Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 01, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | Medicine Man Technologies, Inc. | |
Entity Central Index Key | 1,622,879 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
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 Common Stock, Shares Outstanding | 21,875,011 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
Balance Sheets (Unaudited)
Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 927,884 | $ 351,524 |
Accounts receivable, net | 356,940 | 25,000 |
Accounts receivable - related party | 41,962 | 0 |
Available for sale securities | 0 | 13,998 |
Short term note receivable | 286,455 | 264,016 |
Inventory | 87,685 | 0 |
Other assets | 106,811 | 27,479 |
Total current assets | 1,807,737 | 682,017 |
Non-current assets | ||
Fixed assets, net accumulated depreciation of $63,579 | 155,529 | 42,126 |
Intangible assets, net accumulated amortization of $5,760 | 89,340 | 3,708 |
Goodwill | 9,304,306 | 0 |
Total non-current assets | 9,549,175 | 45,834 |
Total assets | 11,356,912 | 727,851 |
Current liabilities | ||
Accounts payable | 44,189 | 0 |
Accounts payable - related party | 9,776 | 0 |
Derivative liability | 159,105 | 294,002 |
Other liabilities | 14,700 | 175 |
Total current liabilities | 227,770 | 294,177 |
Long-term liabilities | ||
Note payable - related party | 58,280 | 0 |
Convertible loan | 675,000 | 810,000 |
Total long-term liabilities | 733,280 | 810,000 |
Total liabilities | 961,050 | 1,104,177 |
Commitments and Contingencies, note 13 | ||
Shareholders' equity | ||
Common stock $0.001 par value. 90,000,000 authorized, 21,875,011 and 10,402,500 were issued and outstanding September 30, 2017 and December 31, 2016, respectively. | 22,504 | 10,403 |
Additional paid-in capital | 14,346,342 | 1,026,052 |
Additional paid-in capital - Warrants | 2,100,318 | 0 |
Accumulated other comprehensive (loss) | 0 | (4,303) |
Retained earnings | (6,073,302) | (1,408,478) |
Total Shareholders' equity (deficit) | 10,395,862 | (376,326) |
Total liabilities and stockholders' equity | $ 11,356,912 | $ 727,851 |
Balance Sheets (Unaudited) (Par
Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Preferred stock authorized | 10,000,000 | 10,000,000 |
Preferred stock par value | $ 0.001 | $ .001 |
Preferred stock issued | 0 | 0 |
Preferred stock outstanding | 0 | 0 |
Common stock authorized | 90,000,000 | 90,000,000 |
Common stock par value | $ 0.001 | $ .001 |
Common stock issued | 21,875,011 | 10,402,500 |
Common stock outstanding | 21,875,011 | 10,402,500 |
Accumulated depreciation, fixed assets | $ 63,579 | $ 22,919 |
Accumulated amortization, intangible assets | $ 5,760 | $ 1,592 |
Statement of Comprehensive (Los
Statement of Comprehensive (Loss) and Income (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Operating revenues | ||||
Product sales | $ 278,495 | $ 0 | $ 506,900 | $ 0 |
Product sales - related party | 61,768 | 0 | 184,711 | 0 |
Licensing Fees | 347,504 | 227,500 | 848,816 | 564,135 |
Consulting fees | 238,480 | 6,000 | 805,086 | 6,000 |
Seminar fees | 2,017 | 3,093 | 6,239 | 15,253 |
Total revenue | 928,264 | 236,593 | 2,351,752 | 585,388 |
Cost of services | 282,894 | 83,209 | 694,018 | 264,826 |
Cost of services - related party | 14,291 | 0 | 40,327 | 0 |
Total cost of services | 297,185 | 83,209 | 734,345 | 264,826 |
Gross profit | 631,079 | 153,384 | 1,617,407 | 320,562 |
Operating expenses | ||||
General and administrative | 331,764 | 99,891 | 735,018 | 411,523 |
Professional services | 144,796 | 0 | 384,278 | 0 |
Acquisition costs | 42,600 | 0 | 141,301 | 0 |
Stock based compensation expense | 164,000 | 0 | 4,644,318 | 49,200 |
Officers/Directors incentive compensation | 90,823 | 0 | 90,823 | 0 |
Advertising | 49,592 | 39,869 | 136,436 | 61,541 |
Salaries | 127,250 | 0 | 220,365 | 0 |
Total operating expenses | 950,825 | 139,760 | 6,352,539 | 522,264 |
Income from operations | (319,746) | 13,624 | (4,735,132) | (201,702) |
Other income/expense | ||||
Interest Income | (7,562) | (5,128) | (22,439) | (6,936) |
Net loss on derivative | 136,088 | 0 | 4,706 | 0 |
Interest expense related to convertible notes | 22,636 | 0 | 66,965 | 0 |
Loss on management fee contracts | 0 | 0 | 70,257 | 0 |
Net realized loss on available for sale securities | 14,719 | 0 | 14,457 | 0 |
