Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Dec. 13, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | AGRITEK HOLDINGS, INC. | |
Entity Central Index Key | 1,040,850 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Is Entity Emerging Growth Company? | false | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 1,064,368,366 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 35,321 | $ 304,889 |
Marketable Securities | 9,211 | 41,861 |
Inventory, net | 31,048 | 10,000 |
Prepaid assets and other | 45,000 | 48,500 |
Total current assets | 120,580 | 405,251 |
Notes receivable | 285,000 | 210,000 |
Property and equipment, net of accumulated depreciation of $52,192 (2018) and $23,824 (2017) | 315,223 | 286,415 |
Security deposit and other | 13,825 | 13,825 |
Total assets | 734,628 | 915,491 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 1,371,012 | 1,089,334 |
Due to related party | 4,493 | 7,715 |
Customer deposits | 2,400 | 2,400 |
Deferred rent | 24,916 | 24,916 |
Convertible note payable, net of discounts of $780,122 (2018) and $494,193 (2017) | 561,434 | 485,250 |
Derivative liabilities | 1,911,033 | 5,416,830 |
Note payable, current portion | 21,500 | 51,500 |
Total current liabilities | 3,896,788 | 7,077,945 |
Total liabilities | 3,896,788 | 7,077,945 |
Commitments and Contingencies | ||
Stockholders' Deficit: | ||
Series B convertible preferred stock, $0.01 par value; 1,000,000 shares authorized, and 1,000 shares issued and outstanding | 10 | 10 |
Common stock, $.0001 par value; 1,000,000,000 shares authorized; 830,376,608 (2018) and 723,680,348 (2017) shares issued and outstanding | 83,038 | 72,369 |
Common stock to be issued | 5,754 | 5,257 |
Additional paid-in capital | 22,624,771 | 19,312,650 |
Accumulated comprehensive gain (loss) | (7,314) | 25,337 |
Accumulated deficit | (25,868,419) | (25,578,077) |
Total stockholders' deficit | (3,162,160) | (6,162,454) |
Total liabiities and stockholders' deficit | $ 734,628 | $ 915,491 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Assets | ||
Accumulated depreciation of property and equipment | $ (52,192) | $ (23,824) |
Current Liabilities | ||
Discount on convertible notes payable | $ (780,122) | $ (494,193) |
Stockholders' Deficit | ||
Preferred stock Series B par value | $ 0.01 | $ 0.01 |
Preferred stock Series B authorized | 1,000,000 | 1,000,000 |
Preferred stock Series B issued | 1,000 | 1,000 |
Preferred stock Series B outstanding | 1,000 | 1,000 |
Common stock par value | $ 0.0001 | $ 0.0001 |
Common stock shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock shares issued | 830,376,608 | 723,680,348 |
Common stock shares outstanding | 830,376,608 | 723,680,348 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Consulting and other income | $ 24,000 | $ 48,000 | ||
Product revenue | 1,027 | 1,255 | ||
Total revenue | 1,027 | 24,000 | 1,255 | 48,000 |
Cost of revenue, includes $7,500 and $22,500 related party for 2018 | 7,508 | 22,620 | ||
Gross profit (loss) | (6,481) | 24,000 | (21,365) | 48,000 |
Operating Expenses: | ||||
Management fees, includes $22,950 related party stock compensation, for the nine months ended September 30, 2018, and $300,000 related party stock compensation for the nine months ended September 30, 2017 | 25,108 | 37,500 | 112,950 | 412,500 |
Administrative fees, includes related party expenses of $16,000 and $52,000 for the three and nine months ended September 30, 2018, respectively, and $12,000 and $36,000 for the three and nine months ended September 30, 2017, respectively | 16,000 | 18,400 | 60,415 | 50,400 |
Professional and consulting fees, includes stock-based compensation of $97,500 for the nine months ended September 30, 2018, and $24,600 and $191,431 for the three and nine months ended September 30, 2017, respectively | 25,932 | 172,640 | 345,557 | 530,175 |
Gain on recapture of reserve for land | (47,502) | |||
Rent and other occupancy costs | 22,906 | 34,874 | 36,016 | 92,940 |
Leased property expense, includes related party expense of $24,000 and $72,000 for the three and nine months ended September 30, 2018, respectively | 59,057 | 9,561 | 257,123 | 28,683 |
Advertising and promotion, includes related party expenses of $25,000 for the nine months ended September 30, 2018 | 637 | 7,179 | 60,376 | 12,627 |
Travel and entertainment | 41,167 | 52,412 | 124,610 | 93,215 |
Other general and administartive expenses | 44,467 | 62,412 | 102,692 | 112,992 |
Total operating expenses | 235,274 | 394,978 | 1,099,739 | 1,286,030 |
Operating loss | (241,755) | (370,978) | (1,121,104) | (1,238,030) |
Other Income (Expense): | ||||
Loss on debt settlement | (58,759) | |||
Loss on legal matter | (232,246) | |||
Interest expense | (1,337,367) | (438,553) | (1,854,530) | (1,110,560) |
Derivative liability income (expense) | 85,909 | (1,187,676) | 2,976,297 | (1,691,003) |
Total other income (expense), net | (1,251,458) | (1,626,229) | 830,762 | (2,801,563) |
Net loss | (1,493,213) | (1,997,207) | (290,342) | (4,039,592) |
Unrealized gain (loss) on marketable securities | (2,356) | (2,093) | (32,651) | 5,508 |
Net comprehensive (loss) | $ (1,495,569) | $ (1,999,300) | $ (322,993) | $ (4,034,084) |
Basic and diluted loss per share | $ 0 | $ 0 | $ 0 | $ (0.01) |
Weighted average number of common shares outstanding Basic | 810,165,619 | 543,605,667 | 780,208,585 | 479,525,626 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Related party cost of revenue | $ 7,500 | $ 22,500 | ||
Management fees | ||||
Stock based compensation expense | 22,950 | $ 300,000 | ||
Administrative fees | ||||
Stock based compensation expense | 16,000 | $ 12,000 | 52,000 | 36,000 |
Professional and consulting fees | ||||
Stock based compensation expense | $ 24,600 | 97,500 | $ 191,431 | |
Leased property expense | ||||
Stock based compensation expense | $ 24,000 | 72,000 | ||
Advertising and promotion | ||||
Stock based compensation expense | $ 25,000 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (290,342) | $ (4,039,592) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock based compensation | 120,450 | 491,431 |
Common stock issued for additional interest to convertible noteholder | 16,094 | |
Amortization of deferred financing costs | 87,466 | 64,120 |
Loss on legal settlement | 232,246 | |
Loss on debt settlement | 58,759 | |
Depreciation | 28,368 | 6,265 |
Initial expense for fair value of derivative liabilities | 437,368 | 962,317 |
Amortization of discount on convertible notes | 1,622,702 | 904,638 |
Change in fair values of derivative liabilities | (3,413,562) | 728,687 |
Recapture of reserve for land | (47,502) | |
Changes in operating assets and liabilities: | ||
Increase in Inventory | (21,048) | (40,000) |
Increase in Prepaid assets and other | 3,500 | (1,000) |
Increase in Security deposit | (13,000) | |
Increase (decrease) in Accounts payable and accrued expenses | 88,481 | 178,403 |
Increase (decrease) in Due to related party | (3,222) | (18,767) |
Increase (decrease) in Deferred rent | 24,916 | |
Net cash used in operating activities | (1,048,834) | (782,991) |
Cash flows from investing activities: | ||
Purchase of property, equipment and furniture | (57,176) | (68,788) |
Purchase of notes receivable | (75,000) | (235,000) |
Net cash used in investing activities | (132,176) | (303,788) |
Cash flows from financing activities: | ||
Proceeds from issuance of convertible debt | 729,500 | 1,013,193 |
Payments made of principal and interest on convertible notes | (178,058) | |
Payments made on note payable | (30,000) | (17,500) |
Proceeds from sale of common stock to be issued | 390,000 | 335,000 |
Net cash provided by financing activities | 911,442 | 1,330,693 |
Net increase (decrease) in cash and cash equivalents | (269,568) | 243,913 |
Cash and cash equivalents, Beginning | 304,889 | 67,260 |
Cash and cash equivalents, Ending | 35,321 | 311,173 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 6,816 | 1,275 |
Cash paid for income taxes | ||
Schedule of non-cash financing activities: | ||
Discount from derivatives | 1,908,631 | |
Conversion of notes payable and interest into common stock | 374,608 | 995,133 |
Fair value of marketable securities issued in exchange for debt | 16,525 | |
Change in fair value for available for sale marketable securities | (32,651) | 5,508 |
Issuance of note payable as part of land acquisition | 35,000 | |
Settlement of derivatives | 2,438,234 | |
Cashless warrant exercise | $ 3,925 | $ 4,860 |
Organization
Organization | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Note 1 - Organization Business Agritek Holdings Inc. (“the Company” or “Agritek Holdings”) and its wholly-owned subsidiaries, MediSwipe, Inc. (“MediSwipe”), Prohibition Products Inc. (“PPI”), and Agritek Venture Holdings, Inc. (“AVHI”) is a fully integrated, active investor and operator in the legal cannabis sector. Specifically, Agritek Holdings provides strategic capital and functional expertise to accelerate the commercialization of its diversified portfolio of holdings. Currently, the Company is focused on three high-value segments of the cannabis market, including real estate investment, intellectual property brands; and infrastructure, with operations in three U.S. States, Colorado, Washington State, California as well as Canada and Puerto Rico. Agritek Holdings invests its capital via real estate holdings, licensing agreements, royalties and equity in acquisition operations. We provide key business services to the legal cannabis sector including: • Funding and Financing Solutions for Agricultural Land and Properties zoned for the regulated Cannabis Industry. • Dispensary and Retail Solutions • Commercial Production and Equipment Build Out Solutions • Multichannel Supply Chain Solutions • Branding, Marketing and Sales Solutions of proprietary product lines • Consumer Product Solutions The Company intends to bring its’ array of services to each new state that legalizes the use of cannabis according to appropriate state and federal laws. Our primary objective is acquiring commercial properties to be utilized in the commercial marijuana industry as cultivation facilities in compliance with state laws. This is an essential aspect of our overall growth strategy because once acquired and re-zoned, the value of such real property is substantially higher than under the previous zoning and use. Once properties are identified and acquired to be used for purposes related to the commercial marijuana industry as provided for by state law, and we plan to create vertical channels within that legal jurisdiction including equipment financing, payment processing and marketing of exclusive brands and services to retail dispensaries Agritek’s business focus is primarily to hold, develop and manage real property. The Company shall also provide oversight on every property that is part of its portfolio. This can include complete architectural design and subsequent build-outs, general support, landscaping, general up-keep, and state of the art security systems. At this time, Agritek does not grow, process, own, handle, transport, or sell marijuana as the Company is organized and directed to operate strictly in accordance with all applicable state and federal laws. As the legal environment changes in Colorado, California and other states, the Company’s management may explore business opportunities that involve ownership interests in dispensaries and growing operations if and when such business opportunities become legally permissible under applicable state and federal laws. |
Summary of Significant Account
