Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Apr. 12, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | Medicine Man Technologies, Inc. | ||
Entity Central Index Key | 1,622,879 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 18,557,654 | ||
Entity Common Stock, Shares Outstanding | 10,558,087 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
Balance Sheets (Unaudited)
Balance Sheets (Unaudited) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 351,524 | $ 262,146 |
Accounts receivable | 25,000 | 83,739 |
Available for sale securities | 13,998 | 40,000 |
Short-term note receivable | 264,016 | 0 |
Other assets | 27,479 | 38,721 |
Total current assets | 682,017 | 424,606 |
Non-current assets | ||
Property and equipment, net | 42,126 | 48,119 |
Intangible Assets: License Agreement, net | 3,708 | 4,240 |
Total non-current assets | 45,834 | 52,359 |
Total assets | 727,851 | 476,965 |
Current liabilities | ||
Accounts payable | 0 | 8,715 |
Other liabilities | 175 | 13,200 |
Derivative liability | 294,002 | 0 |
Total current liabilities | 294,177 | 21,915 |
Long-term liabilities | ||
Convertible loan | 810,000 | 0 |
Total long-term liabilities | 810,000 | 0 |
Total liabilities | 1,104,177 | 21,915 |
Commitments and Contingencies, note 5 | ||
Shareholders' equity | ||
Preferred stock $0.001 par value, 10,000,000 authorized, none issued and outstanding at December 31, 2106 or 2015 | 0 | 0 |
Common stock $0.001 par value, 90,000,000 authorized, 10,402,500 and 9,972,500 were issued and outstanding December 31, 2016 and December 31, 2015, respectively | 10,403 | 9,973 |
Additional paid-in capital | 1,026,052 | 399,282 |
Accumulated other comprehensive (loss) | (4,303) | (10,000) |
Accumulated deficit | (1,408,478) | 55,795 |
Total Shareholders' (deficit) equity | (376,326) | 455,050 |
Total liabilities and stockholders' equity | $ 727,851 | $ 476,965 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Preferred stock authorized | 10,000,000 | 10,000,000 |
Preferred stock par value | $ .001 | $ .001 |
Preferred stock issued | 0 | 0 |
Preferred stock outstanding | 0 | 0 |
Common stock authorized | 90,000,000 | 90,000,000 |
Common stock par value | $ .001 | $ .001 |
Common stock issued | 10,402,500 | 9,972,500 |
Common stock outstanding | 10,402,500 | 9,972,500 |
Statements of Comprehensive (Lo
Statements of Comprehensive (Loss) and Income - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Operating revenues | ||
Licensing Fees | $ 589,721 | $ 766,957 |
Seminar Fees | 41,735 | 68,820 |
Total revenue | 631,456 | 835,777 |
Cost of services | 462,182 | 209,745 |
Gross profit | 169,274 | 626,032 |
Operating expenses | ||
General and administrative | 382,641 | 372,869 |
Stock based compensation expense | 627,200 | 79,725 |
Advertising | 311,522 | 83,285 |
Total operating expenses | 1,321,363 | 535,879 |
(Loss) income from operations | (1,152,089) | 90,153 |
Other income/expense | ||
Interest Income | (14,016) | (8,071) |
Net loss on derivative liability | 191,095 | 0 |
Net loss on available for sale securities | 9,950 | 0 |
Interest expense related to convertible notes | 22,248 | 0 |
Interest expense related to derivative liability | 102,907 | 0 |
Total other expense | 312,184 | (8,071) |
Net (loss) income before income taxes | (1,464,273) | 98,224 |
Income tax expense | 0 | 12,475 |
Net (loss) income | $ (1,464,273) | $ 85,749 |
Earnings per share attributable to common shareholders: | ||
Basic and diluted earnings per share | $ (.14) | $ 0.01 |
Weighted average number of shares outstanding - basic and diluted | 10,226,086 | 9,906,250 |
Other comprehensive income (loss), net of tax | ||
Net unrealized (loss) on available for sale securities | $ 1,200 | $ (10,000) |
Total other comprehensive income (loss), net of tax | 1,200 | (10,000) |
Comprehensive (loss) income | $ (1,463,073) | $ 75,749 |
Statement of Changes in Stockho
Statement of Changes in Stockholders' Equity - USD ($) | Common Stock | Additional Paid-In Capital | Unrealized Loss on AFS | Accumulated Earnings (Loss) [Member] | Total |
Beginning balance, shares at Dec. 31, 2014 | 9,840,000 | ||||
Beginning balance, value at Dec. 31, 2014 | $ 9,840 | $ 309,690 | $ 0 | $ (29,954) | $ 289,576 |
Stock issued for cash, shares | 10,000 | ||||
Stock issued for cash, value | $ 10 | 9,990 | 10,000 | ||
Stock issued for services, shares | 122,500 | ||||
Stock issued for services, value | $ 123 | 79,602 | 79,725 | ||
Unrealized gain/(loss) on AFS | (10,000) | (10,000) | |||
Net income (loss) | 85,749 | 85,749 | |||
Ending balance, shares at Dec. 31, 2015 | 9,972,500 | ||||
