Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 15, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2022 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2022 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 000-26108 | |
Entity Registrant Name | AMERICAN CANNABIS COMPANY, INC. | |
Entity Central Index Key | 0000945617 | |
Entity Tax Identification Number | 90-1116625 | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Address Line One | 200 Union Street | |
Entity Address, Address Line Two | Ste. 200 | |
Entity Address, Address Line Three | Lakewood | |
Entity Address, City or Town | Denver | |
Entity Address, State or Province | CO | |
Entity Address, Postal Zip Code | 80228 | |
City Area Code | 303 | |
Local Phone Number | 974-4770 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 85,727,938 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Current Assets | ||
Cash and Equivalents | $ 191,516 | $ 670,423 |
Accounts Receivable, Net | 259,926 | 11,316 |
Deposits | 9,595 | 2,895 |
Inventory | 352,494 | 278,608 |
Prepaid Expenses and Other Current Assets | 129,675 | 51,353 |
Total Current Assets | 943,205 | 1,014,595 |
Property and Equipment - Net | 442,901 | 375,832 |
Other Assets | ||
Intangible Assets, net amortization | 686,242 | 745,937 |
Goodwill | 1,985,113 | 1,985,113 |
Right of Use Assets - Operating Leases, net | 211,913 | 95,722 |
Long Term Deposits | 6,000 | 6,000 |
Total Other Assets | 2,889,268 | 2,832,772 |
TOTAL ASSETS | 4,275,374 | 4,223,199 |
Current Liabilities | ||
Accounts Payable | 453,738 | 242,679 |
Advances from Clients | 1,390,972 | 111,892 |
Accrued and Other Current Liabilities | 94,085 | 161,718 |
Stock payable | 117,479 | 42,207 |
Right of Use Liabilities, current | 211,913 | 95,722 |
Litigation Settlement, current | 106,250 | 175,000 |
Note payables, current | 550,000 | 1,100,000 |
Total Current Liabilities | 2,924,436 | 1,929,218 |
LONG TERM LIABILITIES | ||
Litigation Settlement | 93,750 | 175,000 |
Total Long Term Liabilities | 93,750 | 175,000 |
TOTAL LIABILITIES | 3,018,186 | 2,104,218 |
Shareholders’ Equity | ||
Preferred Stock, $0.01 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | ||
Common stock, $0.00001 par value; 500,000,000 shares authorized; 85,727,938 and 70,727,938 shares issued and outstanding at September 30, 2022 and December 31, 2021 , respectively | 856 | 819 |
Additional paid-in capital | 11,794,476 | 11,565,679 |
Accumulated deficit | (10,538,144) | (9,447,517) |
Total Shareholders’ Equity | 1,257,188 | 2,118,981 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ 4,275,374 | $ 4,223,199 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares | Sep. 30, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Preferred stock, Par Value | $ 0.01 | $ 0.01 |
Preferred Stock, Shares Authorized | 5,000,000 | 5,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common stock, Par Value | $ 0.00001 | $ 0.00001 |
Common Stock, Shares Authorized | 500,000,000 | 500,000,000 |
Common Stock, Shares Issued | 85,727,938 | 70,727,938 |
Common Stock, Shares Outstanding | 85,727,938 | 70,727,938 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenues | ||||
Consulting Services | $ 66,824 | $ 53,277 | $ 308,872 | $ 254,669 |
Product & Equipment | 1,866,725 | 292,709 | 6,540,558 | 730,198 |
Cannabis Products | 190,067 | 406,967 | 638,316 | 714,043 |
Total Revenues | 2,123,616 | 752,953 | 7,487,746 | 1,698,910 |
Cost of Revenues | ||||
Cost of Consulting Services | 19,500 | 9,473 | 67,422 | 36,179 |
Cost of Products and Equipment | 1,664,235 | 182,795 | 5,628,432 | 513,051 |
Cost of Cannabis Products | 180,701 | 231,964 | 724,529 | 379,753 |
Total Cost of Revenues | 1,864,436 | 424,232 | 6,420,383 | 928,983 |
Gross Profit | 259,180 | 328,721 | 1,067,363 | 769,927 |
Operating Expenses | ||||
General and Administrative | 617,270 | 539,340 | 1,951,008 | 1,428,092 |
Selling and Marketing | 64,017 | 42,455 | 165,544 | 150,301 |
Stock Based Compensation Expense | 56,170 | 8,318 | 121,479 | 37,008 |
Total Operating Expenses | 737,458 | 590,113 | 2,238,032 | 1,615,401 |
Loss from Operations | (478,277) | (261,392) | (1,170,668) | (845,474) |
Other Income (Expense) | ||||
Interest (expense) | 77,381 | (28,027) | 32,024 | (46,837) |
Debt Forgiveness | 130,186 | 240,100 | ||
Other income | 3,247 | 938 | 48,016 | 3,367 |
Total Other (Expense) Income | 80,627 | 103,097 | 80,040 | 196,630 |
Net Loss | (397,650) | (158,295) | (1,090,628) | (648,844) |
Income Tax Expense | ||||
NET LOSS | $ (397,650) | $ (158,295) | $ (1,090,628) | $ (648,844) |
Basic net loss per common share | $ 0 | $ 0 | $ (0.01) | $ (0.01) |
Basic and diluted weighted average common shares outstanding | 85,727,938 | 8,052,395 | 84,795,246 | 77,584,074 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Balance, December 31, 2021 at Dec. 31, 2020 | $ 707 | $ 9,634,748 | $ (8,008,268) | $ 1,627,187 |
Beginning Balance, shares at Dec. 31, 2020 | 70,727,938 | |||
Stock issued for cash | $ 63 | 1,110,414 | 1,110,477 | |
Stock issued for cash, Shares | 6,300,000 | |||
Net Loss | (648,844) | (648,844) | ||
Stock issued for asset acquistion | $ 30 | 689,970 | 690,000 | |
Stock issued for asset acquistion, shares | 3,000,000 | |||
Stock issued for cashless exercise | $ 1 | (1) | ||
Stock issued for cashless exercise, Shares | 125,000 | |||
Balance, September 30, 2022 at Sep. 30, 2021 | $ 801 | 11,435,131 | (8,657,112) | 2,778,820 |
Ending Balance, shares at Sep. 30, 2021 | 80,152,938 | |||
Balance, December 31, 2021 at Jun. 30, 2021 | $ 798 | 11,408,199 | (8,498,817) | 2,910,180 |
Beginning Balance, shares at Jun. 30, 2021 | 79,902,938 | |||
Stock issued for cash | $ 3 | 26,932 | 26,935 | |
Stock issued for cash, Shares | 250,000 | |||
Net Loss | (158,295) | (158,295) | ||
Balance, September 30, 2022 at Sep. 30, 2021 | $ 801 | 11,435,131 | (8,657,112) | 2,778,820 |
Ending Balance, shares at Sep. 30, 2021 | 80,152,938 | |||
Balance, December 31, 2021 at Dec. 31, 2021 | $ 819 | 11,565,679 | (9,447,517) | 2,118,981 |
Beginning Balance, shares at Dec. 31, 2021 | 81,902,938 | |||
Stock issued for cash | $ 25 | 117,603 | 117,628 | |
Stock issued for cash, Shares | 2,500,000 | |||
Net Loss | (1,090,628) | (1,090,628) | ||
Stock based compensation to employees | $ 3 | $ 46,204 | $ 46,207 | |
Stock based compensation to employees, Shares | 325,000 | |||
Stock based compensation to third party | 10 | 64,990 | 65,000 | |
Stock based compensation to third party, Shares | 1,000,000 | |||
Balance, September 30, 2022 at Sep. 30, 2022 | $ 857 | $ 11,794,476 | $ (10,538,145) | $ 1,257,188 |
Ending Balance, shares at Sep. 30, 2022 | 85,727,938 | |||
Balance, December 31, 2021 at Jun. 30, 2022 | $ 857 | 11,794,476 | (10,140,495) | 1,654,838 |
Beginning Balance, shares at Jun. 30, 2022 | 85,727,938 | |||
Net Loss | (397,650) | (397,650) | ||
Balance, September 30, 2022 at Sep. 30, 2022 | $ 857 | $ 11,794,476 | $ (10,538,145) | $ 1,257,188 |
Ending Balance, shares at Sep. 30, 2022 | 85,727,938 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (1,090,628) | $ (648,844) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 113,362 | 77,810 |
Stock-based compensation to employees | 65,306 | 37,008 |
Stock-based compensation to third party | 29,792 | |
Debt Forgiveness | (240,100) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (248,610) | (185,151) |
Inventory | (73,886) | (64,930) |
Prepaid expenses and other current assets | (55,232) | (30,187) |
Right to Use Lease Asset | (116,191) | (125,889) |
Long Term Deposits | ||
Accounts Payable | 211,059 | 160,608 |
Advances from Clients | 1,279,080 | 197,057 |
Accrued and other current liabilities | (11,463) | 46,945 |
Litigation Settlement Liability | (150,000) | |
Operating Lease Liability | 116,191 | 125,889 |
Net Cash Provied by (Used In) Operating Activities | 68,780 | (649,784) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (105,011) | (324,012) |
Acquisition of Assets | (1,100,000) | |
Intangible assets | (10,305) | (5,943) |
Net Cash Used in Investing Activities | (115,316) | (1,429,955) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from sale of common stock | 117,629 | 1,110,477 |
Proceeds from note payable | 130,186 | |
Payment of note payable | (550,000) | |
Net Cash (Used) Provided by Financing Activities | (432,371) | 1,240,663 |
NET INCREASE IN CASH | (478,907) | (839,076) |
CASH AT BEGINNING OF PERIOD | 670,423 | 1,723,132 |
CASH AT END OF PERIOD | 191,516 | 884,056 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Cash paid for income taxes | ||
Cash paid for interest | ||
Stock Based Compensation Third Party | 65,000 | |
Stock Issued for Receivables | 690,000 | |
Stock Issued for Acquisition | $ 1,100,000 |
Principles of Consolidation
Principles of Consolidation | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Note 1. Principles of Consolidation The unaudited condensed consolidated financial statements for the nine and three months ended September 30, 2022 and 2021 include the accounts of American Cannabis Company, Inc. and its wholly owned subsidiary, Hollister & Blacksmith, Inc., doing business as American Cannabis Company, Inc. Intercompany accounts and transactions have been eliminated. |
Description of Business
