Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 13, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | Veritas Farms, Inc. | |
Entity Central Index Key | 0001669400 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2019 | |
Entity Reporting Status Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | true | |
Entity Small Business | true | |
Entity Interactive Data Current | Yes | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity File Number | 333-191251 | |
Entity Incorporation, State or Country Code | NV | |
Entity Common Stock, Shares Outstanding | 41,404,368 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
CURRENT ASSETS | ||
Cash and Cash Equivalents | $ 5,598,751 | $ 164,086 |
Inventories | 5,643,775 | 2,508,954 |
Accounts Receivable | 721,146 | 244,150 |
Prepaid Expenses | 878,177 | 116,403 |
Total Current Assets | 12,841,849 | 3,033,593 |
PROPERTY PLANT AND EQUIPMENT, net of accumulated depreciation of $851,723 and $580,232, respectively | 4,932,981 | 3,932,459 |
Intellectual Property | 55,000 | |
Right of Use Assets, net of accumulated amortization | 154,497 | |
Deposits | 59,327 | 48,034 |
TOTAL ASSETS | 18,043,654 | 7,014,086 |
CURRENT LIABILITIES | ||
Accounts Payable | 1,527,678 | 189,431 |
Accrued Expenses | 236,804 | 165,677 |
Accrued Interest - Related Parties | 18,828 | 17,949 |
Notes Payable - Related Parties | 262,924 | |
Deferred Rent | 7,045 | 7,045 |
Deferred Revenue | 2,268 | 45,018 |
Current Portion of Right of Use Lease Liability | 80,263 | |
Current Portion of Long Term Debt | 60,333 | 50,432 |
Total Current Liabilities | 1,933,219 | 738,476 |
LONG-TERM LIABILITIES | ||
Long-term Debt, net of current portion | 166,702 | 196,261 |
Right of Use Lease Liability, net of current portion | 72,958 | |
Total Liabilities | 2,172,879 | 934,737 |
STOCKHOLDERS’ EQUITY | ||
Common Stock, $0.004 par value, 50,000,000 shares authorized, 41,343,852 and 27,876,208 shares issued and outstanding at September 30, 2019 and December 31, 2018 respectively | 165,375 | 111,505 |
Additional Paid in Capital | 30,387,458 | 13,894,844 |
Accumulated Deficit | (14,682,058) | (7,927,000) |
Total Stockholders’ Equity | 15,870,775 | 6,079,349 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 18,043,654 | $ 7,014,086 |
Consolidated Balance Sheets (_2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Accumulated depreciation | $ 851,723 | $ 580,232 |
Common stock, par value (in dollars per share) | $ 0.004 | $ 0.004 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, issued | 41,343,852 | 27,876,208 |
Common stock, outstanding | 41,343,852 | 27,876,208 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||||
Sales | $ 1,215,810 | $ 459,329 | $ 5,712,085 | $ 1,277,914 |
Cost of sales | 720,752 | 372,142 | 2,988,793 | 887,840 |
Plant Inventory Write-off | 77,387 | |||
Total Cost of sales | 720,752 | 372,142 | 3,066,180 | 887,840 |
Gross profit | 495,058 | 87,187 | 2,645,905 | 390,074 |
Operating Expenses | ||||
Selling, General and Administrative | 4,084,697 | 1,071,460 | 9,380,589 | 2,041,773 |
Total Operating Expenses | 4,084,697 | 1,071,460 | 9,380,589 | 2,041,773 |
Operating loss | (3,589,639) | (984,273) | (6,734,684) | (1,651,699) |
Other Expenses | ||||
Other Income | ||||
Loss on Disposal of Property and Equipment | 2,207 | 2,207 | ||
Interest Expense - Related Party | 8,802 | 5,714 | 16,248 | |
Interest Expense - Other | 3,273 | 3,207 | 12,453 | 9,764 |
Total Other Expenses | 5,480 | 12,009 | 20,374 | 26,012 |
Loss before Provision for Income Taxes | (3,595,119) | (996,282) | (6,755,058) | (1,677,711) |
Income Tax Provision | ||||
NET LOSS | $ (3,595,119) | $ (996,282) | $ (6,755,058) | $ (1,677,711) |
Net Loss per Share (in dollars per share) | $ (0.09) | $ (0.04) | $ (0.21) | $ (0.1) |
Weighted Average Shares Outstanding (in shares) | 38,682,615 | 22,923,101 | 32,450,833 | 17,587,056 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) | Common Stock | Additional Paid in Capital | Accumulated Deficit | Total |
Balance at beginning at Dec. 31, 2017 | $ 59,895 | $ 7,139,409 | $ (4,091,017) | $ 3,108,287 |
Balance at beginning (in shares) at Dec. 31, 2017 | 14,973,750 | |||
Issuance of Common Stock for Cash | $ 16,255 | 1,481,122 | 1,497,377 | |
Issuance of Common Stock for Cash (in shares) | 4,063,774 | |||
Issuance of Common Stock for Services | $ 50 | 20,450 | 20,500 | |
Issuance of Common Stock for Services (in shares) | 12,500 | |||
Stock-based Compensation | 101,128 | 101,128 | ||
Subscription Receivable | (797,934) | |||
Net loss | (681,429) | (681,429) | ||
Balance at end at Jun. 30, 2018 | $ 76,200 | 8,742,109 | (4,772,446) | 3,247,929 |
Balance at end (in shares) at Jun. 30, 2018 | 19,050,024 | |||
Balance at beginning at Dec. 31, 2017 | $ 59,895 | 7,139,409 | (4,091,017) | 3,108,287 |
Balance at beginning (in shares) at Dec. 31, 2017 | 14,973,750 | |||
Net loss | (1,677,711) | |||
Balance at end at Sep. 30, 2018 | $ 93,822 | 10,182,547 | (5,768,728) | 4,507,601 |
Balance at end (in shares) at Sep. 30, 2018 | 22,955,375 | |||
Balance at beginning at Jun. 30, 2018 | $ 76,200 | 8,742,109 | (4,772,446) | 3,247,929 |
Balance at beginning (in shares) at Jun. 30, 2018 | 19,050,024 | |||
Issuance of Common Stock for Cash | $ 17,447 | 1,515,404 | 1,532,851 | |
Issuance of Common Stock for Cash (in shares) | 3,861,601 | |||
Issuance of Common Stock for Services | $ 175 | 17,500 | 17,675 | |
Issuance of Common Stock for Services (in shares) | 43,750 | |||
Stock-based Compensation | (92,466) | (92,466) | ||
Subscription Receivable | 797,934 | |||
Net loss | (996,282) | (996,282) | ||
Balance at end at Sep. 30, 2018 | $ 93,822 | 10,182,547 | (5,768,728) | 4,507,601 |
Balance at end (in shares) at Sep. 30, 2018 | 22,955,375 | |||
Balance at beginning at Dec. 31, 2018 | $ 111,505 | 13,894,844 | (7,927,000) | 6,079,349 |
Balance at beginning (in shares) at Dec. 31, 2018 | 27,876,208 | |||
Warrants Excercised | $ 767 | 114,233 | 115,000 | |
Warrants Excercised (in shares) | 191,667 | |||
Stock-based Compensation | 661,302 | 661,302 | ||
Net loss | (1,826,924) | (1,826,924) | ||
Balance at end at Mar. 31, 2019 | $ 112,272 | 14,670,379 | (9,753,924) | 5,028,727 |
Balance at end (in shares) at Mar. 31, 2019 | 28,067,875 | |||
Balance at beginning at Dec. 31, 2018 | $ 111,505 | 13,894,844 | (7,927,000) | 6,079,349 |
Balance at beginning (in shares) at Dec. 31, 2018 | 27,876,208 | |||
Warrants Excercised | $ 9,304 | 1,386,321 | 1,395,625 | |
Warrants Excercised (in shares) | 2,326,042 | |||
Issuance of Common Stock for Cash | $ 17,738 | 6,105,196 | 6,122,934 | |
Issuance of Common Stock for Cash (in shares) | 4,434,375 | |||
Issuance of Common Stock for Services | $ 63 | 16,812 | 16,875 | |
Issuance of Common Stock for Services (in shares) | 15,625 | |||
Net loss | (1,333,015) | (1,333,015) | ||
Balance at end at Jun. 30, 2019 | $ 139,377 | 22,355,203 | (11,086,939) | 11,407,641 |
Balance at end (in shares) at Jun. 30, 2019 | 34,843,917 | |||
Balance at beginning at Dec. 31, 2018 | $ 111,505 | 13,894,844 | (7,927,000) | 6,079,349 |
Balance at beginning (in shares) at Dec. 31, 2018 | 27,876,208 | |||
Net loss | (6,755,058) | |||
