Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 29, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | CANNAPHARMARX, INC. | ||
Entity Central Index Key | 0001081938 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity's Reporting Status Current? | No | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Public Float | $ 17,422,378 | ||
Entity Common Stock, Shares Outstanding | 26,791,371 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 | ||
Entity Emerging Growth Company | true | ||
Entity Small Business | true | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | true | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Voluntary Filers | No |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
ASSETS | ||
Cash | $ 464,118 | $ 0 |
Prepaid expenses | 134,689 | 0 |
Total current assets | 598,807 | 0 |
Construction in progress | 1,563,260 | 0 |
Intangible assets | 1,871,000 | 0 |
Goodwill | 6,065,014 | |
Total Assets | 10,098,081 | 0 |
Current liabilities | ||
Accounts payable and accrued expenses | 766,203 | 604,542 |
Accounts payable related party | 9,000 | 0 |
Accrued interest | 68,052 | 0 |
Mortgages payable | 476,450 | 0 |
Accrued legal settlement payable in cash | 190,000 | 190,000 |
Accrued expense - related party | 150,000 | 150,000 |
Notes payable - current | 2,210,975 | 0 |
Convertible notes | 2,072,000 | 0 |
Loan payable - related party | 19,758 | 19,758 |
Total current liabilities | 5,962,438 | 964,300 |
Notes payable - long-term | 4,421,942 | 0 |
Total Liabilities | 10,384,380 | 964,300 |
Stockholders' Equity | ||
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 60,000 shares and -0- issued and outstanding as of December 31, 2018 and December 31, 2017, respectively | 60,000 | 0 |
Common stock, $0.0001 par value; 300,000,000 shares authorized, 18,942,506 and 17,960,741 issued and outstanding as of December 31, 2018 and December 31, 2017, respectively | 1,894 | 1,796 |
Additional paid-in capital | 36,642,276 | 32,930,067 |
Retained earnings (deficit) | (36,990,469) | (33,896,163) |
Total Stockholders' Deficit | (286,299) | (964,300) |
Total Liabilities and Stockholders' Deficit | $ 10,098,081 | $ 0 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred shares, par value | $ 0.0001 | $ .0001 |
Preferred shares, authorized | 10,000,000 | 10,000,000 |
Preferred shares, issued | 60,000 | 0 |
Preferred shares, outstanding | 60,000 | 0 |
Common stock, par value | $ 0.0001 | $ .0001 |
Common stock, authorized | 100,000,000 | 100,000,000 |
Common stock, issued | 18,942,506 | 17,960,741 |
Common stock, outstanding | 18,942,506 | 17,960,741 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Revenue | $ 0 | $ 0 |
Operating Expenses: | ||
General & administrative | 8,763 | 6,633 |
Acquisition expenses | 47,649 | 0 |
Acquisition expenses related party | 373,896 | 0 |
Stock-based compensation | 27,707 | 0 |
Travel an entertainment | 43,443 | 0 |
Rent | 9,000 | 0 |
Professional fees | 250,775 | 0 |
Consulting fees | 33,084 | 0 |
Consulting fees - related parties | 160,000 | 0 |
Total operating expenses | 954,317 | 6,633 |
Income (loss) from operations | (954,317) | (6,633) |
Other income (expense) | ||
Interest expense | (2,140,052) | 0 |
Other income | 63 | 0 |
Total other income (expense) net | (2,139,989) | 0 |
Income (loss) before provision for income taxes | (3,094,306) | (6,633) |
Provision (credit) for income tax | 0 | 0 |
Net income (loss) | $ (3,094,306) | $ (6,633) |
Net income (loss) per share - (Basic and fully diluted) | $ 0 | |
Weighted average number of shares outstanding | 17,963,431 | 17,960,741 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings / Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2015 | 0 | 17,960,741 | |||
Beginning balance, value at Dec. 31, 2015 | $ 0 | $ 1,796 | $ 32,201,942 | $ (32,888,280) | $ (684,542) |
Stock-based compensation | 728,125 | 728,125 | |||
Net loss | (1,001,250) | (1,001,250) | |||
Ending balance, shares at Dec. 31, 2016 | 0 | 17,960,741 | |||
Ending balance, value at Dec. 31, 2016 | $ 0 | $ 1,796 | 32,930,067 | (33,889,530) | (957,667) |
Net loss | (6,633) | (6,633) | |||
Ending balance, shares at Dec. 31, 2017 | 0 | 17,960,741 | |||
Ending balance, value at Dec. 31, 2017 | $ 0 | $ 1,796 | 32,930,067 | (33,896,163) | (964,300) |
Issuance of preferred stock, shares | 60,000 | ||||
Issuance of preferred stock, value | $ 60,000 | 60,000 | |||
Recognition of beneficial conversion features - convertible debentures | 2,072,000 | 2,072,000 | |||
Stock-based compensation related to warrant issuances | 27,707 | 27,707 | |||
Shares issued in connection with the acquisition of AMS, shares | 981,765 | ||||
Shares issued in connection with the acquisition of AMS, value | $ 98 | 1,612,502 | 1,612,600 | ||
Net loss | (3,094,306) | (3,094,306) | |||
Ending balance, shares at Dec. 31, 2018 | 60,000 | 18,942,506 | |||
Ending balance, value at Dec. 31, 2018 | $ 60,000 | $ 1,894 | $ 36,642,276 | $ (36,990,469) | $ (286,299) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash Flows From Operating Activities: | ||
Net income (loss) | $ (3,094,306) | $ (6,633) |
Adjustments to reconcile net income to net cash provided by (used for) operating activities | ||
Stock-based compensation expense | 27,707 | 0 |
Amortization of debt discount | 2,072,000 | 0 |
Changes in operating Assets & Liabilities | ||
(Increase)/decrease in prepaid expenses | (134,689) | 1,667 |
Accrued interest | 68,052 | 0 |
Accounts payable related party | 9,000 | 0 |
Increase/(Decrease) in accounts payable and accrued expenses | 111,100 | 4,966 |
Net cash provided by (used for) operating activities | (941,136) | 0 |
Cash Flows From Investing Activities: | ||
Cash paid for the acquisition of AMS | (726,746) | 0 |
Net cash provided by (used for) investing activities | (726,746) | 0 |
Cash Flows From Financing Activities: | ||
Proceeds from preferred stock | 60,000 | 0 |
Proceeds from convertible notes | 2,072,000 | 0 |
Net cash provided by (used for) financing activities | 2,132,000 | 0 |
Net Increase (Decrease) In Cash | 464,118 | 0 |
Cash At The Beginning Of The Period | 0 | 0 |
Cash At The End Of The Period | 464,118 | 0 |
Non-cash disclosures | ||
Common stock issued related to the acquisition of business | 1,612,600 | 0 |
Debt issued related to the acquisition of a business | 6,632,917 | 0 |
Other accrued consideration related to the acquisition of a business | $ 527,010 | $ 0 |
1. Nature of Operations and Sig