Summary of Significant Account Policies | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Account Policies | Note 2 – Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"). The consolidated financial statements of the Company include the consolidated accounts of Agritek and its’ wholly owned subsidiaries MediSwipe, AVHI, The American Hemp Trading Company, Inc., a Colorado Corporation (dba 77Acres, Inc.) and PPI. PPI, a Florida corporation, was originally formed on July 1, 2013 as The American Hemp Trading Company, Inc. (“HempFL”) and on August 27, 2014, HempFL changed its’ name to PPI. All intercompany accounts and transactions have been eliminated in consolidation. Cash and Cash Equivalents The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. Accounts Receivable The Company records accounts receivable from amounts due from its customers upon the shipment of products. The allowance for losses is established through a provision for losses charged to expenses. Receivables are charged against the allowance for losses when management believes collectability is unlikely. The allowance is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience. While management uses the best information available to make its evaluations, this estimate is susceptible to significant change in the near term. As of September 30, 2018, and December 31, 2017, based on the above criteria, the Company has a full allowance for doubtful accounts of $43,408. Inventory Inventory is valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow-moving inventory is made based on management analysis or inventory levels and future sales forecasts. Notes receivable September 30, December 31, Client 1 $ 170,000 $ 110,000 Client 2 115,000 100,000 Total $ 285,000 $ 210,000 • Note receivable from Client 1 is pursuant to a five (5) year operational and exclusive licensing agreement with a third party who leases a 15,000-sq. ft. approved cultivation facility located in San Juan, Puerto Rico (see Note 10). • Note receivable from Client 2 is pursuant to a five (5) year operational and exclusive licensing agreement with a third party who leases a 10,000-sq. ft. approved cultivation facility located in Washington State (see Note 10). Deferred Financing Costs The costs related to the issuance of debt are capitalized and amortized to interest expense using the straight-line method through the maturities of the related debt. Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Debt Issue Costs and Debt Discount The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. Original Issue Discount For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the initial carrying value of the note and is amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. Marketable Securities and Other Comprehensive Income The Company classifies its marketable securities as available-for-sale securities, which are carried at their fair value based on the quoted market prices of the securities with unrealized gains and losses, net of deferred income taxes, reported as accumulated other comprehensive income (loss), a separate component of stockholders’ equity. Realized gains and losses on available-for-sale securities are included in net earnings in the period earned or incurred. Property and Equipment Property and equipment are stated at cost, and except for land, depreciation is provided by use of a straight-line method over the estimated useful lives of the assets. The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. In February, 2017, the Company entered into a land purchase contract to acquire approximately 80 acres including water and mineral rights. The total cost of the land was $129,555. The Company paid $41,554 at closing and issued a note payable for $88,000. The Company is on the deed of trust of the property with a remaining note balance of $21,500 and $51,500 due the seller as of September 30, 2018 and December 31, 2017, respectively. The estimated useful lives of property and equipment are as follows: Furniture and equipment 5 years Manufacturing equipment 7 years The Company's property and equipment consisted of the following at September 30, 2018, and December 31, 2017: September 30, December 31, Furniture and equipment $ 237,860 $ 180,684 Land 129,555 129.555 Accumulated depreciation (52,192 ) (23,824 ) Balance $ 315,223 $ 286,415 Depreciation expense of $10,250 and $28,368 was recorded for the three and nine months ended September 30, 2018, respectively, and $2,310 and $6,265 for the three and nine months ended September 30, 2017, respectively. Long-Lived Assets Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Deferred rent The Company calculates the total cost of the lease for the entire lease period and divides that amount by the number of months of the lease. The result is the average monthly expense and is charged to rent expense with the offset to deferred rent, irrespective of the actual amount paid. The amounts paid are charged to the deferred rent account. As of September 30, 2018, the Company has a balance of $24,916 in deferred rent which is included in the consolidated balance sheet. Revenue Recognition Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the three and nine months ended September 30, 2018 and 2017, or the twelve months ended December 31, 2017. Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: • Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. • Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. The carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments. The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of September 30, 2018, and December 31, 2017, for each fair value hierarchy level: September 30, 2018 Derivative Liabilities Total Level I $ — $ — Level II $ — $ — Level III $ 1,911,033 $ 1,911,033 December 31, 2017 Level I $ — $ — Level II $ — $ — Level III $ 5,416,830 $ 5,416,830 Income Taxes The Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment. ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. Interest and penalties are classified as a component of interest and other expenses. To date, the Company has not been assessed, nor paid, any interest or penalties. Uncertain tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized. The Company’s tax years subsequent to 2005 remain subject to examination by federal and state tax jurisdictions. Earnings (Loss) Per Share Earnings (loss) per share are computed in accordance with ASC 260, "Earnings per Share". Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities, if any, outstanding during the period. As of September 30, 2018, there were warrants and options to purchase 50,937,528 shares of common stock and the Company’s outstanding convertible debt is convertible into approximately 245,073,504 shares of common stock. These amounts are included in the computation of dilutive net income per share. Accounting for Stock-Based Compensation The Company accounts for stock awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. The measurement date is the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete. Stock awards granted to non-employees are valued at their respective measurement dates based on the trading price of the Company’s common stock and recognized as expense during the period in which services are provided. For the nine months ended September 30, 2018, the Company recorded stock- based compensation of $120,450, and $24,600 and $491,431 for the three and nine months ended September 30, 2017, respectively. (See Note 9). Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates. Advertising The Company records advertising costs as incurred. For the three and nine months ended September 30, 2018, advertising expense was $637 and $60,376, respectively, and $7,179 and $12,627 for the three and nine months ended September 30, 2017, respectively. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Note 3 – Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”. Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard will have on our consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company elected to early adopt the new guidance in the second quarter of fiscal year 2016 which requires us to reflect any adjustments as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. The primary impact of adoption was the recognition of additional stock compensation expense and paid-in capital for all periods in fiscal year 2016. Additional amendments to the recognition of excess tax benefits, accounting for income taxes and minimum statutory withholding tax requirements had no impact to retained earnings as of January 1, 2016, where the cumulative effect of these changes is required to be recorded. We have elected to account for forfeitures as they occur to determine the amount of compensation cost to be recognized in each period. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230).” ASU No. 2016-18 requires that restricted cash be included with cash and cash equivalents when reconciling the change in cash flow. This guidance is reflected in these financial statements. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes the second step of the two-step goodwill impairment test. Under ASU 2017-04, an entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 does not amend the optional qualitative assessment of goodwill impairment. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019; early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has not elected early adoption of this standard and is currently in the process of evaluating the impact of adopting ASU 2017-04 and cannot currently estimate the financial statement impact of adoption. In May 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.” The amendments in this update provide guidance about which changes to the terms or conditions of a share-based award require an entity to apply modification accounting in Topic 718. The guidance will be effective for the Company for its fiscal year 2018, with early adoption permitted. The Company does not expect this ASU to materially impact the Company’s consolidated financial statements. Accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. |
Marketable Securities
Marketable Securities | 9 Months Ended |
Sep. 30, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
Marketable Securities | Note 4 – Marketable Securities The Company owns marketable securities (common stock) as of September 30, 2018, and December 31, 2017 is outlined below: September 30, 2018 December 31, 2017 Beginning balance $ 41,862 $ 39,769 Unrealized gain (loss) marked to fair value (32,651 ) 2,093 Ending balance $ 9,211 $ 41,862 800 Commerce, Inc. (now known as Petrogress, Inc), was a commonly controlled entity until February 29, 2016, owed Agritek $282,947 as of February 29, 2016, as a result of advances received from or payments made by Agritek on behalf of 800 Commerce. These advances were non-interest bearing and were due on demand. Effective February 29, 2016, the Company received 11,025 shares of common stock of Petrogress, Inc. as settlement of the $282,947 owed to the Company. The market value on the date the Company received the shares of common stock was $16,525. |
Prepaid Expenses
Prepaid Expenses | 9 Months Ended |
Sep. 30, 2018 | |
Other Income (Expense): | |
Prepaid Expenses | Note 5 - Prepaid Expenses Prepaid expenses consisted of the following at September 30, 2018 and December 31, 2017: September 30, 2018 December 31, 2017 Vendor deposits $ 31,000 $ 46,000 Investor relations 6,000 2,500 Rent, related party 8,000 — Total prepaid expenses $ 45,000 $ 48,500 |
Concentration of Credit Risk
Concentration of Credit Risk | 9 Months Ended |
Sep. 30, 2018 | |
Risks and Uncertainties [Abstract] | |
Concentration of Credit Risk | Note 6– Concentration of Credit Risk Cash Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash balances at one financial institution, which is insured by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC insured institution insures up to $250,000 on account balances. |
Note Payable
Note Payable | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Note Payable | Note 7 – Note Payable Note Payable Land On March 18, 2014, in conjunction with the land purchase of 80 acres in Pueblo County, Colorado, the Company paid $36,000 cash and entered into a promissory note in the amount of $85,750. In November 2015, the Company was made aware that the land transaction regarding 80 acres in Pueblo County, Colorado, may not have been properly deeded to the Company. The company was a party to the land purchase, however, the second party to the land contract never filed the original quit claim deed on behalf of the Company, even though a copy of the notarized quit claim deed was sent to the Company. In February, 2017, the original owner of the 80 acres foreclosed on the property from the second party and the Company entered into a new land purchase contract (including water and mineral rights) directly with the landowner on February 7, 2017. The Company is on the deed of trust of the property and as of September 30, 2018, and December 31, 2017, the note balance is $21,500 and $51,500, respectively. |
Convertible Debt
Convertible Debt | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Debt | Note 8 – Convertible Debt 2016 Convertible Notes On October 31, 2016, the Company entered into a Convertible Promissory Note ("St. George 2016 Notes") for $555,000 to St. George Investments, LLC. (“St. George”) which included a purchase price of $500,000 and transaction costs of $5,000 and OID interest of $50,000. On October 31, 2016, the Company received $100,000 and recorded $115,000 as convertible note payable, including $5,000 of transaction costs and $10,000 OID interest. St. George also issued to the Company eight secured promissory notes, each in the amount of $50,000. All or any portion of the outstanding balance of the St. George 2016 Notes may be prepaid, without penalty, along with accrued but unpaid interest at any time prior to maturity. The Company has no obligation to pay St. George any amounts on the unfunded portion of the St. George 2016 Notes. The St. George 2016 Note bears interest at 10% per annum (increases to 22% per annum upon an event of default) and is convertible into shares of the Company’s common stock at St. George’s option at a price of $0.05 per share. On December 14, 2016, St. George funded one of the secured promissory notes issued to the Company. During the year ended December 31, 2017, St. George funded the remaining secured promissory notes issued to the Company, of which $177,684 was used as part of the Company’s debt consolidation plan. During the nine months ended September 30, 2018, the Company issued 33,244,681 shares of common stock upon the conversion of $175,120 of principal and $12,380 accrued and unpaid interest on the note. The shares were issued at approximately $0.00564 per share. On July 5, 2018, St. George sold the remaining balance of the 2016 Note of $138,124 to L2 Capital, LLC (“L2”, see below). The principal and interest balance of the note as of September 30, 2018, and December 31, 2017, was $-0- and $313,244, respectively. Beginning on the date that is six (6) months after the later of (i) the Issuance Date, and (ii) the date the Initial Cash Purchase Price is paid to the Company (the “Initial Installment Date”), and on each applicable Installment Date thereafter, the Company is to pay the Holder, the applicable Installment Amount due on such date. Five Installment Amounts of $111,000 plus the sum of any accrued and unpaid interest, fees, costs or charges may be made (a) in cash (a “Company Redemption”), (b) by converting such Installment Amount into shares of Common Stock (a “Company Conversion”), or (c) by any combination of a Company Conversion and a Company Redemption so long as the entire amount of such Installment Amount due shall be converted and/or redeemed by the Company on the applicable Installment Date. The St. George 2016 Note matured fifteen months after the Issuance Date. 2017 Convertible Notes On January 24, 2017, the Company completed the closing of a private placement financing transaction with Cerberus, pursuant to a Securities Purchase Agreement (the “Cerberus Purchase Agreement”). Pursuant to the Cerberus Purchase Agreement, Cerberus purchased an 8% Convertible Debenture (the “Cerberus Debenture”) in the aggregate principal amount of $63,000, and delivered on January 25, 2017, gross proceeds of $60,000 excluding transaction costs, fees, and expenses. During the three months ended March 31, 2017, the Company recorded a debt discount of $60,000 and recorded amortization expense of $10,833. As of September 30, 2018, the note was paid in full. Also, on January 24, 2017, the Company issued to Cerberus, a back-end note under the same terms and conditions, in the amount of $63,000. On June 30, 2017, the back-end note was funded upon receipt of $60,000, excluding transaction costs, fees, and expenses. During the nine months ended September 30, 2018, the Company redeemed the back- end note. The principal balance of the back-end- note as of September 30, 2018, and December 31, 2017 was $-0- and $63,000, respectively. The Company recorded a repayment loss of $20,790 and is included in Loss on debt settlement for the nine months ended September 30, 2018. On February 1, 2017, the Company completed the closing of a private placement financing transaction with Power Up Lending Group, LTD (“Power Up”), pursuant to a Securities Purchase Agreement (the “Power Up Purchase Agreement”). Pursuant to the Power Up Purchase Agreement, Power Up purchased an 12% Convertible Debenture (the “Power Up Debenture”) in the aggregate principal amount of $140,000, and delivered on February 3, 2017 (the “Funding Date”), gross proceeds of $136,500 excluding transaction costs, fees, and expenses. Principal and interest on the Power Up Debentures is due and payable on November 5, 2017, and the Power Up Debenture is convertible into shares of the Company’s common stock beginning six months from the Funding Date, at a VCP. The VCP is calculated as the average of the three (3) lowest closing bid price during the ten (10) trading days immediately prior to the conversion date multiplied by fifty eight percent (58%), representing a forty two percent (42%) discount. During the year ended December 31, 2017, the Company recorded a debt discount of $136,500 and during the year ended December 31, 2017, recorded amortization expense of $136,500. The Company may prepay the Power Up Debenture, subject to prior notice to the holder within an initial 30-day period after issuance, by paying an amount equal to 120% multiplied by the amount that the Company is prepaying. For each additional 30-day period the amount being prepaid is multiplied by an additional 5%, up to a maximum of 140% on the 180 th th On February 24, 2017, the Company completed the closing of a private placement financing transaction with Cerberus, pursuant to a Securities Purchase Agreement (the “Cerberus Purchase Agreement”). Pursuant to the Cerberus Purchase Agreement, Cerberus purchased an 8% Convertible Debenture (the “Cerberus Debenture”) in the aggregate principal amount of $17,500, and delivered on February 27, 2017, gross proceeds of $16,000 excluding transaction costs, fees, and expenses. During the nine months ended September 30, 2018, the Company redeemed the note. The principal and interest balance of the note as of September 30, 2018, and December 31, 2017 was $-0- and $17,500, respectively. Also, on February 24, 2017, the Company issued to Cerberus, a back-end note under the same terms and conditions, in the amount of $17,500. On December 7, 2017, the back-end note was funded upon receipt of $16,000, excluding transaction costs, fees, and expenses. During the nine months ended September 30, 2018, the Company redeemed the back- end note. The principal balance of the back-end- note as of September 30, 2018 and December 31, 2017 was $-0- and $17,500, respectively. The Company recorded a repayment loss of $11,550 on the redemption of the debenture and back-end note and is included in Loss on debt settlement for the nine months ended September 30, 2018. On December 20, 2017, the Company entered into a Convertible Promissory Note ("St. George 2017 Notes") for $1,105,000 to St. George which includes a purchase price of $1,000,000 and transaction costs of $5,000 and OID interest of $100,000. On December 21, 2017, the Company received $200,000 and recorded $225,000 as convertible note payable, including $5,000 of transaction costs and $20,000 OID interest. St. George also issued to the Company four secured promissory notes, each in the amount of $200,000. All or any portion of the outstanding balance of the St. George 2017 Notes may be prepaid, without penalty, along with accrued but unpaid interest at any time prior to maturity. The Company has no obligation to pay St. George any amounts on the unfunded portion of the St. George 2017 Notes. The St. George 2017 Note bears interest at 10% per annum (increases to 22% per annum upon an event of default) and is convertible into shares of the Company’s common stock at St. George’s option at a price of $0.05 per share. On December 27, 2017, St. George funded $250,000 of the secured promissory notes issued to the Company, and the Company recorded $270,000 as convertible note payable, including $20,000 OID interest, $242,060 of the funding was used as part of the Company’s debt consolidation plan. During the year ended December 31, 2017, the Company recorded debt discounts of $450,000. During the nine months ended September 30, 2018, St. George funded $350,000 of the secured promissory notes issued to the Company, of which $236,817 was used as part of the Company’s debt consolidation plan, and the Company recorded $390,000 as convertible note payable, including $40,000 OID interest. On July 5, 2018, St. George sold the remaining principal balance of the 2017 Note of $885,000 to L2 (see below). During the nine months ended September 30, 2018, the Company amortized $833,363 of debt discount to amortization expense. As of September 30, 2018, and December 31, 2017, the unamortized note discounts were $-0- and $529,068, respectively. The principal and interest balance of the St George 2017 Note as of September 30, 2018 and December 31, 2017, was $-0- and $495,926 respectively. 2018 Convertible Notes On May 4, 2018, the Company completed the closing of a private placement financing transaction with Power Up Lending Group, LTD (“Power Up”), pursuant to a Securities Purchase Agreement (the “Power Up Purchase Agreement”). Pursuant to the Power Up Purchase Agreement, Power Up purchased an 12% Convertible Debenture (the “Power Up Debenture”) in the aggregate principal amount of $78,000, and delivered on May 11, 2018 (the “Funding Date”), gross proceeds of $75,000 excluding transaction costs, fees, and expenses. Principal and interest on the Power Up Debentures is due and payable on February 28, 2019, and the Power Up Debenture is convertible into shares of the Company’s common stock beginning six months from the Funding Date, at a VCP. The VCP is calculated as the average of the three (3) lowest closing bid price during the ten (10) trading days immediately prior to the conversion date multiplied by fifty eight percent (58%), representing a forty two percent (42%) discount. The Company recorded a debt discount of $74,759 and during the nine months ended September 30, 2018, recorded amortization expense of $35,747. As of September 30, 2018, the unamortized note discount was $39,012. The Company may prepay the Power Up Debenture, subject to prior notice to the holder within an initial 30-day period after issuance, by paying an amount equal to 120% multiplied by the amount that the Company is prepaying. For each additional 30-day period the amount being prepaid is multiplied by an additional 5%, up to a maximum of 140% on the 180 th th On May 8, 2018, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with L2 Capital, LLC (“L2”) pursuant to which the Company issued and sold a promissory note to the Investor in the aggregate principal amount of up to $565,555 (the “Note”), which is convertible into shares of common stock of the Company, subject to the terms, conditions and limitations set forth in the Note. The Note accrues interest at a rate of 9% per annum. The aggregate principal amount of up to $565,555 consists of a prorated original issuance discount of up to $55,555 and a $10,000 credit to L2 for transactional expenses with net consideration to the Company of up to $500,000 which will be funded in tranches. The maturity date of each tranche funded shall be six (6) months from the effective date of each payment and is the date upon which the principal sum, as well as any accrued and unpaid interest and other fees for each tranche, shall be due and payable. L2 has the right at any time to convert all or any part of the funded portion of the Note into fully paid and non-assessable shares of common stock of the Company at the Conversion Price, which is equal to 58% multiplied by the lowest VWAP during the twenty-five (25) Trading Day period ending, in Holder’s sole discretion on each conversion, on either (i) the last complete Trading Day prior to the Conversion Date or (ii) the Conversion Date (subject to adjustment as provided in the Note), subject to the occurrence of any Event of Default (as defined therein) under the Note. In connection with the funding of the initial tranche $100,000 on May 23, 2018, the Company recorded $121,111 of the Note and also issued a common stock purchase warrant to L2 to purchase up to 6,968,411 shares of the Company’s common stock pursuant to the terms therein (the “L2 Warrant”) as a commitment fee. The Company recorded an initial derivative liability and derivative expense of $108,569 for the issuance of the warrant. The Company recorded a debt discount of $121,111 and during the nine months ended September 30, 2018, recorded amortization expense of $87,402. As of September 30, 2018, the unamortized note discount is $33,709. At the time that each subsequent tranche under the Note is funded by L2 in cash, then on such funding date, the warrant shares shall immediately and automatically be increased by the quotient of 100% of the face value of the respective tranche and 110% of the VWAP of the common stock on the Trading Day immediately prior to the funding date of the respective tranche. The L2 Warrant is exercisable for a period of five (5) years from date of issuance. The L2 Warrant includes a cashless net exercise provision whereby L2 can elect to receive shares equal to the value of the L2 Warrant minus the fair market value of shares being surrendered to pay for the exercise. Since the date of the initial funding L2 has funded $154,500 of additional tranches and the Company increased the Note by $171,665. The Company recorded an initial derivative liability on the additional tranches funded of $191,322, a debt discount of $171,665 and an initial derivative expense of $19,657. During the nine months ended September 30, 2018, the Company recorded amortization expense of $77,206 and the unamortized debt discount s of September 30, 2018, on the additional tranches funded is $94,459. The principal and interest balance of the Note as of September 30, 2018, was $298,803. On June 22, 2018, the Company completed the closing of a private placement financing transaction with Power Up, pursuant to a Securities Purchase Agreement (the “Power Up Purchase Agreement”). Pursuant to the Power Up Purchase Agreement, Power Up purchased an 12% Convertible Debenture (the “Power Up Debenture”) in the aggregate principal amount of $53,000, and delivered on June 27, 2018 (the “Funding Date”), gross proceeds of $50,000 excluding transaction costs, fees, and expenses. Principal and interest on the Power Up Debentures is due and payable on February 28, 2019, and the Power Up Debenture is convertible into shares of the Company’s common stock beginning six months from the Funding Date, at a VCP. The VCP is calculated as the average of the three (3) lowest closing bid price during the ten (10) trading days immediately prior to the conversion date multiplied by fifty eight percent (58%), representing a forty two percent (42%) discount. The Company recorded a debt discount of $49,398 and during the nine months ended September 30, 2018, and has recorded amortization expense of $15,733. As of September 30, 2018, the unamortized note discount was $33,665. The Company may prepay the Power Up Debenture, subject to prior notice to the holder