Other income | 0 | 0 | (219) | 0 |
Total other expense | 165,881 | (5,128) | 133,727 | (6,936) |
Net (loss) income | $ (485,627) | $ 18,752 | $ (4,868,859) | $ (194,766) |
Earnings per share attributable to common shareholders: | ||||
Basic and diluted (loss)/earnings per share | $ (.02) | $ 0 | $ (.22) | $ (.02) |
Weighted average number of shares outstanding - basic and diluted | 21,883,853 | 9,976,146 | 21,883,853 | 9,997,664 |
Other comprehensive income (loss), net of tax | ||||
Net unrealized (loss) on available for sale securities | $ 0 | $ 0 | $ 0 | $ 0 |
Total other comprehensive income (loss), net of tax | 0 | 0 | 0 | 0 |
Comprehensive (loss) gain | $ (485,627) | $ 18,752 | $ (4,868,859) | $ (194,766) |
Statement of Cash Flows (Unaudi
Statement of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities | ||
Net loss for the period | $ (4,868,859) | $ (194,766) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Loss (gain) on derivative, net | 4,706 | 0 |
Stock based compensation | 4,644,318 | 49,200 |
Depreciation and amortization | 43,650 | 12,797 |
Changes in operating assets and liabilities | ||
Short term note receivable | (22,439) | (210,000) |
Accounts receivable | (373,902) | 58,739 |
Inventory | (87,685) | 0 |
Other assets | (65,331) | (32,729) |
Accounts payable and other liabilities | 68,490 | (3,439) |
Net cash used in operating activities | (657,052) | (320,198) |
Cash flows from investing activities | ||
Purchase of assets | (242,683) | 0 |
Acquisition investment | 233,357 | 0 |
Short term debt | 0 | 150,000 |
Loss from sale of AFS securities | 4,303 | 0 |
Net cash used in investing activities | (5,023) | 150,000 |
Cash flows from financing activities | ||
Cash raised by sale of convertible debt | 179,777 | 0 |
Proceeds from issuance of common stock | 1,058,658 | 0 |
Net cash provided by financing activities | 1,238,435 | 0 |
Net increase (decrease) in cash and cash equivalents | 576,360 | (170,198) |
Cash and cash equivalents - beginning of period | 351,524 | 262,146 |
Cash and cash equivalents - end of period | $ 927,884 | $ 91,948 |
1. Liquidity and Capital Resour
1. Liquidity and Capital Resources | 9 Months Ended |
Sep. 30, 2017 | |
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 $927,884 and $351,524 classified as cash and cash equivalents as of September 30, 2017 and December 31, 2016, respectively. |
2. Critical Accounting Policies
2. Critical Accounting Policies and Estimates | 9 Months Ended |
Sep. 30, 2017 | |
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: 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 $4,644,318 in expenses for stock based compensation to employees and consultants during the nine months ended September 30, 2017. Income taxes: Management fee contracts: 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. From April 1, 2017 to September 30, 2017 the Company has agreed to manage the acquirees through a management fee agreement whereby all cash collected was recognized as other income and all cash expenses were direct costs of the project. As of March 31, 2017, the management contract resulted in cash collections of approximately $100,000 and cash expenditures of approximately $170,000 resulting in a net loss of $70,257 which was presented on a net basis as a loss in the other income portion of the Company’s income statement. As of April 1, 2017, the Company’s consolidated financial statements included these two entities. |
3. Recent Accounting Pronouncem
3. Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent Accounting Pronouncements | FASB ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)” FASB ASU 2016-02 “Leases (Topic 842)” FASB ASU 2017-01 “Clarifying the Definition of a Business (Topic 805)” FASB ASU 2016-15 “Statement of Cash Flows (Topic 230)” – FASB ASU 2016-11 “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)” |
4. Stockholders' Equity
4. Stockholders' Equity | 9 Months Ended |
Sep. 30, 2017 | |