1. Nature of Operations and Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Nature of Operations and Significant Accounting Policies | NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Operations CannaPharmaRx, Inc. (the “Company”) is a Delaware corporation. In November 2018 it formed an Ontario corporation, Hanover CPMD Acquisition Corporation to facilitate the acquisition described below. As of the date of this Report, the Company intends to engage in acquisitions or joint ventures with a company or companies that will allow to become a national or internationally branded cannabis cultivation company, or otherwise engage in the cannabis industry. Management is engaged in seeking out and evaluating businesses for acquisition. However, if an opportunity in another industry arises the Company will review that opportunity as well. History The Company was originally incorporated in the State of Colorado in August 1998 under the name “Network Acquisitions, Inc.” It changed its name to Cavion Technologies, Inc. in February 1999 and subsequently to Concord Ventures, Inc. in October 2006. On December 21, 2000, the Company filed for protection under Chapter 11 of the United States Bankruptcy Code. In connection with the filing, on February 16, 2001, the Company sold its entire business, and all of its assets, for the benefit of its creditors. After the sale, the Company still had liabilities of $8.4 million and was subsequently dismissed by the Court from the Chapter 11 reorganization, effective March 13, 2001, at which time the last of the Company’s then remaining directors resigned. On March 13, 2001, the Company had no business or other source of income, no assets, no employees or directors, outstanding liabilities of approximately $8.4 million and had terminated its duty to file reports under securities law. In February 2008, after filing of a Form 10 registration statement pursuant to the Securities Exchange Act of 1934, as amended, we were re-listed on the OTC Bulletin Board. In April 2010, the Company re-domiciled in Delaware under the name CCVG, Inc. (“CCVG”). Effective December 31, 2010, the Company completed an Agreement and Plan of Merger and Reorganization (the “Reorganization") which provided for the merger of two of the Company’s wholly-owned subsidiaries. As a result of this reorganization, the Company’s name became “Golden Dragon Inc.,” which became the surviving publicly quoted parent holding company. On May 9, 2014, the Company entered into a Share Purchase Agreement (the “ Share Purchase Agreement Canna Colorado In October 2014, the Company changed its legal name to “CannaPharmaRx, Inc.” As a result of the aforesaid transactions, the Company became an early-stage pharmaceutical company whose purpose was to advance cannabinoid research and discovery using proprietary formulation and drug delivery technology then under development. In April 2016, the Company ceased operations. Its then management resigned their respective positions with the Company, with the exception of Mr. Gary Herick, who remains as an officer and director. As a result, the Company was considered a “shell” company as defined under the Securities Exchange Act of 1934, as amended, from April 2016 through the year ended December 31, 2018. On November 19, 2018, the Company entered into a Securities Purchase Agreement with Alternative Medical Solutions, Inc., an Ontario, Canada corporation (“AMS”), its shareholders and Hanover CPMD Acquisition Corp. (“CPMD Hanover”) a newly formed subsidiary, wherein on December 31, 2018 the Company acquired all of the issued and outstanding securities of AMS. AMS is a corporation organized under the laws of the Province of Ontario, Canada. It is a late stage marijuana licensed producer applicant in Canada. It is currently in the Pre-License Inspection and Licensing phase, which is Stage 5 of 6, with a fully approved license. Upon completion of the final construction of the facility, Health Canada will inspect the facility and relevant operating procedures to ensure it meets the standards that have been approved in the application. At the completion of the licensing stage. AMS will receive a license to begin cultivation of marijuana. There can be no assurances that the Company will receive this license. The facility is a 48,750 square foot marijuana grow facility built on a 6.7-acre parcel of land located in Hanover, Ontario Canada. To date, exterior construction of the building has been completed, however, no interior construction has begun. Upon full completion, the facility will contain up to 20 separate growing rooms which we believe will provide annual production capacity of 9,500 kilos of marijuana (20,900 lbs.). Completion of the build-out of the facility is expected to take an estimated 20 weeks. Together with the remaining equipment needed to complete the grow we estimate that we will require approximately CAD$20.0 million in additional financing which we will seek to raise via equity and debt. There can be no assurances that we will successfully raise the financing required to complete construction of the facility and begin cultivation. As a result of the completion of the acquisition of AMS, the Company believes that it no longer fits the definition of a shell company, as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act. It filed the required disclosure pursuant to the aforesaid Rule with the SEC in February 2019 and believes that it will no longer be considered a shell company on February 13, 2020. The Company is currently in discussions with other companies operating in the cannabis industry regarding a potential acquisition or other form of partnership. Relevant thereto, we have signed a non-binding letter of intent to acquire Great Northern Cannabis Ltd of Calgary, Alberta, Canada. However, there can be no assurance the Company will be successful consummating any additional acquisitions in the future, nor can there be any assurance that the Company will have access available to equity and debt financing required to consummate any transaction in the future. Basis of Presentation The accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“ FASB Codification GAAP All figures are in U.S. dollars unless indicated otherwise. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of accounts receivable and inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. Cash and Cash Equivalents The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2018 and December 31, 2017, the Company cash equivalents totaled $464,118 and $-0- respectively. Comprehensive Gain or Loss ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of December 31, 2018, and December 31, 2017, the Company determined that it had no items that represented components of comprehensive income and, therefore, has included a statement of comprehensive income in the financial statements. Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible and other promissory notes are reviewed to determine whether they contain embedded derivative instruments that are required to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. Beneficial Conversion Features In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options” the Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt or preferred stock instruments that have conversion features at fixed rates that are in-the-money when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security. Foreign Currency Translation The functional currency and the reporting currency of CannapharmaRx’s US operations is United States dollars, (“USD”). The functional currency of the Company’s Canadian operations is Canadian dollars (“CAD”), Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods. Assets and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurred. The resulting translation adjustment is reflected as accumulated other comprehensive income, a separate component of stockholders' equity in the statement of stockholders' equity. These translation adjustments are reflected in accumulated other comprehensive income, a separate component of the Company's stockholders' equity. Harmonized Sales Tax The Harmonized Sales Tax (“HST”) is a combination of the Canadian Goods and Services Tax (“GST”) and Provincial Sales Tax (“PST”) that is applied to taxable goods and services. By fusing sales tax at the federal level