Ending balance, value at Dec. 31, 2015 | $ 9,973 | 399,282 | (10,000) | 55,795 | 455,050 |
Stock issued as compensation, shares | 430,000 | ||||
Stock issued as compensation, value | $ 430 | 626,770 | 627,200 | ||
Unrealized gain/(loss) on AFS | 5,697 | 5,697 | |||
Net income (loss) | (1,464,273) | (1,464,273) | |||
Ending balance, shares at Dec. 31, 2016 | 10,402,500 | ||||
Ending balance, value at Dec. 31, 2016 | $ 10,403 | $ 1,026,052 | $ (4,303) | $ (1,408,478) | $ (376,326) |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities | ||
Net income for the period | $ (1,464,273) | $ 85,749 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities | ||
Initial fair value of derivative convertible note liability included as interest expense | 102,907 | 0 |
Loss on derivative liability, net | 191,095 | 0 |
Stock based compensation | 627,200 | 79,725 |
Depreciation and amortization | 17,370 | 6,618 |
Changes in operating assets and liabilities | ||
Accounts receivable | 58,739 | (83,739) |
Prepaid Expenses | 13,013 | (29,137) |
Prepaid Rent | (1,771) | (9,584) |
Proceeds from note receivable | (264,016) | 253,123 |
Accounts payable | (8,715) | (9,785) |
Other liabilities | (13,026) | 8,873 |
Net cash (used)/earned from operating activities | (741,477) | 301,843 |
Cash flows from investing activities | ||
Purchase of fixed assets | (10,844) | (54,207) |
AFS Securities Investment, net | 31,699 | (50,000) |
Net cash used in investing activities | 20,855 | (104,207) |
Cash flows from financing activities | ||
Long-term convertible debt | 810,000 | 0 |
Common stock | 0 | 10,000 |
Net cash provided by financing activities | 810,000 | 10,000 |
Net decrease in cash and cash equivalents | 89,378 | 207,636 |
Cash and cash equivalents - beginning of year | 262,146 | 54,510 |
Cash and cash equivalents - end of year | 351,524 | 262,146 |
Supplemental disclosures | ||
Interest paid | 0 | 0 |
Income taxes paid | 12,475 | 0 |
Non-Cash Transactions | ||
Derivative convertible liability | $ 294,002 | $ 0 |
Organization and Nature of Oper
Organization and Nature of Operations | 12 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Description | Business Description Business Activity: |
1. Liquidity and Capital Resour
1. Liquidity and Capital Resources | 12 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Liquidity and Capital Resources | Cash Flows Cash and cash equivalents are carried at cost and represent cash on hand, deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date. The Company had $351,524 and $262,146 classified as cash and cash equivalents as of December 31, 2016 and December 31, 2015, respectively. The Company has recently elected to accelerate its organic growth path through additional marketing, team development, intelligent acquisition, and other corporate activities wherein it expects to generate negative cash flow and an additional demand for capital to fuel such growth as described in it subsequent events notes. |
2. Critical Accounting Policies
2. Critical Accounting Policies and Estimates | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Critical Accounting Policies and Estimates | Basis of Presentation: Fair Value Measurements: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Our financial instruments include cash, accounts receivable, note receivable, accounts payables and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of our debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us. Our derivative liability was adjusted to fair market value at the end of each reporting period, using Level 3 inputs. Use of Estimates: Accounts receivable: AFS Securities: Debt and derivative liability: Short term note receivable: Other assets: Accounts payable: Other liabilities: Fair Value of Financial Instruments: Revenue recognition and related allowances: Costs of Services Sold General & Administrative Expenses – Advertising and Marketing Costs: Stock based compensation: Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when stock or options are awarded for previous or current service without further recourse. The Company issued stock options to contractors and external companies that had been providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18 these options were recognized as expense in the period issued because they were given as a form of payment for services already rendered with no recourse. Share based expense paid to through direct stock grants is expensed as occurred. Since the Company’s stock has become publicly traded, the value is determined based on the number of shares issued and the trading value of the stock on the date of the transaction. Prior to the company’s stock being traded the Company used the most recent valuation. The company recognized $627,200 in expenses for stock based compensation to employees through direct stock grants of 430,000 shares in the year ended December 31, 2016 and $79,725 in expenses from the issuance of 122,500 shares in the year ended December 31, 2015. The Stock issuance were as follows: # of shares Price per Share Expense Issuance #1 120,000 $ 0.41 $ 49,200 Issuance #2 260,000 $ 1.74 $ 453,000 Issuance #3 50,000 $ 2.5 $ 125,000 430,000 627,200 Income taxes: |