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 2016 the Company subsequently 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. 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. During the three months ended March 31, 2017, the Company issued 145,587 shares of Common Stock upon conversion of convertible notes in the aggregate amount of $254,777. On June 3, 2017, the Company issued 1,400,000 shares of Common Stock to various individuals in consideration of their services rendered in support of the Company resulting in recognizing compensation expense of $2,380,000 based upon the closing stock price on September 2, 2017 at $1.70 per share. On June 3, 2017, the Company issued an aggregate of 7,000,000 shares of Common Stock in consideration for the acquisition of Success Nutrients and Pono Publications. On June 19, 2017, the Company issued 2,000,000 warrants to purchase Common Stock to three individuals. See Note 15 for further explanation. During the three months ended June 30, 2017, the Company issued 44,151 shares of Common Stock upon conversion of convertible notes in the aggregate amount of $60,000. On July 21, 2017, the Company issued 2,258,065 shares of Common Stock in consideration for the acquisition of Denver Consulting Group. During the three months ended September 30, 2017, the Company issued 34,533 shares of Common Stock in exchange for services, at a value of $1.39 per share on July 28, 2017. During the three months ended September 30, 2017, the Company sold 937,647 shares of Common Stock to a private investor of the Company, at a value of $1.0665 per share on August 20, 2017. During the three months ended September 30, 2017, the Company issued 100,000 shares of Common Stock in exchange for services, at a value of $1.16 per share on August 29, 2017. During the three months ended September 30, 2017, the Company sold 25,000 shares of Common Stock to Andy Williams, Director of the Board of the Company, at a value of $1.0665 per share on September 20, 2017. During the three months ended September 30, 2017, the Company sold 30,000 shares of Common Stock to Brett Roper, CEO of the Company, at a value of $1.0665 per share on September 20, 2017. At September 30, 2017, the Company had 21,875,011 common shares outstanding. |
5. Property and Equipment
5. Property and Equipment | 9 Months Ended |
Sep. 30, 2017 | |
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: September 30, 2017 December 31, 2016 Furniture & Fixtures $ 101,212 $ 11,526 Marketing Display 36,900 42,681 Vehicles 6,000 – Office Equipment 74,996 10,838 $ 219,108 $ 65,045 Less: Accumulated Depreciation (63,579 ) (22,919 ) $ 155,529 $ 42,126 Depreciation on equipment is provided on a straight-line basis over its expected useful lives at the following annual rates. Furniture & Fixtures 3 years Marketing Display 3 years Vehicles 3 years Office Equipment 3 years Depreciation expense for the nine-month periods ending September 30, 2017 and 2016 was $40,659 and $12,399 respectively. |
6. Intangible Asset
6. Intangible Asset | 9 Months Ended |
Sep. 30, 2017 | |
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, 2014, no impairment was deemed necessary. During 2016, the Company attained two intangible assets, Product Agreement & Registration and a Trade Secret. These two intangible assets were acquired due to the result of the acquisition of Success and Pono on September 30, 2017. Refer to the Note 9 for further explanation of the purchase price accounting. The Company’s procurement of product registration during the year was within five states and Canada. The Company’s product was registered in California, Oregon, Colorado, Michigan, Arizona, Washington and all of Canada. The registration allows the Company to sell their product within the confines of that region. The registration fees capitalized are the initial costs to obtain the license. The licenses have nominal annual renewal costs. These subscriptions are amortized over a 15-year period. During 2016, the Company incurred an intangible asset due to the development of the products nutrient recipe. The nutrient recipe development was a onetime fee, paid to the Company’s developer. The intellectual property is amortized over a 15-year economic life of the asset. The economic life of the asset is shorter than the indefinite life considered the legal life of the assets so 15 years is deemed the economic life of the asset. During 2016, the Company attained one additional intangible assets, Product Agreement & Registration. The Company’s procurement of product registration during the year was within seven states. The Company’s product was