with sales tax at the provincial level, the participating provinces harmonized both taxes into a single federal-provincial sales tax. HST is a consumption tax paid by the consumer at the point of sale (POS). The vendor or seller collects the tax proceeds from consumers by adding the HST rate to the cost of goods and services. They then remit the total collected tax to the government at the end of the year. The HST is in effect in five of the ten Canadian provinces: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island. The HST is collected by the Canada Revenue Agency (CRA), which remits the appropriate amounts to the participating provinces. The HST may differ across these five provinces, as each province will set its own PST rates within the HST. In provinces and territories which have not enacted the HST, the CRA collects only the 5% goods and services tax. The current rate in Ontario is 13%. Capital Assets- Construction In Progress As of December 31, 2018 and 2017, the Company had $1,563,260 and $ -0- in construction in progress, respectively, comprised entirely of the construction in progress relating to the building acquired relating to the acquisition of AMS. Depreciation expenses total $-0- and $-0- for the years ended December 31, 2018, and December 31, 2017, respectively. Stock-Based Compensation The Company has adopted ASC Topic 718, (Compensation—Stock Compensation) Goodwill and Intangible Assets Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist of customer relationships and non-compete agreements. Their useful lives range from 10 to 15 years. The Company’s indefinite-lived intangible assets consist of trade names. Goodwill and indefinite-lived assets are not amortized but are subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans, and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform an impairment test prior to scheduled annual impairment tests. The Company performed its annual fair value assessment on December 31, 2018 on its subsidiaries with material goodwill and intangible asset amounts on their respective balance sheets and determined that no impairment exists. Long-Lived Assets The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances have indicated that an asset may not be recoverable. The long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value. The Company evaluated the recoverability of its long-lived assets on December 31, 2018 and at December 31, 2017, respectively on its subsidiaries with material amounts on their respective balance sheets and determined that no impairment exists. Fair Values of Assets and Liabilities The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. Level 1: Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. Level 3: Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the periods ended December 31, 2018, or December 31, 2017. Financial Instruments The estimated fair value for financial instruments was determined at discrete points in time based on relevant market information. These estimates involve uncertainties and could not be determined with exact precision. The fair value of the Company’s financial instruments, which include cash, prepaid expenses, accounts payable and the related party loan, each approximate their carrying value due either to their short length to maturity or interest rates that approximate prevailing market rates. Income Taxes The Company accounts for income taxes under the liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Income (Loss) Per Share Income (loss) per share is presented in accordance with Accounting Standards Update (“ ASU Earning per Share EPS Business Segments Our activities during the year ended December 31, 2018 comprised a single segment. Recently Issued Accounting Pronouncements On June 10, 2014, the FASB issued update ASU 2014-10, Development Stage Entities Management has reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations. |
2. Going Concern and Liquidity
2. Going Concern and Liquidity | 12 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern and Liquidity | NOTE 2. GOING CONCERN AND LIQUIDITY As of December 31, 2018 and 2017, the Company had $464,118 and $-0- cash on hand respectively, and no revenue-producing business or other sources of income. Additionally, as of December 31, 2018, the Company had outstanding liabilities totaling $10,384,380 and stockholders’ deficit of ($286,299). The Company had a working capital deficit of $5,363,631 on December 31, 2018. In the Company’s financial statements for the fiscal years ended December 31, 2018 and 2017, the Reports of the Independent Registered Public Accounting Firm include an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Based on our current financial projections, we believe we do not have sufficient existing cash resources to fund our current limited operations. It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that these events will be satisfactorily completed or at terms acceptable to the Company. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by the Company to successfully implement these plans would have a material adverse effect on its business, including the possible inability to continue operations. |
3. Prepaid Expenses
3. Prepaid Expenses | 12 Months Ended |
Dec. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid Expenses | NOTE 3. PREPAID EXPENSES The following table sets forth the components of the Company’s prepaid expenses at December 31, 2018 and December 31, 2017: December 31, 2018 December 31, 2017 Prepaid stock purchase (a) $ 98,955 $ – Prepaid interest (b) 35,734 – Total $ 134,689 $ – (a) Represents money held in escrow to purchase Company stock held by the Sellers of AMS pursuant to the terms of the Securities Purchase Agreement for the acquisition of AMS (b) Represents six months of prepaid interest on a mortgage assumed by the Company under the terms of the acquisition of AMS. |
4. Construction in Progress
4. Construction in Progress | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
Construction in Progress | NOTE 4. CONSTRUCTION IN PROGRESS As of December 31, 2018 and December 31, 2017, the Company had $1,563,260 and $-0- respectively, in construction in progress. The facility acquired as part of the AMS acquisition is a 48,750 square foot marijuana grow facility built on a 6.7-acre parcel of land located in Hanover, Ontario Canada. To date, exterior construction of the building has been completed, however, no interior construction has begun. Upon full completion, the facility will contain up to 20 separate growing rooms which we believe will provide annual production capacity of 9,500 kilos of marijuana (20,900 lbs.). The Company did not have any other property or equipment. For construction in progress assets, no depreciation is recorded until the asset is placed in service. When construction is completed, the asset should be reclassified as building, building improvements, or land improvement and should be capitalized and depreciated. Construction in progress includes all costs related to the construction of a medical cannabis facility. Cost also includes soft costs such as loan fees and interest and consulting fees and related expenses. The facility is not available for use and therefore not being amortized. |
5. Business Combination