3. Recent Accounting Pronouncem
3. Recent Accounting Pronouncements | 12 Months Ended |
Dec. 31, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent Accounting Pronouncements | Financial Accounting Standards Board, or FASB, Accounting Standards Update, or FASB ASU 2016-15 “Statement of Cash Flows (Topic 230)” – In August 2016, the FASB issued 2016-15. Stakeholders indicated that there is a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU will not have a significant impact on our statement of cash flows. FASB ASU 2016-12 “Revenue from Contracts with Customers (Topic 606)” – In May 2016, the FASB issued 2016-12. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-12 provides clarification on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications. This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position. FASB ASU 2016-11 “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)” – In May 2016, the FASB issued 2016-11, which clarifies guidance on assessing whether an entity is a principal or an agent in a revenue transaction. This conclusion impacts whether an entity reports revenue on a gross or net basis. This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position. FASB ASU 2016-10 “Revenue from Contracts with Customers (Topic 606)” – In April 2016, the FASB issued ASU 2016-10, clarify identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position. FASB ASU 2016-09 “Compensation – Stock Compensation (Topic 718)” – In March 2016, the FASB issued ASU 2016-09, which includes multiple provisions intended to simplify various aspects of accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, earnings per share, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures. |
4. Stockholders' Equity
4. Stockholders' Equity | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Stockholders' Equity | The Company’s initial authorized stock at inception was 1,000,000 common shares, par value $0.001 per share. In 2015 the Company amended its Articles of Incorporation to increase its authorized shares to 90,000,000 Common Shares, par value $0.001 per share and 10,000,000 preferred shares, par value $0.001 per share. During the time in which the Company was establishing its operations it issued 4,199,000 shares of Common Stock to various individuals as founders for prior services completed which was valued at par value, resulting in the Company booking stock based expense of $4,199. During the time in which the Company was establishing it operations it issued 5,331,000 shares of Common Stock to various individuals for a license agreement valued at par value resulting in the Company recognizing a purchased asset of $5,331. Commencing in November 2014, the Company commenced a private offering of its Common Stock at an offering price of $1.00 per share. At December 31, 2014, it had accepted subscription from 26 investors and received net proceeds of $260,000 therefrom. In December 2014, the Company issued 50,000 shares of its Common Stock for legal fees and recognized an expense for this issuance of $50,000 based upon the prior sale in November 2014 of its Common Stock. At December 31, 2014, the Company had 9,840,000 shares outstanding. On March 17, 2015, 10,000 shares of Common Stock were sold to one investor as part of the private offering commencing in November 2014 in exchange for $10,000 cash. During the second quarter of 2015, the Company issued 50,000 shares of Common Stock to an individual in consideration for their services rendered in support of the Company resulting in the Company recognizing compensation expense of $50,000 based upon a per share price of $1.00 per share realized in the most recent private offering. On July 1, 2015, the Company issued 72,500 shares of Common Stock to four different individuals in consideration for their services rendered in support of the Company, resulting in recognizing compensation expense of $29,725 based upon an