Balance at end at Sep. 30, 2019 | $ 165,375 | 30,387,458 | (14,682,058) | 15,870,775 |
Balance at end (in shares) at Sep. 30, 2019 | 41,343,852 | |||
Balance at beginning at Jun. 30, 2019 | $ 139,377 | 22,355,203 | (11,086,939) | 11,407,641 |
Balance at beginning (in shares) at Jun. 30, 2019 | 34,843,917 | |||
Warrants Excercised | $ 5,158 | (5,158) | ||
Warrants Excercised (in shares) | 1,290,457 | |||
Issuance of Common Stock for Cash | $ 20,841 | 7,216,602 | 7,237,443 | |
Issuance of Common Stock for Cash (in shares) | 5,209,479 | |||
Stock-based Compensation | 820,810 | 820,810 | ||
Net loss | (3,595,119) | (3,595,119) | ||
Balance at end at Sep. 30, 2019 | $ 165,375 | $ 30,387,458 | $ (14,682,058) | $ 15,870,775 |
Balance at end (in shares) at Sep. 30, 2019 | 41,343,852 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (6,755,058) | $ (1,677,711) |
Adjustments to Reconcile Net Loss to Net Cash Used Operating Activities | ||
Depreciation | 280,340 | 194,095 |
Amortization of Right of Use Assets | 60,455 | |
Stock-based Compensation | 1,675,482 | 46,437 |
Loss on Disposal of Property and Equipment | 2,207 | |
Changes in Operating Assets and Liabilities | ||
Inventories | (3,134,821) | (317,263) |
Prepaid Expenses | (761,774) | (65,254) |
Accounts Receivable | (476,996) | (132,623) |
Deposits | (11,293) | (25,034) |
Deferred Revenue | (42,750) | |
Accrued Interest - Related Parties | 879 | 8,892 |
Right of Use Lease Liability | (61,731) | |
Accrued Expenses | 71,127 | (19,342) |
Accounts Payable | 1,338,247 | (137,660) |
NET CASH USED IN OPERATING ACTIVITIES | (7,815,686) | (2,125,463) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of Property and Equipment | (1,283,069) | (292,212) |
Purchase of Intangible Asset | (55,000) | |
NET CASH USED IN INVESTING ACTIVITIES | (1,338,069) | (292,212) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payments of Long-term Debt | (19,658) | (9,103) |
Repayment of Notes Payable - Related Parties | (262,924) | (84,756) |
Proceeds from Stock Warrants Exercised | 1,510,625 | |
Proceeds from Issuance of Common Stock | 13,360,377 | 3,030,628 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 14,588,420 | 2,936,769 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 5,434,665 | 519,094 |
CASH AND CASH EQUIVALENTS - Beginning of Period | 164,086 | 27,803 |
CASH AND CASH EQUIVALENTS - End of Period | 5,598,751 | 546,897 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash Paid for Interest | 19,699 | 14,928 |
Cash Paid for Income Taxes | ||
Non-Cash Financing Activities | ||
Operating Lease Right of Use Asset Obtained in Exchange for Lease Obligations | $ 214,952 |
Nature of Business and Summary
Nature of Business and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Veritas Farms, Inc. (Formerly Known As SanSal Wellness Holdings Inc.) (the "Company"), was incorporated as Armeau Brands Inc. in the State of Nevada on March 15, 2011. On October 13, 2017, the Company filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State changing the name from "Armeau Brands Inc." to "SanSal Wellness Holdings, Inc." The Company's business objectives are to produce natural rich-hemp products, using strict natural protocols and materials yielding broad spectrum phytocannabinoid rich hemp oils, distillates and isolates. The Company is licensed by the Colorado Department of Agriculture to grow industrial hemp pursuant to Federal law on its farm. Effective September 27, 2017, the Company acquired 100% of the issued and outstanding limited liability company membership interests of 271 Lake Davis Holdings LLC dba SanSal Wellness ("271 Lake Davis") in exchange for 11,700,000 (46,800,000 prior to reverse split) restricted shares of the Company's common stock, which represented 100% of 271 Lake Davis's total membership interests outstanding immediately following the closing of the transaction. The transaction has been accounted for as a reverse merger, whereby 271 Lake Davis is the accounting survivor and the historical financial statements presented are those of 271 Lake Davis. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (the "SEC"). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company's management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2019, and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2019, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Form 10-K for the year ended December 31, 2018, filed with the SEC on April 16, 2019. Principles of Consolidation The accompanying consolidated financial statements reflect the accounts of Veritas Farms, Inc. and 271 Lake Davis Holdings and its wholly owned subsidiary, SanSal, LLC. All significant inter-company accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from these estimates. Fair Value Measurement The Company has adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company's short and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions) The Company does not have any assets or liabilities measured at fair value on a recurring basis. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At times, cash and cash equivalents may be in excess of FDIC insurance limits. Revenue Recognition On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers" and all the related amendments, which are also codified into ASC 606. The Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company's financial position, results of operations or cash flows. Under the new standard, the Company recognizes a sale as follows: Hemp Cultivation and Production The Company recognizes revenue from manufacturing and distribution product sales when our customers obtain control of our products. Revenue from our online store is recorded at the time customers take possession of the product. Revenue is recognized net of discounts, promotional adjustments and returns. We collect taxes on certain revenue transactions to be remitted to governmental authorities, which may include sales, excise and local taxes. These taxes are not included in the transaction price and are, therefore, excluded from revenue. Upon purchase, the Company has no further performance obligations and collection is assured as sales are paid for at time of purchase. Revenue related to distribution customers is recorded when the customer is determined to have taken control of the product. This determination is based on the customer specific terms of the arrangement and gives consideration to factors including, but not limited to, whether the customer has an unconditional obligation to pay, whether a time period or event is specified in the arrangement and whether the Company can mandate the return or transfer of the products. Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities with collected taxes recorded as current liabilities until remitted to the relevant government authority. Cost of Goods Sold Hemp Cultivation and Production Cost of goods sold includes the costs directly attributable to production of inventory such as cultivation costs, extraction costs, packaging costs, security, and allocated overhead. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs. Inventories Inventories consist of growing and processed plants and oils and are valued at the lower of cost or net realizable value. In evaluating whether inventories are stated at lower of cost or net realizable value, management considers such factors as inventories in hand, estimated time to sell such inventories and current market conditions. Write-offs for inventory obsolescence are recorded when, in the opinion of management, the value of specific inventory items has been impaired. Property, Plant and Equipment Purchase of property, plant and equipment are recorded at cost. Improvements and replacements of property, plant and equipment are capitalized. Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to expense as incurred. When assets are sold or retired, their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the Consolidated Statements of Operations Impairment of Long-Lived Assets The carrying value of long-lived assets are reviewed when facts and circumstances suggest that the assets may be impaired or that the amortization period may need to be changed. The Company considers internal and external factors relating to each asset, including cash flows, local market developments, industry trends and other publicly available information. If these factors and the projected undiscounted cash flows of the Company over the remaining amortization period indicate that the asset will not be recoverable, the carrying value will be adjusted to the fair market value. The Company has determined that no impairment exists at September 30, 2019 and December 31, 2018. Compensation and Benefits The Company records compensation and benefits expense for all cash and deferred compensation, benefits, and related taxes as earned by its employees. Compensation and benefits expense also includes compensation earned by temporary employees and contractors who perform similar services to those performed by the Company's employees. Stock-Based Compensation The Company accounts for share-based payments in accordance with ASC 718, "Compensation - Stock Compensation," which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, "Measurement Objective – Fair Value at Grant Date," the Company estimates the fair value of the award using the Black-Scholes option pricing model for valuation of the share- based payments. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders. The simplified method is used to determine compensation expense since historical option exercise experience is limited relative to the number of options issued. The compensation cost is recognized ratably using the straight-line method over the expected vesting period. The Company accounts for stock-based compensation to other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments, and is recognized as expense over the service period. Income Taxes The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. In accordance with Financial Accounting Standards Board ASC Topic 740, Income Taxes, management evaluated the Company's tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. The Company is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Income tax benefits are recognized for income tax positions taken or expected to be taken in a tax return, only when it is determined that the income tax position will more-likely than-not be sustained upon examination by taxing authorities. The Company has analyzed tax positions taken for filings with the Internal Revenue Service and all tax jurisdictions where it operates. The Company believes that income tax filing positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse effect on the Company's financial condition, results of operations or cash flows. Accordingly, the Company has not recorded any reserves, or related accruals for interest and penalties for uncertain income tax positions at September 30, 2019 and December 31, 2018. Leases The Company has one leased buildings in Fort Lauderdale, Florida that is classified as operating lease right-of use ("ROU") assets and operating lease liabilities in the Company's consolidated balance sheet. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of Selling, General and Administrative expenses. The standard was effective for us beginning January 1, 2019. The Company elected the available practical expedients on adoption. The adoption had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated income statements. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. Finance leases are not material to the Company and were not impacted by the adoption of ASC 842, as finance lease liabilities and the corresponding assets were already recorded in the balance sheet under the previous guidance, ASC 840. Related Party Transactions The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The consolidated financial statements shall include disclosures of related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Subsequent Events The Company has evaluated subsequent events through the date which the financial statements were available to be issued. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2019 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 2: INVENTORIES Inventory consists of: September 30, December 31, 2019 2018 Inventory Work In Progress $ 4,324,504 $ 2,241,554 Finished Goods 584,564 72,604 Other 734,707 194,796 Inventory $ 5,643,775 $ 2,508,954 During the periods ending September 30, 2019 and December 31, 2018 the Company realized a loss from destruction of plants in the amounts of $77,387 and $0, respectively. |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 3: PROPERTY AND EQUIPMENT September 30, December 31, Life 2019 2018 PROPERTY AND EQUIPMENT Land and Land Improvements - $ 398,126 398,126 Building and Improvements 39 1,510,176 1,465,245 Greenhouse 39 893,987 693,987 Fencing and Irrigation 15 203,793 203,793 Machinery and Equipment 7 2,448,555 1,475,644 Furniture and Fixtures 7 236,344 224,682 Computer Equipment 5 22,665 20,053 Vehicles 5 71,058 31,161 $ 5,784,704 $ 4,512,691 Less Accumulated Depreciation (851,723 ) (580,232 ) Property and Equipment $ 4,932,981 3,932,459 Total depreciation expense was $101,174 and $67,367 for the three month period and $280,340 and $194,095 for the nine month periods ending September 30, 2019 and 2018, respectively. |
Long-Term Debt
Long-Term Debt | 9 Months Ended |
Sep. 30, 2019 | |
Long-term Debt, Unclassified [Abstract] | |