5. Business Combination | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Business Combination | NOTE 5. BUSINESS COMBINATION Description of acquisition On November 19, 2018, the Company entered into a Securities Purchase Agreement with AMS, wherein on December 31, 2018 the Company acquired all of the issued and outstanding securities of AMS. Fair Value of Consideration Transferred and Recording of Assets Acquired The following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired, and liabilities assumed including an amount for goodwill: Consideration Paid: Cash and cash equivalents $ 726,747 Common stock, 981,765 shares of CannapharmaRX common stock 1,612,600 Promissory note net of $697,083 discount 6,632,917 Fair value of total consideration $ 8,972,264 Recognized amount of identifiable assets acquired, and liabilities assumed: Construction in progress $ 1,563,260 Accrued liabilities (50,560 ) Mortgage payable (476,450 ) Intangible assets 1,871,000 Goodwill 6,065,014 $ 8,972,264 |
6. Goodwill and Intangible Asse
6. Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | NOTE 6. GOODWILL AND INTANGIBLE ASSETS As of December 31, 2018 and December 31, 2017 the Company had $6,065,014 in goodwill and $1,871,000 in intangible assets; compared to zero and zero, respectively. The goodwill and intangible assets arose as a result of the acquisition of AMS. Based on a valuation study performed on the acquisition, the Company determined that the marijuana license in process at AMS had a value of $1,871,000 which will be amortized over a fifteen year period or $124,733 per year. The Company did not record any amortization expense for the years ended December 31, 2018 and December 31, 2017 because the acquisition of AMS was consummated on the last day of the Company’s year ended December 31, 2018. The Company will begin recording amortization expense on January 1, 2019. |
7. Accounts Payable and Accrued
7. Accounts Payable and Accrued Expenses | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
Accounts Payable and Accrued Expenses | NOTE 7. ACCOUNT PAYABLE AND ACCRUED LIABILITIES Accounts payables are recognized initially at the transaction price and subsequently measured at the undiscounted amount of cash or other consideration expected to be paid. Accrued expenses are recognized based on the expected amount required to settle the obligation or liability. The following table sets forth the components of the Company’s accrued liabilities at December 31, 2018 and December 31, 2017. December 31, 2018 December 31, 2017 Accounts payable and accrued expenses $ 766 ,203 $ 604,542 Accrued interest (a) 68,052 – Mortgages payable (b) 476,450 – Accrued legal settlement (c ) 190,000 190,000 Total accounts payable and accrued liabilities $ 1,50 0,705 $ 794,542 (a) Represents interest accrued on the outstanding convertible notes -see Note 11 (b) Pursuant to the acquisition of AMS, the Company assumed the mortgage on the construction in progress. The mortgage is an interest only instrument at an interest rate of 15% due and payable on December 31, 2019 (c) We had previously been party to an action filed by Gary M. Cohen, a former officer and director of our Company in 2014. In March 2015, we entered into a Settlement Agreement with Mr. Cohen wherein we agreed to repurchase 2,250,000 shares of our Common Stock from Mr. Cohen in consideration for $350,000. Mr. Cohen passed away while there was a remaining balance of $190,000 remaining to be paid in accordance with the Settlement Agreement. We have taken the position that his death has discharged any obligation we might have to make the balance of the payments. We have not received any demand for payment or otherwise been involved in any attempt to collect this balance for a period of greater than two years prior to the date of this report. |
8. Related Party Transactions
8. Related Party Transactions | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 8. RELATED PARTY TRANSACTIONS The following table sets forth the components of the Company’s related party liabilities at December 31, 2018 and December 31, 2017. December 31, 2018 December 31, 2017 Accounts payable related party(a) $ 28,758 $ 19,758 Accrued expense - related party 150,000 150,000 Total accounts payable and accrued liabilities $ 178,758 $ 169,758 (a) Accounts payable related party represents includes an advance made to the Company of $19,768; to pay certain expenses of the Company in prior periods when the Company had no cash on hand, During the year ended December 31, 2018 the Company paid Mr. Herick a total of $121,000 for deferred compensation and expenses. In April 2018, the Company issued an aggregate of 60,000 shares of Series A Convertible Preferred Stock at a price of $1.00 per share to management. Each share of Series A Convertible Preferred Stock is convertible into 1,250 shares of common stock and vote on an as-converted basis. The rights and designations of these Preferred Shares include the following: ☐ entitles the holder thereof to 1,250 votes on all matters submitted to a vote of the shareholders; ☐ The holders of outstanding Series A Convertible Preferred Stock shall only be entitled to receive dividends upon declaration by the Board of Directors of a dividend payable on our Common Stock whereupon the holders of the Series A Convertible Preferred Stock shall receive a dividend on the number of shares of Common Stock in to which each share of Series A Convertible Preferred Stock is convertible; ☐ Each Series A Preferred Share is convertible into 1,250 shares of Common Stock; and ☐ not redeemable. As of December 31, 2018, there was $150,000 due to two former directors, which was accrued salaries arising out of services provided in 2015 and 2016. Management is currently in discussions with these individuals to settle this obligation. On April 1, 2018, the Company changed its principal place of business to 2 Park Plaza, Suite 1200 – B. Irvine, CA 92614. This space is provided to the Company on a twelve-month term by a company to which Mr. Nicosia, one of the Company’s directors, serves as Chief Executive Officer. Monthly rent is $1,000, however, as of the date of this report, the Company has not made any rent payments and continue to accrue those amounts as accounts payable. |
9. Convertible Notes
9. Convertible Notes | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Notes | NOTE 9. CONVERTIBLE NOTES In July 2018, the Company commenced an offering of up to $2 million of one-year maturity convertible notes (“Notes”). These Notes carry both a voluntary conversion feature and an automatic conversion feature. The Notes carry an interest rate of 12% and are convertible into shares of the Company’s common stock. Automatic conversion feature If the Company issues equity securities (“Equity Securities”) in a transaction or series of related transactions resulting in aggregate gross proceeds to the Company of at least $5,000,000, including conversion of the Notes and any other indebtedness, or issuance of Equity Securities in connection with any business combination, including a merger or acquisition (a “Qualified Financing”), then the Notes, and any accrued but unpaid interest thereon, will automatically convert into the equity securities issued pursuant to the Qualified Financing at a conversion price equal to the lesser of (i) 50% of the per share price paid by the purchasers of such equity securities in the Qualified Financing or (ii) $0.40 per share. Voluntary conversion feature If these Notes have not been previously converted pursuant to a Qualified Financing, then, upon Holders election prior to the Maturity Date or effective upon the Maturity Date, the Holder may elect to convert their Notes into shares of the Company’s Common Stock at a conversion price equal to the lesser of (i) 50% of the market price for the Company’s Common Stock as of the Maturity Date or (ii) $0.40 per share. During the year ended December 31, 2018, the Company received $2,072,000 in proceeds from the sale of convertible notes to 35 accredited investors. No convertible notes were sold during 2017. Based on current activities Company believes it is highly probable that the Notes will be subject to the automatic conversion feature prior to the maturity date of the Notes. As a result, the Company did not record a derivate liability associated with these Notes. The Company calculated a beneficial conversion feature of $2,072,000 and record the full amount as interest expense during the period ended December 31, 2018, because the Notes can be immediately converted without a waiting period. |