Description of Business | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Description of Business | Note 2. Description of Business American Cannabis Company, Inc. and its wholly owned subsidiary Company, Hollister & Blacksmith, Inc., doing business as American Cannabis Consulting (“American Cannabis Consulting”), (collectively “the “Company”) are based in Denver, Colorado and operate a fully-integrated business model that features end-to-end solutions for businesses operating in the regulated cannabis industry in states and countries where cannabis is regulated and/or has been de-criminalized for medical use and/or legalized for recreational use. We provide advisory and consulting services specific to this industry, design industry-specific products and facilities, and sell both exclusive and non-exclusive customer products commonly used in the industry. On April 30, 2021, the Company closed its acquisition of the assets of Medihemp, LLC, and its wholly owned subsidiary SLAM Enterprises, LLC, and Medical Cannabis Caregivers, Inc., each an entity organized and operating under the laws of the State of Colorado, and all doing business as “Naturaleaf” in the medicinal cannabis industry in Colorado. Naturaleaf agreed to sell or assign to the Company the following assets: 1. Three Medical Marijuana (MMC) Store Licenses; 2. One Marijuana Infused Product Licenses (MIPS); and, 3. One Option Premises Cultivation License (OPC); and, 4. Related real property assets, goodwill, and related business assets. The aggregate consideration paid for the Assets was $2,890,000, which consisted of (i) a cash payment of $1,100,000, (ii) the issuance of a promissory note to the owner of Naturaleaf in the principal amount of $1,100,000 (the “Seller Note”), and (iii) the issuance of 3,000,000 shares of the Company’s restricted common stock valued at $0.23 per share or $690,000. See Note 4. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies Basis of Accounting The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include normal recurring adjustments that are necessary for a fair presentation of the results for the periods presented. Unaudited Interim Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year. Going Concern Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern Our assessment included the preparation of a detailed cash forecast that included all projected cash inflows and outflows. During 2021, we secured additional cash financings through the sales and issuances of our common stock through. However, we continue to focus on growing our revenues. Accordingly, operating expenditures may exceed the revenue we expect to receive for the foreseeable future. We, also, have a history of operating losses, negative operating cash flows, and negative working capital, and expect these trends to continue into the foreseeable future. As of the date of this Quarterly Report on Form 10-q, while we believe we have adequate capital resources to complete our near-term operations, there is no guarantee that such capital resources will be sufficient until such time we reach profitability. We may access capital markets to fund strategic acquisitions or ongoing operations on terms we believe are favorable. The timing and amount of capital that may be raised is dependent on market conditions and the terms and conditions upon which investors would require to provide such capital. We may utilize debt or sell newly issued equity securities through public or private transactions. There can be no assurance that we will be able to obtain additional funding on satisfactory terms or at all. In addition, no assurance can be given that any such financing, if obtained, will be adequate to meet our capital needs and support our growth. If additional funding cannot be obtained on a timely basis and on satisfactory terms, our operations would be materially negatively impacted; however, we have been successful in accessing capital markets in the past, and we are confident in our ability to access capital markets again, if needed. The Company has an accumulated deficit, recurring losses, and expects continuing future losses. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s primary source of operating funds during the nine months ended September 30, 2022 and the year ended December 31, 2021 has been from funds generated from proceeds from the sale of common stock and operations. The Company has experienced net losses from operations since its inception but expects these conditions to improve in 2022 and beyond as it develops its business model. The Company has an accumulated deficit at September 30, 2022 and requires additional financing to fund future operations. The Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern. The accompanying unaudited consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Use of Estimates in Financial Reporting The preparation of unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities, and disclosures of contingent assets and liabilities, as of the date of the condensed consolidated financial statements during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period in which they are deemed to be necessary. Significant estimates made in the accompanying consolidated financial statements include but are not limited to following those related to revenue recognition, allowance for doubtful accounts and unbilled services, lives and recoverability of equipment and other long-lived assets, the allocation of the asset purchase price, contingencies, and litigation. The Company is subject to uncertainties, such as the impact of future events, economic, environmental, and political factors, and changes in the business climate; therefore, actual results may differ from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities, the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company’s consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the unaudited consolidated financial statements. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution. Cash balances may exceed federally insured limits. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. At December 31, 2021, the Company had cash balances in excess of FDIC insured limits of $ 250,000 Accounts Receivable Accounts receivable are recorded at the net value of face amount less an allowance for doubtful accounts. The Company evaluates its accounts receivable periodically based on specific identification of any accounts receivable for which the Company deems the net realizable value to be less than the gross amount of accounts receivable recorded; in these cases, an allowance for doubtful accounts is established for those balances. In determining its need for an allowance for doubtful accounts, the Company considers historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, the Company’s actual experience may vary from its estimates. If the financial condition of its clients were to deteriorate, resulting in their inability or unwillingness to pay the Company’s fees, it may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent that the Company receives retainers from its clients prior to performing significant services. The allowance for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client’s inability to make required payments on accounts receivables, the provision is recorded in operating expenses. As of September 30, 2022, and December 31, 2021, the Company’s allowance for doubtful accounts was $ 69,415 69,415 Deposits Deposits is comprised of advance payments made to third parties, for rent, utilities, and inventory for which the Company has not yet taken title. When the Company takes title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon sale. Inventory Inventory is comprised of products and equipment owned by the Company to be sold to end-customers. The Company’s inventory as it relates to its soil products and equipment is valued at cost using the first-in first-out and specific identification methods, unless and until the market value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to net realizable value. As of September 30, 2022 and December 31, 2021, market values of all the Company’s inventory were greater than cost, and accordingly, no such valuation allowance was recognized. Inventory also consists of pre-harvested cannabis plants and related end products. Inventory is valued at the lower of cost or net realizable value. Costs of inventory purchased from third party vendors for retail sales at dispensaries is determined using the first in first out method. Costs are capitalized to cultivated inventory until substantially ready for sale. Costs include direct and indirect labor, consumables, materials, packaging supplies, utilities, facilities costs, quality and testing costs, production related depreciation and other overhead costs. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items. The reserve estimate for excess and obsolete inventory is based on expected future use and on an assessment of market conditions. At September 30, 2022, the Company’s management determined that a reserve for excess and obsolete inventory was not necessary Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets are primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. Significant Clients and Customers During the nine months ended September 30, 2022, three customers accounted for 42.5 During the nine months ended September 30, 2021, three customers accounted for 42.5 Property and Equipment, net Property and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Costs associated with in progress construction are capitalized as incurred and depreciation is consummated once the underlying asset is placed into service. Property and equipment are reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” The Company did not capitalize any interest as of September 30, 2022 and December 31, 2021. Goodwill Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. The Company accounts for goodwill under ASC Topic 350, Intangibles-Goodwill and Other 1,985,113 The Company does not have any other indefinite-lived intangible assets. In accordance with FASB ASC 350, “Intangibles – Goodwill and Other,” we perform goodwill impairment testing at least annually, unless indicators of impairment exist in interim periods. The impairment test for goodwill uses a two-step approach. Step one compares the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying value exceeds the estimated fair value, step two must be performed. Step two compares the carrying value of the reporting unit to the fair value of all of the assets and liabilities of the reporting unit (including any unrecognized intangibles) as if the reporting unit was acquired in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized in an amount equal to the excess. Intangible Assets, net Definite life intangible assets at September 30, 2022 include licenses and brand names recognized as part of the Naturaleaf Acquisition. Intangible assets are record at cost. Licenses and brand names represent the estimated fair value of these items at the date of acquisition, April 30, 2021. Intangible assets are amortized on a straight-line basis over their estimated useful life. Licenses are assigned a life of 15 5 70,000 Accounting for the Impairment of Long-Lived Assets The Company evaluates long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending upon the nature of the assets. The Company had no Fair Value Measurements Fair value is defined 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. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows: 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, deposits, accounts receivable, accounts payables, advances from clients, accrued expense, and other current liabilities. The carrying values of these financial instruments approximate their fair value due to their short maturities. Revenue Recognition We have adopted the following accounting principles related to revenue recognition: (a) FASB ASU 2016-12 “ Revenue from Contracts with Customers (Topic 606). Our service and product revenues arise from contracts with customers. Service revenue includes Operations Divisions consulting revenue. Product revenue includes (a) Operations Division product sales (So-Hum Living Soils), (b) Equipment sales division, (c) Cannabis sales division. The majority of our revenue is derived from distinct performance obligations, such as time spent delivering a service or the delivery of a specific product. We may also enter into contracts with customers that identify a single, or few, distinct performance obligations, but that also have non-distinct, underlying performance obligations. These contracts are typically fulfilled within one to six months. Only an insignificant portion of our revenue would be assessed for allocation between distinct (contractual) performance obligations and non-distinct deliverables between reporting periods and, accordingly, we do not record a contract asset for completed, non-distinct performance obligations prior to invoicing the customer. We recognize revenue in accordance with ASC 606 using the following 5 steps to identify revenues: (1) Identify the contract with the Customer. (2) Identify the performance obligations in the contract. (3) Determination of the transaction price. (4) Allocation of the transaction price to the performance obligations in the contract (5) Recognize Revenue when (or as) the entity satisfies a performance obligation. Advances from Clients deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Where possible, we obtain retainers to lessen our risk of non-payment by our customers. Advances from Clients deposits are recognized as revenue as we meet specified performance obligations as detailed in the contract. Product and Equipment Sales Revenue from product and equipment sales, including delivery fees, is recognized when an order has been obtained from the customer, the price is fixed and determinable when the order is placed, the product is delivered, title has transferred, and collectability is reasonably assured. Generally, our suppliers’ drop-ship orders to our clients with destination terms. The Company realizes revenue upon delivery to the customer. Given the facts that (1) our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in our product sales contracts is fixed and determinable at the time the customer places the order, we are not of the opinion that our product sales indicate or involve any significant financing that would materially change the amount of revenue recognized under the contract, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606. During the nine months ended September 30, 2022 and 2021, sales returns were $ 0 Consulting Services We also generate revenues from professional services consulting agreements. These arrangements are generally entered into: (1) on an hourly basis for a fixed fee; or (2) on a contingent fee basis. Generally, we require a complete or partial prepayment or retainer prior to performing services. For hourly based fixed fee service contracts, we utilize and rely upon the proportional performance method, which recognizes revenue as services are completed. Under this method, in order to determine the amount of revenue to be recognized, we calculate the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable. We segregate upon entry into a contract any advances or retainers received from clients for fixed fee hourly services into a separate “Advances from Clients” account, and only recognize revenues as we incur and charge billable hours, and then deposit the funds earned into our operating account. Because our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing, that would materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing component under FASB ASC Topic 606. Occasionally, our fixed-fee hourly engagements are recognized under the completed performance method. Some fixed fee arrangements are for completion of a final deliverable or act which is significant to the arrangement. These engagements do not generally exceed a one-year term. If the performance is for a final deliverable or act, we recognize revenue under the completed performance method, in which revenue is recognized once the final act or deliverable is performed or delivered for a fixed fee. Revenue recognition is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable. FASB ASC Topic 606 provides a practical expedient to disregard the effects of a financing component if the period between payment and performance is one year or less. As our fixed fee hourly engagements do not exceed one year, no significant customer-based financing is implicated under FASB ASC Topic 606. During the nine months ended September 30, 2022 and 2021, we incurred no losses from fixed fee engagements that terminate prior to completion. We believe if an engagement terminates prior to completion, we can recover the costs incurred related to the services provided. We primarily enter into arrangements for which fixed and determinable revenues are contingent and agreed upon achieving a pre-determined deliverable or future outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability is reasonably assured. Our arrangements with clients may include terms to deliver multiple services or deliverables. These contracts specifically identify the services to be provided with the corresponding deliverable. The value for each deliverable is determined based on the prices charged when each element is sold separately or by other vendor-specific objective evidence (“VSOE”) or estimates of stand-alone selling prices. Revenues are recognized in accordance with our accounting policies for the elements as described above (see Product Sales). The elements qualify for separation when the deliverables have value on a stand-alone basis and the value of the separate elements can be established by VSOE or an estimated selling price. While assigning values and identifying separate elements requires judgment, selling prices of the separate elements are generally readily identifiable as fixed and determinable as we also sell those elements individually outside of a multiple services engagement. Contracts with multiple elements typically incorporate a fixed-fee or hourly pricing structure. Arrangements are typically terminable by either party upon sufficient notice or do not include provisions for refunds relating to services provided. Reimbursable expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component of revenues. Typically, an equivalent amount of reimbursable expenses is included in total direct client service costs. Reimbursable expenses related to time and materials and fixed-fee engagements are recognized as revenue in the period in which the expense is incurred and collectability is reasonably assured. Taxes collected from customers and remitted to governmental authorities are recognized as liabilities and paid to the appropriate government entities. Cannabis Sales Revenues consist of the retail sale of cannabis and related products. Revenue is recognized at the point of sale for retail customers. Payment is typically due upon transferring the goods to the customer or within a specified time period permitted under the Company’s credit policy. Sales discounts were not material during the nine months ended September 30 2022. Loyalty Reward Program The Company offers a loyalty reward program to its dispensary customers that provides a discount on purchases based upon the total amount of a purchase, at the time of purchase. Management has determined that as there is no separate performance obligation to the reward program, i.e., the accumulation and redemption of points, and as such the Company recognizes the revenue at the time of purchase. Costs of Revenues The Company’s policy is to recognize costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenue includes the costs directly attributable to revenue recognition and includes compensation and fees for services, travel and other expenses for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred. Advertising and Promotion Costs Advertising and Promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the nine months ended September 30, 2022 and 2021 these expenses were $ 98,414 33,238 Shipping and Handling Costs For product and equipment sales, shipping and handling costs are included as a component of cost of revenues. Stock-Based Compensation Restricted shares are awarded to employees and entitle the grantee to receive shares of common stock at the end of the established vesting period. The fair value of the grant is based on the stock price on the date of grant. We recognize related compensation costs on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant date. During the nine months ended September 30, 2022 and 2021, stock-based compensation expense for restricted shares for Company employees was $ 65,310 28,690 Research and Development As a component of our equipment and supplies offerings, from time-to-time we design and develop our own proprietary products to meet demand in markets where current offerings are insufficient. These products include, but are not limited to: The Satchel™, Cultivation Cube™, So-Hum Living Soils™ and the HDCS™. Costs associated with the development of new products are expensed as incurred as research and development operating expenses. During the nine months ended September 30, 2022 and 2021, our research and development costs were de minimis. Income Taxes The Company’s corporate status changed from an S Corporation, which it had been since inception, to a C Corporation during the year ended December 31, 2014. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, S Corporations are not subject to corporate income taxes; instead, the owners are taxed on their proportionate share of the S Corporation’s taxable income. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the year ended December 31, 2021, due to cumulative losses since our corporate status changed, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero. As of September 30, 2022 and December 31, 2021, we had no liabilities related to federal or state income taxes and the carrying value of our deferred tax asset was zero. Due to its cannabis operations, the Company is subject to the limitations of Internal Revenue Code (“ IRC Net Loss Per Common Share The Company reports net loss per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share is equal to basic earnings per share because there are no potential dilatable instruments that would have an anti-dilutive effect on earnings. Diluted net loss per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion, exercise or contingent exercise of securities since that would have an anti-dilutive effect on earnings. Related Party Transactions The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, 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. Impact of COVID-19 Pandemic On March 11, 2020 , 19” 19 In response to state and local measures and for protection of both employees, the Company made required changes to operations, which did not have a material impact upon operations or the financial condition of the Company. While the state and local governments have eased restrictions on restrictions and activities, it is possible that a resurgence in COVID- 19 Recent Accounting Pronouncements The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements. |