LONG-TERM DEBT | NOTE 4: LONG-TERM DEBT Long-term debt consisted of the following: September 30, December 31, 2019 2018 Note Payable which requires monthly payments of $1,618 including interest at 6.00% per annum until February 1, 2020 when the balance is due in full. The note is secured by specific assets of the Company. $ - $ 99,902 Notes Payable which require monthly payments of $3,690, $669, and $1,691, including interest at 5.16% per annum until December 1, 2022, May 1, 2023, and August 1, 2024, when the balance is due in full. The note is secured by specific assets of the Company. 227,035 146,791 227,035 246,693 Less Current Portion (60,333 ) (50,432 ) Long-Term Debt - net of current portion $ 166,702 $ 196,261 Future principal payments for the next 5 years are as follows for the years ended December 31: 2019 $ 15,083 2020 60,333 2021 60,333 2022 60,333 2023 19,750 Thereafter 11,203 $ 227,035 |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 5: STOCK-BASED COMPENSATION The Company approved their 2017 Incentive Stock Plan on September 27, 2017 (the "Incentive Plan") which authorizes the Company to grant or issue non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and other equity awards up to a total of 45 million shares. Under the terms of the Incentive Plan, awards may be granted to our employees, directors or consultants. Awards issued under the Incentive Plan vest as determined by the Board of Directors or any of the Committees appointed under the Incentive Plan at the time of grant. The Company's outstanding stock options have a 10-year term. Outstanding non-qualified stock options granted to employees and a consultant vest on a case by case basis. Outstanding incentive stock options issued to employees vest over a three-year period. The incentive stock options granted vest based solely upon continued employment ("time-based"). The Company's time-based share awards that vest in their entirety at the end of three-year periods, time-based share awards where 33.3% of the award vests on each of the three anniversary dates. Outstanding incentive stock options issued to executives vest partially upon grant date, with the residual vesting over the subsequent 6 or 12 months. Stock-based compensation expense was as follows: Three Months Ended Nine Months Ended 2019 2018 2019 2018 Non-Qualified Stock Options - $ - $ 2,887 $ - $ 8,662 Incentive Stock Options - Time Bases 820,881 - 1,658,677 - Total Stock-based Compensation Expense $ 820,881 $ 2,887 $ 1,658,677 $ 8,662 Stock option activity was as follows in the periods ended Sep 30, 2019 (Post Reverse Split) and December 31, 2018: Stock Weighted- Average Exercise Price Weighted- Average Remaining Options per Share Contractual Outstanding at December 31, 2018 2,275,000 $ 1.06 9.30 Granted 1,868,750 $ 5.02 9.77 Exercised - Forfeited/Canceled - Outstanding at Sep 30, 2019 4,143,750 $ 2.84 9.13 Vested at Sep 30, 2019 2,232,292 $ 2.84 8.08 Exercisable at Sep 30, 2019 2,232,292 $ 2.84 8.08 The Company estimated the fair value of each stock option on the date of grant using the Black Scholes valuation model with the following assumptions: Valuation Assumptions Risk-free interest rate 2.14% - 2.94% Expected dividend yield 0% Expected stock price volatility 105% to 180% Expected life of stock options (in years) 10 |
Leases
Leases | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
LEASES | NOTE 6: LEASES We adopted ASC 842 using the modified retrospective approach, electing the practical expedient that allows us not to restate our comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption. The Company recognized the following related to leases in its Unaudited Consolidated Balance Sheet: September 30, December 31, 2019 2018 Right of Use Lease Liabilities Current portion $ 80,263 $ - Long-term portion 72,958 - $ 153,221 $ - On January 15, 2017, the Company entered an agreement with Pueblo, CO Board of Water Works to lease water for the Company's cultivation process. The agreement went into effect as of November 1, 2016 with a term of 10 years expiring on October 31, 2026, with an option to extend the lease upon expiration for 10 additional years. This agreement replaced previously entered agreements with Pueblo, CO Board of Water Works. The lease requires annual non-refundable minimum service fees of $15,000 and a usage charge of $1,063 per acre for 30 acres. The minimum service fees and usage charges are subject to escalators for each year based upon percentage increases of Pueblo, CO Board of Water Works rates from the previous calendar year. Total water lease expense was $6,346 and $11,724 for the three month periods and $22,663 and $35,172 for the nine month periods ended September 30, 2019 and 2018, respectively. On June 22, 2018, the Company entered into a sublease agreement with ESDA Inc., a Florida Corporation. The Agreement went into effect as of July 1, 2018 with a term of three years expiring August 31, 2021. The lease contains annual escalators and charges Florida sales tax. Total depreciation expense related to the lease was $20,152 and $60,456 for the three and nine months ended September 30, 2019. Prior to 2019 the lease was treated as an operating lease and right of use asset guidance was not applicable. As of September 30, 2019 and December 31, 2018, operating leases have no minimum rental commitments. |
Common Stock
Common Stock | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
COMMON STOCK | NOTE 7: COMMON STOCK In 2018 the Company issued 12,596,208 shares of common stock for proceeds of $5,532,852, net of $409,495 issuance costs, and 306,250 shares of common stock for marketing services valued at $388,000. In 2019, 3,808,165 stock warrants were exercised for $1,510,625. The Company also issued 1,290,570 shares of common stock in accordance with a cashless exercise of warrants. In 2019, the Company issued 9,643,854 shares of common stock for proceeds of $13,360,377, net of $2,069,603 issuance costs, and 15,625 shares of common stock for marketing services valued at $16,875. In September of 2019, the board of directors approved an amendment to the Company's Certificate of Incorporation, as amended, to effect a 1-for-4 reverse stock split on the issued and outstanding common. All relevant information relating to numbers of shares and warrants and per share information have been retrospectively adjusted to reflect the reverse stock split for all periods presented. The reverse split was effective on September 19, 2019. |
Income Tax
Income Tax | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAX | NOTE 8: INCOME TAX The reconciliation of income tax computed at the Federal statutory rate to the provision for income taxes from continuing operations is as follows: Three Months Ended Three Months Ended September 30, 2019 September 30, 2018 Federal Taxes (credits) at statutory rates $ (790,000 ) $ (219,000 ) State and local taxes, net of Federal benefit (170,000 ) (46,000 ) Change in valuation allowance 960,000 265,000 $ - $ - Nine Months Ended Nine Months Ended September 30, 2019 September 30, 2018 Federal Taxes (credits) at statutory rates $ (1,490,000 ) $ (494,000 ) State and local taxes, net of Federal benefit (334,000 ) (77,000 ) Change in valuation allowance 1,824,000 571,000 $ - $ - Components of deferred tax assets are as follows: September 30, December 31, 2019 2018 Deferred Tax Assets; Net Operating Loss Carryforwards $ 3,130,000 $ 1,242,000 Stock Compensation 493,000 273,000 Accrued Related Party Expenses 20,000 5,000 Total Deferred Tax Assets 3,643,000 1,520,000 Valuation Allowance (3,128,000 ) (1,304,000 ) Total Deferred Tax Assets net of Valuation Allowance $ 515,000 $ 216,000 Depreciation and Amortization 315,000 200,000 Prepaid Expense 200,000 16,000 Total Deferred Tax Liabilities 515,000 216,000 Net Deferred Tax Assets $ - $ - The Company has approximately $13,130,000 net operating loss carryforwards that are available to reduce future taxable income. Those NOLs begin to expire in 2038. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets for every period because it is more likely than not that all of the deferred tax assets will not be realized. The Company's deferred tax liability associated with timing differences related to depreciation and amortization includes $69,000 of liability resulting from tax depreciation deducted in excess of GAAP depreciation prior to the Company becoming taxed as a C-Corporation. The Company files income tax returns in the U.S. federal jurisdiction, and the state of Colorado. The Company adopted the provisions of FASB ASC 740, A ccounting for Uncertainty in Income Taxes |
