, $17,936 and $0, respectively, was paid under this agreement. As of March 31, 2021, the outstanding balance was $144,326, and is included in Accrued payable – related party in the accompanying consolidated balance sheet. On October 29, 2019, the Company accepted the resignation of Ron Throgmartin from his positions as CEO, President and Director. Mr. Throgmartin’s resignation was not the result of any disagreements with the Company’s plan of operations, policies or management. On the same date, we appointed Christopher D. Strachan, our Chief Financial Officer, to membership on our Board of Directors and appointed Nello Gonfiantini III, our Chief Operations Officer, to the additional post of Chief Executive Officer. Ron Throgmartin signed a 5-year term Separation Agreement which, among other matters, terminated his Employment Agreement, as amended. On the date of the Separation Agreement, the Company acknowledged it owed Mr. Throgmartin the amount of $517,252 in principal and accrued interest of note payable, salary and fees, accrued during the 5 years of his employment. In addition, the Company further acknowledged that it will pay Mr. Throgmartin fifty (50%) percent of his compensation due under the remaining Employment Agreement, or $614,583 under certain conditions, which the Company accrued in full as the date of Mr. Throgmartin’s separation. This agreement provides that the Company will pay him $5,000 monthly against his accrued salary/fees and 50% of future compensation due under his terminated Employment Agreement, with certain accelerated payments in the event our financial results attain certain EBITA benchmarks. The Company shall have the right to require Mr. Throgmartin to provide consulting services to it for a per diem fee of $500. During the three months ended March 31, 2021 and 2020, $15,000 and $15,000, respectively, were paid under this agreement. As of March 31, 2021, the outstanding balance was $865,597, and is included in Accrued payable – related party in the accompanying consolidated balance sheet. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 11 – Subsequent Events The Company evaluated subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements are available to be issued. Any material events that occur between the balance sheet date and the date that the consolidated financial statements were available for issuance are disclosed as subsequent events, while the consolidated financial statements are adjusted to reflect any conditions that existed at the balance sheet date. Based upon this review, except as disclosed within the footnotes or as discussed below, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements. During the period from April 1, 2021 through May 15, 2021: The Company issued 1,137,826 shares of common stock, which had been included in shares to be issued at March 31, 2021. The Company received payment of $400,000 of principal and $93,770 of accrued interest related to one of the notes receivable described in Note 4. |
Significant and Critical Acco_2
Significant and Critical Accounting Policies and Practices (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and presented in accordance with accounting principles generally accepted in the United States of America (US GAAP). The accompanying consolidated balance sheet at December 31, 2020, has been derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related notes to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the U.S. Securities and Exchange Commission (“SEC”) on the opinion of management, all material adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been made to the condensed consolidated financial statements. The condensed consolidated financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed consolidated financial statements not misleading as required by Regulation S-X Rule 10-01. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any future periods. |
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. |