independent valuation determining the value of shares at $0.41 per share. At December 31, 2015, the Company had 9,972,500 shares outstanding. On January 4, 2016, the Company issued 120,000 shares of Common Stock to various individuals in consideration of their services rendered in support of the Company resulting in recognizing compensation expense of $49,200 based upon an independent valuation determining the value of shares at $0.41 per share. On October 13, 2016, the Company issued 260,000 shares of Common Stock to various individuals in consideration of their services rendered in support of the Company resulting in recognizing compensation expense of $452,400 based upon a closing stock price of $1.74 per share. On December 26, 2016, the Company issued 50,000 shares of Common Stock to various individuals in consideration of their services rendered in support of the Company resulting in recognizing compensation expense of $136,000 based upon a closing stock price of $2.72 per share. At December 30, 2016, the Company had 10,402,500 Common Shares outstanding. |
5. Property and Equipment
5. Property and Equipment | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and equipment are recorded at cost, net of accumulated depreciation and are comprised of the following: December 31, 2016 December 31, 2015 Furniture & Fixtures $ 11,526 $ 11,526 Marketing Display 42,681 42,681 Office Equipment 10,838 0 $ 65,045 $ 54,207 Less: Accumulated Depreciation (22,919 ) (6,088 ) $ 42,126 $ 48,119 Depreciation on equipment is provided on a straight-line basis over its expected useful lives at the following annual rates. Depreciation expense for the year ending December 31, 2016 and 2015 was $16,833 and $6,087, respectively. |
6. Intangible Asset
6. Intangible Asset | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Asset | On May 1, 2014, the Company entered into a non-exclusive Technology License Agreement with Futurevision, Inc., f/k/a Medicine Man Production Corporation, a Colorado corporation, dba Medicine Man Denver (“Medicine Man Denver”), a company owned and controlled by affiliates of the Company, whereby Medicine Man Denver granted a license to use all of their proprietary processes they have developed, implemented and practiced at its cannabis facilities relating to the commercial growth, cultivation, marketing and distribution of medical marijuana and recreational marijuana pursuant to relevant state laws and the right to use and to license such information, including trade secrets, skills and experience (present and future). As payment for the license rights the Company issued Medicine Man Denver (or its designees) 5,331,000 shares of the Company’s common stock. The Company accounted for this license in accordance with ASC 350-30-30 “Intangibles – Goodwill and Other by recognizing the fair value of the amount paid by the company for the asset at the time of purchase. Since the Company has a limited operating history, management determined to use par value as the value recognized for the transaction. Since the term of the initial license agreement is ten (10) years, the cost of the asset will be recognized on a straight-line basis over the life of the agreement. In addition, each period the Company will evaluate the intangible asset for impairment. As of December 31, 2016, no impairment was deemed necessary. December 31, 2016 December 31, 2015 License Agreement $ 5,300 $ 5,300 Less: accumulated amortization (1,592 ) (1,060 ) $ 3,708 $ 4,240 Amortization expense for the periods ending December 31, 2016 and 2015 was $532 and $530, respectively. |
7. Convertible Notes and Deriva
7. Convertible Notes and Derivative Liability | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Convertible Notes and Derivative Liability | In the year ended December 31, 2016 the Company raised $810,000 through a private placement of promissory convertible notes with certain accredited investors, bearing interest at 12%, with interest and principal due January 1, 2019. Upon issuance, each of the notes is immediately convertible at the noteholders election into the company’s common stock at $1.75 per share or 90% of the VWAP of the five days following the notice of conversion, whichever is lower. Since the conversion rate can be tied to an underlying item, the warrants are considered to be a derivative that is recorded as a liability at fair value and adjusted to fair value at the conclusion of each reporting period. The underlying assumptions used in the Black Scholes model to determine the fair value of the derivative liability were