10. Notes Payable
10. Notes Payable | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 10. NOTES PAYABLE Pursuant to the terms of the of the Securities Purchase Agreement with AMS we issued a non-interest bearing CAD $10,000,000 ($7,330,000 USD) promissory note secured only by the shares acquired in AMS Principal payments under the Promissory Note are due quarterly and are computed based upon 50% of AMS' cash flow, defined as EBITDA less all capital expenditures, taxes incurred, non-recurring items and other non-cash items for the relevant fiscal quarter, including the servicing of all senior debt payment obligations of the company. The Promissory Note matures the earlier of two years from the date AMS receives a license to cultivate or December 31, 2021. The Company performed a valuation study as part of the AMS acquisition. The valuation study determined that the Promissory Note should be valued at $6,632,917 since it was non-interest bearing. As a result, the Company recorded a note discount of $697,083. The note discount will be amortized to interest expense over the three-year term of the Promissory Note. No interest expense was recorded in 2018 since the acquisition occurred on December 31, 2018. The following tables set forth the components of the Company’s, convertible debentures as of December 31, 2018 and December 31, 2017: December 31, December 31, Principal value of Promissory Note $ 7,330,000 $ – Loan discounts (697,083 ) – Less: Current portion, net of discount (2,210,975 ) – Promissory Note, long term net of discount $ 4,421,942 $ – |
12. Commitments and Contingenci
12. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 12. COMMITMENTS AND CONTINGENCIES On April 1, 2018, the Company changed its principal place of business to 2 Park Plaza, Suite 1200 – B. Irvine, CA 92614. This space is provided on a twelve-month term by a company to which Mr. Nicosia, one of the Company’s directors, serves as Chief Executive Officer. Monthly rent is $1,000, however, as of the date of this filing, the Company has not made any rent payments and continues to accrue those amounts as accounts payable. |
13. Stockholders' Equity
13. Stockholders' Equity | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 13. STOCKHOLDERS’ EQUITY Preferred Stock The Company is authorized to issue up to 10,000,000 shares of one or more series of preferred stock, at a par value of $0.0001 per share. The Board of Directors may, without stockholder approval, determine the dividend rates, redemption prices, preferences on liquidation or dissolution, conversion rights, voting rights, and any other preferences. In April 2018, the Company issued 60,000 shares of its Series A Convertible Preferred Stock at a price of $1.00 per share to its current management, all of whom are accredited investors. Each share of Series A Convertible Preferred Stock is convertible into 1,250 shares of common stock and vote on an as-converted basis. The rights and designations of these Preferred Shares include the following: · entitles the holder thereof to 1,250 votes on all matters submitted to a vote of the shareholders; · The holders of outstanding Series A Convertible Preferred Stock shall only be entitled to receive dividends upon declaration by the Board of Directors of a dividend payable on the Company’s Common Stock, whereupon the holders of the Series A Convertible Preferred Stock shall receive a dividend on the number of shares of Common Stock in to which each share of Series A Convertible Preferred Stock is convertible; · Each Series A Preferred Share is convertible into 1,250 shares of Common Stock; · not redeemable. The beneficial conversion (“BCF”) feature attributed to the purchase of Preferred Stock was deemed to have no value on the date of purchase for the following reasons: Ø There was no public trading market for the Convertible Preferred Stock, and none is expected to develop in the future. Ø Any shares of Common Stock underlying the Preferred Stock to be issued upon conversion would not be eligible for any exemption from registration pursuant to Rule 144 for a period of one (1) year from the date which the Company ceases being deemed a shell company. Ø Currently, there is a very limited trading market for the Company's Common Stock. Ø The Company had no business activity for the prior twenty-four (24) month period; Ø The Company has limited assets and substantial liabilities. Therefore, therefore the BCF related to the Preferred Shares was considered to have no value on the date of issuance. There were 60,000 and -0- shares of preferred stock issued and outstanding as of December 31, 2018 and December 31, 2017, respectively. Common Stock The Company is authorized to issue 300,000,000 shares of Common Stock, par value $0.0001 per share. As of December 31, 2018, and December 31, 2017, 18,942,608 and 17,960,741 shares of Common Stock were issued and outstanding, respectively. In January 2019, the Company closed a private offering of 12% Convertible Debentures where it accepted subscriptions in the aggregate amount of $2,072,000 from 35 accredited investors, as that term is defined in Rule 501 of Regulation D. Each Convertible Debenture is convertible into shares of common stock at the lesser of $0.40 or 50% of the closing market price on the date a business combination valued at greater than $5,000,000 is completed., The Company used the proceeds from this offering for the purchase of AMS, as well as working capital, including costs associated with the preparation of over three years of reports that had not been filed with the SEC. Stock Options During the years ended December 31, 2018 and 2017, the Company did not record any stock-based compensation expense related to stock options. As of December 31, 2018, there were options outstanding to purchase 750,000 shares of our common stock at an exercise price of $1.00 per share. These stock options expire on November 1, 2024 Stock Purchase Warrants The following table reflects all outstanding and exercisable warrants on December 31, 2018 and December 31, 2017: Number of Weighted Average Average Remaining Warrants outstanding, January 1, 2018 – $ – – Warrants issued 350,000 0.57 2.875 Warrants exercised – – – Warrant forfeited – – – Warrants outstanding, December 31, 2018 350,000 $ 0.57 2.875 All stock purchase warrants are exercisable for a period of three years from the date of issuance. The remaining contractual life of the stock purchase warrants outstanding as of December 31, 2018, was 2.875 years. During the year ended December 31, 2018, the Company issued 350,000 warrants. The value of the stock purchase warrants was determined using the following Black-Scholes methodology: For the Year Ended December 31, 2018 Expected dividend yield (1) 0.00% Risk-free interest rate (2) 2.91% Volatility (3) 442.92% Expected life (in years) 3.00 ______________ (1) The Company has no history or expectation of paying cash dividends on its common stock. (2) The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. (3) The volatility of the Company’s common stock is based on trading activity for the previous three year period ended at each stock purchase warrant contract date. |