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, the collectability of accounts receivable and other receivables (See Note 4), valuation of right of use assets and lease liabilities 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 and 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 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 March 31, 2021 and December 31, 2020. 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. The following table reflects assets and liabilities that are measured at fair value on a recurring basis (in thousands): As of March 31, 2021 Fair Value Measurement Using Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 5,586 $ 5,586 Stock warrant liabilities — — 5 5 $ — $ — $ 5,591 $ 5,591 As of December 31, 2020 Fair Value Measurement Using Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 5,998 $ 5,998 Stock warrant liabilities — — 1 1 $ — $ — $ 5,999 $ 5,999 Derivative liabilities and stock warrant liabilities were valued using the Binomial Option Pricing Model in calculating the embedded conversion features for the three months ended March 31, 2021 and the year ended December 31, 2020. |
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. There were no uninsured balances at March 31, 2021. Uninsured balances were approximately $73,000 at December 31, 2020. |
Revenue Recognition | Revenue recognition In accordance with ASC 842, Leases, 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 management concludes that the Company is the owner of tenant improvements, the Company records the cost to construct the tenant improvements as a capital asset. In addition, the Company 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, the Company 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, we record 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 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. |
Advertising | Advertising During the three months ended March 31, 2021 and 2020, advertising expense was $9,881 and $6,804, respectively. |
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 common 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 132,973,796 and 926,023,386 common stock equivalents at March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021 and 2020, these 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 and, 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. The Company believes 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. |
Organization and Operations (Ta
Organization and Operations (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of properties generating rents | The properties generating rents in 2021 and 2020 are as follows: Purpose Size City State Retail store (recreational and medical) 3,300 sq. Denver CO Cultivation warehouse – terminated October 2020 18,600 sq. Denver CO Cultivation warehouse 14,800 sq. Denver CO |
Significant and Critical Acco_3
Significant and Critical Accounting Policies and Practices (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Schedule of fair value, assets and liabilities measured on recurring basis | The following table reflects assets and liabilities that are measured at fair value on a recurring basis (in thousands): As of March 31, 2021 Fair Value Measurement Using Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 5,586 $ 5,586 Stock warrant liabilities — — 5 5 $ — $ — $ 5,591 $ 5,591 As of December 31, 2020 Fair Value Measurement Using Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 5,998 $ 5,998 Stock warrant liabilities — — 1 1 $ — $ — $ 5,999 $ 5,999 |
Accounts Receivables and Othe_2
Accounts Receivables and Other Receivables (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Common shares issued for security payment of convertible notes, value | |
Schedule of monthly payments accrued | RAM shall continue to accrue debt to the company, assessed on the first day of each month, according to the schedule below: Monthly Payments Accrued October 1, 2020 to June 30, 2021 $ 11,284 July 1, 2021 to June 30, 2022 11,622 July 1, 2022 to June 30, 2023 11,971 July 1, 2023 to June 30, 2024 12,330 |
Convertible Notes Payable (Tabl
Convertible Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Schedule of Liabilities Measured Using Fair Significant Unobservable Inputs (Level 3) | The tables below provide the note payable activity for the three months ended March 31, 2021 and 2020, and also a reconciliation of the beginning and ending balances for the derivative liabilities measured using Level 3 fair value inputs for the three months ended March 31, 2021 and 2020: Convertible Discount Convertible Derivative Balance, December 31, 2020 $ 3,239,274 $ — $ 3,239,274 $ 5,997,865 Issuance of convertible notes 2,000 — 2,000 115,160 Conversion of convertible notes (100,000 ) — (100,000 ) (661,087 ) Repayment of convertible notes (200,000 ) — (200,000 ) (302,452 ) Change in fair value of derivatives — — — 177,244 Amortization — — — — Balance March 31, 2021 $ 2,941,274 $ — $ 2,941,274 $ 5,326,730 Convertible Discount Convertible Derivative Balance, December 31, 2019 $ 3,266,775 $ 914,245 $ 2,352,530 $ 4,834,190 Issuance of convertible notes 103,000 103,000 — 232,013 Conversion of convertible notes (89,000 ) (25,377 ) (63,623 ) (97,838 ) Repayment of convertible notes (2,500 ) — (2,500 ) (3,925 ) Change in fair value of derivatives — — — (315,692 ) Amortization — (452,058 ) 452,058 — Balance March 31, 2020 $ 3,278,275 $ 539,810 $ 2,738,465 $ 4,648,748 |