Naturaleaf Asset Acquisition
Naturaleaf Asset Acquisition | 9 Months Ended |
Sep. 30, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
Naturaleaf Asset Acquisition | Note 4. Naturaleaf Asset Acquisition On April 30, 2021, the Company closed its acquisition of the assets of Medihemp, LLC, and its wholly owned subsidiary SLAM Enterprises, LLC, and Medical Cannabis Caregivers, Inc., each an entity organized and operating under the laws of the State of Colorado, and all doing business as “Naturaleaf” in the medicinal cannabis industry in Colorado. Naturaleaf agreed to sell or assign to the Company the following assets: 1. Three Medical Marijuana (MMC) Store Licenses; 2. One Marijuana Infused Product Licenses (MIPS); and, 3. One Option Premises Cultivation License (OPC); and, 4. Related real property assets, goodwill, and related business assets. The aggregate consideration paid for the Assets was $2,890,000, which consisted of (i) a cash payment of $1,100,000, (ii) the issuance of a promissory note to the owner of Naturaleaf in the principal amount of $1,100,000 (the “Seller Note”), and (iii) the issuance of 3,000,000 shares of the Company’s restricted common stock valued at $0.23 per share or $690,000. The asset acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations As part of the acquisition, the owners of Naturaleaf retained the outstanding cash balance on the date of the acquisition and had agreed to the payment of all outstanding accounts payables and related party advances. The Company has performed a valuation analysis of the fair market value of Naturaleaf’s assets. The following table summarizes the allocation of the preliminary purchase price as of the acquisition date: Schedule of Purchase price as of the acquisition Cash $ — Inventory 72,172 Property, plant and equipment 26,715 Long Term Deposits 6,000 Identifiable intangible assets 800,000 Goodwill 1,985,113 Accounts payable — Total consideration $ 2,890,000 Goodwill from the acquisition primarily relates to the future economic benefits arising from the assets acquired, the assembled workforce acquired and synergies between the cultivation and retail operations and is consistent with the Company’s stated intentions and strategy. Other assets include inventory and fixed assets. The fair value of Naturaleaf’s identifiable intangible assets was $800,000 at April 30, 2021, consisting of $500,000 in licenses and $300,000 in brand names. During the nine months ended September 30, 2022, the Company recognized an amortization expense of $70,000. |
Accounts Receivable and Advance
Accounts Receivable and Advance from Clients | 9 Months Ended |
Sep. 30, 2022 | |
Receivables [Abstract] | |
Accounts Receivable and Advance from Clients | Note 5. Accounts Receivable and Advance from Clients Accounts receivable was comprised of the following: Schedule of Accounts Receivable September 30, December 31, Accounts Receivable – Trade $ 329,341 $ 93,856 Less: Allowance for Doubtful Accounts (69,415 ) (82,540 ) Accounts Receivable, net $ 259,926 $ 11,316 The Company had bad debt expense during the nine months ended September 30, 2022 and 2021 of $ 0 Our Advances from Clients had the following activity: Schedule of Advances from Clients September 30, December 31, Beginning Balance $ 111,892 $ 88,843 Additional deposits received 6,207,877 404,143 Less: Deposits recognized as revenue (4,928,797 ) (381,094 ) Ending Balance $ 1,390,972 $ 111,892 |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2022 | |
Inventory Disclosure [Abstract] | |
Inventory | Note 6. Inventory Inventory consisted of the following: Schedule of Inventory September 30, December 31, Raw Materials - Soil $ 68,370 $ 60,900 Work In Process - Cultivation 239,061 136,266 Finished Goods - Soil 42,101 58,594 Finished Goods - Cannabis Retail 2,962 22,848 Total Inventory $ 352,494 $ 278,608 |
Property and Equipment, net
Property and Equipment, net | 9 Months Ended |
Sep. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, net | Note 7. Property and Equipment, net Property and equipment, net, was comprised of the following: Schedule of Property and Equipment, Net September 30, December 31, Office equipment $ 48,344 $ 39,574 Software 13,204 13,204 Furniture and Fixtures 2,328 2,328 Machinery and Equipment 478,407 376,745 Property and equipment, gross $ 542,283 $ 431,851 Less: Accumulated Depreciation (99,382 ) (56,019 ) Property and equipment, net $ 442,901 $ 375,832 During the nine months ended September 30, 2022, the Company purchased $ 8,770 101,662 |
Intangibles Assets, Net
Intangibles Assets, Net | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangibles Assets, Net | Note 8. Intangibles Assets, Net A significant amount of the Company’s current identified intangible assets were assumed upon consummation of the Naturaleaf acquisition on April 30, 2021. The Company has incurred capitalizable costs in connection with patent applications that it started work on. Identified intangible assets consisted of the following at the dates indicated below: Schedule of Finite-Lived Intangible Assets September 30, 2022 Gross Accumulated Carrying Estimated Licenses $ 500,000 ($ 47,219 ) $ 452,781 15 Brand $ 300,000 ($ 85,002 ) $ 214,998 5 Patent Applications $ 18,463 — $ 18,463 — Total intangible assets, net $ 818,462 ($ 132,221 ) $ 686,242 December 31, 2021 Gross Accumulated Carrying Estimated Licenses $ 500,000 ($ 22,223 ) $ 477,777 15 Brand $ 300,000 ($ 40,000 ) $ 260,000 5 Patent Applications $ 8,160 — $ 8,160 — Total intangible assets, net $ 808,160 ($ 62,223 ) $ 745,937 The weighted-average amortization period for intangible assets we acquired during the year ended December 31, 2021 was approximately 11.47 years. There were no intangible assets acquired during the nine months ended September 30, 2022. Amortization expense for intangible assets was $ 70,000 0 Schedule of estimated amortization expense Year Ended December 31, 2022 $ 46,666 2023 $ 93,333 2024 $ 93,333 2025 $ 93,333 2026 $ 53,333 Thereafter $ 311,113 TOTAL $ 691,111 |
Accrued and Other Current Liabi
Accrued and Other Current Liabilities | 9 Months Ended |
Sep. 30, 2022 | |
Payables and Accruals [Abstract] | |
Accrued and Other Current Liabilities | Note 9. Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following: Schedule of Accrued and Other Current Liabilities September 30, December 31, Accrued Interest $ 39,106 $ 74,137 Accrued Payroll 14,335 18,428 Sales Tax Payable 4,959 592 Other Accrued Expenses & Payables 35,685 68,561 Accrued and other current liabilities $ 94,085 $ 161,718 |
Operating Lease Right-of-Use As
Operating Lease Right-of-Use Asset/Operating Lease Liability | 9 Months Ended |
Sep. 30, 2022 | |
Operating Lease Right-of-use Assetoperating Lease Liability | |
Operating Lease Right-of-Use Asset/Operating Lease Liability | Note 10. Operating Lease Right-of-Use Asset/Operating Lease Liability The Company leases property under operating leases. Property leases include retail and cultivation space with fixed rent payments and lease terms ranging from one to two years. The Company is obligated to pay the lessor for maintenance, real estate taxes, insurance and other operating expenses on certain property leases. These expenses are variable and are not included in the measurement of the lease asset or lease liability. These expenses are recognized as variable rent expense when incurred. The Company’s lease portfolio consists of the following. Schedule of lease Lease Name Asset Type Start Date Expiration Date Monthly Rent Durango Lease Real Property 5/1/2021 5/31/2022 $ 10,200 Lehman Lease Real Property 5/1/2021 12/31/2022 $ 2,732 Palmer Lease Real Property 7/1/2022 6/30/2023 $ 5,000 Greenspace Membership Real Property 1/1/2022 6/30/2022 $ 1,000 Tejon Lease Real Property 5/1/2022 4/30/2027 $ 3,875 On June 1, 2021 Company entered into an 8 1/2 month lease with Greenspace, LLC for an amount of $1,159 per month. In January 2022, we determined under ASC 842, due to the short-term nature of the lease that the lease membership agreement met the criteria of ASC 842-20-25-2 and as such it was not necessary to capitalize the lease and rent will be recognized on a monthly straight-line basis. The membership agreement expired on June 30, 2022. On May 1, 2020, as part of the Naturaleaf Acquisition, leases for grow facilities and dispensaries were assigned to the Company. These leases were determined to be operating leases under ASC 842 and such leases was capitalized. It was determined that the Tejon lease, due to the short-term nature of the lease met the criteria of ASC 842-20-25-2 and as such it was not necessary to capitalize the lease and rent would be recognized on a straight-line basis. On April 30, 2022, the Tejon Lease expired and the Company entered into a new lease for the space with a 5 year term. The new lease was determined to be an operating lease under ASC 842 and as such the lease has been capitalized. On May 31, 2022, the Durango Lease expired. The Company has not entered into a new lease with the landlord and has lapsed into month-to-month payments, while it looks for a new location for this facility in Colorado Springs, CO. It was determined that due to the short-term nature of the lease met the criteria of ASC 842-20-25-2 and as such it was not necessary to capitalize the lease and rent would be recognized on a straight-line basis. The Company records the lease asset and lease liability at the present value of lease payments over the lease term. The leases typically do not provide an implicit rate; therefore, the Company uses its estimated incremental borrowing rate at the time of lease commencement to discount the present value of lease payments. The Company’s discount rate for operating leases at September 30, 2022 was 12.5%. Leases often include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. Lease expense is recognized on a straight-line basis over the lease term to the extent that collection is considered probable. As a result, the Company been recognizing rents as they become payable. As of September 30, 2022, the aggregate remaining annual lease payments of operating leases liabilities are as follows: Schedule of Operating leases liabilities Operating 2022 $ 40,709 Thereafter 143,429 Total 184,138 Less: amount representing interest (57,928 ) Present value of future minimum lease payments 126,210 Less: current obligations under leases 40,709 Long-term lease obligations $ 85,501 As of September 30, 2022, the aggregate remaining minimal annual lease payments under these operating leases were as follows: Schedule of remaining minimal annual lease payments 2022 62,384 2023 77,200 2024 49,300 2025 51,400 2026 53,500 2027 36,600 Total $ 330,384 |