based on the individual date the notes were closed and were the following: Upon issuance December 31, 2016 Current stock price $ 1.66 to $4.35 $ 2.74 Risk-free interest rate 0.67% 0.67% Expected dividend yield 0 0 Expected term (in years) 2.39 to 2.09 2 Expected volatility 85% to 114% 116% The initial fair value of the derivative liability was recorded as interest expense of $102,907. Changes in the derivative liability were as follows: January 1, 2016 $ – Initial fair value of warrants issued 102,907 Increase in fair value 191,095 December 31, 2016 $ 294,002 The total liability of $294,002 is presented on the current liability section of the balance sheet as the conversion can be exercised at any time at the note holders’ request. The initial fair value of warrants issued of $102,907 is recognized as interest expense in the other income/expense section of the income statement. The increase in fair value is recognized as a loss of $191,095 on derivative liabilities also in the other income/expense section of the income statement. |
8. Related Party Transactions
8. Related Party Transactions | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Through March 1, 2017, the Company operated from offices at 4880 Havana St, Suite 101 South, Denver CO 80239 via a sub-lease with one of its shareholders and founding partners, ChineseInvestors.COM. During 2015 and 2016, the Company had a verbal agreement with Chineseinvestors.com Inc. and Futurevistion to share employee’s time while the majority of their salary was covered by these related companies. The Company also paid the individuals a modest stipend for their time. While this agreement was in place through the 3 rd During 2016, the Company received two short term loans bearing 12% annual interest from related parties, which were repaid in full along with interest. The Company borrowed $25,000 from Chineseinvestors.com, Inc. in July, which was repaid along with $250 interest in August. In that same period the Company borrowed $50,000 from Brett Roper, the COO and director, which was repaid along with $1,299 in interest in October. |
9. Net Income (Loss) per Share
9. Net Income (Loss) per Share | 12 Months Ended |
Dec. 31, 2016 | |
Earnings per share attributable to common shareholders: | |
Net Income (Loss) per Share | In accordance with ASC Topic 280 – “Earnings per Share”, the basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company's quarterly earnings for the period ended December 31, 2016 and 2015 basic and diluted earnings/(loss) per share $(.14) and $0.01, respectively. |
10. Commitments and Concentrati
10. Commitments and Concentrations | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Concentrations | Office Lease – Denver, Colorado 2017 fiscal year $ 95,947 2018 fiscal year 154,174 2019 fiscal year 171,000 2020 fiscal year 29,000 |
11. Tax Provision
11. Tax Provision | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Tax Provision | The Company is registered in the State of Colorado and is subject to the United States of America tax law. As of December 31, 2016, the Company had incurred no income on a tax basis resulting in the Company calculating that it owed $0 to the federal government at December 31, 2016 and $9,744 at December 31, 2015. In addition, the Company owed the State of Colorado $0 in 2016 and $2,731 at December 31, 2015. The Federal tax is shown on the income statement as tax expense and was accrued as a current accrued liability on the balance sheet in 2015. As the Company generated a loss from operations in the year ended December 31, 2016 the Company did not recognize any additional tax expense. The company utilizes FASB ASC 740, “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established if it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company generated a deferred tax credit through net operating loss carry forwards. As of December 31, 2016 the Company had federal and state net operating loss carry forwards of approximately $293,000 ($0 in 2015) that can be used to offset future taxable income. The carry forwards will begin to expire in 2027 unless utilized in earlier years. December 31, 2016 December 31, 2015 Net operating losses carryforward $ 293,000 $ – Less: valuation allowance (293,000 ) – Net deferred tax assets $ – $ – |
12. Subsequent Events