Schedule of Assumptions Used Black Scholes Model | The following assumptions were used in the Binomial Option Pricing Model in calculating the embedded conversion features and current liabilities for the three months ended March 31, 2021 and 2020: March 31, March 31, Risk-free interest rates 0.02 – 0.09 % 0.11 – 1.58 % Expected life (years) 0.25 0.25 – 1.0 Expected dividends 0 % 0 % Expected volatility 164 – 544 % 179 – 214 % |
Stockholder's Equity (Deficit)
Stockholder's Equity (Deficit) (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Schedule of temporary equity | The tables below provide the preferred stock activity for the three months ended March 31, 2021 and 2020, and also a reconciliation of the beginning and ending balances for the derivative liabilities measured using fair significant unobservable inputs (Level 3) for the three months ended March 31, 2021 and 2020: Preferred Discount Preferred Derivative Balance , December 31, 2020 $ — — — — Issuance of Series C Preferred shares 293,700 293,700 — 1,259,672 Accretion of discount — (10,963 ) 10,963 — Accretion of dividend on Series C preferred stock 2,192 — 2,192 2,866 Change in fair value of derivatives — — — (875,693 ) Balance March 31, 2021 $ 295,892 $ 282,737 $ 13,155 $ 386,845 Preferred Discount Preferred Derivative Balance , December 31, 2019 $ 140,000 $ 131,250 $ 8,750 $ 190,131 Issuance of Series C Preferred shares 55,800 55,800 — 88,868 Accretion of discount — (14,809 ) 14,809 — Accretion of dividend on Series C preferred stock 4,779 — 4,779 — Change in fair value of derivatives — — — 13,688 Balance March 31, 2020 $ 200,579 $ 172,241 $ 28,338 $ 292,687 |
Schedule of assumptions | The following assumptions were used in the Binomial Option Pricing Model in calculating the embedded conversion features and current liabilities for the three months ended March 31, 2021 and 2020: 2021 2020 Risk-free interest rates 0.12 – 0.16 % 0.23 – 0.71 % Expected life (years) 1.9 – 2.0 1.7 – 2.0 Expected dividends 0 % 0 % Expected volatility 188 – 196 % 246 – 251 % |
Schedule of Warrant Liabilities Measured using Fair Significant Unobservable Inputs (Level 3) | 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 three months ended March 31, 2021 and 2020: Three Months ended March 31, 2021 2020 Balance at beginning of year $ 476 $ 967 Additions to derivative instruments — — Loss (gain) on change in fair value of derivative liability 4,442 (97 ) Balance at end of year $ 4,918 $ 870 |
Schedule of Fair Value on Assumptions | The following assumptions were used in the Binomial Option Pricing Model in calculating the embedded conversion features and current liabilities for the three months ended March 31, 2021 and 2020: March 31, 2021 March 31, 2020 Annual dividend yield 0 % 0 % Expected life (years) 1.75 – 6.13 0.42 – 8.13 Risk-free interest rate 0.16 – 1.16 % 1.56 – 2.40 % Expected volatility 198 – 243 % 165 – 318 % |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of maturities of operating leases liabilities | As of March 31, 2021, the maturities of operating leases liabilities are as follows (in thousands): Operating Leases 2021 293 2022 270 2023 270 2024 270 2025 45 Total 1,148 Less: amount representing interest (210 ) Present value of future minimum lease payments 938 Less: current obligations under leases 270 Long-term lease obligations $ 668 |
Schedule of rent expense is recognized on a straight-line basis | Rent expense is recognized on a straight-line basis over the life of the lease. Rent expense consists of the following: Three months ended March 31, 2021 2020 Operating lease costs $ 111,268 $ 249,225 Variable rent costs 47,759 41,568 Total rent expense $ 159,027 $ 290,793 |
Schedule of cash flows of operating leases over the next five years | As of March 31, 2021, the aggregate remaining minimal annual lease payments under these operating leases plus NNN were as follows: (in thousands): 2021 $ 223 2022 197 2023 222 2024 250 2025 46 Total $ 938 |