Concentrations
Concentrations | 9 Months Ended |
Sep. 30, 2019 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | NOTE 9: CONCENTRATIONS The Company had three customers in the nine months ended September 30, 2019 accounting for 21%, 21% and 11% of sales. For the nine months ended September 30, 2018, two customers accounted for 41% and 12% of sales. The Company had one customers in the three months ended September 30, 2019 accounting for 10% of sales. For the three months ended September 30, 2018, one customer accounted for 33% of sales. The Company had two customers at September 30, 2019 accounting for 34% and 30% of accounts receivable. At December 31, 2018, the Company had two customers accounting for 30% ad 24% of accounts receivable. |
Going Concern
Going Concern | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GOING CONCERN | NOTE 10: GOING CONCERN The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate continuation of the Company as a going concern. However, the Company has sustained substantial losses from operations since its inception. As of and for the period ended September 30, 2019, the Company had an accumulated deficit of $14,682,058, and a net loss of $6,755,058. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. Continuation as a going concern is dependent on the ability to raise additional capital and financing, though there is no assurance of success. The Company's rebranded line of hemp oil and extract product allowed market penetration into large retail chains vastly increasing brand exposure and awareness. The initial rollouts have been successful creating opportunities for thousands of new retail outlets across the country. The shift from smaller order fulfillment to larger "big box store" orders creates an economy of scale and increased profitability. Currently, the Company incorporates an aggressive marketing plan to compete in the Cannabinoid industry. To become market leaders in the market, the Company will use three primary departments to market its products including: web-based marketing, traditional marketing, and medical marketing departments. |
Related Party
Related Party | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY | NOTE 11: RELATED PARTY The Company incurred $57,500 and $78,025 of related party legal expenses during the three month periods ended September 30, 2019 and 2018, and $132,500 and $179,245 of related party legal expenses during the nine month periods ended September 30, 2019 and 2018, respectively. The Company entered into various note payables with stockholders of the company between June 2017 and March 2019. The notes bear interest between 2.00% and 3.00% per annum. The principal balance due on these notes was $0 and $262,924 as of September 30, 2019 and December 31, 2018. Interest accrued was $18,828 and $17,949 as of September 30, 2019 and December 31, 2018, respectively. The principal balance has been paid in full as of June 30, 2019. The Company issued stock incentives to various directors and employees. Refer to Note 5 for additional details. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 12: SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date the financial statements were available to be issued. The Company had no subsequent events that required disclosure. |
Nature of Business and Summar_2
Nature of Business and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | Nature of Business Veritas Farms, Inc. (Formerly Known As SanSal Wellness Holdings Inc.) (the "Company"), was incorporated as Armeau Brands Inc. in the State of Nevada on March 15, 2011. On October 13, 2017, the Company filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State changing the name from "Armeau Brands Inc." to "SanSal Wellness Holdings, Inc." The Company's business objectives are to produce natural rich-hemp products, using strict natural protocols and materials yielding broad spectrum phytocannabinoid rich hemp oils, distillates and isolates. The Company is licensed by the Colorado Department of Agriculture to grow industrial hemp pursuant to Federal law on its farm. Effective September 27, 2017, the Company acquired 100% of the issued and outstanding limited liability company membership interests of 271 Lake Davis Holdings LLC dba SanSal Wellness ("271 Lake Davis") in exchange for 11,700,000 (46,800,000 prior to reverse split) restricted shares of the Company's common stock, which represented 100% of 271 Lake Davis's total membership interests outstanding immediately following the closing of the transaction. The transaction has been accounted for as a reverse merger, whereby 271 Lake Davis is the accounting survivor and the historical financial statements presented are those of 271 Lake Davis. |
Basis of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (the "SEC"). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company's management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2019, and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2019, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Form 10-K for the year ended December 31, 2018, filed with the SEC on April 16, 2019. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements reflect the accounts of Veritas Farms, Inc. and 271 Lake Davis Holdings and its wholly owned subsidiary, SanSal, LLC. All significant inter-company accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from these estimates. |
Fair Value Measurement | Fair Value Measurement The Company has adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company's short and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions) The Company does not have any assets or liabilities measured at fair value on a recurring basis. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At times, cash and cash equivalents may be in excess of FDIC insurance limits. |