registered in Florida, Illinois, Maine, Massachusetts, Minnesota, Nevada and Ohio. The registration allows the Company to sell their product within the confines of that region. The registration fees capitalized are the initial costs to obtain the license. The licenses have nominal annual renewal costs. These subscriptions are amortized over a 15-year period. Amortization expense for the periods ending September 30, 2017 and 2016 was $1,463 and $266, respectively. September 30, 2017 December 31, 2016 License Agreement $ 5,300 $ 5,300 Product License and Registration 57,300 – Trade Secret - IP 32,500 – $ 95,100 $ 5,300 Less: accumulated amortization (5,760 ) (1,592 ) $ 89,340 $ 3,708 |
7. Convertible Notes and Deriva
7. Convertible Notes and Derivative Liability | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Convertible Notes and Derivative Liability | At December 31, 2016 the Company had raised $810,000 through a private placement of convertible promissory notes with certain accredited investors, bearing interest at 12%, with interest and principal due January 1, 2019. During the quarter ended September 30, 2017 the Company did not raise any additional capital with the same terms. In the period ended September 30, 2017 the Company converted $0 of promissory convertible notes with certain accredited investors, bearing interest at 12%, with interest and principal due January 1, 2019. As of September 30, 2017, the convertible debt balance was $675,000. 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 notes 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 September 30, 2017 Current stock price $ 1.66 to $4.35 $ 1.01 Risk-free interest rate 67% 147% Expected dividend yield 0 0 Expected term (in years) 2.39 to 2.09 2 Expected volatility 85% to 114% 130% Changes in the derivative liability were as follows: January 1, 2017 $ 294,002 Gain on derivative liability 4,706 Conversion of notes - APIC (139,603 ) September 30, 2017 $ 159,105 |
8. Related Party Transactions
8. Related Party Transactions | 9 Months Ended |
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | As of September 30, 2017, the Company had five related parties, Medicine Man Denver, Josh Haupt, Future Vision, De Best Inc. and Super Farm LLC. One of the Officers of the Company, Joshua Haupt, currently owns 20% of both De Best and Super Farm. During the nine months ended September 30, 2017, the Company had net sales from Super Farm LLC totaling $80,021 and $28,985 sales from De Best Inc. The Company gives a larger discount to related parties than non-related parties. As of September 30, 2017, the Company had accounts receivable balance with Super Farm LLC totaling $33,832 and $8,130 accounts receivable from De Best Inc. During the nine months ended September 30, 2017, the Company had cost of sales associated with Super Farm LLC totaling $16,789 and $6,367 from De Best Inc. Additionally, one of the Directors of the Company, Andy Williams, currently owns 38% of Medicine Man Denver. During the nine months ended September 30, 2017, the Company had net sales from Medicine Man Denver totaling $75,705 and cost of sales totaling $17,170. As of September 30, 2017, the Company had an accounts payable balance owed to Josh Haupt totaling $6,752 and $3,024 owed to Future Vision. Additionally, one of the Directors of the Company, Andy Williams, currently owns 38% of Future Vision. |
9. Goodwill and Acquisition acc
9. Goodwill and Acquisition accounting | 9 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
Goodwill and Acquisition accounting | On June 3, 2017, the Company issued an aggregate of 7,000,000 shares of its common stock for 100% ownership of both Success Nutrients and Pono Publications. The Company utilized purchase price accounting stating that net book value approximates fair market value of the assets acquired. The purchase price accounting resulted in $6,301,080 of Goodwill. The ASC at 350-20-35-3A directs that “An entity may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount, including goodwill. The Company had a valuation done at this time and the value exceeded the purchase price indicating that there would not be any impairment. On July 21, 2017, the Company issued 2,258,065 shares of its Common Stock for 100% ownership of Denver Consulting Group (“DCG”). The