Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 09, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | CANNAPHARMARX, INC. | |
Entity Central Index Key | 0001081938 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | No | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 42,654,399 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 | |
Entity Emerging Growth Company | true | |
Entity Small Business | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity File Number | 000-27055 | |
Interactive data current | Yes | |
State of Incorporation | DE |
UNAUDITED CONSOLIDATED BALANCE
UNAUDITED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | |
Current assets | |||
Cash | $ 243,314 | $ 1,547 | |
Deposit | 0 | 1,308,830 | |
HST receivable | 663 | 28,361 | |
Prepaid expenses | 2,622 | 592,473 | |
Total current assets | 246,599 | 1,931,211 | |
Construction in progress | 1,495,119 | 1,540,918 | |
Land | 139,444 | 143,201 | |
Office equipment | 2,712 | 3,978 | |
Investments | 6,672,019 | 4,193,597 | |
Intangible assets | 1,690,371 | 1,834,176 | |
Goodwill | 6,203,194 | 6,370,333 | |
Total Assets | 16,449,458 | 16,017,414 | |
Current liabilities | |||
Accounts payable and accrued expenses | 1,244,678 | 902,854 | |
Accounts payable related party | 349,024 | 154,291 | |
Accrued interest | [1] | 102,253 | 27,630 |
Accrued legal settlement | [2] | 190,000 | 190,000 |
Accrued expense - related party | [3] | 1,049,307 | 606,356 |
Notes payable current | 1,059,921 | 2,800,559 | |
Convertible notes - net of discount | 1,750,039 | 552,603 | |
Derivative liability | 1,748,237 | 0 | |
Loan payable - related party | 295,000 | 427,805 | |
Total current liabilities | 7,788,459 | 5,662,098 | |
Notes payable - long-term | 7,199,931 | 5,501,118 | |
Total Liabilities | 14,988,391 | 11,163,216 | |
Commitments and contingencies | |||
Stockholders' Equity | |||
Common stock, $0.0001 par value; 300,000,000 shares authorized, 42,654,399 and 36,486,999 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively | 4,265 | 3,649 | |
Treasury stock, 133,200 and -0- shares as of September 30, 2020 and December 31, 2019, respectively | (13) | (13) | |
Additional paid-in capital | 66,673,255 | 61,619,415 | |
Retained earnings (deficit) | (65,781,637) | (57,441,549) | |
Accumulated other comprehensive income (loss) | 30,197 | 137,696 | |
Total Stockholders' Equity (Deficit) | 1,461,067 | 4,854,198 | |
Total Liabilities and Stockholders' (Equity) | 16,449,458 | 16,017,414 | |
Series A Preferred Stock [Member] | |||
Stockholders' Equity | |||
Preferred Stock value | 60,000 | 60,000 | |
Series B Preferred Stock [Member] | |||
Stockholders' Equity | |||
Preferred Stock value | $ 475,000 | $ 475,000 | |
[1] | Represents interest accrued on the outstanding convertible notes and other notes -see Notes 11 and 12. | ||
[2] | The Company had previously been a party to an action filed by Gary M. Cohen, a former officer and director of the Company in 2014. In March 2015, the Company entered into a Settlement Agreement with Mr. Cohen wherein the Company agreed to repurchase 2,250,000 shares of its 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. The Company has taken the position that his death has discharged any obligation the Company might have to make the balance of the payments. The Company has 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. | ||
[3] | Accrued expense related parties of $1,049,307 is comprised of accrued bonuses and fees due to current and former directors and officers of the Company. As of September 30, 2020, there was $150,000 included with the $899,307 amount due to claims received from two former directors, which was purported to be accrued salaries arising out of services provided in 2015 and 2016. Management is in the process of reviewing these claims. |