Schedule of other information related to leases | Other information related to leases is as follows: Three Months ended Other information: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 104,843 Weighted-average remaining lease term - operating leases 3.47yr Weighted-average discount rate - operating leases 12 % |
Sublease income | As of March 31, 2021, the maturities of expected base sublease income are as follows (in thousands): Operating Leases 2021 $ 396 2022 346 2023 346 2024 346 2025 and beyond 58 Total $ 1,492 |
Organization and Operations (De
Organization and Operations (Details) | 3 Months Ended |
Mar. 31, 2021ft² | |
State | DE |
Retail store (recreational and medical) | |
Area | 3,300 |
City | Denver |
State | CO |
Cultivation warehouse | |
Area | 18,600 |
City | Denver |
State | CO |
Cultivation warehouse | |
Area | 14,800 |
City | Denver |
State | CO |
Organization and Operations (_2
Organization and Operations (Details Narrative) | Oct. 31, 2020ft² |
Cultivation warehouse | |
Area terminated | 18,600 |
Significant and Critical Acco_4
Significant and Critical Accounting Policies and Practices (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Derivative liabilities | $ 5,714 | $ 5,998 |
Stock warrant liabilities | 5 | 1 |
Total | 5,719 | 5,999 |
Level 1 [Member] | ||
Derivative liabilities | ||
Stock warrant liabilities | ||
Total | ||
Level 2 [Member] | ||
Derivative liabilities | ||
Stock warrant liabilities | ||
Total | ||
Level 3 [Member] | ||
Derivative liabilities | 5,714 | 5,998 |
Stock warrant liabilities | 5 | 1 |
Total | $ 5,719 | $ 5,999 |
Significant and Critical Acco_5
Significant and Critical Accounting Policies and Practices (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Uninsured balances | $ 0 | $ 73,000 | |
Common stock equivalents | 132,973,796 | 926,023,386 | |
Advertising expense | $ 9,881 | $ 6,804 | |
Insufficient shares | 839,341,383 | ||
Maximum [Member] | |||
Cash insured by FDIC | $ 250,000 |
Going Concern (Details Narrativ
Going Concern (Details Narrative) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Working capital deficit | $ 11,228,725 | |
Accumulated deficit | $ (55,299,546) | $ (55,110,000) |
Accounts Receivables and Othe_3
Accounts Receivables and Other Receivables (Details) | Mar. 31, 2021USD ($) |
Monthly Payments Accrued | |
October 1, 2020 to June 30, 2021 | $ 11,284 |
July 1, 2021 to June 30, 2022 | 11,622 |
July 1, 2022 to June 30, 2023 | 11,971 |
July 1, 2023 to June 30, 2024 | $ 12,330 |
Accounts Receivables and Othe_4
Accounts Receivables and Other Receivables (Details Narrative) | 3 Months Ended | ||||
Mar. 31, 2021USD ($) | Mar. 31, 2020USD ($) | Dec. 31, 2020USD ($) | Oct. 31, 2020USD ($)ft² | Sep. 09, 2020 | |
Notes receivable | $ 1,057,272 | $ 1,030,422 | |||
Accrued interest receivable | 327,272 | 300,422 | |||
Receivables guaranteed | 400,000 | ||||
Receivables from subleases | 520,974 | $ 523,958 | |||
Interest income | 26,850 | $ 32,846 | |||
Long term notes receivable | 1,482,824 | ||||
Lease Termination Payments | 33,851 | ||||
Accrued interest receivable | $ 68,000 | ||||
Cultivation warehouse | |||||
Area terminated | ft² | 18,600 | ||||
Membership Interest Purchase Agreement [Member] | |||||
Ownership percentage | 15.13% | ||||
Minimum [Member] | |||||
Interest rate | 12.00% | ||||
Maximum [Member] | |||||
Interest rate | 18.00% | ||||
RAM [Member] | |||||
Debt of deferred rent | $ 1,418,480 | ||||
Revenues | $ 725,000 | ||||
VPC [Member] | |||||
Debt of deferred rent | $ 64,344 | ||||
Third Parties [Member] | |||||
Other Receivables | $ 1,030,000 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Accrued fees - related parties | $ 323,997 | $ 289,897 | |
Accrued payable | 1,009,922 | 1,042,859 | |
Cash based compensation - related parties | 90,000 | $ 90,000 | |
Share based compensation - related parties | 24,843 | $ 67,621 | |
Accrued interest | $ 71,746 | 70,101 | |
Related party description | From 2017 to 2019, Mr. Gonfiantini, CEO, personally and through his Company, Crystal Bay Financial LLC, loaned an aggregate amount of $1,020,000 to Royal Asset Management. These notes accrue interest at 17% - 18% per annum, and require monthly payment approximately from $5,000 to $20,000. These notes are personally guaranteed by the managing member of Royal Asset Management, and are secured by certain equipment and other tangible properties of Royal Asset Management. Among these notes, $500,000 note was also secured by the medical marijuana licenses held by Royal Asset Management. | ||