Company utilized purchase price accounting stating that net book value approximates fair market value of the assets acquired. The purchase price accounting resulted in $3,003,226 of Goodwill. The ASC at 350-20-35-3A directs that “An entity may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount, including goodwill”. The Company obtained an independent valuation of the DCG on July 21, 2017. The fair market value on July 21, 2017 of DCG was $3,650,000, thus creating a fair market value greater than the carrying value of Goodwill. The ASC at 350-20-35-3D directs that “If an entity determines that it is not more likely that the fair value of a reporting unit is less than its carrying amount, then Goodwill impairment is unnecessary.” Denver Consulting Group Balance Sheet Book Value Fair Value Book Value Fair Value Assets Liabilities Cash 43,797 43,797 Customer deposits 43,797 43,797 43,797 43,797 43,797 43,797 Purchase Price (2,258,065 * 1.33) 3,003,226 Less: BV of Assets (43,797 ) Add: BV of Liabilities 43,797 Goodwill 3,003,226 As of September 30, 2017, the Company’s Goodwill has a balance of $9,304,306. This amount consisted of $3,003,226 from the DCG acquisition and $6,301,080 from the Pono and Success acquisition. |
10. Inventory
10. Inventory | 9 Months Ended |
Sep. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Inventory | As of September 30, 2017, and December 31, 2016, respectively, the Company had $87,685 and $0 of finished goods inventory. The Company only has finished goods within inventory because it does not produce any of its products. All inventory is produced by a third party. The inventory valuation method that the Company uses is the FIFO method. During 2017 and 2016, the company had $0 obsolescence within their inventory. |
11. Note Payable
11. Note Payable | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Note Payable | As of September 30, 2017, and December 31, 2016, the Company had a note payable balance of $58,280 and $0, respectively. The note payable is a balance that is due to an officer of the Company, Joshua Haupt. |
12. Net Income (Loss) per Share
12. Net Income (Loss) per Share | 9 Months Ended |
Sep. 30, 2017 | |
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 September 30, 2017 and 2016 basic and diluted earnings/(loss) per share $(0.22) and $(0.02), respectively. |
13. Commitments and Concentrati
13. Commitments and Concentrations | 9 Months Ended |
Sep. 30, 2017 | |
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 Office and Warehouse Lease – Denver, Colorado th 2017 fiscal year $ 115,328 2018 fiscal year 118,528 2019 fiscal year 121,728 2020 fiscal year 124,928 The Company notes that this lease is accelerated, and the deferred amount isn’t booked due to immateriality. |
14. Tax Provision
14. Tax Provision | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Tax Provision | The Company had no tax provisions as of September 30, 2017 and December 31, 2016. The company had a net loss in the quarter ending September 30, 2017 and the deferred tax asset has a full valuation against it. |
15. Warrants
15. Warrants | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Warrants | The Company issued one round of warrants related to various equity transactions that was approved by the Board on June 3, 2017 and issued on June 19, 2017. Since the terms weren’t established until June 19, 2017, these were valued on this date per the signed agreements and issuance on June 19, 2017. The Company accounts for its warrants issued in accordance with the US GAAP accounting guidance under ASC 480. We estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes option pricing model as described in the stock-based compensation section above, based on the estimated market value of the underlying common stock at the valuation measurement date of $1.50, the remaining contractual term of the warrant of 2.5 years, risk-free interest rate of 1.38% and expected volatility of the price of the underlying common stock of 126%. There is a moderate degree of subjectivity involved when using option pricing models to estimate the warrants and the assumptions used in the Black Scholes option-pricing model are moderately judgmental. Number of shares Exercise Price Balance as of March 31, 2017 – – Warrants issued 2,000,000 $ 1.445 Settlements – – Balance as of September 30, 2017 2,000,000 During the nine months ended September 30, 2017, the Company issued 2,000,000 common stock purchase warrants to three employees of the Company with an exercise price of $1.445 per share for a period of time expiring on December 31, 2019. As of September 30, 2017, none of the warrants were exercised. Stock-based compensation expense recognized for warrants during the nine-month period ended September 30, 2017 was $2,100,318. |