Revenue Recognition | Revenue Recognition On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers" and all the related amendments, which are also codified into ASC 606. The Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company's financial position, results of operations or cash flows. Under the new standard, the Company recognizes a sale as follows: Hemp Cultivation and Production The Company recognizes revenue from manufacturing and distribution product sales when our customers obtain control of our products. Revenue from our online store is recorded at the time customers take possession of the product. Revenue is recognized net of discounts, promotional adjustments and returns. We collect taxes on certain revenue transactions to be remitted to governmental authorities, which may include sales, excise and local taxes. These taxes are not included in the transaction price and are, therefore, excluded from revenue. Upon purchase, the Company has no further performance obligations and collection is assured as sales are paid for at time of purchase. Revenue related to distribution customers is recorded when the customer is determined to have taken control of the product. This determination is based on the customer specific terms of the arrangement and gives consideration to factors including, but not limited to, whether the customer has an unconditional obligation to pay, whether a time period or event is specified in the arrangement and whether the Company can mandate the return or transfer of the products. Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities with collected taxes recorded as current liabilities until remitted to the relevant government authority. |
Cost of Goods Sold | Cost of Goods Sold Hemp Cultivation and Production Cost of goods sold includes the costs directly attributable to production of inventory such as cultivation costs, extraction costs, packaging costs, security, and allocated overhead. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs. |
Inventories | Inventories Inventories consist of growing and processed plants and oils and are valued at the lower of cost or net realizable value. In evaluating whether inventories are stated at lower of cost or net realizable value, management considers such factors as inventories in hand, estimated time to sell such inventories and current market conditions. Write-offs for inventory obsolescence are recorded when, in the opinion of management, the value of specific inventory items has been impaired. |
Property, Plant and Equipment | Property, Plant and Equipment Purchase of property, plant and equipment are recorded at cost. Improvements and replacements of property, plant and equipment are capitalized. Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to expense as incurred. When assets are sold or retired, their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the Consolidated Statements of Operations |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The carrying value of long-lived assets are reviewed when facts and circumstances suggest that the assets may be impaired or that the amortization period may need to be changed. The Company considers internal and external factors relating to each asset, including cash flows, local market developments, industry trends and other publicly available information. If these factors and the projected undiscounted cash flows of the Company over the remaining amortization period indicate that the asset will not be recoverable, the carrying value will be adjusted to the fair market value. The Company has determined that no impairment exists at September 30, 2019 and December 31, 2018. |
Compensation and Benefits | Compensation and Benefits The Company records compensation and benefits expense for all cash and deferred compensation, benefits, and related taxes as earned by its employees. Compensation and benefits expense also includes compensation earned by temporary employees and contractors who perform similar services to those performed by the Company's employees. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for share-based payments in accordance with ASC 718, "Compensation - Stock Compensation," which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, "Measurement Objective – Fair Value at Grant Date," the Company estimates the fair value of the award using the Black-Scholes option pricing model for valuation of the share- based payments. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders. The simplified method is used to determine compensation expense since historical option exercise experience is limited relative to the number of options issued. The compensation cost is recognized ratably using the straight-line method over the expected vesting period. The Company accounts for stock-based compensation to other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments, and is recognized as expense over the service period. |
Income Taxes | Income Taxes The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. In accordance with Financial Accounting Standards Board ASC Topic 740, Income Taxes, management evaluated the Company's tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. The Company is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Income tax benefits are recognized for income tax positions taken or expected to be taken in a tax return, only when it is determined that the income tax position will more-likely than-not be sustained upon examination by taxing authorities. The Company has analyzed tax positions taken for filings with the Internal Revenue Service and all tax jurisdictions where it operates. The Company believes that income tax filing positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse effect on the Company's financial condition, results of operations or cash flows. Accordingly, the Company has not recorded any reserves, or related accruals for interest and penalties for uncertain income tax positions at September 30, 2019 and December 31, 2018. |
Lease | Leases The Company has one leased buildings in Fort Lauderdale, Florida that is classified as operating lease right-of use ("ROU") assets and operating lease liabilities in the Company's consolidated balance sheet. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of Selling, General and Administrative expenses. The standard was effective for us beginning January 1, 2019. The Company elected the available practical expedients on adoption. The adoption had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated income statements. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. Finance leases are not material to the Company and were not impacted by the adoption of ASC 842, as finance lease liabilities and the corresponding assets were already recorded in the balance sheet under the previous guidance, ASC 840. |
Related Party Transactions | Related Party Transactions The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The consolidated financial statements shall include disclosures of related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. |
Subsequent Events | Subsequent Events The Company has evaluated subsequent events through the date which the financial statements were available to be issued. |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories | September 30, December 31, 2019 2018 Inventory Work In Progress $ 4,324,504 $ 2,241,554 Finished Goods 584,564 72,604 Other 734,707 194,796 Inventory $ 5,643,775 $ 2,508,954 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | September 30, December 31, Life 2019 2018 PROPERTY AND EQUIPMENT Land and Land Improvements - $ 398,126 398,126 Building and Improvements 39 1,510,176 1,465,245 Greenhouse 39 893,987 693,987 Fencing and Irrigation 15 203,793 203,793 Machinery and Equipment 7 2,448,555 1,475,644 Furniture and Fixtures 7 236,344 224,682 Computer Equipment 5 22,665 20,053 Vehicles 5 71,058 31,161 $ 5,784,704 $ 4,512,691 Less Accumulated Depreciation (851,723 ) (580,232 ) Property and Equipment $ 4,932,981 3,932,459 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Long-term Debt, Unclassified [Abstract] | |