UNAUDITED CONSOLIDATED BALANC_2
UNAUDITED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 300,000,000 | 300,000,000 |
Common stock, issued | 42,654,399 | 36,486,999 |
Common stock, outstanding | 42,654,399 | 36,486,999 |
Treasury stock, Shares | 133,200 | 0 |
Series A Preferred Stock [Member] | ||
Preferred shares, par value | $ 0.0001 | $ 0.0001 |
Preferred shares, authorized | 60,000 | 60,000 |
Preferred shares, issued | 60,000 | 60,000 |
Preferred shares, outstanding | 60,000 | 60,000 |
Series B Preferred Stock [Member] | ||
Preferred shares, par value | $ 0.0001 | $ 0.0001 |
Preferred shares, authorized | 3,000,000 | 3,000,000 |
Preferred shares, issued | 475,000 | 0 |
Preferred shares, outstanding | 475,000 | 0 |
UNAUDITED CONSOLIDATED STATEMEN
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Revenue | $ 0 | $ 0 | $ 0 | $ 0 |
Operating Expenses: | ||||
General & administrative | 575,585 | 34,659 | 803,835 | 94,684 |
Acquisition expenses | 68,984 | 5,834,000 | 1,931,621 | 5,957,347 |
Amortization and depreciation | 36,308 | 32,222 | 99,450 | 96,009 |
Stock-based compensation | 204,600 | 199,035 | 617,758 | 521,704 |
Travel and entertainment | 5,471 | 18,090 | 13,413 | 83,331 |
Rent related parties | 9,011 | 17,528 | 26,608 | 42,684 |
Professional fees | 313,486 | 166,508 | 585,610 | 468,707 |
Consulting fees | 0 | 16,761 | 0 | 261,352 |
Consulting fees and payroll-related parties | 99,345 | 38,196 | 591,989 | 466,967 |
Total operating expenses | 1,312,790 | 6,356,998 | 4,670,284 | 7,992,785 |
Income (loss) from operations | (1,312,790) | (6,356,998) | (4,670,284) | (7,992,785) |
Other income (expense) | ||||
Interest (expense) | (358,950) | (2,897,523) | (1,719,651) | (3,078,510) |
Loss on conversion of convertible note | (201,916) | 0 | (201,916) | 0 |
Change in the fair value of derivative liability | (779,134) | (66,016) | (1,748,237) | (66,016) |
Other income | 0 | 0 | 0 | 25 |
Other income (expense) net | (1,340,000) | (2,963,539) | (3,669,804) | (3,144,501) |
Income (loss) before provision for income taxes | (2,652,790) | (9,320,537) | (8,340,088) | (11,137,286) |
Provision (credit) for income tax | 0 | 0 | 0 | 0 |
Net income (loss) | $ (2,652,790) | $ (9,320,537) | $ (8,340,088) | $ (11,137,286) |
Basic and diluted earnings (loss) per common share | $ (0.07) | $ (0.27) | $ (0.20) | $ (0.38) |
Weighted average number of shares outstanding | 39,720,700 | 33,921,191 | 42,583,650 | 29,444,513 |
Comprehensive loss: | ||||
Net income (loss) | $ (2,652,790) | $ (9,320,537) | $ (8,340,088) | $ (11,137,286) |
Foreign currency translation adjustment | (53,706) | 217,349 | (107,499) | 73,153 |
Comprehensive income (loss) | $ (2,706,496) | $ (9,103,188) | $ (8,447,587) | $ (11,064,133) |
UNAUDITED STATEMENTS OF CONSOLI
UNAUDITED STATEMENTS OF CONSOLIDATED CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash Flows From Operating Activities: | ||
Net income (loss) | $ (8,340,088) | $ (11,137,286) |
Adjustments to reconcile net income to net cash provided by (used for) operating activities | ||
Stock-based compensation expense | 617,758 | 521,704 |
Amortization of intangible assets | 98,304 | 96,009 |
Advertising expense paid with common stock | 554,000 | 0 |
Acquisition consideration paid in common stock | 0 | 5,800,000 |
Common stock issued in connection with financing | 0 | 0 |
Change in the fair value of derivatives | 1,748,237 | 0 |
Depreciation | 1,146 | 0 |
Amortization of debt discount | 1,704,907 | 3,068,510 |
Changes in operating assets and liabilities | ||