16. Subsequent Event
16. Subsequent Event | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Event | The Company received notice from two holders of their request for conversion of debt as described herein related to Convertible Notes valued at $45,000, to convert into an aggregate of 46,249 of Common Shares at a conversion price of $0.973 per share. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation: |
Fair Value Measuerments | 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: |
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 $4,644,318 in expenses for stock based compensation to employees and consultants during the nine months ended September 30, 2017. |
Income taxes | Income taxes: |
Mangement fee contracts | Management fee contracts: 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. From April 1, 2017 to September 30, 2017 the Company has agreed to manage the acquirees through a management fee agreement whereby all cash collected was recognized as other income and all cash expenses were direct costs of the project. As of March 31, 2017, the management contract resulted in cash collections of approximately $100,000 and cash expenditures of approximately $170,000 resulting in a net loss of $70,257 which was presented on a net basis as a loss in the other income portion of the Company’s income statement. As of April 1, 2017, the Company’s consolidated financial statements included these two entities’. |
5. Property and Equipment (Tabl
5. Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment table | September 30, 2017 December 31, 2016 Furniture & Fixtures $ 101,212 $ 11,526 Marketing Display 36,900 42,681 Vehicles 6,000 – Office Equipment 74,996 10,838 $ 219,108 $ 65,045 Less: Accumulated Depreciation (63,579 ) (22,919 ) $ 155,529 $ 42,126 |
Schedule of property and equipment useful lives | Furniture & Fixtures 3 years Marketing Display 3 years Vehicles 3 years Office Equipment 3 years |
6. Intangible Asset (Tables)
6. Intangible Asset (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
License Agreement | September 30, 2017 December 31, 2016 License Agreement $ 5,300 $ 5,300 Product License and Registration 57,300 – Trade Secret - IP 32,500 – $ 95,100 $ 5,300 Less: accumulated amortization (5,760 ) (1,592 ) $ 89,340 $ 3,708 |
7. Convertible Notes and Deri25
7. Convertible Notes and Derivative Liability (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Assumptions used | Upon issuance September 30, 2017 Current stock price $ 1.66 to $4.35 $ 1.01 Risk-free interest rate 67% 147% Expected dividend yield 0 0 Expected term (in years) 2.39 to 2.09 2 Expected volatility 85% to 114% 130% |
Schedule of derivative liability | January 1, 2017 $ 294,002 Gain on derivative liability 4,706 Conversion of notes - APIC (139,603 ) September 30, 2017 $ 159,105 |
9. Goodwill and Acquisition a26
9. Goodwill and Acquisition accounting (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
Acquisition information | Denver Consulting Group Balance Sheet Book Value Fair Value Book Value Fair Value Assets Liabilities Cash 43,797 43,797 Customer deposits 43,797 43,797 43,797 43,797 43,797 43,797 Purchase Price (2,258,065 * 1.33) 3,003,226 Less: BV of Assets (43,797 ) Add: BV of Liabilities 43,797 Goodwill 3,003,226 |
13. Commitments and Concentra27
13. Commitments and Concentrations (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum lease | Office Lease – Denver, Colorado 2017 fiscal year $ 95,947 2018 fiscal year 154,174 2019 fiscal year 171,000 2020 fiscal year 29,000 Office and Warehouse Lease – Denver, Colorado 2017 fiscal year $ 115,328 2018 fiscal year 118,528 2019 fiscal year 121,728 2020 fiscal year 124,928 |
15. Warrants (Tables)