within an initial 30-day period after issuance, by paying an amount equal to 120% multiplied by the amount that the Company is prepaying. For each additional 30-day period the amount being prepaid is multiplied by an additional 5%, up to a maximum of 140% on the 180 th th On July 5, 2018, as part of the Company’s debt consolidation plan, the Company accepted and agreed to a Note Purchase Agreement (the “NPA”), whereby, St George assigned $174,374.72 of principal and interest of their St George 2016 Note (See above) and $927,323.67 of principal and interest on their St George 2017 Note (see above) to L2. The Company issued a 10% Replacement Promissory Note (the “RPN”) to L2 for $1,101,698. The RPN is due January 5, 2019, and is convertible into shares of the Company’s common stock at any time at the discretion of L2 at a conversion price equal to the lowest trading price during the twenty-five (25) trading days immediately prior to the conversion date multiplied by fifty eight percent (58%), representing a forty two percent (42%) discount. During the nine months ended September 30, 2018, the Company recorded amortization expense of $522,420 and as of September 30, 2018 the unamortized note discount was $579,278. During the nine months ended September 30, 2018, L2 converted $187,308 of the RPN into 34,500,000 shares of common stock at n average conversion price of $0.0054 per share. As of September 30, 2018, the remining principal and interest balance of the RPN is $961,875. The Company determined that the conversion feature of the 2017 and 2018 Convertible Notes represent an embedded derivative since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the 2017 Convertible Notes were not considered to be conventional debt under ASC 815-40 (formerly EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock) and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments being recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to each Note. Such discount is being amortized from the date of issuance to the maturity dates of the Notes. The change in the fair value of the liability for derivative contracts are recorded in other income or expenses in the consolidated statements of operations at the end of each quarter, with the offset to the derivative liability on the balance sheet. The embedded feature included in the 2017 Convertible Notes that were funded in 2018, and the 2018 Convertible Notes resulted in an initial debt discount of $1,908,631, an initial derivative liability expense of $328,799 and an initial derivative liability of $2,237,430. During the nine months ended September 30, 2018, the Company recorded amortization expense on the debt discounts of $1,622,702, and there remains $780,122 of unamortized debt discount as of September 30, 2018. Convertible Note Conversions During the nine months ended September 30, 2018, the Company issued the following shares of common stock upon the conversions of portions of the Convertible Notes: Date Principal Conversion Interest Conversion Total Conversion Conversion Price Shares Issued Issued to 2/12/18 $ 69,221 $ 5,779 $ 75,000 $ 0.00564 13,297,872 St Georges 3/27/18 $ 47,061 $ 2,939 $ 50,000 $ 0.00564 8,865,248 St Georges 4/23/18 $ 26,234 $ 1,266 $ 27,500 $ 0.00564 4,875,887 St Georges 6/11/18 $ 32,604 $ 2,396 $ 35,000 $ 0.00564 6,205,674 St Georges 7/9/18 $ 17,690 $ — $ 17,690 $ 0.00707 2,500,000 L2 7/31/18 $ 27,550 $ — $ 27,550 $ 0.00550 5,000,000 L2 8/6/18 $ 44,080 $ — $ 44,080 $ 0.00551 8,000,000 L2 9/18/18 $ 29,928 $ — $ 29,928 $ 0.00498 6,000,000 L2 9/24/18 $ 31,320 $ — $ 31,320 $ 0.00520 6,000,000 L2 9/28/18 $ 36,540 $ — $ 36,540 $ 0.00522 7,000,000 L2 $ 362,228 $ 12,380 $ 374,608 67,744,681 A summary of the convertible notes payable balance as of September 30, 2018, and December 31, 2017, is as follows: 2018 2017 Beginning Principal Balance $ 979,443 826,480 Convertible notes-newly issued 816,966 1,813,210 Conversion of convertible notes (principal) (362,228 ) (1,350,247 ) Accrued interest added to convertible notes 78,574 — Principal payments (171,199 ) (310,000 ) Unamortized discount (780,122 ) (494,193 ) Ending Principal Balance, net $ 561,434 485,260 The Company recorded a loss on debt settlement of $58,759 on the redemption of convertible notes for the nine months ended September 30, 2018. |
Derivative liabilities
Derivative liabilities | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Derivative liabilities | Note 9 - Derivative liabilities As of September 30, 2018, the Company revalued the embedded conversion feature of the Convertible Notes, and warrants (see note 11). The fair values were calculated based on the Monte Carlo simulation method consistent with the terms of the related debt. A summary of the derivative liability balance as of September 30, 2018, is as follows: Notes Warrants Total Beginning Balance $ 3,608,345 $ 1,808,485 $ 5,416,830 Initial Derivative Liability 2,237,430 108,569 2,345,999 Fair Value Change (2,093,754 ) (1,319,808 ) (3,413,562 ) Derivative Settlement (2,332,708 ) (105,526 ) (2,438,234 ) Ending Balance $ 1,419,313 $ 491,720 $ 1,911,033 The credit to derivative expense for the nine months ended September 30, 2018, of $2,976,297 is comprised of the initial derivative expense of $437,368 resulting from the issuances of new convertible notes and warrants in the period and the fair value change decreasing the liability and expense by $3,413,562. For the nine months ended September 30, 2017, there was derivative expense of $1,691,003, comprised of $962,317 of initial derivative expense resulting form new convertible notes issued during the nine months ended September 30, 2017, and the change, increasing the liability and expense by $728,686. The fair value at the commitment date for the 2018 Convertible Notes and the re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of September 30, 2018: Commitment date Remeasurement date Expected dividends -0- -0- Expected volatility 88%-178% 100%-102% Expected term 6-12 months 6-6.5 months Risk free interest 1.83%-2.36% 2.36%-2.37% On May 23, 2018, the Company issued a warrant to purchase 6,968,411 shares of common stock (see Norte 8) and valued the warrant at $108,569. As of September 30, 2018, the Company evaluated all outstanding warrants to determine whether these instruments may be tainted. All warrants outstanding were considered tainted. The Company valued the embedded derivatives within the warrants using the Black-Scholes valuation model. The fair value for Warrants as of the issue date and measurement date were based upon the following management assumptions: Commitment date Remeasurement date Expected dividends -0- -0- Expected volatility 198% 189%-194% Expected term 5 years 3.03-4.8 years Risk free interest 2.78% 2.78%-3.0% |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 10 – Related Party Transactions Effective January 1, 2013, the Company agreed to an annual compensation of $150,000 for its CEO, Mr. Michael Friedman (resigned March 20, 2015, re-appointed November 4, 2015). Effective March 20, 2015, Mr. Justin Braune was named CEO and President. Mr. Braune also was appointed to the Board of Directors. The Company agreed to an annual compensation of $100,000 for Mr. Braune in his role of CEO and Director of the Company and to issue Mr. Braune 15,000,000 shares of restricted common stock. Mr. Braune resigned from the board of directors and as CEO on November 4, 2015, and agreed to cancel the 15,000,000 shares in his letter of resignation. The Company also initially issued Mr. Braune 12,500,000 shares of common stock on October 13, 2015. On October 16, 2015, Mr. Braune advised the Company’s transfer agent at the time to cancel the shares. For the three and nine months ended September 30, 2018 and 2017, the Company recorded expenses to the CEO of $32,608 and $112,500, respectively, and $37,500 and $112,500 for the three and nine months ended September 30, 2017, respectively. For the three and nine months ended September 30, 2018, $7,500 and $22,500, respectively, is included in cost of sales and $25,108 and $90,000, respectively, is included in Management Fees in the condensed consolidated statements of operations, included herein. As of September 30, 2018, and December 31, 2017, the Company owed the CEO $4,493 and $7,715, respectively, and is included in due to related party on the Company’s consolidated balance sheet. On June 25, 2018, the Company issued 1,700,000 shares to the CEO. The Company recorded an expense of $22,950 (based on the market price of the Company’s common stock of $0.0135 per share) for 1,700,000 shares and is included in management fees in the condensed consolidated statements of operations for the three and nine months ended September 30, 2018. On October 5, 2017, the Company agreed to lease from the Company’s CEO, a "420 Style" resort and estate property approximately one hour outside of Quebec City, Canada. The fifteen-acre estate consists of nine (9) unique guest suites, horse stables, and is within walking distance to a public golf course. A separate structure will serve as a small grow facility run by patient employees and caretakers on the property which may be toured by guests of the facility. Pursuant to the agreement, the Company will pay $8,000 per month in exchange for the Company being entitled to all rents and income generated from the property. For the three and nine months ended September 30, 2018, the Company paid and recorded $24,000 and $72,000, respectively, of expense, included in leased property expense, related party in the condensed consolidated statements of operations, included herein. The Company will be responsible for all costs of the property, including, but not limited to, renovations, repairs and maintenance, insurance and utilities. For the three and nine months ended September 30, 2018, the Company has incurred $33,500 and $133,000, respectively, of renovation expense. On August 8, 2017, the Company issued 5,000,000 shares of common stock to the seller. The Company valued the shares at $0.0123 per share (the market price of the common stock) and has included $61,500 in stock- based compensation expense for the year ended December 31, 2017. The Company has since paid in excess of $50,000 towards renovations. Mr. Johnston will now retain the shares under an amended agreement in exchange for legal fees, tax and license applications and as a financial custodian over the renovation account as a Canadian citizen. The 5,000,000 shares will be in exchange for twelve months of services. For the three and nine months ended September 30, 2018, the Company expenses $16,000 and $52,000, respectively, to the wife of the Company’s CEO for administrative fees, and $12,000 and $36,000 for the three and nine months ended September 30, 2017, respectively. The Company also paid Mrs. Friedman $25,000 for the nine months ended September 30, 2018, for developing and managing the Company’s websites and social media accounts. For the three and nine months ended September 30, 2018, the Company paid $13,400 and $32,400, respectively and $2,500 and $25,500 for the three and six months ended June 30, 2017, respectively, for investor relations services to a company controlled by our CEO. |
Common and Preferred Stock
Common and Preferred Stock | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Common and Preferred Stock | Note 11 – Common and Preferred Stock C ommon Stock 2018 Issuances Date Principal Conversion Interest Conversion Total Conversion Conversion Price Shares Issued Issued to 2/12/18 $ 69,221 $ 5,779 $ 75,000 $ 0.00564 13,297,872 St Georges 3/27/18 $ 47,061 $ 2,939 $ 50,000 $ 0.00564 8,865,248 St Georges 4/23/18 $ 26,234 $ 1,266 $ 27,500 $ 0.00564 4,875,887 St Georges 6/11/18 $ 32,604 $ 2,396 $ 35,000 $ 0.00564 6,205,674 St Georges 7/9/18 $ 17,690 $ — $ 17,690 $ 0.00707 2,500,000 L2 7/31/18 $ 27,550 $ — $ 27,550 $ 0.00550 5,000,000 L2 8/6/18 $ 44,080 $ — $ 44,080 $ 0.00551 8,000,000 L2 9/18/18 $ 29,928 $ — $ 29,928 $ 0.00498 6,000,000 L2 9/24/18 $ 31,320 $ — $ 31,320 $ 0.00520 6,000,000 L2 9/28/18 $ 36,540 $ — $ 36,540 $ 0.00522 7,000,000 L2 $ 362,228 $ 12,380 $ 374,608 67,744,681 The 7,000,000 shares recorded on September 28, 2018 are included in common stock to be issued as of September 30, 2018, as they were issued on October 2, 2018. In addition to the above, during the nine months ended September 30, 2018, the Company: On February 26, 2018, the Company agreed to issue 5,000,000 shares of common stock to Dr. Stephen Holt, for his appointment to the advisory board. The Company recorded an expense of $97,500 (based on the market price of the Company’s common stock of $0.0195 per share) and is included in professional and consulting fees in the condensed consolidated statements of operations for the nine months ended September 30, 2018. On June 21, 2018, the Company filed Amended Articles of Incorporation with the State of Delaware increasing the authorized shares of common stock to 1,250,000,000 shares. On June 25, 2018, the Company issued 1,700,000 shares to Mr. Friedman. The Company recorded an expense of $22,950 (based on the market price of the Company’s common stock of $0.0135 per share) for 1,700,000 shares and is included in management fees in the condensed consolidated statements of operations for the nine months ended September 30, 2018. During the nine months ended September 30, 2018, issued 39,251,579 shares