Mr. Throgmartin [Member] | |||
Accrued interest | $ 52,181 | 49,401 | |
Debt instrument face amount | $ 140,958 | $ 140,958 | |
Debt instrument interest rate | 8.00% |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | ||||
Jun. 30, 2020 | Apr. 22, 2020 | Aug. 31, 2015 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Note payable | $ 133,403 | $ 133,403 | ||||
Accrued interest | 71,746 | $ 70,101 | ||||
Forgiveness of debt income | $ 56,908 | |||||
Numerica Credit Union [Member] | ||||||
Proceeds from loan | $ 56,444 | |||||
Interest rate | 1.00% | |||||
Small Business Association [Member] | ||||||
Proceeds from loan | $ 150,000 | |||||
Interest rate | 3.75% | |||||
Third Parties [Member] | ||||||
Note payable principal amount | $ 126,000 | |||||
Note maturity date | Oct. 31, 2018 |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Issuance of convertible notes | $ 100,000 | |
Repayment of convertible notes | (200,000) | (2,500) |
Convertible Notes [Member] | ||
Balance, beginning | 3,239,274 | 3,266,775 |
Issuance of convertible notes | 2,000 | 103,000 |
Conversion of convertible notes | (100,000) | (89,000) |
Repayment of convertible notes | (200,000) | (2,500) |
Change in fair value of derivatives | ||
Amortization | ||
Balance, ending | 2,941,274 | 3,278,275 |
Discount [Member] | ||
Balance, beginning | 914,245 | |
Issuance of convertible notes | 103,000 | |
Conversion of convertible notes | (25,377) | |
Repayment of convertible notes | ||
Change in fair value of derivatives | ||
Amortization | (452,058) | |
Balance, ending | 539,810 | |
Convertible Note Net of Discount [Member] | ||
Balance, beginning | 3,239,274 | 2,352,530 |
Issuance of convertible notes | 2,000 | |
Conversion of convertible notes | (100,000) | (63,623) |
Repayment of convertible notes | (200,000) | (2,500) |
Change in fair value of derivatives | ||
Amortization | 452,058 | |
Balance, ending | 2,941,274 | 2,738,465 |
Derivative Liabilities [Member] | ||
Balance, beginning | 5,997,865 | 4,834,190 |
Issuance of convertible notes | 115,160 | 232,013 |
Conversion of convertible notes | (661,087) | (97,838) |
Repayment of convertible notes | (302,452) | (3,925) |
Change in fair value of derivatives | 177,244 | (315,692) |
Amortization | ||
Balance, ending | $ 5,326,730 | $ 4,648,748 |
Convertible Notes Payable (De_2
Convertible Notes Payable (Details 1) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Risk Free Interest Rates [Member] | Minimum [Member] | ||
Fair value assumptions, percentage | 0.02% | 0.11% |
Risk Free Interest Rates [Member] | Maximum [Member] | ||
Fair value assumptions, percentage | 0.09% | 1.58% |
Expected Life [Member] | ||
Fair value assumptions, term | 2 months 30 days | |
Expected Life [Member] | Minimum [Member] | ||
Fair value assumptions, term | 2 months 30 days | |
Expected Life [Member] | Maximum [Member] | ||
Fair value assumptions, term | 1 year | |
Expected Dividends [Member] | ||
Fair value assumptions, percentage | 0.00% | 0.00% |
Expected Volatility [Member] | Minimum [Member] | ||
Fair value assumptions, volatility | 164.00% | 179.00% |
Expected Volatility [Member] | Maximum [Member] | ||
Fair value assumptions, volatility | 544.00% | 214.00% |
Convertible Notes Payable (De_3
Convertible Notes Payable (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Derivative liability | $ 5,326,730 | $ 5,997,865 | |
Interest rate | 10.00% | ||
Gain (Loss) on extinguishment of debt | $ 389,550 | $ 1,932 | |
Non cash finace cost | 2,000 | ||
Holder [Member] | |||
Conversion of convertible notes | 100,000 | 89,000 | |
Interest converted into share | $ 6,256 | $ 6,282 | |
Debt instruments conversion into shares | 5,026,413 | 13,767,631 | |
Debt Conversion, Converted Instrument, Amount | $ 705,635 | ||
Convertible notes past due | 2,941,274 | ||
Convertible Notes [Member] | |||
Conversion of convertible notes | $ 100,000 | ||
Debt instruments conversion into shares | 4,444,444 | ||
Debt Conversion, Converted Instrument, Amount | $ 697,779 | ||
Gain (Loss) on extinguishment of debt | 59,999 | ||
Reduction of derivative liabilities | 657,778 | ||
Non cash finace cost | 2,000 | ||
Convertible Notes 1 [Member] | |||
Interest converted into share | $ 6,256 | ||
Debt instruments conversion into shares | 581,969 | ||
Debt Conversion, Converted Instrument, Amount | $ 7,856 | ||