11. Income Taxes
11. Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 11. INCOME TAXES As of December 31, 2018, the Company has approximately $7,255,000 of federal net operating loss carryforwards. The federal net operating loss carryforwards begin to expire in 2030. State net operating loss carryforwards begin to expire in 2034. Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s net operating loss carryforwards could be subject to annual limitations against taxable income in future periods which could substantially limit the eventual utilization of such carryforwards. The Company has not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore no determination has been made whether the net operating loss carryforward is subject to any Internal Revenue Code Section 382 limitation. To the extent there is a limitation there could be a substantial reduction in the deferred tax asset with an offsetting reduction in the valuation allowance. As of December 31, 2018, the Company has no unrecognized income tax benefits. The tax years from 2014 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities. |
14. Subsequent Events
14. Subsequent Events | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 14. SUBSEQUENT EVENTS In February 2019, the Company commenced an offering of up to $3 million in principal amount of Units at a price of $1.00 per Unit, each Unit consisting of one share of Series “B” Convertible Preferred Stock, each Convertible Preferred Share convertible into one share of the Company’s Common Stock at the election of the holder and one Common Stock Purchase Warrant exercisable to purchase one share of Common Stock at an exercise price of $2.00 per share, which offering is to be offered only to “accredited investors,” as that term is defined in Rule 501 of Regulation D.As of the date of this report, the Company has accepted $169,000 in subscriptions in this offering. On February 25, 2019 the Company completed the acquisition of a minority interest in GN Ventures, LTD., (“GN”), an Alberta corporation, engaged in the development of Canadian cannabis cultivation facilities. Under the terms of the stock purchase agreement, the Company acquired approximately eighteen (18%) percent of the issued and outstanding securities of GN for total consideration of 7,998,963 shares of CPMD common stock. Additionally, the Company acquired warrants exercisable to purchase an additional 2,500,000 shares of GN at an exercise price of CAD$1.00 per share. The seller of the GN interests is the former President, CEO and a director of the Company, positions he assumed again after the acquisition. GN owns a 60,000 square foot cannabis cultivation and grow facility located on 38 acres in Stevensville, Ontario, Canada. Once completed, GN estimates annual total production capacity from the Stevensville facility of up to 12,500 kilograms of cannabis. GN believes the Stevensville facility to be 95% complete and to receive a license to cultivate from the Canadian Ministry of Health prior to the end of the second quarter of 2019. If and when completed, GN believes it will begin cultivation activities and generate its initial harvest during the middle of 2019. Additionally, the plan is to increase cannabis production by building additional cannabis cultivation facilities on the excess land presently owned adjacent to the existing Stevensville facility, provided that additional funding can be obtained on commercially reasonable terms. GN does not have any firm commitment to provide any of the funds necessary for expansion as of the date of this report. |
1. Nature of Operations and S_2
1. Nature of Operations and Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentaion | Basis of Presentation The accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“ FASB Codification GAAP All figures are in U.S. dollars unless indicated otherwise. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of accounts receivable and inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2018 and December 31, 2017, the Company cash equivalents totaled $464,118 and $-0- respectively. |
Comprehensive Gain or Loss | Comprehensive Gain or Loss ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of December 31, 2018, and December 31, 2017, the Company determined that it had no items that represented components of comprehensive income and, therefore, has included a statement of comprehensive income in the financial statements. |
Derivative Financial Instruments | Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible and other promissory notes are reviewed to determine whether they contain embedded derivative instruments that are required to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. |
Beneficial Conversion Features | Beneficial Conversion Features In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options” the Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt or preferred stock instruments that have conversion features at fixed rates that are in-the-money when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security. |
Foreign Currency Translation | Foreign Currency Translation The functional currency and the reporting currency of CannapharmaRx’s US operations is United States dollars, (“USD”). The functional currency of the Company’s Canadian operations is Canadian dollars (“CAD”), Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods. Assets and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurred. The resulting translation adjustment is reflected as accumulated other comprehensive income, a separate component of stockholders' equity in the statement of stockholders' equity. These translation adjustments are reflected in accumulated other comprehensive income, a separate component of the Company's stockholders' equity. |
Harmonized Sales Tax | Harmonized Sales Tax The Harmonized Sales Tax (“HST”) is a combination of the Canadian Goods and Services Tax (“GST”) and Provincial Sales Tax (“PST”) that is applied to taxable goods and services. By fusing sales tax at the federal level with sales tax at the provincial level, the participating provinces harmonized both taxes into a single federal-provincial sales tax. HST is a consumption tax paid by the consumer at the point of sale (POS). The vendor or seller collects the tax proceeds from consumers by adding the HST rate to the cost of goods and services. They then remit the total collected tax to the government at the end of the year. The HST is in effect in five of the ten Canadian provinces: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island. The HST is collected by the Canada Revenue Agency (CRA), which remits the appropriate amounts to the participating provinces. The HST may differ across these five provinces, as each province will set its own PST rates within the HST. In provinces and territories which have not enacted the HST, the CRA collects only the 5% goods and services tax. The current rate in Ontario is 13%. |