15. Warrants (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Schedule of Warrants | Number of shares Exercise Price Balance as of March 31, 2017 – – Warrants issued 2,000,000 $ 1.445 Settlements – – Balance as of September 30, 2017 2,000,000 |
1. Liquidity and Capital Reso29
1. Liquidity and Capital Resources (Details Narrative) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Cash and cash equivalents | $ 927,884 | $ 351,524 | $ 91,948 | $ 262,146 |
2. Critical Accounting Polici30
2. Critical Accounting Policies and Estimates (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Accounts receivable | $ 398,902 | $ 398,902 | $ 25,000 | ||
Available for sale instruments | 0 | 0 | 13,998 | ||
Note receivable | 286,455 | 286,455 | 264,016 | ||
Other assets | 106,811 | 106,811 | 27,479 | ||
Accounts payable | 53,965 | 53,965 | 0 | ||
Accrued liabilities | 14,700 | 14,700 | $ 175 | ||
Advertising and marketing | 49,592 | $ 39,869 | 136,436 | $ 61,541 | |
Stock based compensation | 164,000 | $ 0 | 4,644,318 | $ 49,200 | |
Proceeds from management contract | 100,000 | ||||
Management fee contract expenses | 170,000 | ||||
Net loss from management fee contracts | (70,257) | ||||
Prepaid Registration Fees [Member] | |||||
Other assets | 67,241 | 67,241 | |||
Security Deposits [Member] | |||||
Other assets | 24,500 | 24,500 | |||
Customer Deposits [Member] | |||||
Accrued liabilities | 14,700 | 14,700 | |||
Prepaid Inventory [Member] | |||||
Other assets | 9,732 | 9,732 | |||
Prepaid Insurancey [Member] | |||||
Other assets | $ 5,337 | $ 5,337 |
4. Stockholders' Equity (Detail
4. Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | |
Sep. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2017 | Sep. 30, 2017 | |
Common Stock [Member] | July 28, 2017 [Member] | ||||
Stock issued for services, shares issued | 34,533 | |||
Common Stock [Member] | August 29, 2017 [Member] | ||||
Stock issued for services, shares issued | 100,000 | |||
Acquisitions [Member] | ||||
Stock issued for acquisition, shares | 7,000,000 | |||
Denver Consulting Group [Member] | ||||
Stock issued for acquisition, shares | 258,065 | 2,258,065 | ||
Various Individuals [Member] | ||||
Stock issued for services, shares issued | 1,400,000 | |||
Stock issued for services, value | $ 2,380,000 | |||
Three Individuals [Member] | ||||
Warrants issued, shares | 2,000,000 | |||
Private Investor [Member] | Common Stock [Member] | ||||
Stock issued new, shares | 937,647 | |||
Andy Williams [Member] | Common Stock [Member] | ||||
Stock issued new, shares | 25,000 | |||
Brett Roper [Member] | Common Stock [Member] | ||||
Stock issued new, shares | 30,000 | |||
Convertible Notes [Member] | ||||
Stock issued for conversion of notes, shares issued | 145,587 | 44,151 | ||
Conversion of notes, amount converted | $ 254,777 | $ 60,000 |
5. Property and Equipment (Deta
5. Property and Equipment (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Abstract] | ||
Furniture & fixtures | $ 101,212 | $ 11,526 |
Marketing Display | 36,900 | 42,681 |
Vehicles | 6,000 | 0 |
Office Equipment | 74,996 | 10,838 |
Property and Equipment, gross | 219,108 | 65,045 |
Less: Accumulated Depreciation | (63,579) | (22,919) |
Property and equipment, net | $ 155,529 | $ 42,126 |
5. Property and Equpment (Detai
5. Property and Equpment (Details - Useful life) | 9 Months Ended |
Sep. 30, 2017 | |
Furniture and Fixtures | |
Useful lives of property and equipment | 3 years |
Marketing Display | |
Useful lives of property and equipment | 3 years |
Vehicles [Member] | |
Useful lives of property and equipment | 3 years |
Office Equipment [Member] | |
Useful lives of property and equipment | 3 yeas |
5. Property and Equipment (De34
5. Property and Equipment (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 40,659 | $ 12,399 |
6. Intangible Asset (Details)
6. Intangible Asset (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
License agreement costs | $ 95,100 | $ 5,300 |
Less: accumulated amortization | (5,760) | (1,592) |
License agreement costs, net | 89,340 | 3,708 |
License Agreement [Member] | ||
License agreement costs | 5,300 | 5,300 |
Product License and Registration [Member] | ||
License agreement costs | 57,300 | 0 |
Trade Secret [Member] | ||
License agreement costs | $ 32,500 | $ 0 |
6. Intangible Asset (Details Na
6. Intangible Asset (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 1,463 | $ 266 |