12. Subsequent Events | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | In January 2017, the Company added three new fulltime positions that will be charged with providing additional support for the various service groupings offered by the Company, specifically a cultivation specialist, a dispensary specialist, and an administrative and events specialist. In February 2017, the Company entered into a Merger Agreement with Pono Publications Ltd. (“Pono”), as well as a Share Exchange Agreement with Success Nutrients, Inc. (“SN”), each a Colorado corporation, in order to facilitate our acquisition of both of these entities. The ratification of the acquisition of these companies requires the approval of the holders of a majority of the Company’s shareholders, which will be submitted for such approval at the Company’s annual shareholder meeting to be held in May 2017. If approved the relevant agreements provide that the effective date for accounting purposes will be March 1, 2016. Success Nutrients will become a wholly owned subsidiary of Medicine Man Technologies, Inc. and the business conducted by Pono will be incorporated into a newly formed wholly owned subsidiary, Medicine Man Consulting, Inc., which is also where we will continue to conduct the Company’s consulting service business. In March 2017, the Company moved its principal place of business to 4880 Havana Street, Suite 200, Denver, Colorado 80239. This space consists of 12,097 square feet of executive office space, common area, conference rooms, a kitchen, restroom and storage space. The lease term is 36 months (February 2020 expiration date). Until August 2017, the Company will pay monthly rent of $6,479.60. From August 2017 through February 28, 2018, rent escalates to $12,086.92 per month, increasing to $13,000 from March 2018 through February 2019 and to $14500 in June 2017 through May 2018. The Company also pays its percentage of base operating expenses. In March 2017, the Company integrated Pono Publications and Success Nutrients into its operations including a lease for approximately 10,000 square feet of space located at 6660 East 47th Street, Denver, CO 80216. This integration also included four (4) full time team members as well as several independent contractors. In March, 2017, the Company entered into an employment agreement with Joshua Haupt’s to serve as its Chief Cultivation Officer On March 1, 2017, the Company added its initial Cultivation MAX client relationship having a 500-light facility in southern Nevada. That service agreement’s baseline performance factor as assigned (wherein the Company is able to re-define its cultivation practices and nutrient management systems) allows the Company to receive payments for such services based upon the delta it is able to achieve for their cultivation at that location as well as future locations based upon the client’s wholesale price points as achieved throughout the duration of the agreement. On April 3, 2017, the Company entered into its second substantial Cultivation MAX client relationship having a 400-light facility in Las Vegas Nevada. This relationship will follow the same performance principles described in the preceding paragraph. As of the date of this Report holders of five of the outstanding convertible notes elected to convert their notes into shares of the Company’s Common Stock. Convertible Notes aggregating $254,777 were converted to 155,687 shares of the Company’s Common Stock. These conversions were computed at both the floor value of $1.75 as well as at a VWAP value as allowable under the terms of the conversion rights. |
2. Critical Accounting Polici20
2. Critical Accounting Policies and Estimates (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation: |
Fair Value Measurements | Fair Value Measurements: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Our financial instruments include cash, accounts receivable, note receivable, accounts payables and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of our debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us. Our derivative liability was adjusted to fair market value at the end of each reporting period, using Level 3 inputs. |
Use of Estimates | Use of Estimates: |
Accounts receivable | Accounts receivable: |
AFS Securities | AFS Securities: |
Debt and derivative liability | Debt and derivative liability: |
Short-term note receivable | Short term note receivable: |
Other assets | Other assets: |
Accounts payable | Accounts payable: |
Other liabilities | Other liabilities: |
Fair Value of Financial Instruments | Fair Value of Financial Instruments: |
Revenue recognition and related allowances | Revenue recognition and related allowances: |
Cost of Services Sold | Costs of Services Sold |
General and Administrative Expenses | General & Administrative Expenses – |