Capital Assets - Construction in Progress | Capital Assets- Construction In Progress As of December 31, 2018 and 2017, the Company had $1,563,260 and $ -0- in construction in progress, respectively, comprised entirely of the construction in progress relating to the building acquired relating to the acquisition of AMS. Depreciation expenses total $-0- and $-0- for the years ended December 31, 2018, and December 31, 2017, respectively. |
Stock-Based Compensation | Stock-Based Compensation The Company has adopted ASC Topic 718, (Compensation—Stock Compensation) |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist of customer relationships and non-compete agreements. Their useful lives range from 10 to 15 years. The Company’s indefinite-lived intangible assets consist of trade names. Goodwill and indefinite-lived assets are not amortized but are subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans, and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform an impairment test prior to scheduled annual impairment tests. The Company performed its annual fair value assessment on December 31, 2018 on its subsidiaries with material goodwill and intangible asset amounts on their respective balance sheets and determined that no impairment exists. |
Long-Lived Assets | Long-Lived Assets The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances have indicated that an asset may not be recoverable. The long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value. The Company evaluated the recoverability of its long-lived assets on December 31, 2018 and at December 31, 2017, respectively on its subsidiaries with material amounts on their respective balance sheets and determined that no impairment exists. |
Fair Values of Assets and Liabilities | Fair Values of Assets and Liabilities The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. Level 1: Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. Level 3: Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the periods ended December 31, 2018, or December 31, 2017. |
Financial Instruments | Financial Instruments The estimated fair value for financial instruments was determined at discrete points in time based on relevant market information. These estimates involve uncertainties and could not be determined with exact precision. The fair value of the Company’s financial instruments, which include cash, prepaid expenses, accounts payable and the related party loan, each approximate their carrying value due either to their short length to maturity or interest rates that approximate prevailing market rates. |
Income Taxes | Income Taxes The Company accounts for income taxes under the liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. |
Income (Loss) Per Share | Income (Loss) Per Share Income (loss) per share is presented in accordance with Accounting Standards Update (“ ASU Earning per Share EPS |
Business Segments | Business Segments Our activities during the year ended December 31, 2018 comprised a single segment. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements On June 10, 2014, the FASB issued update ASU 2014-10, Development Stage Entities Management has reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations. |
3. Prepaid Expenses (Tables)
3. Prepaid Expenses (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of prepaid expenses | December 31, 2018 December 31, 2017 Prepaid stock purchase (a) $ 98,955 $ – Prepaid interest (b) 35,734 – Total $ 134,689 $ – (a) Represents money held in escrow to purchase Company stock held by the Sellers of AMS pursuant to the terms of the Securities Purchase Agreement for the acquisition of AMS (b) Represents six months of prepaid interest on a mortgage assumed by the Company under the terms of the acquisition of AMS. |
5. Business Combination (Tables
5. Business Combination (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Schedule of business acquisition consideration allocated | Consideration Paid: Cash and cash equivalents $ 726,747 Common stock, 981,765 shares of CannapharmaRX common stock 1,612,600 Promissory note net of $697,083 discount 6,632,917 Fair value of total consideration $ 8,972,264 Recognized amount of identifiable assets acquired, and liabilities assumed: Construction in progress $ 1,563,260 Accrued liabilities (50,560 ) Mortgage payable (476,450 ) Intangible assets 1,871,000 Goodwill 6,065,014 $ 8,972,264 |
7. Accounts Payable and Accru_2
7. Accounts Payable and Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of accounts payable and accrued liabilities | December 31, 2018 December 31, 2017 Accounts payable and accrued expenses $ 766 ,203 $ 604,542 Accrued interest (a) 68,052 – Mortgages payable (b) 476,450 – Accrued legal settlement (c ) 190,000 190,000 Total accounts payable and accrued liabilities $ 1,50 0,705 $ 794,542 (a) Represents interest accrued on the outstanding convertible notes -see Note 11 (b) Pursuant to the acquisition of AMS, the Company assumed the mortgage on the construction in progress. The mortgage is an interest only instrument at an interest rate of 15% due and payable on December 31, 2019 (c) We had previously been party to an action filed by Gary M. Cohen, a former officer and director of our Company in 2014. In March 2015, we entered into a Settlement Agreement with Mr. Cohen wherein we agreed to repurchase 2,250,000 shares of our Common Stock from Mr. Cohen in consideration for $350,000. Mr. Cohen passed away while there was a remaining balance of $190,000 remaining to be paid in accordance with the Settlement Agreement. We have taken the position that his death has discharged any obligation we might have to make the balance of the payments. We have not received any demand for payment or otherwise been involved in any attempt to collect this balance for a period of greater than two years prior to the date of this report. |
8. Related Party Transactions (
8. Related Party Transactions (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Schedule of related party transactions | December 31, 2018 December 31, 2017 Accounts payable related party(a) $ 28,758 $ 19,758 Accrued expense - related party 150,000 150,000 Total accounts payable and accrued liabilities $ 178,758 $ 169,758 (a) Accounts payable related party represents includes an advance made to the Company of $19,768; to pay certain expenses of the Company in prior periods when the Company had no cash on hand, |
10. Notes Payable (Tables)
10. Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable | December 31, December 31, Principal value of Promissory Note $ 7,330,000 $ – Loan discounts (697,083 ) – Less: Current portion, net of discount (2,210,975 ) – Promissory Note, long term net of discount $ 4,421,942 $ – |
13. Stockholders' Equity (Table
13. Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Warrant activity | Number of Weighted Average Average Remaining Warrants outstanding, January 1, 2018 – $ – – Warrants issued 350,000 0.57 2.875 Warrants exercised – – – Warrant forfeited – – – Warrants outstanding, December 31, 2018 350,000 $ 0.57 2.875 |