Loans Payable
Loans Payable | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Loans Payable | Note 11. Loans Payable Naturaleaf Seller Note As part of the Naturaleaf Acquisition, the Company issued a promissory note to the owner of Naturaleaf in the principal amount of $1,100,000 (the “Seller Note”). The note originally had a term of 1 year with a due date of April 30, 2022 and did not require any payments prior to the due date. The note had an annual interest rate of 10%. On April 30, 2022, the Company entered into an Amendment to the Asset Purchase Agreement to amend the Seller Note as follows, that the due date of the Note would be extended to April 30, 2023. That interest will accrue on the outstanding principal at a rate of 12.5%. In addition, the Company agreed to pay all accrued interest at April 30, 2021 and make a principal payment of $500,000. On April 29, 2022, principal in the amount of $550,000 and accrued interest of $110,000 were paid. At September 30, 2022, principal in the amount of $550,000 was outstanding and interest of $9,493 had been accrued. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 12. Related Party Transactions The Company has a related party entity, Tabular Investments, LLC (“Tabular”) which was set to assign the Company’s interest in various equity partnership. The sole member of Tabular is Tad Mailander, the Company’s outside legal counsel and Director. The Company has valued all of its equity partnership investments at $0. Neither our direct equity ownership in, nor our assignments of equity to Tabular Investments, LLC are, or are reasonably likely to allow for, substantive terms, transactions, and arrangements, whether contractual or not contractual, that will have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We have no direct or indirect majority influence or control over any entity in which we have a direct equity interest or equity interests assigned to Tabular. We do not have any direct or indirect interest in, and do not control Tabular. We have not absorbed losses from either our direct equity interests or assignments to Tabular, and we have provided no subordinated financial support to any project. |
Stock Based Compensation
Stock Based Compensation | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Stock Based Compensation | Note 13. Stock Based Compensation During the nine months ended September 30, 2022, the Company issued stock-based compensation for employees and service providers pursuant to its 2015 Equity Incentive Plan. Restricted Shares Compensation From time to time, the Company grants certain employees restricted shares of its common stock to provide further compensation in-lieu of wages and to align the employee’s interests with the interests of its stockholders. Because vesting is based on continued employment, these equity-based incentives are also intended to attract, retain and motivate personnel upon whose judgment, initiative and effort the Company’s success is largely dependent. The shares are not issued until the completion of the employee’s contract year or earlier in case of resignation and as such the Company has also accrued the expense until such time the stock is issued. During the nine months ended September 30, 2022, the Company granted 830,616 restricted shares of its common stock and recognized $61,309 in associated employee stock-based compensation expense. The fair value of restricted stock unit is determined based on the quoted closing price of the Company’s common stock on the date grant. During the nine months ended September 30, 2021, the Company granted 135,616 shares and recognized $28,690 in associated employee stock-based compensation expense. The fair value of the restricted stock is determined based on the quoted closing price of the Company’s common stock on the date of grant. |
Shareholders_ Equity
Shareholders’ Equity | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Shareholders’ Equity | Note 14. Shareholders’ Equity Preferred Stock American Cannabis Company, Inc. is authorized to issue 5,000,000 shares of preferred stock at $0.01 par value. No shares of preferred stock were issued and outstanding at September 30, 2022 and December 31, 2021, respectively. Common Stock During the nine months ended September 30, 2022, the Company issued 1,000,000 restricted shares of common stock valued at $65,000 to a third party for consulting services over the next 12 months. The Company has recognized $13,542 in consulting expense during the nine months ended September 30, 2022. During the nine months ended September 30, 2022 , the Company issued 325,000 restricted shares valued at $46,207 granted during the fiscal year ended December 31, 2021. During the nine months ended September 30, 2022 the Company issued 2,500,000 registered shares of common stock in exchange for net proceeds of $117,628 pursuant to the Common Stock Purchase Agreement entered into on October 11, 2019 with White Lion Capital LLC. Subscription Receivable On March 28, 2022, the Company issued 500,000 registered shares of its common stock in exchange for net proceeds of $25,165 pursuant to the Common Stock Purchase Agreement entered into on October 11, 2019 with White Lion Capital LLC. At March 31, 2022, the Company had not received the funds and as such recognized a subscription receivable in connection with the funds owed. The funds were paid to the Company on April 9, 2022. Net Loss Per Share Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss per share is computed similarly to basic loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised. Outstanding stock options and common stock warrants are considered anti-dilutive because we are in a net loss position. Accordingly, the number of weighted average shares outstanding for basic and fully diluted net loss per share are the same. At September 30, 2022, the Company did not have any warrants or options issued and outstanding. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 15. Commitments and Contingencies Legal In the ordinary course of its business, the Company becomes involved in various legal proceedings involving a variety of matters. The Company does not believe there are any pending legal proceedings that will have a material adverse effect on the Company’s business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. The Companies expenses legal fees in the period in which they are incurred. Employment Litigation On November 15, 2019, a civil action was filed against the Company and Mr. Terry Buffalo, our former chief executive officer and director, and Mr. Ellis Smith our chief development officer and director, in Denver County District Court, Case Number 2019CV034380. The complaint sought a declaratory judgement and damages related to Plaintiff’s allegation that she was misclassified as an independent contractor while working for the Company. Plaintiff alleged she was owed unpaid overtime, liquidated damages, wages, statutory penalties and other compensatory damages for her misclassification and alleged wrongful termination. Plaintiff’s suit against Mr. Buffalo and Mr. Smith alleges that each were the alter ego of the Company and are therefore jointly and severally liable. The Company filed a counterclaim against Plaintiff alleging misappropriation of trade secrets, breach of contract, and other claims relating to her theft of confidential and proprietary information. A Settlement Agreement was entered into by all parties in January 2022. The Settlement Agreement provides for a cash settlement of $350,000 to be paid over a 2 year period and as a result at December 31, 2021, the Company has recognized a total of liability of $350,000. During the nine months ended September 30, 2022, the Company paid $131,250. At September 30, 2022, of which $218,750 is outstanding of which $125,000 is classified as current. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 16. Subsequent Events In accordance with ASC 855-10, the Company has analyzed its operations after unaudited consolidated financial statements were available to be issued and has determined that there were no other significant subsequent events or transactions that would require recognition or disclosure in the unaudited condensed consolidated financial statements for the nine months ended September 30, 2022, and did not find any events. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Accounting | Basis of Accounting The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include normal recurring adjustments that are necessary for a fair presentation of the results for the periods presented. |
Unaudited Interim Financial Statements | Unaudited Interim Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year. |