of common stock to St. George pursuant to Notices of Exercise of Warrant received. The shares were issued based upon the cashless exercise provision of the warrant. The Company recorded the shares at their par value of $0.0001, with the offset to additional-paid-in-capital. Common stock to be issued During the nine months ended September 30, 2018, the Company reduced the shares of common stock to be issued previously recorded in fiscal year ended December 31, 2017, by 23,202,587 shares. The adjustment was a result of the terms of the SPA, whereby the purchase price of the common stock to be issued is based on 90% of the closing share price 6 months after the SPA. St. George and the Company have agreed to amend the SPA, whereby, the purchase price is 90% of the closing price of the common stock, the day preceding any SPA. During the nine months ended September 30, 2018, the Company received $390,000, pursuant to Stock Purchase Agreements (the “SPA”) with St. George to buy 21,163,815 shares of common stock. As of September 30, 2018, and December 31, 2017, shares of common stock to be issued are 57,553,563 and 52,574,335, respectively. Preferred Stock On June 26, 2015, the Company filed with the Delaware Secretary of State the Amended and Restated Designation Preferences and Rights (the “Certificate of Designation”) of Class B Preferred Stock (the “Series B Preferred Stock”). Pursuant to the Certificate of Designation, 1,000 shares constitute the Series B Preferred Stock. The Series B Preferred Stock and any accrued and unpaid dividends thereon shall, with respect to rights on liquidation, winding up and dissolution, rank senior to the Company’s issued and outstanding common stock and Series A preferred stock. The Series P e r S Warrants and Options On April 14, 2015, in connection with the appointment of Dr. Stephen Holt to the advisory board, the Company agreed the advisor shall receive a non-qualified stock option to purchase 1,000,000 shares (“Option Shares”) of the Company’s common stock at an exercise price equal to $0.05 per share and expiring April 14, 2018. Option Shares of 400,000 vested immediately and 50,000 Option Shares vested each month from April 2015 through March 2016. Accordingly, as of March 31, 2016, 1,000,000 Option Shares have vested and the Company recorded $2,317 as stock compensation expense for the year ended December 31, 2016, based on Black-Scholes. On October 31, 2016, the Company granted (Warrant #1) to St. George the right to purchase at any time on or after November 10, 2016 (the “Issue Date”) until the date which is the last calendar day of the month in which the fifth anniversary of the Issue Date occurs (the “Expiration Date”), a number of fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, equal to $57,500 divided by the Market Price (defined below) as of the Issue Date, as such number may be adjusted from time to time pursuant to the terms and conditions of Warrant #1 to Purchase Shares of Common Stock. The Market Price is equal to the lowest intra-day trade price in the twenty (20) Trading Days immediately preceding the applicable date of exercise, multiplied by sixty percent (60%). The exercise price is the lower of $0.05 and is subject to price adjustments pursuant to the agreement and includes a cashless exercise provision. The Company also issued Warrant #’s 2-9, with each warrant only effective upon St. George funding of the secured notes they issued to the Company. Warrant #’s 2-9 give St. George the right to purchase Warrant Shares equal to $27,500 divided by the Market Price on the funded date. On December 14, 2016, the Company received a payment of $50,000, and accordingly, Warrant #2 became effective. During the year ended December 31, 2017, the Company received the funding on the remaining notes and Warrant #’s 3-9 became effective. During the nine months ended September 30, 2018, the company issued 39,251,579 shares of common stock to St. George pursuant to Notices of Exercise of 4,166,775 Warrants received. The shares were issued based upon the cashless exercise provision of the warrant. The following table summarizes the activity related to warrants of the Company for the nine months ended September 30, 2018, and the year ended December 31, 2017: Number of Warrants Weighted-Average Exercise Price per share Weighted-Average Remaining Life (Years) Outstanding and exercisable at December 31, 2016 17,926,130 $ 0.0811 4.88 Warrant issued 40,573,870 0.00564 — Warrants exercised (9,364,108 ) 0.00564 — Outstanding and exercisable at December 31, 2017 49,135,892 0.00654 4.17 Warrants issued 6,968,411 0,0176 5.0 Warrants expired (1,000,000 ) 0.05 Warrants exercised (4,166,775 ) 0.00564 — Outstanding and exercisable September 30, 2018 50,937,528 $ 0.0064 3.30 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 12 – Income Taxes The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations. No provision for federal income taxes has been recorded due to the available net operating loss carry forwards of approximately $9,255,892 will expire in various years through 2032. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the future tax loss carry forwards. The actual income tax provisions differ from the expected amounts calculated by applying the statutory income tax rate to the Company's loss before income taxes. The components of these differences are as follows at September 30, 2018 and December 31, 2017: 2018 2017 Net tax loss carry-forwards $ 9,255,892 $ 7,878,733 Statutory rate 21.0 % 37.6 % Expected tax recovery 1,943,737 2,962,404 Change in valuation allowance (1,943,737 ) (2,962,404 ) Income tax provision $ — $ — Components of deferred tax asset: Non capital tax loss carry forwards $ 1,943,737 $ 2,962,404 Less: valuation allowance (1,943,737 ) (2,962,404 ) Net deferred tax asset $ — $ — |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 13 – Commitments and Contingencies Office Space In April 2014, the Company entered into a two-year sublease agreement for the use of up to 7,500 square feet with a Colorado based oncology clinical trial and drug testing company and facility presently doing cancer research and testing for established pharmaceutical companies seeking FDA approval for new drugs In January 2017, the Company signed a five (5) year lease, beginning February 1, 2017, for approximately 6,000 square feet of office space, comprised of two floors, in San Juan, Puerto Rico. Pursuant to the lease, the Company will pay $3,000 per month for the third floor of the building for the first year of the lease. The rent will increase 3% per year on February beginning in 2018 and an additional 3% per year on each successive February 1, during the term of the lease. The landlord agreed that the month of February 2017, the rent was $1,500. The rent for second floor of the building will be $2,000 per month during the term of the lease and the Company does not have any rent payments for the first three months of the lease (February 2017 through April 2017). Through September 30, 2017, the Company calculated the total amount of the rent for the term lease and recorded straight line rent expense of $45,417 and had made payments of $20,516. As of September 30, 2018, the Company has a balance of $24,916 in deferred rent which is included in the consolidated balance sheet. The leases for the second and third floor were cancelled in September 2017 as a result of Hurricane Irma. Rent expense was $22,906 and $36,016 for the three and nine months ended September 30, 2018, and $34,873 and $92,940 for the three and nine months ended September 30, 2017, respectively. Leased Properties On April 28, 2014, the Company executed and closed a ten-year lease agreement for 20 acres of an agricultural farming facility located in South Florida following the approval of the so-called “Charlotte’s Web” legislation, aimed at decriminalizing low grade marijuana specifically for the use of treating epilepsy and cancer patients. Pursuant to the lease agreement, the Company maintains a first right of refusal to purchase the property for three years. The Company has recorded $38,244 of expense (included in leased property expenses) for the years ended December 31, 2017, and 2016, respectively. The Company is currently in default of the lease agreement, as rents have not been for the second year of the lease beginning May 2015. On July 11, 2014, the Company signed a ten-year lease agreement for an additional 40 acres in Pueblo, Colorado. The lease requires monthly rent payments of $10,000 during the first year and is subject to a 2% annual increase over the life of the lease. The lease also provides rights to 50 acres of certain tenant water rights for $50,000 annually plus cost of approximately $2,400 annually. The Company paid the $50,000 in July 2014, and has not used the property and any water and has not paid for any water rights after September 30, 2015. The Company has not recorded any expense for the three and nine months ended September 30, 2018, and 2017. The Company is currently in default of the lease agreement, as rents have not been paid since February 2015. Agreements On April 5, 2017, the Company executed a five (5) year operational and exclusive licensing agreement with a third party who leases a 15,000-sq. ft. approved cultivation facility located in San Juan, Puerto Rico. The Company will be the exclusive funding source, and supervise all infrastructure buildout, equipment lease/finance, security systems and personnel and provide access of seasoned Colorado and California cultivation crews to ensure the facility meets all standard operating procedures as set forth by the Department Of Health of Puerto Rico. Under the agreement, the Company is to receive $12,000 a month in consulting fees, licensing fees on all vaporizer and edible sales, equipment and lighting rental and financing fees along with equity interest in the property. As of September 30, 2018, and December 31, 2017, the Company has invested $170,000 and $110,000, respectively. On August 7, 2017, the Company signed a LOI with Green Acres, whereby in consideration of consulting fees, licensing fees on all vaporizer and edible brands, equipment and lighting rental and financing fees, the Company will provide up to $250,000 of working capital and potentially, up to $3,500,000 for the buyout of Green Acres existing mortgage on their Washington State facility. As of September 30, 2018, and December 31, 2017, the Company has invested $115,000 and $100,000, respectively. On October 5, 2017, the Company agreed to lease from the Company’s CEO, a "420 Style" resort and estate property approximately one hour outside of Quebec City, Canada. The fifteen-acre estate consists of nine (9) guest suites, horse stables, and is within walking distance to a public golf course. A separate structure will serve as a small grow facility run by patient employees and caretakers on the property which may be toured by guests of the facility. Pursuant to the agreement, the Company will pay $8,000 per month in exchange for the Company being entitled to all rents and income generated from the property. For the three and nine months ended September 30, 2018, the Company paid and recorded $24,000 and $72,000, respectively, of expense, included in leased property expense, related party in the condensed consolidated statements of operations, included herein. The Company will be responsible for all costs of the property, including, but not limited to, renovations, repairs and maintenance, insurance and utilities. For the three and nine months ended September 30, 2018, the Company has incurred $33,500 and $133,000, respectively, of renovation expense. Legal & Other On March 2, 2015, the Company, the Company’s CEO and the Company’s CFO at the time were named in a civil complaint filed by Erick Rodriguez (the “Rodriguez Matter”) in the District Court in Clark County, Nevada (the “DCCC”). The complaint alleges that Mr. Rodriguez never received 250,000 shares of Series B preferred stock that were initially approved by the Board of Directors in 2012, subject to the completion of a merger of a company controlled by Mr. Rodriguez. Since the merger was never completed, the shares were never certificated to Mr. Rodriguez. On March 21, 2017, the DCC agreed to Set Aside the Entry of Default against the Defendants. Mr. Rodriguez resigned in June 2013. On April 12, 2018, an Arbitrator issued a final award to Rodriguez in the amount of $399,291. The Company and the Company’s counsel believe the Arbitrator denied a number of detailed objections to the award, which cited clear mistakes as to Nevada law and to the facts. The Company has retained a Nevada attorney who is an expert in fighting attempts to convert arbitration awards into judgments in Nevada courts, to work with our arbitration counsel. On May 3, 2018, the Arbitrator issued an amended final award of $631,537, inclusive of interest and legal fees. The Company recorded a loss of $232,246 on the legal matter, included in other expenses for the nine months ended September 30, 2018. On September 13, 2018, the motion to vacate the award was denied. On December 10, 2018, the parties agreed to a confidential settlement on the matter. On May 6, 2016, the Company, B. Michael Freidman and Barry Hollander (former CFO) were named as defendants in a Summons/Complaint filed by Justin Braune (the “Plaintiff”) in Palm Beach County Civil Court, Florida (the “PBCCC”). The complaint alleges that Mr. Braune was entitled to shares of common stock of the Company. On December 5, 2016, the PBCCC set aside a court default that had been previously issued. The defendants have answered the complaint, including the defenses that Mr. Braune advised the Company’s transfer agent and the Company in his letter of resignation dated November 4, 2015, clearly stating that he has relinquished all shares of common stock. The Company has filed a counterclaim suit against the Plaintiff, as well as sanctions against the Plaintiff and their counsel. |