Assumptions used | For the Year Ended December 31, 2018 Expected dividend yield (1) 0.00% Risk-free interest rate (2) 2.91% Volatility (3) 442.92% Expected life (in years) 3.00 ______________ (1) The Company has no history or expectation of paying cash dividends on its common stock. (2) The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. (3) The volatility of the Company’s common stock is based on trading activity for the previous three year period ended at each stock purchase warrant contract date. |
1. Nature of Operations and S_3
1. Nature of Operations and Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash equivalents | $ 464,118 | $ 0 |
Construction in progress | 1,563,260 | 0 |
Depreciation expense | $ 0 | $ 0 |
Intangible asset useful lives | 10-15 years | |
Options [Member] | ||
Antidilutive shares | 750,000 |
2. Going Concern and Liquidity
2. Going Concern and Liquidity (Details Narrative) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Cash | $ 682,059 | |||
Liabilities | 10,384,380 | $ 964,300 | ||
Stockholders' Deficit | (286,299) | $ (964,300) | $ (957,667) | $ (684,542) |
Working Capital | $ (5,363,631) |
3. Prepaid Expenses (Details)
3. Prepaid Expenses (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid stock purchase | $ 98,955 | $ 0 |
Prepaid interest | 35,734 | 0 |
Prepaid expenses | $ 134,689 | $ 0 |
4. Construction in Progress (De
4. Construction in Progress (Details Narrative) | Dec. 31, 2018USD ($)ft² | Dec. 31, 2017USD ($) |
Construction in progress | $ 1,563,260 | $ 0 |
Hanover Facility [Member] | ||
Construction in progress | $ 1,563,260 | |
Square feet of building | ft² | 48,750 |
5. Business Combination (Detail
5. Business Combination (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Consideration Paid: | ||
Common stock, 981,765 shares of CannapharmaRX common stock | $ 1,612,600 | $ 0 |
Recognized amount of identifiable assets acquired, and liabilities assumed: | ||
Goodwill | 6,065,014 | |
AMS [Member] | ||
Consideration Paid: | ||
Cash and cash equivalents | 726,747 | |
Common stock, 981,765 shares of CannapharmaRX common stock | 1,612,600 | |
Promissory note net of $697,083 discount | 6,632,917 | |
Fair value of total consideration | 8,972,264 | |
Recognized amount of identifiable assets acquired, and liabilities assumed: | ||
Construction in progress | 1,563,260 | |
Accrued liabilities | (50,560) | |
Mortgage payable | (476,450) | |
Intangible assets | 1,871,000 | |
Goodwill | 6,065,014 | |
Recognized amount of identifiable assets acquired, and liabilities assumed | $ 8,972,264 |
6. Goodwill and Intangible As_2
6. Goodwill and Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill | $ 6,065,014 | |
Intangible asset | 1,871,000 | $ 0 |
AMS [Member] | ||
Goodwill | 6,065,014 | |
Intangible asset | $ 1,871,000 | |
AMS [Member] | Marijuana license [Member] | ||
Amortization period | 15 years | |
Future amortization per year | $ 124,733 |
7. Accounts Payable and Accru_3
7. Accounts Payable and Accrued Expenses (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Accounts payable and accrued expenses | $ 766,203 | $ 604,542 |
Accrued interest | 68,052 | 0 |
Mortgages payable | 476,450 | 0 |
Accrued legal settlement | 190,000 | 190,000 |
Total accounts payable and accrued expenses | $ 1,500,705 | $ 794,542 |
8. Related Party Transactions_2
8. Related Party Transactions (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Related Party Transactions [Abstract] | ||
Accounts payable related party | $ 28,758 | $ 19,758 |
Accrued expense related party | 150,000 | 150,000 |
Total accounts payable and accrued liabilities | $ 178,758 | $ 169,758 |
8. Related Party Transactions_3
8. Related Party Transactions (Details Narrative) | 12 Months Ended |
Dec. 31, 2018USD ($)Integershares | |
Series A Preferred Stock [Member] | |
Number of common shares if converted | Integer | 1,250 |
Herick [Member] | |
Officer salary | $ 121,000 |
Management [Member] | Series A Preferred Stock [Member] | |
Stock issued for services, shares | shares | 60,000 |
Two Former Directors [Member] | |
Due to related parties | $ 150,000 |
9. Convertible Notes (Details N
9. Convertible Notes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Debt face amount | $ 7,330,000 | |
Proceeds from sale of convertible notes | 2,072,000 | $ 0 |
Convertible Notes Payable [Member] | ||
Debt face amount | $ 2,000,000 | |
Debt stated interest rate | 12.00% | |
Proceeds from sale of convertible notes | $ 2,072,000 | |
Beneficial conversion feature | $ 2,072,000 |
10. Notes Payable (Details)
10. Notes Payable (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Debt Disclosure [Abstract] | ||
Principal value of Promissory Note | $ 7,330,000 | $ 0 |
Loan discounts | (697,083) | 0 |
Less: Current portion, net of discount | (2,210,975) | 0 |
Promissory Note, long term net of discount | $ 4,421,942 | $ 0 |
10. Notes Payable (Details Narr
10. Notes Payable (Details Narrative) - 12 months ended Dec. 31, 2018 | USD ($) | CAD ($) |
Debt face amount | $ 7,330,000 | |
Promissory note carrying amount | 6,632,917 | |
Interest expense | $ 0 | |
Canada, Dollars | ||
Debt face amount | $ 10,000,000 |
11. Income Taxes (Details Narra
11. Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Net operating loss carryforwards | $ 7,255,000 |
Operating loss carryforward begining expiration date | Dec. 31, 2030 |
Unrecognized tax benefits | $ 0 |
State [Member] | |
Operating loss carryforward begining expiration date | Dec. 31, 2034 |
13. Stockholders' Equity (Detai
13. Stockholders' Equity (Details - Warrant activity) - Warrant [Member] | 12 Months Ended |
Dec. 31, 2018$ / sharesshares | |
Number of Warrants Outstanding | |
Warrants outstanding, beginning balance | shares | 0 |
Warrants issued | shares | 350,000 |
Warrants exercised | shares | 0 |
Warrants forfeited | shares | 0 |
Warrants outstanding, ending balance | shares | 350,000 |
Weighted Average Exercise Price | |
Warrants outstanding, beginning balance | $ / shares | |
Warrants issued | $ / shares | 0.57 |
Warrants exercised | $ / shares | |
Warrants forfeited | $ / shares | |
Warrants outstanding, ending balance | $ / shares | $ 0.57 |
Average Remaining Contractual Life | |
Warrants outstanding | 2 years 10 months 6 days |
Warrants issued | 2 years 10 months 6 days |
13. Stockholders' Equity (Det_2
13. Stockholders' Equity (Details - Warrant assumptions) - Warrant [Member] | 12 Months Ended |
Dec. 31, 2018 | |
Expected dividend yield | 0.00% |
Risk-free interest rate | 2.91% |
Volatility | 444.92% |
Expected life | 3 years |
13. Stockholders' Equity (Det_3
13. Stockholders' Equity (Details Narrative) | 1 Months Ended | 12 Months Ended | |
Jan. 31, 2019USD ($) | Dec. 31, 2018USD ($)Integer$ / sharesshares | Dec. 31, 2017USD ($) | |
Stock based compensation | $ 27,707 | $ 0 | |
Proceeds from convertible debt | 2,072,000 | $ 0 | |
Options [Member] | |||
Stock based compensation | $ 0 | ||
Options outstanding | shares | 750,000 | ||
Option exercise price | $ / shares | $ 1 | ||
Subsequent Event [Member] | Private Placement [Member] | |||
Proceeds from convertible debt | $ 2,072,000 | ||
Series A Preferred Stock [Member] | |||
Preferred stock issued, shares issued | shares | 60,000 | ||
Number of common shares if converted | Integer | 1,250 |