Going Concern | Going Concern Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern Our assessment included the preparation of a detailed cash forecast that included all projected cash inflows and outflows. During 2021, we secured additional cash financings through the sales and issuances of our common stock through. However, we continue to focus on growing our revenues. Accordingly, operating expenditures may exceed the revenue we expect to receive for the foreseeable future. We, also, have a history of operating losses, negative operating cash flows, and negative working capital, and expect these trends to continue into the foreseeable future. As of the date of this Quarterly Report on Form 10-q, while we believe we have adequate capital resources to complete our near-term operations, there is no guarantee that such capital resources will be sufficient until such time we reach profitability. We may access capital markets to fund strategic acquisitions or ongoing operations on terms we believe are favorable. The timing and amount of capital that may be raised is dependent on market conditions and the terms and conditions upon which investors would require to provide such capital. We may utilize debt or sell newly issued equity securities through public or private transactions. There can be no assurance that we will be able to obtain additional funding on satisfactory terms or at all. In addition, no assurance can be given that any such financing, if obtained, will be adequate to meet our capital needs and support our growth. If additional funding cannot be obtained on a timely basis and on satisfactory terms, our operations would be materially negatively impacted; however, we have been successful in accessing capital markets in the past, and we are confident in our ability to access capital markets again, if needed. The Company has an accumulated deficit, recurring losses, and expects continuing future losses. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s primary source of operating funds during the nine months ended September 30, 2022 and the year ended December 31, 2021 has been from funds generated from proceeds from the sale of common stock and operations. The Company has experienced net losses from operations since its inception but expects these conditions to improve in 2022 and beyond as it develops its business model. The Company has an accumulated deficit at September 30, 2022 and requires additional financing to fund future operations. The Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern. The accompanying unaudited consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. |
Use of Estimates in Financial Reporting | Use of Estimates in Financial Reporting The preparation of unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities, and disclosures of contingent assets and liabilities, as of the date of the condensed consolidated financial statements during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period in which they are deemed to be necessary. Significant estimates made in the accompanying consolidated financial statements include but are not limited to following those related to revenue recognition, allowance for doubtful accounts and unbilled services, lives and recoverability of equipment and other long-lived assets, the allocation of the asset purchase price, contingencies, and litigation. The Company is subject to uncertainties, such as the impact of future events, economic, environmental, and political factors, and changes in the business climate; therefore, actual results may differ from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities, the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company’s consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the unaudited consolidated financial statements. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution. Cash balances may exceed federally insured limits. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. At December 31, 2021, the Company had cash balances in excess of FDIC insured limits of $ 250,000 |
Accounts Receivable | Accounts Receivable Accounts receivable are recorded at the net value of face amount less an allowance for doubtful accounts. The Company evaluates its accounts receivable periodically based on specific identification of any accounts receivable for which the Company deems the net realizable value to be less than the gross amount of accounts receivable recorded; in these cases, an allowance for doubtful accounts is established for those balances. In determining its need for an allowance for doubtful accounts, the Company considers historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, the Company’s actual experience may vary from its estimates. If the financial condition of its clients were to deteriorate, resulting in their inability or unwillingness to pay the Company’s fees, it may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent that the Company receives retainers from its clients prior to performing significant services. The allowance for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client’s inability to make required payments on accounts receivables, the provision is recorded in operating expenses. As of September 30, 2022, and December 31, 2021, the Company’s allowance for doubtful accounts was $ 69,415 69,415 |
Deposits | Deposits Deposits is comprised of advance payments made to third parties, for rent, utilities, and inventory for which the Company has not yet taken title. When the Company takes title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon sale. |
Inventory | Inventory Inventory is comprised of products and equipment owned by the Company to be sold to end-customers. The Company’s inventory as it relates to its soil products and equipment is valued at cost using the first-in first-out and specific identification methods, unless and until the market value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to net realizable value. As of September 30, 2022 and December 31, 2021, market values of all the Company’s inventory were greater than cost, and accordingly, no such valuation allowance was recognized. Inventory also consists of pre-harvested cannabis plants and related end products. Inventory is valued at the lower of cost or net realizable value. Costs of inventory purchased from third party vendors for retail sales at dispensaries is determined using the first in first out method. Costs are capitalized to cultivated inventory until substantially ready for sale. Costs include direct and indirect labor, consumables, materials, packaging supplies, utilities, facilities costs, quality and testing costs, production related depreciation and other overhead costs. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items. The reserve estimate for excess and obsolete inventory is based on expected future use and on an assessment of market conditions. At September 30, 2022, the Company’s management determined that a reserve for excess and obsolete inventory was not necessary |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets are primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. |
Significant Clients and Customers | Significant Clients and Customers During the nine months ended September 30, 2022, three customers accounted for 42.5 During the nine months ended September 30, 2021, three customers accounted for 42.5 |
Property and Equipment, net | Property and Equipment, net Property and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Costs associated with in progress construction are capitalized as incurred and depreciation is consummated once the underlying asset is placed into service. Property and equipment are reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” The Company did not capitalize any interest as of September 30, 2022 and December 31, 2021. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. The Company accounts for goodwill under ASC Topic 350, Intangibles-Goodwill and Other 1,985,113 The Company does not have any other indefinite-lived intangible assets. In accordance with FASB ASC 350, “Intangibles – Goodwill and Other,” we perform goodwill impairment testing at least annually, unless indicators of impairment exist in interim periods. The impairment test for goodwill uses a two-step approach. Step one compares the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying value exceeds the estimated fair value, step two must be performed. Step two compares the carrying value of the reporting unit to the fair value of all of the assets and liabilities of the reporting unit (including any unrecognized intangibles) as if the reporting unit was acquired in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized in an amount equal to the excess. |
Intangible Assets, net | Intangible Assets, net Definite life intangible assets at September 30, 2022 include licenses and brand names recognized as part of the Naturaleaf Acquisition. Intangible assets are record at cost. Licenses and brand names represent the estimated fair value of these items at the date of acquisition, April 30, 2021. Intangible assets are amortized on a straight-line basis over their estimated useful life. Licenses are assigned a life of 15 5 70,000 |
Accounting for the Impairment of Long-Lived Assets | Accounting for the Impairment of Long-Lived Assets The Company evaluates long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending upon the nature of the assets. The Company had no |
Fair Value Measurements | Fair Value Measurements Fair value is defined 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. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows: 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, deposits, accounts receivable, accounts payables, advances from clients, accrued expense, and other current liabilities. The carrying values of these financial instruments approximate their fair value due to their short maturities. |
Revenue Recognition | Revenue Recognition We have adopted the following accounting principles related to revenue recognition: (a) FASB ASU 2016-12 “ Revenue from Contracts with Customers (Topic 606). Our service and product revenues arise from contracts with customers. Service revenue includes Operations Divisions consulting revenue. Product revenue includes (a) Operations Division product sales (So-Hum Living Soils), (b) Equipment sales division, (c) Cannabis sales division. The majority of our revenue is derived from distinct performance obligations, such as time spent delivering a service or the delivery of a specific product. We may also enter into contracts with customers that identify a single, or few, distinct performance obligations, but that also have non-distinct, underlying performance obligations. These contracts are typically fulfilled within one to six months. Only an insignificant portion of our revenue would be assessed for allocation between distinct (contractual) performance obligations and non-distinct deliverables between reporting periods and, accordingly, we do not record a contract asset for completed, non-distinct performance obligations prior to invoicing the customer. We recognize revenue in accordance with ASC 606 using the following 5 steps to identify revenues: (1) Identify the contract with the Customer. (2) Identify the performance obligations in the contract. (3) Determination of the transaction price. (4) Allocation of the transaction price to the performance obligations in the contract (5) Recognize Revenue when (or as) the entity satisfies a performance obligation. Advances from Clients deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Where possible, we obtain retainers to lessen our risk of non-payment by our customers. Advances from Clients deposits are recognized as revenue as we meet specified performance obligations as detailed in the contract. |