Schedule of long-term debt | September 30, December 31, 2019 2018 Note Payable which requires monthly payments of $1,618 including interest at 6.00% per annum until February 1, 2020 when the balance is due in full. The note is secured by specific assets of the Company. $ - $ 99,902 Notes Payable which require monthly payments of $3,690, $669, and $1,691, including interest at 5.16% per annum until December 1, 2022, May 1, 2023, and August 1, 2024, when the balance is due in full. The note is secured by specific assets of the Company. 227,035 146,791 227,035 246,693 Less Current Portion (60,333 ) (50,432 ) Long-Term Debt - net of current portion $ 166,702 $ 196,261 |
Schedule of future principal payments | 2019 $ 15,083 2020 60,333 2021 60,333 2022 60,333 2023 19,750 Thereafter 11,203 $ 227,035 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of stock-based compensation expense | Three Months Ended Nine Months Ended 2019 2018 2019 2018 Non-Qualified Stock Options - $ - $ 2,887 $ - $ 8,662 Incentive Stock Options - Time Bases 820,881 - 1,658,677 - Total Stock-based Compensation Expense $ 820,881 $ 2,887 $ 1,658,677 $ 8,662 |
Schedule of stock option | Stock Weighted- Average Exercise Price Weighted- Average Remaining Options per Share Contractual Outstanding at December 31, 2018 2,275,000 $ 1.06 9.30 Granted 1,868,750 $ 5.02 9.77 Exercised - Forfeited/Canceled - Outstanding at Sep 30, 2019 4,143,750 $ 2.84 9.13 Vested at Sep 30, 2019 2,232,292 $ 2.84 8.08 Exercisable at Sep 30, 2019 2,232,292 $ 2.84 8.08 |
Schedule of black scholes valuation model | Valuation Assumptions Risk-free interest rate 2.14% - 2.94% Expected dividend yield 0% Expected stock price volatility 105% to 180% Expected life of stock options (in years) 10 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Lease | September 30, December 31, 2019 2018 Right of Use Lease Liabilities Current portion $ 80,263 $ - Long-term portion 72,958 - $ 153,221 $ - |
Income Tax (Tables)
Income Tax (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax reconciliation | Three Months Ended Three Months Ended September 30, 2019 September 30, 2018 Federal Taxes (credits) at statutory rates $ (790,000 ) $ (219,000 ) State and local taxes, net of Federal benefit (170,000 ) (46,000 ) Change in valuation allowance 960,000 265,000 $ - $ - Nine Months Ended Nine Months Ended September 30, 2019 September 30, 2018 Federal Taxes (credits) at statutory rates $ (1,490,000 ) $ (494,000 ) State and local taxes, net of Federal benefit (334,000 ) (77,000 ) Change in valuation allowance 1,824,000 571,000 $ - $ - |
Schedule of deferred tax assets | September 30, December 31, 2019 2018 Deferred Tax Assets; Net Operating Loss Carryforwards $ 3,130,000 $ 1,242,000 Stock Compensation 493,000 273,000 Accrued Related Party Expenses 20,000 5,000 Total Deferred Tax Assets 3,643,000 1,520,000 Valuation Allowance (3,128,000 ) (1,304,000 ) Total Deferred Tax Assets net of Valuation Allowance $ 515,000 $ 216,000 Depreciation and Amortization 315,000 200,000 Prepaid Expense 200,000 16,000 Total Deferred Tax Liabilities 515,000 216,000 Net Deferred Tax Assets $ - $ - |
Nature of Business and Summar_3
Nature of Business and Summary of Significant Accounting Policies (Details) - USD ($) | 1 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 27, 2017 | Sep. 30, 2019 | Dec. 31, 2018 | |
Ownership percentage | 100.00% | ||
Impairment | $ 0 | $ 0 | |
Income tax penalties and interest accrued | $ 0 | $ 0 | |
Restricted Stock [Member] | |||
Stock issued | 11,700,000 | ||
Stock Issued during period, shares, prior to reverse-splits | 46,800,000 |
Inventories (Details)
Inventories (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Inventory | ||
Work In Progress | $ 4,324,504 | $ 2,241,554 |
Finished Goods | 584,564 | 72,604 |
Other | 734,707 | 194,796 |
Inventory | $ 5,643,775 | $ 2,508,954 |
Inventories (Details Textual)
Inventories (Details Textual) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | ||
Loss from destruction of plants | $ 77,387 | $ 0 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | $ 5,784,704 | $ 4,512,691 |
Less Accumulated Depreciation | (851,723) | (580,232) |
Property and Equipment | $ 4,932,981 | 3,932,459 |
Land and Land Improvements | ||
PROPERTY AND EQUIPMENT | ||
Life | 0 years | |
Property and equipment, gross | $ 398,126 | 398,126 |
Building and Improvements [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 39 years | |
Property and equipment, gross | $ 1,510,176 | 1,465,245 |
Greenhouse [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 39 years | |
Property and equipment, gross | $ 893,987 | 693,987 |
Fencing and Irrigation [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 15 years | |
Property and equipment, gross | $ 203,793 | 203,793 |
Machinery and Equipment [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 7 years | |
Property and equipment, gross | $ 2,448,555 | 1,475,644 |
Furniture and Fixtures [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 7 years | |
Property and equipment, gross | $ 236,344 | 224,682 |
Computer Equipment [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 5 years | |
Property and equipment, gross | $ 22,665 | 20,053 |
Vehicles [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 5 years | |
Property and equipment, gross | $ 71,058 | $ 31,161 |
Property and Equipment (Detai_2
Property and Equipment (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 101,174 | $ 67,367 | $ 280,340 | $ 194,095 |
Long-Term Debt (Details)
Long-Term Debt (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Long-term debt | $ 227,035 | $ 246,693 |
Less Current Portion | (60,333) | (50,432) |
Long-Term Debt - net of current portion | 166,702 | 196,261 |
Note Payable [Member] | ||
Long-term debt | 99,902 | |
Note Payable Two [Member] | ||
Long-term debt | $ 227,035 | $ 146,791 |
Long-Term Debt (Details 1)
Long-Term Debt (Details 1) | Sep. 30, 2019USD ($) |
Long-term Debt, Unclassified [Abstract] | |
2019 | $ 15,083 |
2020 | 60,333 |
2021 | 60,333 |
2022 | 60,333 |
2023 | 19,750 |
Thereafter | 11,203 |
Total | $ 227,035 |
Long-Term Debt (Details Textual
Long-Term Debt (Details Textual) | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Note Payable Two [Member] | |
Monthly payments | $ 3,690 |
Debt interest rate, percentage | 5.16% |
Maturity term | Dec. 1, 2022 |
Note Payable [Member] | |
Monthly payments | $ 1,618 |
Debt interest rate, percentage | 6.00% |
Maturity term | Feb. 1, 2020 |
Note Payable Three [Member] | |
Monthly payments | $ 669 |
Debt interest rate, percentage | 5.16% |
Maturity term | May 1, 2023 |
Note Payable Four [Member] | |
Monthly payments | $ 1,691 |
Debt interest rate, percentage | 5.16% |