Going Concern
Going Concern | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | Note 14 – Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. As of September 30, 2018, the Company had an accumulated deficit of $25,868,419 and working capital deficit of $3,776,208, inclusive of a derivative liability of $1,911,033. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 15 – Subsequent Events From October 1, 2018 through November 28, 2018, the Company issued 139,411,403 shares of common stock upon the conversion of $454,768 of principal and $4,680 of accrued interest. On October 3, 2018, the Company issued 3,129,980 shares of common stock to St George. The shares were previously recorded as shares to be issued, and have now been certificated. On October 11, 2018, and October 25, 2018, the Company issued 4,300,000 and 5,300,000 shares of common stock, respectively, to St. George pursuant to a Notice of Exercise of Warrant received. The shares were issued based upon the cashless exercise provision of the warrant. On December 10, 2018, Mr. Suneil Singh Mundie was appointed to the Board of Directors (the “BOD”) of the Company. Also, on December 10, 2018, the BOD received a letter of resignation from B. Michael Friedman, notifying the BOD that effective December 11, 2018, he was resigning as CEO of the Company as well as resigning from the BOD of the Company and any subsidiary BOD positions. Effective December 11, 2018, Mr. Mundie was named Interim CEO. On December 10, 2018, the parties involved in the Rodriguez Matter (see Note 13) agreed to a confidential settlement. |
Summary of Significant Accoun_2
Summary of Significant Account Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"). The consolidated financial statements of the Company include the consolidated accounts of Agritek and its’ wholly owned subsidiaries MediSwipe, AVHI, The American Hemp Trading Company, Inc., a Colorado Corporation (dba 77Acres, Inc.) and PPI. PPI, a Florida corporation, was originally formed on July 1, 2013 as The American Hemp Trading Company, Inc. (“HempFL”) and on August 27, 2014, HempFL changed its’ name to PPI. All intercompany accounts and transactions have been eliminated in consolidation. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. |
Accounts Receivable | Accounts Receivable The Company records accounts receivable from amounts due from its customers upon the shipment of products. The allowance for losses is established through a provision for losses charged to expenses. Receivables are charged against the allowance for losses when management believes collectability is unlikely. The allowance is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience. While management uses the best information available to make its evaluations, this estimate is susceptible to significant change in the near term. As of September 30, 2018, and December 31, 2017, based on the above criteria, the Company has a full allowance for doubtful accounts of $43,408. |
Inventory | Inventory Inventory is valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow-moving inventory is made based on management analysis or inventory levels and future sales forecasts. |
Notes receivable | Notes receivable September 30, December 31, Client 1 $ 170,000 $ 110,000 Client 2 115,000 100,000 Total $ 285,000 $ 210,000 • Note receivable from Client 1 is pursuant to a five (5) year operational and exclusive licensing agreement with a third party who leases a 15,000-sq. ft. approved cultivation facility located in San Juan, Puerto Rico (see Note 10). • Note receivable from Client 2 is pursuant to a five (5) year operational and exclusive licensing agreement with a third party who leases a 10,000-sq. ft. approved cultivation facility located in Washington State (see Note 10). |
Deferred Financing Costs | Deferred Financing Costs The costs related to the issuance of debt are capitalized and amortized to interest expense using the straight-line method through the maturities of the related debt. |
Derivative Financial Instruments | Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. |
Debt Issue Costs and Debt Discount | Debt Issue Costs and Debt Discount The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. |
Original Issue Discount | Original Issue Discount For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the initial carrying value of the note and is amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. |
Marketable Securities and Other Comprehensive Income | Marketable Securities and Other Comprehensive Income The Company classifies its marketable securities as available-for-sale securities, which are carried at their fair value based on the quoted market prices of the securities with unrealized gains and losses, net of deferred income taxes, reported as accumulated other comprehensive income (loss), a separate component of stockholders’ equity. Realized gains and losses on available-for-sale securities are included in net earnings in the period earned or incurred. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost, and except for land, depreciation is provided by use of a straight-line method over the estimated useful lives of the assets. The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. In February, 2017, the Company entered into a land purchase contract to acquire approximately 80 acres including water and mineral rights. The total cost of the land was $129,555. The Company paid $41,554 at closing and issued a note payable for $88,000. The Company is on the deed of trust of the property with a remaining note balance of $21,500 and $51,500 due the seller as of September 30, 2018 and December 31, 2017, respectively. The estimated useful lives of property and equipment are as follows: Furniture and equipment 5 years Manufacturing equipment 7 years The Company's property and equipment consisted of the following at September 30, 2018, and December 31, 2017: September 30, December 31, Furniture and equipment $ 237,860 $ 180,684 Land 129,555 129.555 Accumulated depreciation (52,192 ) (23,824 ) Balance $ 315,223 $ 286,415 Depreciation expense of $10,250 and $28,368 was recorded for the three and nine months ended September 30, 2018, respectively, and $2,310 and $6,265 for the three and nine months ended September 30, 2017, respectively. |
Long-Lived Assets | Long-Lived Assets Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. |
Deferred rent | Deferred rent The Company calculates the total cost of the lease for the entire lease period and divides that amount by the number of months of the lease. The result is the average monthly expense and is charged to rent expense with the offset to deferred rent, irrespective of the actual amount paid. The amounts paid are charged to the deferred rent account. As of September 30, 2018, the Company has a balance of $24,916 in deferred rent which is included in the consolidated balance sheet. |
Revenue Recognition | Revenue Recognition Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the three and nine months ended September 30, 2018 and 2017, or the twelve months ended December 31, 2017. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: • Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. • Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. The carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments. The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of September 30, 2018, and December 31, 2017, for each fair value hierarchy level: September 30, 2018 Derivative Liabilities Total Level I $ — $ — Level II $ — $ — Level III $ 1,911,033 $ 1,911,033 December 31, 2017 Level I $ — $ — Level II $ — $ — Level III $ 5,416,830 $ 5,416,830 |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment. ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. Interest and penalties are classified as a component of interest and other expenses. To date, the Company has not been assessed, nor paid, any interest or penalties. Uncertain tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized. The Company’s tax years subsequent to 2005 remain subject to examination by federal and state tax jurisdictions. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Earnings (loss) per share are computed in accordance with ASC 260, "Earnings per Share". Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities, if any, outstanding during the period. As of September 30, 2018, there were warrants and options to purchase 50,937,528 shares of common stock and the Company’s outstanding convertible debt is convertible into approximately 245,073,504 shares of common stock. These amounts are included in the computation of dilutive net income per share. |
Accounting for Stock-Based Compensation | Accounting for Stock-Based Compensation The Company accounts for stock awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. The measurement date is the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete. Stock awards granted to non-employees are valued at their respective measurement dates based on the trading price of the Company’s common stock and recognized as expense during the period in which services are provided. For the nine months ended September 30, 2018, the Company recorded stock- based compensation of $120,450, and $24,600 and $491,431 for the three and nine months ended September 30, 2017, respectively. (See Note 9). |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates. |
Advertising | Advertising The Company records advertising costs as incurred. For the three and nine months ended September 30, 2018, advertising expense was $637 and $60,376, respectively, and $7,179 and $12,627 for the three and nine months ended September 30, 2017, respectively. |
Summary of Significant Accoun_3
Summary of Significant Account Policies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Note receivable | September 30, December 31, Client 1 $ 170,000 $ 110,000 Client 2 115,000 100,000 Total $ 285,000 $ 210,000 |
Property and equipment | September 30, December 31, Furniture and equipment $ 237,860 $ 180,684 Land 129,555 129.555 Accumulated depreciation (52,192 ) (23,824 ) Balance $ 315,223 $ 286,415 |
Financial instruments measured at fair value on a recurring basis | September 30, 2018 Derivative Liabilities Total Level I $ — $ — Level II $ — $ — Level III $ 1,911,033 $ 1,911,033 December 31, 2017 Level I $ — $ — Level II $ — $ — Level III $ 5,416,830 $ 5,416,830 |
Marketable Securities (Tables)
Marketable Securities (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
Marketable securities owned by Company | September 30, 2018 December 31, 2017 Beginning balance $ 41,862 $ 39,769 Unrealized gain (loss) marked to fair value (32,651 ) 2,093 Ending balance $ 9,211 $ 41,862 |
Prepaid Expenses (Tables)
Prepaid Expenses (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Other Income (Expense): | |
Prepaid expenses | September 30, 2018 December 31, 2017 Vendor deposits $ 31,000 $ 46,000 Investor relations 6,000 2,500 Rent, related party 8,000 — Total prepaid expenses $ 45,000 $ 48,500 |
Convertible Debt (Tables)
Convertible Debt (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Common stock issued upon conversions of portions of Convertible Notes | Date Principal Conversion Interest Conversion Total Conversion Conversion Price Shares Issued Issued to 2/12/18 $ 69,221 $ 5,779 $ 75,000 $ 0.00564 13,297,872 St Georges 3/27/18 $ 47,061 $ 2,939 $ 50,000 $ 0.00564 8,865,248 St Georges 4/23/18 $ 26,234 $ 1,266 $ 27,500 $ 0.00564 4,875,887 St Georges 6/11/18 $ 32,604 $ 2,396 $ 35,000 $ 0.00564 6,205,674 St Georges 7/9/18 $ 17,690 $ — $ 17,690 $ 0.00707 2,500,000 L2 7/31/18 $ 27,550 $ — $ 27,550 $ 0.00550 5,000,000 L2 8/6/18 $ 44,080 $ — $ 44,080 $ 0.00551 8,000,000 L2 9/18/18 $ 29,928 $ — $ 29,928 $ 0.00498 6,000,000 L2 9/24/18 $ 31,320 $ — $ 31,320 $ 0.00520 6,000,000 L2 9/28/18 $ 36,540 $ — $ 36,540 $ 0.00522 7,000,000 L2 $ 362,228 $ 12,380 $ 374,608 67,744,681 |
Summary of convertible notes payable balance | 2018 2017 Beginning Principal Balance $ 979,443 826,480 Convertible notes-newly issued 816,966 1,813,210 Conversion of convertible notes (principal) (362,228 ) (1,350,247 ) Accrued interest added to convertible notes 78,574 — Principal payments (171,199 ) (310,000 ) Unamortized discount (780,122 ) (494,193 ) Ending Principal Balance, net $ 561,434 485,260 |
Derivative liabilities (Tables)
Derivative liabilities (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Summary of derivative liability balance | Notes Warrants Total Beginning Balance $ 3,608,345 $ 1,808,485 $ 5,416,830 Initial Derivative Liability 2,237,430 108,569 2,345,999 Fair Value Change (2,093,754 ) (1,319,808 ) (3,413,562 ) Derivative Settlement (2,332,708 ) (105,526 ) (2,438,234 ) Ending Balance $ 1,419,313 $ 491,720 $ 1,911,033 |