Product and Equipment Sales | Product and Equipment Sales Revenue from product and equipment sales, including delivery fees, is recognized when an order has been obtained from the customer, the price is fixed and determinable when the order is placed, the product is delivered, title has transferred, and collectability is reasonably assured. Generally, our suppliers’ drop-ship orders to our clients with destination terms. The Company realizes revenue upon delivery to the customer. Given the facts that (1) our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in our product sales contracts is fixed and determinable at the time the customer places the order, we are not of the opinion that our product sales indicate or involve any significant financing that would materially change the amount of revenue recognized under the contract, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606. During the nine months ended September 30, 2022 and 2021, sales returns were $ 0 |
Consulting Services | Consulting Services We also generate revenues from professional services consulting agreements. These arrangements are generally entered into: (1) on an hourly basis for a fixed fee; or (2) on a contingent fee basis. Generally, we require a complete or partial prepayment or retainer prior to performing services. For hourly based fixed fee service contracts, we utilize and rely upon the proportional performance method, which recognizes revenue as services are completed. Under this method, in order to determine the amount of revenue to be recognized, we calculate the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable. We segregate upon entry into a contract any advances or retainers received from clients for fixed fee hourly services into a separate “Advances from Clients” account, and only recognize revenues as we incur and charge billable hours, and then deposit the funds earned into our operating account. Because our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing, that would materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing component under FASB ASC Topic 606. Occasionally, our fixed-fee hourly engagements are recognized under the completed performance method. Some fixed fee arrangements are for completion of a final deliverable or act which is significant to the arrangement. These engagements do not generally exceed a one-year term. If the performance is for a final deliverable or act, we recognize revenue under the completed performance method, in which revenue is recognized once the final act or deliverable is performed or delivered for a fixed fee. Revenue recognition is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable. FASB ASC Topic 606 provides a practical expedient to disregard the effects of a financing component if the period between payment and performance is one year or less. As our fixed fee hourly engagements do not exceed one year, no significant customer-based financing is implicated under FASB ASC Topic 606. During the nine months ended September 30, 2022 and 2021, we incurred no losses from fixed fee engagements that terminate prior to completion. We believe if an engagement terminates prior to completion, we can recover the costs incurred related to the services provided. We primarily enter into arrangements for which fixed and determinable revenues are contingent and agreed upon achieving a pre-determined deliverable or future outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability is reasonably assured. Our arrangements with clients may include terms to deliver multiple services or deliverables. These contracts specifically identify the services to be provided with the corresponding deliverable. The value for each deliverable is determined based on the prices charged when each element is sold separately or by other vendor-specific objective evidence (“VSOE”) or estimates of stand-alone selling prices. Revenues are recognized in accordance with our accounting policies for the elements as described above (see Product Sales). The elements qualify for separation when the deliverables have value on a stand-alone basis and the value of the separate elements can be established by VSOE or an estimated selling price. While assigning values and identifying separate elements requires judgment, selling prices of the separate elements are generally readily identifiable as fixed and determinable as we also sell those elements individually outside of a multiple services engagement. Contracts with multiple elements typically incorporate a fixed-fee or hourly pricing structure. Arrangements are typically terminable by either party upon sufficient notice or do not include provisions for refunds relating to services provided. Reimbursable expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component of revenues. Typically, an equivalent amount of reimbursable expenses is included in total direct client service costs. Reimbursable expenses related to time and materials and fixed-fee engagements are recognized as revenue in the period in which the expense is incurred and collectability is reasonably assured. Taxes collected from customers and remitted to governmental authorities are recognized as liabilities and paid to the appropriate government entities. |
Cannabis Sales | Cannabis Sales Revenues consist of the retail sale of cannabis and related products. Revenue is recognized at the point of sale for retail customers. Payment is typically due upon transferring the goods to the customer or within a specified time period permitted under the Company’s credit policy. Sales discounts were not material during the nine months ended September 30 2022. |
Loyalty Reward Program | Loyalty Reward Program The Company offers a loyalty reward program to its dispensary customers that provides a discount on purchases based upon the total amount of a purchase, at the time of purchase. Management has determined that as there is no separate performance obligation to the reward program, i.e., the accumulation and redemption of points, and as such the Company recognizes the revenue at the time of purchase. |
Costs of Revenues | Costs of Revenues The Company’s policy is to recognize costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenue includes the costs directly attributable to revenue recognition and includes compensation and fees for services, travel and other expenses for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred. |
Advertising and Promotion Costs | Advertising and Promotion Costs Advertising and Promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the nine months ended September 30, 2022 and 2021 these expenses were $ 98,414 33,238 |
Shipping and Handling Costs | Shipping and Handling Costs For product and equipment sales, shipping and handling costs are included as a component of cost of revenues. |
Stock-Based Compensation | Stock-Based Compensation Restricted shares are awarded to employees and entitle the grantee to receive shares of common stock at the end of the established vesting period. The fair value of the grant is based on the stock price on the date of grant. We recognize related compensation costs on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant date. During the nine months ended September 30, 2022 and 2021, stock-based compensation expense for restricted shares for Company employees was $ 65,310 28,690 |
Research and Development | Research and Development As a component of our equipment and supplies offerings, from time-to-time we design and develop our own proprietary products to meet demand in markets where current offerings are insufficient. These products include, but are not limited to: The Satchel™, Cultivation Cube™, So-Hum Living Soils™ and the HDCS™. Costs associated with the development of new products are expensed as incurred as research and development operating expenses. During the nine months ended September 30, 2022 and 2021, our research and development costs were de minimis. |
Income Taxes | Income Taxes The Company’s corporate status changed from an S Corporation, which it had been since inception, to a C Corporation during the year ended December 31, 2014. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, S Corporations are not subject to corporate income taxes; instead, the owners are taxed on their proportionate share of the S Corporation’s taxable income. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the year ended December 31, 2021, due to cumulative losses since our corporate status changed, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero. As of September 30, 2022 and December 31, 2021, we had no liabilities related to federal or state income taxes and the carrying value of our deferred tax asset was zero. Due to its cannabis operations, the Company is subject to the limitations of Internal Revenue Code (“ IRC |
Net Loss Per Common Share | Net Loss Per Common Share The Company reports net loss per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share is equal to basic earnings per share because there are no potential dilatable instruments that would have an anti-dilutive effect on earnings. Diluted net loss per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion, exercise or contingent exercise of securities since that would have an anti-dilutive effect on earnings. |
Related Party Transactions | Related Party Transactions The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, 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. |
Impact of COVID-19 Pandemic | Impact of COVID-19 Pandemic On March 11, 2020 , 19” 19 In response to state and local measures and for protection of both employees, the Company made required changes to operations, which did not have a material impact upon operations or the financial condition of the Company. While the state and local governments have eased restrictions on restrictions and activities, it is possible that a resurgence in COVID- 19 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements. |
Naturaleaf Asset Acquisition (T
Naturaleaf Asset Acquisition (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Purchase price as of the acquisition | Schedule of Purchase price as of the acquisition Cash $ — Inventory 72,172 Property, plant and equipment 26,715 Long Term Deposits 6,000 Identifiable intangible assets 800,000 Goodwill 1,985,113 Accounts payable — Total consideration $ 2,890,000 |