Gain (Loss) on extinguishment of debt | 1,709 | ||
Reduction of derivative liabilities | 3,309 | ||
Convertible Notes 2 [Member] | |||
Gain (Loss) on extinguishment of debt | 177,116 | ||
Repayment of debt | 200,000 | ||
Reduction of derivative liabilities | 177,116 | ||
Convertible Notes 3 [Member] | |||
Gain (Loss) on extinguishment of debt | 150,726 | ||
Accrued interest repaid | 70,000 | ||
Reduction of derivative liabilities | $ 125,336 |
Stockholder's Equity (Deficit_2
Stockholder's Equity (Deficit) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Preferred Stock and Accrued Dividends [Member] | ||
Balance at beginning | $ 140,000 | |
Issuance of Series C Preferred shares | 293,700 | 55,800 |
Accretion of discount | ||
Accretion of conversion feature on Series C preferred stock | 2,192 | 4,779 |
Change in fair value of derivatives | ||
Balance at end | 295,892 | 200,579 |
Preferred Stock and Accrued Dividends Net of Discount [Member] | ||
Balance at beginning | 8,750 | |
Issuance of Series C Preferred shares | ||
Accretion of discount | 10,963 | 14,809 |
Accretion of conversion feature on Series C preferred stock | 2,192 | 4,779 |
Change in fair value of derivatives | ||
Balance at end | 13,155 | 28,338 |
Discount [Member] | ||
Balance at beginning | 131,250 | |
Issuance of Series C Preferred shares | 293,700 | 55,800 |
Accretion of discount | (10,963) | (14,809) |
Accretion of conversion feature on Series C preferred stock | ||
Change in fair value of derivatives | ||
Balance at end | 282,737 | 172,241 |
Derivative Liabilities [Member] | ||
Balance at beginning | 190,131 | |
Issuance of Series C Preferred shares | 1,259,672 | 88,868 |
Accretion of discount | ||
Accretion of conversion feature on Series C preferred stock | 2,866 | |
Change in fair value of derivatives | (1,002,782) | (875,693) |
Balance at end | $ 259,756 | $ 386,845 |
Stockholder's Equity (Deficit_3
Stockholder's Equity (Deficit) (Details 1) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Expected dividends | 0.00% | 0.00% |
Minimum [Member] | ||
Risk-free interest rate | 0.12% | 0.23% |
Expected life (years) | 1 year 10 months 25 days | 1 year 8 months 12 days |
Expected volatility | 188.00% | 246.00% |
Maximum [Member] | ||
Risk-free interest rate | 0.16% | 0.71% |
Expected life (years) | 2 years | 2 years |
Expected volatility | 196.00% | 251.00% |
Stockholder's Equity (Deficit_4
Stockholder's Equity (Deficit) (Details 2) - Level 3 [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Balance at beginning | $ 476 | $ 967 |
Additions to derivative instruments | ||
Loss (gain) on change in fair value of derivative liability | 4,442 | (97) |
Balance at end | $ 4,918 | $ 870 |
Stockholder's Equity (Deficit_5
Stockholder's Equity (Deficit) (Details 3) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Annual dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Expected life (years) | 1 year 9 months | 5 months 1 day |
Risk-free interest rate | 0.16% | 1.56% |
Expected volatility | 198.00% | 165.00% |
Maximum [Member] | ||
Expected life (years) | 6 years 1 month 16 days | 8 years 1 month 16 days |
Risk-free interest rate | 1.16% | 2.40% |
Expected volatility | 243.00% | 318.00% |
Stockholder's Equity (Deficit_6
Stockholder's Equity (Deficit) (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Feb. 24, 2021 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Derivative liability | $ 5,714 | $ 5,998 | ||
Common Stock payable issued for services - related parties | $ 24,843 | |||
Common Stock payable issued for services - related parties, shares | 606,769 | |||
Unissued shares for related party, shares | 2,338,456 | 1,731,687 | ||
Unissued shares for related party, value | $ 38,207 | $ 13,364 | ||
Shares Payable, shares | 406,160 | |||
Shares Payable, value | $ 13,601 | |||
Shares Payable, shares | 31,696 | |||
Shares Payable, value | $ 2,000 | |||
Number of shares to be issued for services, shares | 1,137,553 | 1,105,857 | ||
Number of shares to be issued for services, value | $ 16,000 | $ 14,000 | ||
Number of shares to be issued for debt conversions, shares | 31,960 | 31,960 | ||
Number of shares to be issued for debt conversions, Value | $ 21,861 | $ 21,861 | ||
Common stock issued for legal services, shares | 30,000 | |||
Common stock issued for legal services, value | $ 1,915 | |||
Preffered stock sold | 113,850 | |||
Proceeds from stock sold | $ 103,500 | |||
Redeemable convertible preferred stock, Series C [Member] | ||||