Fair value assumptions for derivative liabilities | Commitment date Remeasurement date Expected dividends -0- -0- Expected volatility 88%-178% 100%-102% Expected term 6-12 months 6-6.5 months Risk free interest 1.83%-2.36% 2.36%-2.37% |
Fair value assumptions for warrants | Commitment date Remeasurement date Expected dividends -0- -0- Expected volatility 198% 189%-194% Expected term 5 years 3.03-4.8 years Risk free interest 2.78% 2.78%-3.0% |
Common and Preferred Stock (Tab
Common and Preferred Stock (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Common And Preferred Stock | |
Common stock issuances upon conversion of portions of convertible notes | Date Principal Conversion Interest Conversion Total Conversion Conversion Price Shares Issued Issued to 2/12/18 $ 69,221 $ 5,779 $ 75,000 $ 0.00564 13,297,872 St Georges 3/27/18 $ 47,061 $ 2,939 $ 50,000 $ 0.00564 8,865,248 St Georges 4/23/18 $ 26,234 $ 1,266 $ 27,500 $ 0.00564 4,875,887 St Georges 6/11/18 $ 32,604 $ 2,396 $ 35,000 $ 0.00564 6,205,674 St Georges 7/9/18 $ 17,690 $ — $ 17,690 $ 0.00707 2,500,000 L2 7/31/18 $ 27,550 $ — $ 27,550 $ 0.00550 5,000,000 L2 8/6/18 $ 44,080 $ — $ 44,080 $ 0.00551 8,000,000 L2 9/18/18 $ 29,928 $ — $ 29,928 $ 0.00498 6,000,000 L2 9/24/18 $ 31,320 $ — $ 31,320 $ 0.00520 6,000,000 L2 9/28/18 $ 36,540 $ — $ 36,540 $ 0.00522 7,000,000 L2 $ 362,228 $ 12,380 $ 374,608 67,744,681 |
Activity related to warrants | Number of Warrants Weighted-Average Exercise Price per share Weighted-Average Remaining Life (Years) Outstanding and exercisable at December 31, 2016 17,926,130 $ 0.0811 4.88 Warrant issued 40,573,870 0.00564 — Warrants exercised (9,364,108 ) 0.00564 — Outstanding and exercisable at December 31, 2017 49,135,892 0.00654 4.17 Warrants issued 6,968,411 0,0176 5.0 Warrants expired (1,000,000 ) 0.05 Warrants exercised (4,166,775 ) 0.00564 — Outstanding and exercisable September 30, 2018 50,937,528 $ 0.0064 3.30 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income tax reconciliation | 2018 2017 Net tax loss carry-forwards $ 9,255,892 $ 7,878,733 Statutory rate 21.0 % 37.6 % Expected tax recovery 1,943,737 2,962,404 Change in valuation allowance (1,943,737 ) (2,962,404 ) Income tax provision $ — $ — |
Components of deferred tax asset | Components of deferred tax asset: Non capital tax loss carry forwards $ 1,943,737 $ 2,962,404 Less: valuation allowance (1,943,737 ) (2,962,404 ) Net deferred tax asset $ — $ — |
Summary of Significant Accounti
Summary of Significant Accounting Policies - Notes receivable (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Notes receivable | $ 285,000 | $ 210,000 |
Client 1 | ||
Notes receivable | 170,000 | 110,000 |
Client 2 | ||
Notes receivable | $ 115,000 | $ 100,000 |
Summary of Significant Accoun_4
Summary of Significant Account Policies - Property and equipment (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Summary Of Significant Account Policies - Property And Equipment | ||
Furniture and Equipment | $ 237,860 | $ 180,684 |
Land | 129,555 | 129,555 |
Accumulated depreciation | (52,192) | (23,824) |
Balance | $ 315,223 | $ 286,415 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Financial instruments measured at fair value on a recurring basis (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Derivative liabilities | $ 1,911,033 | $ 5,416,830 |
Level I | ||
Derivative liabilities | ||
Level II | ||
Derivative liabilities | ||
Level III | ||
Derivative liabilities | $ 1,911,033 | $ 5,416,830 |
Summary of Significant Accoun_6
Summary of Significant Account Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Allowance for doubtful accounts | $ 43,408 | ||||
Depreciation expense | $ (10,250) | $ (2,310) | $ (28,368) | $ (6,265) | |
Deferred rent balance | 24,916 | $ 24,916 | |||
Warrants to purchase common stock excluded from computation of earnings per share | 50,937,528 | ||||
Antidilutive shares excluded from computation of earnings per share | 245,073,504 | ||||
Stock and warrant based compensation | 24,600 | $ 120,450 | 491,431 | ||
Advertising expenses | $ 637 | $ 7,179 | $ 60,376 | $ 12,627 | |
Furniture and fixtures | |||||
Useful life | 5 years | ||||
Manufacturing equipment | |||||
Useful life | 7 years |
Marketable Securities - Marketa
Marketable Securities - Marketable securities owned by Company (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |||||
Beginning balance | $ 41,861 | $ 39,769 | $ 39,769 | ||
Unrealized gain marked to fair value | $ (2,356) | $ (2,093) | (32,651) | $ 5,508 | 2,093 |
Ending balance | $ 9,211 | $ 9,211 | $ 41,861 |
Marketable Securities (Details
Marketable Securities (Details Narrative) | Feb. 29, 2016USD ($) |
Investments, Debt and Equity Securities [Abstract] | |
Market value of shares of common stock received | $ 16,525 |
Prepaid Expenses - Prepaid expe
Prepaid Expenses - Prepaid expenses (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Prepaid Expenses - Prepaid Expenses | ||
Vendor deposits | $ 31,000 | $ 46,000 |
Investor relations | 6,000 | 2,500 |
Rent, related party | 8,000 | |
Total prepaid expenses | $ 45,000 | $ 48,500 |
Concentration of Credit Risk (D
Concentration of Credit Risk (Details Narrative) | Sep. 30, 2018USD ($) |
Risks and Uncertainties [Abstract] | |
FDIC maximum amount insured | $ 250,000 |
Note Payable (Details Narrative
Note Payable (Details Narrative) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Mar. 18, 2014 |
Remaining note balance held by original land owner | $ 21,500 | $ 51,500 | |
Note Payable | |||
Cash paid in conjunction of land purchase | $ 36,000 | ||
Promissory note entered in conjunction with land purchase | $ 85,750 |
Convertible Debt - Common stock
Convertible Debt - Common stock issued upon conversions of portions of Convertible Notes (Details) - Conversions of portions of Convertible Notes - USD ($) | Sep. 29, 2018 | Sep. 25, 2018 | Sep. 19, 2018 | Aug. 07, 2018 | Aug. 01, 2018 | Jul. 10, 2018 | Jun. 12, 2018 | Apr. 24, 2018 | Mar. 28, 2018 | Feb. 13, 2018 | Sep. 30, 2018 |
Principal conversion | $ 36,540 | $ 31,320 | $ 29,928 | $ 44,080 | $ 27,550 | $ 17,690 | $ 32,604 | $ 26,234 | $ 47,061 | $ 69,221 | |
Interest conversion | 2,396 | 1,266 | 2,939 | 5,779 | |||||||
Total conversion | $ 36,540 | $ 31,320 | $ 29,928 | $ 44,080 | $ 27,550 | $ 17,690 | $ 35,000 | $ 27,500 | $ 50,000 | $ 75,000 | |
Conversion price | $ 0.00522 | $ 0.00520 | $ 0.00498 | $ 0.00551 | $ 0.00550 | $ 0.00707 | $ 0.00564 | $ 0.00564 | $ 0.00564 | $ 0.00564 | |
Shares Issued | 7,000,000 | 6,000,000 | 6,000,000 | 8,000,000 | 5,000,000 | 2,500,000 | 6,205,674 | 4,875,887 | 8,865,248 | 13,297,872 | |
Issued to | L2 | L2 | L2 | L2 | L2 | L2 | St Georges | St Georges | St Georges | St Georges | |
Principal conversion | $ 362,228 | ||||||||||
Interest conversion | 12,380 | ||||||||||
Total conversion | $ 374,608 | ||||||||||
Shares Issued | 67,744,681 |
Convertible Debt - Summary of c
Convertible Debt - Summary of convertible notes payable balance (Details) - Convertible notes payable balance summary - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Beginning Principal Balance | $ 979,443 | $ 826,480 |
Convertible notes - newly issued | 816,966 | 1,813,210 |
Conversion of convertible notes (principal) | (362,228) | (1,350,247) |
Accrued interest added to convertible notes | 78,574 | |
Principal payments | (171,199) | (310,000) |
Unamortized discount | (780,122) | (494,193) |
Ending Principal Balance | $ 561,434 | $ 485,260 |
Convertible Debt - 2016 Convert
Convertible Debt - 2016 Convertible Notes (Details Narrative) - USD ($) | Oct. 31, 2016 | Sep. 30, 2018 | Dec. 31, 2017 |
Initial debt discount | $ 780,122 | $ 494,193 | |
St. George 2016 Notes (1) | |||
Convertible Promissory Note issued, amount | $ 555,000 | ||
Purchase price balance | 500,000 | ||
Transaction costs | 5,000 | ||
OID interest | 50,000 | ||
Purchase price received | 100,000 | ||
Amount recorded as convertible note payable | 115,000 | ||
Secured promissory notes issued, total | $ 400,000 | ||
Conversion of note, principal converted | 175,120 | ||
Conversion of note, accrued and unpaid interest converted | $ 12,380 | ||
Conversion price | $ 0.05 | $ 0.00564 | |
Conversion of note, shares issued | 33,244,681 | ||
Principal and interest balance outstanding | $ 313,244 | ||
Interest rate per annum | 10.00% | ||
Interest rate per annum in occurrence of event of default | 22.00% |
Convertible Debt - 2017 Convert
Convertible Debt - 2017 Convertible Notes (Details Narrative) - USD ($) | Mar. 21, 2018 | Jan. 10, 2018 | Dec. 28, 2017 | Dec. 21, 2017 | Feb. 03, 2017 | Dec. 31, 2017 | Feb. 24, 2017 | Jan. 25, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 20, 2017 | Jun. 23, 2017 | Feb. 01, 2017 | Jan. 24, 2017 |
Initial debt discount | $ 494,193 | $ 780,122 | $ 780,122 | $ 494,193 | |||||||||||||
Loss on debt settlement recorded | (58,759) | ||||||||||||||||
Cerberus Purchase Agreement 2017 (1) | |||||||||||||||||
Convertible Promissory Note issued, amount | $ 63,000 | ||||||||||||||||
Back end note issued | $ 63,000 | ||||||||||||||||
Net proceeds received | $ 60,000 | ||||||||||||||||
Principal and interest balance | |||||||||||||||||
Accrued interest outstanding | |||||||||||||||||
Principal and interest balance of back-end note | $ 63,000 | 63,000 | |||||||||||||||
Interest rate per annum | 8.00% | ||||||||||||||||
Power Up Purchase Agreement 2017 (1) | |||||||||||||||||
Convertible Promissory Note issued, amount | $ 140,000 | ||||||||||||||||
Net proceeds received | $ 136,500 | ||||||||||||||||
Conversion of note, principal converted | 73,198 | ||||||||||||||||
Conversion of note, accrued and unpaid interest converted | $ 967 | ||||||||||||||||
Conversion price | $ 0.00583 | $ 0.00583 | |||||||||||||||
Conversion of note, shares issued | 12,721,391 | ||||||||||||||||
Interest rate per annum | 12.00% | ||||||||||||||||
Replacement note, amount | $ 73,198 | ||||||||||||||||
Replacement note, outstanding balance | $ 73,199 | $ 73,199 | |||||||||||||||
Cerberus Purchase Agreement 2017 (2) | |||||||||||||||||
Convertible Promissory Note issued, amount | $ 17,500 | ||||||||||||||||
Back end note issued | 17,500 | ||||||||||||||||
Net proceeds received | $ 16,000 | ||||||||||||||||
Principal and interest balance of back-end note | 17,500 | 17,500 | |||||||||||||||
Interest rate per annum | 8.00% | ||||||||||||||||
St George 2017 Notes (1) | |||||||||||||||||
Convertible Promissory Note issued, amount | $ 1,105,000 | ||||||||||||||||
Net proceeds received | $ 75,000 | $ 200,000 | $ 250,000 | $ 200,000 | |||||||||||||
Convertible note payable recorded | 295,000 | 270,000 | 225,000 | ||||||||||||||
Purchase price balance | $ 1,000,000 | ||||||||||||||||
Transaction costs | 5,000 | 5,000 | |||||||||||||||
OID interest | $ 20,000 | $ 20,000 | $ 20,000 | 100,000 | |||||||||||||
Debt discounts recorded | 450,000 | ||||||||||||||||
Conversion price | $ 0.05 | ||||||||||||||||
Principal and interest balance | $ 495,926 | 495,926 | |||||||||||||||
Interest rate per annum | 10.00% | ||||||||||||||||
Unamortized debt discount remaining | $ 529,068 | $ 529,068 |
Convertible Debt - 2018 Convert
Convertible Debt - 2018 Convertible Notes (Details Narrative) - USD ($) | May 08, 2018 | May 04, 2018 | Jun. 22, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jul. 05, 2018 | Dec. 31, 2017 |
Initial debt discount | $ 780,122 | $ 780,122 | $ 494,193 | ||||||
Loss on debt settlement recorded | (58,759) | ||||||||
Power Up Purchase Agreement 2018 (1) | |||||||||
Convertible Promissory Note issued, amount | $ 78,000 | ||||||||
Net proceeds received | $ 75,000 | ||||||||
Debt discounts recorded | 74,759 | ||||||||
Maturity date | Feb. 28, 2019 | ||||||||
Principal and interest balance | 81,692 | 81,692 | |||||||
Interest rate per annum | 12.00% | ||||||||
Amortization expense on debt discounts recorded | 35,747 | ||||||||
Unamortized debt discount remaining | 39,012 | 39,012 | |||||||
L2 Securities Purchase Agreement 2018 (1) | |||||||||
Convertible Promissory Note issued, amount | $ 565,555 | ||||||||
Debt discounts recorded | 121,111 | ||||||||
Principal and interest balance | 298,803 | 298,803 | |||||||
Interest rate per annum | 9.00% | ||||||||
Amortization expense on debt discounts recorded | 77,206 | ||||||||
Unamortized debt discount remaining | 94,459 | 94,459 | |||||||
Power Up Purchase Agreement 2018 (2) | |||||||||
Convertible Promissory Note issued, amount | $ 53,000 | ||||||||
Net proceeds received | $ 50,000 | ||||||||
Debt discounts recorded | 49,398 | ||||||||
Principal and interest balance | 54,678 | 54,678 | |||||||
Interest rate per annum | 12.00% | ||||||||
Amortization expense on debt discounts recorded | 15,733 | ||||||||
Unamortized debt discount remaining | 33,655 | 33,655 | |||||||
NPA RPN | |||||||||
Convertible Promissory Note issued, amount | $ 1,101,698 | ||||||||
Conversion of note, principal converted | $ 187,308 | ||||||||
Conversion of note, shares issued | 34,500,000 | ||||||||
Principal and interest balance | 961,875 | $ 961,875 | |||||||
Amortization expense on debt discounts recorded | 522,420 | ||||||||
Unamortized debt discount remaining | 579,278 | 579,278 | |||||||
2018 Convertible Notes | |||||||||
Initial debt discount | 1,908,631 | 1,908,631 | |||||||
Initial derivative liability expense | 328,799 | ||||||||
Initial Derivative Liability | 2,237,430 | 2,237,430 | |||||||
Amortization expense on debt discounts recorded | 1,622,702 | ||||||||