Accounts Receivable and Advan_2
Accounts Receivable and Advance from Clients (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Receivables [Abstract] | |
Schedule of Accounts Receivable | Schedule of Accounts Receivable September 30, December 31, Accounts Receivable – Trade $ 329,341 $ 93,856 Less: Allowance for Doubtful Accounts (69,415 ) (82,540 ) Accounts Receivable, net $ 259,926 $ 11,316 |
Schedule of Advances from Clients | Schedule of Advances from Clients September 30, December 31, Beginning Balance $ 111,892 $ 88,843 Additional deposits received 6,207,877 404,143 Less: Deposits recognized as revenue (4,928,797 ) (381,094 ) Ending Balance $ 1,390,972 $ 111,892 |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Schedule of Inventory September 30, December 31, Raw Materials - Soil $ 68,370 $ 60,900 Work In Process - Cultivation 239,061 136,266 Finished Goods - Soil 42,101 58,594 Finished Goods - Cannabis Retail 2,962 22,848 Total Inventory $ 352,494 $ 278,608 |
Property and Equipment, net (Ta
Property and Equipment, net (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment, Net | Schedule of Property and Equipment, Net September 30, December 31, Office equipment $ 48,344 $ 39,574 Software 13,204 13,204 Furniture and Fixtures 2,328 2,328 Machinery and Equipment 478,407 376,745 Property and equipment, gross $ 542,283 $ 431,851 Less: Accumulated Depreciation (99,382 ) (56,019 ) Property and equipment, net $ 442,901 $ 375,832 |
Intangibles Assets, Net (Tables
Intangibles Assets, Net (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | Schedule of Finite-Lived Intangible Assets September 30, 2022 Gross Accumulated Carrying Estimated Licenses $ 500,000 ($ 47,219 ) $ 452,781 15 Brand $ 300,000 ($ 85,002 ) $ 214,998 5 Patent Applications $ 18,463 — $ 18,463 — Total intangible assets, net $ 818,462 ($ 132,221 ) $ 686,242 December 31, 2021 Gross Accumulated Carrying Estimated Licenses $ 500,000 ($ 22,223 ) $ 477,777 15 Brand $ 300,000 ($ 40,000 ) $ 260,000 5 Patent Applications $ 8,160 — $ 8,160 — Total intangible assets, net $ 808,160 ($ 62,223 ) $ 745,937 |
Schedule of estimated amortization expense | Schedule of estimated amortization expense Year Ended December 31, 2022 $ 46,666 2023 $ 93,333 2024 $ 93,333 2025 $ 93,333 2026 $ 53,333 Thereafter $ 311,113 TOTAL $ 691,111 |
Accrued and Other Current Lia_2
Accrued and Other Current Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued and Other Current Liabilities | Schedule of Accrued and Other Current Liabilities September 30, December 31, Accrued Interest $ 39,106 $ 74,137 Accrued Payroll 14,335 18,428 Sales Tax Payable 4,959 592 Other Accrued Expenses & Payables 35,685 68,561 Accrued and other current liabilities $ 94,085 $ 161,718 |
Operating Lease Right-of-Use _2
Operating Lease Right-of-Use Asset/Operating Lease Liability (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Operating Lease Right-of-use Assetoperating Lease Liability | |
Schedule of lease | Schedule of lease Lease Name Asset Type Start Date Expiration Date Monthly Rent Durango Lease Real Property 5/1/2021 5/31/2022 $ 10,200 Lehman Lease Real Property 5/1/2021 12/31/2022 $ 2,732 Palmer Lease Real Property 7/1/2022 6/30/2023 $ 5,000 Greenspace Membership Real Property 1/1/2022 6/30/2022 $ 1,000 Tejon Lease Real Property 5/1/2022 4/30/2027 $ 3,875 |
Schedule of Operating leases liabilities | Schedule of Operating leases liabilities Operating 2022 $ 40,709 Thereafter 143,429 Total 184,138 Less: amount representing interest (57,928 ) Present value of future minimum lease payments 126,210 Less: current obligations under leases 40,709 Long-term lease obligations $ 85,501 |
Schedule of remaining minimal annual lease payments | Schedule of remaining minimal annual lease payments 2022 62,384 2023 77,200 2024 49,300 2025 51,400 2026 53,500 2027 36,600 Total $ 330,384 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Product Information [Line Items] | |||
Cash, FDIC Insured Amount | $ 250,000 | $ 250,000 | |
Allowance for doubtful accounts | 69,415 | 69,415 | |
Goodwill | 1,985,113 | ||
Amortization expense | 70,000 | $ 0 | |
Impairment of Long-Lived Assets | 0 | $ 0 | |
Sales return | 0 | 0 | |
Advertising Expense | 98,414 | 33,238 | |
Stock-based compensation expense | $ 65,310 | $ 28,690 | |
License [Member] | |||
Product Information [Line Items] | |||
Estimated useful life | 15 years | ||
Trade Names [Member] | |||
Product Information [Line Items] | |||
Estimated useful life | 5 years | ||
Revenues [Member] | Customer Concentration Risk [Member] | Three Customer [Member] | |||
Product Information [Line Items] | |||
Concentrations of credit risk | 42.50% | 42.50% |
Naturaleaf Asset Acquisition (D
Naturaleaf Asset Acquisition (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | ||
Property, plant and equipment | $ 542,283 | $ 431,851 |
Goodwill | 1,985,113 | $ 1,985,113 |
Acquisition-related Costs [Member] | ||
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | ||
Cash | ||
Inventory | 72,172 | |
Property, plant and equipment | 26,715 | |
Long Term Deposits | 6,000 | |
Identifiable intangible assets | 800,000 | |
Goodwill | 1,985,113 | |
Accounts payable | ||
Total consideration | $ 2,890,000 |
Accounts Receivable and Advan_3
Accounts Receivable and Advance from Clients (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Receivables [Abstract] | ||
Accounts Receivable – Trade | $ 329,341 | $ 93,856 |
Less: Allowance for Doubtful Accounts | (69,415) | (82,540) |
Accounts Receivable, net | $ 259,926 | $ 11,316 |
Accounts Receivable and Advan_4
Accounts Receivable and Advance from Clients (Details 1) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Receivables [Abstract] | ||
Beginning Balance | $ 111,892 | $ 88,843 |
Additional deposits received | 6,207,877 | 404,143 |
Less: Deposits recognized as revenue | 4,928,797 | 381,094 |
Ending Balance | $ 1,390,972 | $ 111,892 |
Accounts Receivable and Advan_5
Accounts Receivable and Advance from Clients (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Receivables [Abstract] | ||
Bad debt expense | $ 0 | $ 0 |
Inventory (Details)
Inventory (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Inventory Disclosure [Abstract] | ||
Raw Materials - Soil | $ 68,370 | $ 60,900 |
Work In Process - Cultivation | 239,061 | 136,266 |
Finished Goods - Soil | 42,101 | 58,594 |
Finished Goods - Cannabis Retail | 2,962 | 22,848 |
Total Inventory | $ 352,494 | $ 278,608 |
Property and Equipment, net (De
Property and Equipment, net (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 542,283 | $ 431,851 |
Less: accumulated depreciation | (99,382) | (56,019) |
Property and equipment, net | 442,901 | 375,832 |
Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 48,344 | 39,574 |
Software Development [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 13,204 | 13,204 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 2,328 | 2,328 |
Machinery and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 478,407 | $ 376,745 |
Property and Equipment, net (_2
Property and Equipment, net (Details Narrative) - Office Equipment [Member] | 9 Months Ended |
Sep. 30, 2022 USD ($) | |
Property, Plant and Equipment [Line Items] | |
Payment for purchase of office equipment | $ 8,770 |
Machinery and equipment | $ 101,662 |
Intangibles Assets, Net (Detail
Intangibles Assets, Net (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | $ 818,462 | $ 808,160 |
Accumulated amortization | 132,221 | 62,223 |
Carrying value | 686,242 | 745,937 |
License [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | 500,000 | 500,000 |
Accumulated amortization | 47,219 | 22,223 |
Carrying value | $ 452,781 | $ 477,777 |
Estimated useful life | 15 years | 15 years |
Brand [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | $ 300,000 | $ 300,000 |
Accumulated amortization | 85,002 | 40,000 |
Carrying value | $ 214,998 | $ 260,000 |
Estimated useful life | 5 years | 5 years |
Patents [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | $ 18,463 | $ 8,160 |
Accumulated amortization | ||
Carrying value | $ 18,463 | $ 8,160 |
Intangibles Assets, Net (Deta_2
Intangibles Assets, Net (Details 1) | Sep. 30, 2022 USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
$ 46,666 | |
93,333 | |
93,333 | |
93,333 | |
53,333 | |
311,113 | |
$ 691,111 |
Intangibles Assets, Net (Deta_3
Intangibles Assets, Net (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 70,000 | $ 0 |
Accrued and Other Current Lia_3
Accrued and Other Current Liabilities (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Payables and Accruals [Abstract] | ||
Accrued Interest | $ 39,106 | $ 74,137 |
Accrued Payroll | 14,335 | 18,428 |
Sales Tax Payable | 4,959 | 592 |
Other Accrued Expenses & Payables | 35,685 | 68,561 |
Accrued and other current liabilities | $ 94,085 | $ 161,718 |
Operating Lease Right-of-Use _3
Operating Lease Right-of-Use Asset/Operating Lease Liability (Details) | 9 Months Ended |
Sep. 30, 2022 USD ($) | |
Durango Lease [Member] | |
Lessee, Lease, Description [Line Items] | |
Operations Commenced Date | May 01, 2021 |
Lease Expiration Date | May 31, 2022 |
Monthly Rent | $ 10,200 |
Lehman Lease [Member] | |
Lessee, Lease, Description [Line Items] | |
Operations Commenced Date | May 01, 2021 |
Lease Expiration Date | Dec. 31, 2022 |
Monthly Rent | $ 2,732 |
Palmer Lease [Member] | |
Lessee, Lease, Description [Line Items] | |
Operations Commenced Date | Jul. 01, 2022 |
Lease Expiration Date | Jun. 30, 2023 |
Monthly Rent | $ 5,000 |
Greenspace Membership [Member] | |
Lessee, Lease, Description [Line Items] | |
Operations Commenced Date | Jan. 01, 2022 |
Lease Expiration Date | Jun. 30, 2022 |
Monthly Rent | $ 1,000 |
Tejon Lease [Member] | |
Lessee, Lease, Description [Line Items] | |
Operations Commenced Date | May 01, 2022 |
Lease Expiration Date | Apr. 30, 2027 |
Monthly Rent | $ 3,875 |
Operating Lease Right-of-Use _4
Operating Lease Right-of-Use Asset/Operating Lease Liability (Details 1) | Sep. 30, 2022 USD ($) |
Operating Lease Right-of-use Assetoperating Lease Liability | |
2022 | $ 40,709 |
Thereafter | 143,429 |
Total | 184,138 |
Less: amount representing interest | (57,928) |
Present value of future minimum lease payments | 126,210 |
Less: current obligations under leases | 40,709 |
Long-term lease obligations | $ 85,501 |
Operating Lease Right-of-Use _5
Operating Lease Right-of-Use Asset/Operating Lease Liability (Details 2) | Sep. 30, 2022 USD ($) |
Operating Lease Right-of-use Assetoperating Lease Liability | |
$ 62,384 | |
77,200 | |
49,300 | |
51,400 | |
53,500 | |
36,600 | |
$ 330,384 |