Derivative liability | $ 1,082,441 | |||
Conversion feature | $ 386,845 | $ 177,231 | ||
Preferred stock sold | 179,850 | 293,700 | ||
Geneva [Member] | Redeemable convertible preferred stock, Series C [Member] | ||||
Cash received from sale of preferred stock | $ 163,500 | |||
Common stock discount percentage | 30.00% | |||
Related Party Note [Member] | ||||
Shares Payable, shares | 4,951,781 | |||
Shares Payable, value | $ 106,842 | |||
Holder [Member] | ||||
Number of shares issued for conversion of notes, value | $ 100,000 | $ 89,000 | ||
Debt converted into share | 5,026,413 | 13,767,631 | ||
Interest converted into share | $ 6,256 | $ 6,282 | ||
Fees converted into share | 210 | |||
Debt Conversion, Converted Instrument, Amount | $ 705,635 | |||
Common stock, shares authorized but not issued, shares | 35,844 | |||
Common stock, shares authorized but not issued, value | $ 35,844 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) | Mar. 31, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2021 | $ 293,000 |
2022 | 270,000 |
2023 | 270,000 |
2024 | 270,000 |
2025 | 45,000 |
Total | 1,148,000 |
Less: amount representing interest | (210,000) |
Present value of future minimum lease payments | 938,000 |
Less: current obligations under leases | 270,000 |
Long-term lease obligations | $ 668,000 |
Commitments and Contingencies_3
Commitments and Contingencies (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating lease costs | $ 111,268 | $ 249,225 |
Variable rent costs | 47,759 | 41,568 |
Total rent expense | $ 159,027 | $ 290,793 |
Commitments and Contingencies_4
Commitments and Contingencies (Details 2) | Mar. 31, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2021 | $ 223,000 |
2022 | 197,000 |
2023 | 222,000 |
2024 | 250,000 |
2025 | 46,000 |
Total | $ 938,000 |
Commitments and Contingencies_5
Commitments and Contingencies (Details 3) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from operating leases | $ 104,843 |
Weighted-average remaining lease term - operating leases | 3 years 5 months 20 days |
Weighted-average discount rate - operating leases | 12.00% |
Commitments and Contingencies_6
Commitments and Contingencies (Details 4) | Mar. 31, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2021 | $ 396,000 |
2022 | 346,000 |
2023 | 346,000 |
2024 | 346,000 |
2025 and beyond | 58,000 |
Total | $ 1,492,000 |
Commitments and Contingencies_7
Commitments and Contingencies (Details Narrative) - USD ($) | Feb. 01, 2019 | Oct. 29, 2019 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 |
Operating leases discount rate | 12.00% | ||||
Weighted-average remaining lease term | 3 years 5 months 20 days | ||||
Sublease income | $ 191,753 | $ 384,031 | |||
Stock issued for employment agreements | $ 27,000 | ||||
Stock issued for employment agreements, Shares | 1,652.116 | ||||
Accrued compensation | $ 38,207 | $ 13,364 | |||
Accrued compensastion, shares | 2,338,456 | ||||
Outstanding balance | $ 865,597 | ||||
CEO [Member] | |||||
Stock grant for restricted common shares for accrued salary | 53,717 | ||||
Restricted common share issued for stock option | 122,934 | ||||
Stock options issued | 122,000 | ||||
Payment of compensation | 17,936 | 0 | |||
Accrued compensation | $ 144,326 | ||||
Employment Agreements [Member] | CEO [Member] | |||||
Ownership percentage | 10.00% | ||||
Employment Agreements [Member] | Other Executives [Member] | |||||
Ownership percentage | 2.00% | ||||
Employment Agreements [Member] | Ron Throgmartin | |||||
Term | 5 years | ||||
Accrued salary | $ 5,000 | ||||
Diem fee | $ 500 | ||||
Debt description | Company acknowledged it owed Mr. Throgmartin the amount of $517,252 in principal and accrued interest of note payable, salary and fees, accrued during the 5 years of his employment. In addition, the Company further acknowledged that it will pay Mr. Throgmartin fifty (50%) percent of his compensation due under the remaining Employment Agreement, or $614,583 under certain conditions, which the Company accrued in full as the date of Mr. Throgmartin’s separation. | ||||
Payment of compensation | $ 15,000 | $ 15,000 | |||
Accrued compensation | $ 25,000 | ||||
Accrued compensastion, shares | 606,769 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] | 1 Months Ended |
May 15, 2021USD ($)shares | |
Common stock issued | shares | 1,137,826 |
Principal [Member] | |
Proceeds from notes receivable | $ 400,000 |
Accrued interest [Member] | |
Proceeds from notes receivable | $ 93,770 |