7. Convertible Notes and Deri37
7. Convertible Notes and Derivative Liability (Details - Assumptions) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Current stock price | 1.01 | |
Risk-free interest rate | 147.00% | |
Expected dividend yield | 0.00% | |
Expected term (in years) | 2 years | |
Expected volatility | 130% | |
Upon Issuance [Member] | ||
Current stock price | 1.66 to $4.35 | |
Risk-free interest rate | 67.00% | |
Expected dividend yield | 0.00% | |
Expected term (in years) | 2.39 to 2.09 years | |
Expected volatility | 85% to 114% |
7. Convertible Notes and Deri38
7. Convertible Notes and Derivative Liability (Details - Derivative liability) | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Debt Disclosure [Abstract] | |
Derivative liability, beginning balance | $ 294,002 |
Gain on derivative liability | 4,706 |
Conversion of notes - APIC | (139,603) |
Derivative liability, ending balance | $ 159,105 |
7. Convertible Notes and Deri39
7. Convertible Notes and Derivative Liability (Details Narrative) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Debt Disclosure [Abstract] | ||
Convertible debt balance | $ 675,000 | $ 810,000 |
8. Related Party Transactions (
8. Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Related party sales | $ 61,768 | $ 0 | $ 184,711 | $ 0 | |
Related party cost of sales | 14,291 | $ 0 | 40,327 | $ 0 | |
Accounts payable - related party | 9,776 | 9,776 | $ 0 | ||
Super Farm LLC [Member] | |||||
Related party sales | 80,021 | ||||
Accounts receivable | 33,832 | 33,832 | |||
Related party cost of sales | 16,789 | ||||
De Best [Member] | |||||
Related party sales | 28,985 | ||||
Accounts receivable | 8,130 | 8,130 | |||
Related party cost of sales | 6,367 | ||||
Medicine Man Denver [Member] | |||||
Related party sales | 75,705 | ||||
Related party cost of sales | 17,170 | ||||
Josh Haupt [Member] | |||||
Accounts payable - related party | 6,752 | 6,752 | |||
Future Vision [Member] | |||||
Accounts payable - related party | $ 3,024 | $ 3,024 |
9. Goodwill and Acquisition a41
9. Goodwill and Acquisition accounting (Details - Goodwill) - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Goodwill | $ 9,304,306 | $ 9,304,306 | $ 0 |
Pono and Success [Member] | |||
Stock issued for acquisition, shares | 7,000,000 | ||
Goodwill | $ 6,301,080 | $ 6,301,080 | |
Denver Consulting Group [Member] | |||
Stock issued for acquisition, shares | 258,065 | 2,258,065 | |
Goodwill | $ 3,003,226 | $ 3,003,226 |
10. Inventory (Details Narrativ
10. Inventory (Details Narrative) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Finished goods inventory | $ 87,685 | $ 0 |
11. Note Payable (Details Narra
11. Note Payable (Details Narrative) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Debt Disclosure [Abstract] | ||
Note payable | $ 58,280 | $ 0 |
12. Net Income (Loss) per Sha44
12. Net Income (Loss) per Share (Details Narrative) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Earnings per share attributable to common shareholders: | ||||
Earnings per share - basic and diluted | $ (.02) | $ 0 | $ (.22) | $ (.02) |
13. Commitments and Concentra45
13. Commitments and Concentrations (Details) | Sep. 30, 2017USD ($) |
Havana Street [Member] | |
2017 fiscal year | $ 95,947 |
2018 fiscal year | 154,174 |
2019 fiscal year | 171,000 |
2020 fiscal year | 29,000 |
E. 47th St. [Member] | |
2017 fiscal year | 115,328 |
2018 fiscal year | 118,528 |
2019 fiscal year | 121,728 |
2020 fiscal year | $ 124,928 |
14. Tax Provision (Details Narr
14. Tax Provision (Details Narrative) - USD ($) | May 15, 2017 | Dec. 31, 2016 |
Income Tax Disclosure [Abstract] | ||
Income tax liability | $ 0 | $ 0 |
15. Warrants (Details)
15. Warrants (Details) - Warrants [Member] | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Number of Warrants | |
Warrants outstanding, beginning balance | 0 |
Warrants issued | 2,000,000 |
Warrant settlements | 0 |
Warrants outstanding, ending balance | 2,000,000 |
Warrants issued, exercise price | $ / shares | $ 1.445 |
15. Warrants (Details Narrative
15. Warrants (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Stock based compensation | $ 164,000 | $ 0 | $ 4,644,318 | $ 49,200 |
Three Employees [Member] | ||||
Warrants issued | 2,000,000 | |||
Stock based compensation | $ 2,100,318 |