Maturity term | Aug. 1, 2024 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Total Stock-based Compensation Expense | $ 820,881 | $ 2,887 | $ 1,658,677 | $ 8,662 |
2017 Incentive Stock Plan [Member] | Incentive Stock Options [Member] | ||||
Total Stock-based Compensation Expense | 820,881 | 1,658,677 | ||
2017 Incentive Stock Plan [Member] | Non-Qualified Stock Options [Member] | ||||
Total Stock-based Compensation Expense | $ 2,887 | $ 8,662 |
Stock-Based Compensation (Det_2
Stock-Based Compensation (Details 1) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Stock Options | ||
Outstanding beginning balance | 2,275,000 | |
Granted | 1,868,750 | |
Forfeited/Canceled | ||
Outstanding ending balance | 4,143,750 | 2,275,000 |
Vested | 2,232,292 | |
Exercisable | 2,232,292 | |
Weighted- Average Exercise Price per Share | ||
Outstanding beginning balance (in dollars per share) | $ 1.06 | |
Granted (in dollars per share) | 5.02 | |
Outstanding ending balance (in dollars per share) | 2.84 | $ 1.06 |
Vested (in dollars per share) | 2.84 | |
Exercisable (in dollars per share) | $ 2.84 | |
Weighted Average Remaining Contractual | ||
Outstanding (in years) | 9 years 1 month 16 days | 9 years 3 months 19 days |
Granted (in years) | 9 years 9 months 7 days | |
Vested (in years) | 8 years 29 days | |
Exercisable (in years) | 8 years 29 days |
Stock-Based Compensation (Det_3
Stock-Based Compensation (Details 2) | 9 Months Ended |
Sep. 30, 2019 | |
Expected dividend yield | 0.00% |
Expected life of stock options (in years) | 10 years |
Minimum [Member] | |
Risk-free interest rate | 2.14% |
Maximum [Member] | |
Risk-free interest rate | 2.94% |
Minimum [Member] | |
Expected stock price volatility | 105.00% |
Maximum [Member] | |
Expected stock price volatility | 180.00% |
Stock-based compensation (Det_4
Stock-based compensation (Details Textual) - 2017 Incentive Stock Plan [Member] - shares | 9 Months Ended | |
Sep. 30, 2019 | Sep. 27, 2017 | |
Authorized stock | 45,000,000 | |
Incentive Stock Options [Member] | ||
Stock options term | 10 years | |
Stock options vesting term | 3 years | |
Description of stock options vesting | Vest in their entirety at the end of three-year periods, time-based share awards where 33.3% of the award vests on each of the three anniversary dates. |
Leases (Details)
Leases (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
Current portion | $ 80,263 | |
Long-term portion | 72,958 | |
Operating lease, liability | $ 153,221 |
Leases (Details Textual)
Leases (Details Textual) | Jan. 15, 2017USD ($)a | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) |
Water lease expense | $ 6,346 | $ 11,724 | $ 22,663 | $ 35,172 | |
Depreciation expense related to lease | $ 20,152 | $ 60,456 | |||
Pueblo CO Board of Water Works [Member] | Agreement One [Member] | |||||
Operating lease term | 10 years | ||||
Lease expiration date | Oct. 31, 2026 | ||||
Operating additional extend year | 10 years | ||||
Non-refundable minimum service fee | $ 15,000 | ||||
Water usage charge | $ 1,063 | ||||
Area of land | a | 30 |
Common Stock (Details)
Common Stock (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Common stock issued | 9,643,854 | 12,596,208 | |
Proceeds from issuance of common stock | $ 13,360,377 | $ 3,030,628 | $ 5,532,852 |
Issuance costs | $ 2,069,603 | $ 409,495 | |
Common stock issued for marketing services, Shares | 15,625 | 306,250 | |
Common stock issued for marketing services, value | $ 16,875 | $ 388,000 | |
Stock warrants exercised, shares | 3,808,165 | ||
Stock warrants exercised | $ 1,510,625 | ||
Description of reverse stock split | The board of directors approved an amendment to the Company’s Certificate of Incorporation, as amended, to effect a 1-for-4 reverse stock split on the issued and outstanding common. | ||
Common Stock [Member] | |||
Stock warrants exercised, shares | 1,290,570 |
Income Tax (Details)
Income Tax (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Federal taxes (credits) at statutory rates | $ (790,000) | $ (219,000) | $ (1,490,000) | $ (494,000) |
State and local taxes, net of Federal benefit | (170,000) | (46,000) | (334,000) | (77,000) |
Change in valuation allowance | 960,000 | 265,000 | 1,824,000 | 571,000 |
Income tax provision |
Income Tax (Details 1)
Income Tax (Details 1) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Deferred Tax Assets; | ||
Net Operating Loss Carryforwards | $ 3,130,000 | $ 1,242,000 |
Stock Compensation | 493,000 | 273,000 |
Accrued Related Party Expenses | 20,000 | 5,000 |
Total Deferred Tax Assets | 3,643,000 | 1,520,000 |
Valuation Allowance | (3,128,000) | (1,304,000) |
Total Deferred Tax Assets net of Valuation Allowance | 515,000 | 216,000 |
Depreciation and Amortization | 315,000 | 200,000 |
Prepaid Expense | 200,000 | 16,000 |
Total Deferred Tax Liabilities | 515,000 | 216,000 |
Net Deferred Tax Assets |
Income Tax (Details Textual)
Income Tax (Details Textual) | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Income Tax (Textual) | |
Net operating loss carry forward | $ 13,130,000 |
Operating loss carry forwards expiration date | Dec. 31, 2038 |
Depreciation and amortization | $ 69,000 |
Concentrations (Details Textual
Concentrations (Details Textual) - Customer | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Sales Revenue, Net [Member] | First Customer [Member] | |||||
Concentration risk, percentage | 10.00% | 33.00% | 21.00% | 41.00% | |
Number of customenr | 3 | 3 | 3 | 2 | |
Sales Revenue, Net [Member] | Second Customer [Member] | |||||
Concentration risk, percentage | 21.00% | 12.00% | |||
Number of customenr | 3 | 2 | |||
Sales Revenue, Net [Member] | Third Customer [Member] | |||||
Concentration risk, percentage | 11.00% | ||||
Number of customenr | 3 | ||||
Accounts Receivable [Member] | First Customer [Member] | |||||
Concentration risk, percentage | 34.00% | 30.00% | |||
Number of customenr | 2 | 2 | |||
Accounts Receivable [Member] | Second Customer [Member] | |||||
Concentration risk, percentage | 30.00% | 24.00% | |||
Number of customenr | 2 | 2 |
Going Concern (Details)
Going Concern (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||||
Sep. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Going Concern (Textual) | ||||||||
Accumulated deficit | $ (14,682,058) | $ (14,682,058) | $ (7,927,000) | |||||
Net loss | $ (3,595,119) | $ (1,826,924) | $ (996,282) | $ (1,333,015) | $ (681,429) | $ (6,755,058) | $ (1,677,711) |
Related Party (Details)
Related Party (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 13 Months Ended | 22 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Sep. 30, 2018 | Mar. 31, 2019 | |
Related Party (Textual) | |||||||
Payment to related party | $ 57,500 | $ 78,025 | $ 262,924 | $ 84,756 | |||
Notes payable - related parties | 262,924 | ||||||
Accrued interest | $ 18,828 | 18,828 | $ 17,949 | ||||
Related party legal expenses | $ 132,500 | $ 179,245 | |||||
Shareholders | |||||||
Related Party (Textual) | |||||||
Due date | Jun. 30, 2019 | ||||||
Maximum [Member] | Shareholders | |||||||
Related Party (Textual) | |||||||
Interest rate | 3.00% | ||||||
Minimum [Member] | Shareholders | |||||||
Related Party (Textual) | |||||||
Interest rate | 2.00% |