Advertising and Marketing Costs | Advertising and Marketing Costs: |
Stock-based compensation | Stock based compensation: Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when stock or options are awarded for previous or current service without further recourse. The Company issued stock options to contractors and external companies that had been providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18 these options were recognized as expense in the period issued because they were given as a form of payment for services already rendered with no recourse. Share based expense paid to through direct stock grants is expensed as occurred. Since the Company’s stock has become publicly traded, the value is determined based on the number of shares issued and the trading value of the stock on the date of the transaction. Prior to the company’s stock being traded the Company used the most recent valuation. The company recognized $627,200 in expenses for stock based compensation to employees through direct stock grants of 430,000 shares in the year ended December 31, 2016 and $79,725 in expenses from the issuance of 122,500 shares in the year ended December 31, 2015. The Stock issuance were as follows: # of shares Price per Share Expense Issuance #1 120,000 $ 0.41 $ 49,200 Issuance #2 260,000 $ 1.74 $ 453,000 Issuance #3 50,000 $ 2.5 $ 125,000 430,000 627,200 |
Income taxes | Income taxes: |
2. Critical Accounting Polici21
2. Critical Accounting Policies and Estimates (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Schedule of stock grants | # of shares Price per Share Expense Issuance #1 120,000 $ 0.41 $ 49,200 Issuance #2 260,000 $ 1.74 $ 453,000 Issuance #3 50,000 $ 2.5 $ 125,000 430,000 627,200 |
5. Property and Equipment (Tabl
5. Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment table | December 31, 2016 December 31, 2015 Furniture & Fixtures $ 11,526 $ 11,526 Marketing Display 42,681 42,681 Office Equipment 10,838 0 $ 65,045 $ 54,207 Less: Accumulated Depreciation (22,919 ) (6,088 ) $ 42,126 $ 48,119 |
6. Intangible Asset (Tables)
6. Intangible Asset (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
License Agreement | December 31, 2016 December 31, 2015 License Agreement $ 5,300 $ 5,300 Less: accumulated amortization (1,592 ) (1,060 ) $ 3,708 $ 4,240 |
7. Convertible Notes and Deri24
7. Convertible Notes and Derivative Liability (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Assumptions used | Upon issuance December 31, 2016 Current stock price $ 1.66 to $4.35 $ 2.74 Risk-free interest rate 0.67% 0.67% Expected dividend yield 0 0 Expected term (in years) 2.39 to 2.09 2 Expected volatility 85% to 114% 116% |
Schedule of derivative liability | January 1, 2016 $ – Initial fair value of warrants issued 102,907 Increase in fair value 191,095 December 31, 2016 $ 294,002 |
10. Commitments and Concentra25
10. Commitments and Concentrations (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future operating lease obligation | 2017 fiscal year $ 95,947 2018 fiscal year 154,174 2019 fiscal year 171,000 2020 fiscal year 29,000 |
11. Tax Provision (Tables)
11. Tax Provision (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Deferred tax assets | December 31, 2016 December 31, 2015 Net operating losses carryforward $ 293,000 $ – Less: valuation allowance (293,000 ) – Net deferred tax assets $ – $ – |
1. Liquidity and Capital Reso27
1. Liquidity and Capital Resources (Details Narrative) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Cash and cash equivalents | $ 351,524 | $ 262,146 | $ 54,510 |
2. Critical Accounting Polici28
2. Critical Accounting Policies and Estimates (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Stock grants issued | 430,000 | 122,500 |
Share based compensation expense | $ 627,200 | $ 79,725 |
Issuance #1 [Member] | ||
Stock grants issued | 120,000 | |
Price per share | $ 0.41 | |
Share based compensation expense | $ 49,200 | |
Issuance #2 [Member] | ||
Stock grants issued | 260,000 | |
Price per share | $ 1.74 | |
Share based compensation expense | $ 453,000 | |
Issuance #3 [Member] | ||
Stock grants issued | 50,000 | |
Price per share | $ 2.50 | |
Share based compensation expense | $ 125,000 |
2. Critical Accounting Polici29
2. Critical Accounting Policies and Estimates (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Accounts receivable | $ 25,000 | $ 83,739 |
Accounts receivable written off | 5,792 | |
Allowance for doubtful accounts | 0 | |
Available for sale securities, fair value | 13,998 | 40,000 |
Available for sale securities, cost basis | 50,000 | |