Unamortized debt discount remaining | $ 780,122 | $ 780,122 |
Derivative liabilities - Summar
Derivative liabilities - Summary of derivative liability balance (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Fair Value Change | $ 85,909 | $ (1,187,676) | $ 2,976,297 | $ (1,691,003) |
Notes | ||||
Beginning Balance | 3,608,345 | |||
Initial Derivative Liability | 2,237,430 | |||
Fair Value Change | (2,093,754) | |||
Derivative Settlement | (2,332,708) | |||
Ending Balance | 1,419,313 | 1,419,313 | ||
Warrants | ||||
Beginning Balance | 1,808,485 | |||
Initial Derivative Liability | 108,569 | |||
Fair Value Change | (1,319,808) | |||
Derivative Settlement | (105,526) | |||
Ending Balance | 491,720 | 491,720 | ||
Totals | ||||
Beginning Balance | 5,416,830 | |||
Initial Derivative Liability | 2,345,999 | |||
Fair Value Change | (3,413,562) | |||
Derivative Settlement | (2,438,234) | |||
Ending Balance | $ 1,911,033 | $ 1,911,033 |
Derivative liabilities - Fair v
Derivative liabilities - Fair value assumptions for derivative liabilities (Details) | 9 Months Ended |
Sep. 30, 2018 | |
Commitment date | |
Expected dividends | 0.00% |
Expected volatility, minimum | 88.00% |
Expected volatility, maximum | 178.00% |
Expected term, minimum | 6 months |
Expected term, maximum | 12 months |
Risk free interest, minimum | 1.83% |
Risk free interest, maximum | 2.36% |
Remeasurement date | |
Expected dividends | 0.00% |
Expected volatility, minimum | 100.00% |
Expected volatility, maximum | 102.00% |
Expected term, minimum | 6 months |
Expected term, maximum | 6 months 15 days |
Risk free interest, minimum | 2.36% |
Risk free interest, maximum | 2.37% |
Derivative liabilities - Fair_2
Derivative liabilities - Fair value assumptions for warrants (Details) | 9 Months Ended |
Sep. 30, 2018 | |
Commitment date | |
Expected dividends | 0.00% |
Expected volatility, maximum | 198.00% |
Expected term, maximum | 5 years |
Risk free interest, maximum | 2.78% |
Remeasurement date | |
Expected dividends | 0.00% |
Expected volatility, minimum | 189.00% |
Expected volatility, maximum | 194.00% |
Expected term, minimum | 3 years 11 days |
Expected term, maximum | 4 years 9 months 18 days |
Risk free interest, minimum | 2.78% |
Risk free interest, maximum | 3.00% |
Derivative liabilities (Details
Derivative liabilities (Details Narrative) - USD ($) | May 24, 2018 | Sep. 30, 2018 | Sep. 30, 2017 |
Derivative Liabilities | |||
Credit to derivative expense | $ 2,976,297 | $ 1,691,003 | |
Initial derivative expense | 437,368 | 962,317 | |
Derivative liability decrease in fair value and expense | $ (3,413,562) | ||
Derivative liability increase in fair value and expense | $ 728,686 | ||
Warrant issued, shares | 6,968,411 | ||
Warrant issued, value | $ 108,569 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | Oct. 05, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Nov. 04, 2015 | Sep. 30, 2018 | Sep. 30, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Aug. 08, 2017 | Jan. 30, 2017 |
Officer compensation expense included in Administrative and Management Fees | $ 32,608 | $ 37,500 | $ 112,500 | $ 112,500 | ||||||
Amounts owed to officer included in due to related party | 4,493 | 4,493 | $ 7,715 | |||||||
Monthly payment to CEO for rights to rent and income generated from property owned by CEO | $ 8,000 | |||||||||
Expense paid included in cost of sales, related party | 7,500 | 22,500 | ||||||||
Expense paid included in Management Fees, related party | 25,108 | 90,000 | ||||||||
Expense paid included in leased property expense, related party | 24,000 | 72,000 | ||||||||
Renovation expense | 33,500 | 133,000 | ||||||||
Shares of common stock issued to seller | 5,000,000 | |||||||||
Amounts expensed to wife of CEO for administrative fees | 16,000 | 12,000 | 52,000 | 36,000 | ||||||
Amounts paid to wife of CEO for website and social media account development and management | 25,000 | |||||||||
Amounts paid to company controlled by CEO for investor relations services | $ 13,400 | $ 2,500 | $ 32,400 | $ 25,500 | ||||||
Mr. Friedman | ||||||||||
Annual compensation | $ 150,000 | |||||||||
Common stock issued for services, shares | 10,000,000 | |||||||||
Common stock issued for services, value | $ 301,000 | |||||||||
Common stock issued for services, price per share | $ 0.0301 | |||||||||
Mr. Braune, former CEO | ||||||||||
Annual compensation | $ 100,000 | |||||||||
Restricted common stock issued, shares | 15,000,000 | |||||||||
Restricted common stock issued, shares cancelled | (15,000,000) | |||||||||
Additional common stock issued, shares | 12,500,000 | |||||||||
Additional common stock issued, shares cancelled | (12,500,000) |
Common and Preferred Stock - Co
Common and Preferred Stock - Common stock issuances upon conversion of portions of convertible notes (Details) - Conversions of portions of Convertible Notes - USD ($) | Sep. 29, 2018 | Sep. 25, 2018 | Sep. 19, 2018 | Aug. 07, 2018 | Aug. 01, 2018 | Jul. 10, 2018 | Jun. 12, 2018 | Apr. 24, 2018 | Mar. 28, 2018 | Feb. 13, 2018 | Sep. 30, 2018 |
Principal conversion | $ 36,540 | $ 31,320 | $ 29,928 | $ 44,080 | $ 27,550 | $ 17,690 | $ 32,604 | $ 26,234 | $ 47,061 | $ 69,221 | |
Interest conversion | 2,396 | 1,266 | 2,939 | 5,779 | |||||||
Total conversion | $ 36,540 | $ 31,320 | $ 29,928 | $ 44,080 | $ 27,550 | $ 17,690 | $ 35,000 | $ 27,500 | $ 50,000 | $ 75,000 | |
Conversion price | $ 0.00522 | $ 0.00520 | $ 0.00498 | $ 0.00551 | $ 0.00550 | $ 0.00707 | $ 0.00564 | $ 0.00564 | $ 0.00564 | $ 0.00564 | |
Shares Issued | 7,000,000 | 6,000,000 | 6,000,000 | 8,000,000 | 5,000,000 | 2,500,000 | 6,205,674 | 4,875,887 | 8,865,248 | 13,297,872 | |
Issued to | L2 | L2 | L2 | L2 | L2 | L2 | St Georges | St Georges | St Georges | St Georges | |
Principal conversion | $ 362,228 | ||||||||||
Interest conversion | 12,380 | ||||||||||
Total conversion | $ 374,608 | ||||||||||
Shares Issued | 67,744,681 |
Common and Preferred Stock - Ac
Common and Preferred Stock - Activity related to warrants (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Outstanding | ||
Warrants outstanding, beginning | 17,926,130 | |
Weighted-average exercise price per share | $ 0.0811 | |
Weighted-average remaining life | 4 years 10 months 17 days | |
Warrants issued | ||
Warrants outstanding, beginning | 49,135,892 | |
Warrants issued | 40,573,870 | |
Weighted-average exercise price per share | $ 0.0176 | $ 0.00564 |
Weighted-average remaining life | 5 years | |
Warrants exercised | ||
Warrants issued | 6,968,411 | |
Warrants expired | (1,000,000) | |
Warrants exercised | (4,166,775) | (9,364,108) |
Weighted-average exercise price per share | $ 0.00564 | $ 0.00564 |
Weighted-average exercise price per share, expired | $ 0.05 | |
Outstanding and exercisable | ||
Warrants outstanding and exercisable | 50,937,528 | 49,135,892 |
Weighted-average exercise price per share | $ 0.0064 | $ 0.00654 |
Weighted-average remaining life | 3 years 3 months 18 days | 4 years 2 months 1 day |
Common and Preferred Stock - _2
Common and Preferred Stock - Common Stock (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Feb. 26, 2018 | |
Shares issued to Mr. Friedman | 1,700,000 | |
Issued to Stephen Holt for appointment to advisory board | ||
Common stock issued, shares | 5,000,000 | |
Common stock issued, price per share | $ 0.0195 | |
Stock compensation expense recorded | $ 97,500 | |
St. George Note Issuances | ||
Issuance of shares pursuant to Notices of Exercise of Warrant received | 39,251,579 |
Common and Preferred Stock - _3
Common and Preferred Stock - Common stock to be issued (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Common And Preferred Stock - Common Stock To Be Issued | ||
Reduction in shares of common stock to be issued previously recorded | (23,202,587) | |
Proceeds received pursuant to Stock Purchase Agreements | $ 390,000 | |
Shares of common stock to be bought by St George in SPA | 21,163,815 | |
Shares of common stock to be issued | 57,553,563 | 52,574,335 |
Common and Preferred Stock - Pr
Common and Preferred Stock - Preferred Stock (Details Narrative) - shares | Sep. 30, 2018 | Dec. 31, 2017 | Jun. 26, 2015 |
Common And Preferred Stock - Preferred Stock | |||
Preferred stock, shares issued to Mr. B Michael Friedman | 1,000 | ||
Preferred stock, shares outstanding | 1,000 | 1,000 |
Common and Preferred Stock - Wa
Common and Preferred Stock - Warrants (Details Narrative) - USD ($) | Apr. 14, 2015 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 14, 2016 |
Payments received from St. George upon Warrants becoming effective | $ 50,000 | |||
Common stock issued pursuant to Notice of Exercise of Warrants, shares | 39,251,579 | |||
Notice of Execise of Warrants received, warrants amount | 4,166,775 | |||
Dr. Holt | ||||
Non-qualified stock option to purchase common stock, shares | 1,000,000 | |||
Non-qualified stock option to purchase common stock, price per share | $ 0.05 | |||
Option shares vested | 1,000,000 | |||
Stock compensation expense for stock option vested shares | $ 2,317 | |||
Warrant expiration date | Apr. 14, 2018 |
Income Taxes - Income tax recon
Income Taxes - Income tax reconciliation (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Net tax loss carry-forwards | $ 9,255,892 | $ 7,878,733 |
Statutory rate | 21.00% | 37.60% |
Expected tax recovery | $ 1,943,737 | $ 2,962,404 |
Change in valuation allowance | (1,943,737) | (2,962,404) |
Income tax provision |
Income Taxes - Components of de
Income Taxes - Components of deferred tax asset (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Income Tax Disclosure [Abstract] | ||
Non capital tax loss carry forwards | $ 1,943,737 | $ 2,962,404 |
Less: valuation allowance | (1,943,737) | (2,962,404) |
Net deferred tax asset |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | Sep. 30, 2018USD ($) |
Income Tax Disclosure [Abstract] | |
Net operating loss carry forwards | $ 9,255,892 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | 10 Months Ended | 12 Months Ended | 24 Months Ended | 120 Months Ended | ||||||||
Feb. 28, 2017USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Mar. 31, 2016USD ($) | Jul. 10, 2024USD ($) | Aug. 07, 2017USD ($) | Apr. 05, 2017USD ($) | Jul. 11, 2014a | Apr. 28, 2014a | |
Office Space | ||||||||||||||||
Rent expense | $ 22,906 | $ 34,873 | $ 45,417 | $ 36,016 | $ 92,940 | |||||||||||
Payments made on rent expense | $ 20,516 | |||||||||||||||
Deferred rent balance | 24,916 | $ 24,916 | 24,916 | $ 24,916 | $ 24,916 | |||||||||||
Leased Properties | ||||||||||||||||
Land leased | a | 40 | 20 | ||||||||||||||
Expense recorded in leased property expenses | 38,244 | $ 38,244 | ||||||||||||||
Lease agreement term | 10 years | 10 years | ||||||||||||||
Lease agreement monthly rent payments during first year | $ 10,000 | |||||||||||||||
Lease agreement annual increase percentage | 2.00% | |||||||||||||||
Tenant water rights provided by lease, acres | a | 50 | |||||||||||||||
Tenant water rights provided by lease, annual price | $ 50,000 | |||||||||||||||
Tenant water rights provided by lease, approximate annual additional cost | $ 2,400 | |||||||||||||||
Expenses related to the land and water rights | ||||||||||||||||
Agreements | ||||||||||||||||
Monthly consulting and licensing fees received by Company from operation and licensing agreement with third party | $ 12,000 | |||||||||||||||
Investment in property pursuant to operation and licensing agreement with third party | 170,000 | 110,000 | 170,000 | 110,000 | 110,000 | |||||||||||
Maximum working capital available to be provided by Company pursuant to LOI with Green Acres | $ 250,000 | |||||||||||||||
Maximum buyout amount of existing mortgage on facility prusuant to LOI with Green Acres | $ 3,500,000 | |||||||||||||||
Investment pursuant to LOI with Green Acres | 115,000 | 100,000 | 115,000 | 100,000 | $ 100,000 | |||||||||||
Legal and Other | ||||||||||||||||
Loss on legal matter | $ (232,246) | |||||||||||||||
Sublease agreement with Colorado research facility | ||||||||||||||||
Office Space | ||||||||||||||||
Rent for office space, monthly | $ 3,500 | |||||||||||||||
Amounts owed to landlord | $ 48,750 | |||||||||||||||
First floor of San Juan, Puerto Rico office (2) | ||||||||||||||||
Office Space | ||||||||||||||||
Rent for office space, monthly | $ 1,500 | $ 3,000 | ||||||||||||||
Second floor of San Juan, Puerto Rico office (2) | ||||||||||||||||
Office Space | ||||||||||||||||
Rent for office space, monthly | $ 2,000 |
Going Concern (Details Narrativ
Going Concern (Details Narrative) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accumulated deficit | $ (25,868,419) | $ (25,578,077) |
Working capital deficit | (3,776,208) | |
Derivative liability included in working capital deficit | $ (1,911,033) |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | 2 Months Ended | |||
Nov. 28, 2018 | Oct. 25, 2018 | Oct. 11, 2018 | Oct. 03, 2018 | |
Subsequent Events [Abstract] | ||||
Common stock issued upon conversion of principal and interest, shares | 139,411,403 | |||
Common stock issued upon conversion of principal, amount | $ 454,768 | |||
Common stock issued upon conversion of interest, amount | $ 4,680 | |||
Common stock issued to St. George, previously recorded as to be issued, now certified | 3,129,980 | |||
Common stock issued to St. George pursuant to Notice of Exercise of Warrant received | 5,300,000 | 4,300,000 |