Proceeds from sale of securities | 40,050 | |
Loss on sale of securities | (9,950) | 0 |
Payments for investments | 18,300 | |
Fair value of investments at year end | 13,998 | |
Unrealized loss on investment | 4,303 | |
Short term note receivable, face value | 250,000 | |
Accrued interest receivable | 14,016 | |
Short term note receivable balance | $ 264,016 | 0 |
Note receivable maturity date | Nov. 1, 2017 | |
Other assets | $ 27,479 | 38,721 |
Accounts payable | 0 | 8,715 |
Other liabilities | 175 | 13,200 |
Advertising and marketing expense | 311,522 | 15,997 |
Stock based compensation expense | 627,200 | 79,725 |
Accrued Taxes [Member] | ||
Other liabilities | $ 13,200 | |
Accrued Interest [Member] | ||
Other liabilities | $ 175 |
4. Stockholders' Equity (Detail
4. Stockholders' Equity (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Stock issued for services, value | $ 79,725 | |
Various Individuals [Member] | January 4, 2016 [Member] | ||
Stock issued for services, shares issued | 120,000 | |
Stock issued for services, value | $ 49,200 | |
Various Individuals [Member] | October 13, 2016 [Member] | ||
Stock issued for services, shares issued | 260,000 | |
Stock issued for services, value | $ 452,400 | |
Various Individuals [Member] | December 26, 2016 [Member] | ||
Stock issued for services, shares issued | 50,000 | |
Stock issued for services, value | $ 136,000 |
5. Property and Equipment (Deta
5. Property and Equipment (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Property and Equipment, gross | $ 65,045 | $ 54,207 |
Less: Accumulated Depreciation | (22,919) | (6,088) |
Property and equipment, net | 42,126 | 48,119 |
Furniture and Fixtures [Member] | ||
Property and Equipment, gross | 11,526 | 11,526 |
Marketing Display [Member] | ||
Property and Equipment, gross | 42,681 | 42,681 |
Office Equipment [Member] | ||
Property and Equipment, gross | $ 10,838 | $ 0 |
5. Property and Equipment (De32
5. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 16,833 | $ 6,087 |
6. Intangible Asset (Details)
6. Intangible Asset (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
License agreement costs | $ 5,300 | $ 5,300 |
Less: accumulated amortization | (1,592) | (1,060) |
License agreement costs, net | $ 3,708 | $ 4,240 |
6. Intangible Asset (Details Na
6. Intangible Asset (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 532 | $ 530 |
7. Convertible Notes and Deri35
7. Convertible Notes and Derivative Liability (Details - Assumptions) | 12 Months Ended |
Dec. 31, 2016 | |
Current stock price | $ 2.74 |
Risk-free interest rate | 0.67% |
Expected dividend yield | 0.00% |
Expected term (in years) | 2 years |
Expected volatility | 116% |
Upon Issuance [Member] | |
Current stock price | 1.66 to $4.35 |
Risk-free interest rate | 0.67% |
Expected dividend yield | 0.00% |
Expected term (in years) | 2.39 to 2.09 years |
Expected volatility | 85% to 114% |
7. Convertible Notes and Deri36
7. Convertible Notes and Derivative Liability (Details - Derivative liability) | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Debt Disclosure [Abstract] | |
Derivative liability, beginning balance | $ 0 |
Initial fair value of warrants issued | 102,907 |
Increase in fair value | 191,095 |
Derivative liability, ending balance | $ 294,002 |
8. Related Party Transactions (
8. Related Party Transactions (Details Narrative) | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Chineseinvestors.com [Member] | |
Proceeds from related party | $ 25,000 |
Repayment to related party | 25,000 |
Interest expense, related party | 250 |
Rober [Member] | |
Proceeds from related party | 50,000 |
Repayment to related party | 50,000 |
Interest expense, related party | $ 1,299 |
10. Commitments and Concentra38
10. Commitments and Concentrations (Details) | Dec. 31, 2016USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Future operating lease commitment, 2017 | $ 95,947 |
Future operating lease commitment, 2018 | 154,174 |
Future operating lease commitment, 2019 | 171,000 |
Future operating lease commitment, 2020 | $ 29,000 |
11. Tax Provision (Details - de
11. Tax Provision (Details - deferred taxes) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforward | $ 293,000 | $ 0 |
Less: valuation allowance | (293,000) | 0 |
Net deferred tax assets | $ 0 | $ 0 |
11. Tax Provision (Details Narr
11. Tax Provision (Details Narrative) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Internal Revenue Service (IRS) [Member] | ||
Income tax liability | $ 0 | $ 9,744 |
State of Colorado [Member] | ||
Income tax liability | $ 0 | $ 2,731 |