(Increase)/decrease in prepaid expenses and deposit | 1,824,558 | (1,147,796) |
HST Receivable | 26,954 | 0 |
Accrued interest | 74,623 | (58,052) |
Mortgages payable | 0 | (476,450) |
Accounts/loan payable related party | 198,780 | 95,382 |
Loan payable related party | (15,158) | 75,000 |
Accrued expense related party | 442,951 | 294,591 |
Accounts payable and accrued expense | 230,706 | 46,994 |
Net cash provided by (used for) operating activities | (832,322) | (2,821,394) |
Cash Flows From Investing Activities: | ||
Purchase of fixed assets | 0 | (2,766) |
Changes in intangible assets | 95,681 | 0 |
Capitalized mortgage interest and changes in construction in progress | 0 | (36,673) |
Net cash provided by (used for) investing activities | 95,681 | (39,439) |
Cash Flows From Financing Activities: | ||
Proceeds from the sale of preferred stock | 0 | 475,000 |
Proceeds from convertible loans, net of repayments | 945,000 | 1,200,000 |
Proceeds from loans, net of repayment | (3,566) | 1,000,000 |
Purchase of treasury shares | 0 | (98,955) |
Proceeds (repayment of related party loans), net | (15,158) | 75,000 |
Net cash provided by (used for) financing activities | 926,276 | 2,651,045 |
Effect of exchange rates on cash and cash equivalents | 52,132 | (61,827) |
Net Increase (Decrease) In Cash | 189,635 | (209,788) |
Cash At The Beginning Of The Period | 1,547 | 464,118 |
Cash At The End Of The Period | 243,314 | 192,503 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 14,744 | 66,016 |
Cash paid for income taxes | 0 | 0 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Common stock issued for advertising expense | 554,000 | 0 |
Common stock issued related to investment in Great Northern Cannabis | 2,478,422 | 11,264,438 |
Common stock issued to convert convertible notes and accrued interest into equity | $ 306,750 | $ 2,202,213 |
UNAUDITED CONSOLIDATED STATEM_2
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($) | Preferred Stock Series A | Preferred Stock Series B | Common Stock | Treasury Stock | Paid-In Capital | Retained earnings (deficit) | Accumulated Other Comprehensive Income (loss) | Total |
Beginning balance, shares at Dec. 31, 2018 | 60,000 | 18,942,506 | ||||||
Beginning balance, value at Dec. 31, 2018 | $ 60,000 | $ 1,894 | $ 36,642,275 | $ (36,990,469) | $ (286,299) | |||
Net loss | (1,068,669) | (73,552) | (1,142,221) | |||||
Issuance of Series B Preferred Stock, shares | 178,000 | |||||||
Issuance of Series B Preferred Stock, value | $ 178,000 | 178,000 | ||||||
Conversion of convertible notes and accrued interest to common shares, shares | 5,505,530 | |||||||
Conversion of convertible notes and accrued interest to common shares, value | $ 551 | 2,201,662 | 2,202,213 | |||||
Issuance of common stock to purchase non-controlling interest in GN, shares | 7,988,963 | |||||||
Issuance of common stock to purchase non-controlling interest in GN, value | $ 799 | 11,263,639 | 11,264,438 | |||||
Stock-based compensation related to warrant issuances | 161,133 | 161,133 | ||||||
Repurchase of shares from investor, shares | 133,200 | |||||||
Repurchase of shares from investor, value | $ (13) | (98,942) | (98,955) | |||||
Ending balance, shares at Mar. 31, 2019 | 60,000 | 178,000 | 32,436,999 | 133,200 | ||||
Ending balance, value at Mar. 31, 2019 | $ 60,000 | $ 178,000 | $ 3,244 | $ (13) | 50,169,767 | (38,059,138) | (73,552) | 12,278,509 |
Beginning balance, shares at Dec. 31, 2018 | 60,000 | 18,942,506 | ||||||
Beginning balance, value at Dec. 31, 2018 | $ 60,000 | $ 1,894 | 36,642,275 | (36,990,469) | (286,299) | |||
Ending balance, shares at Sep. 30, 2019 | 60,000 | 475,000 | 36,136,999 | 133,200 | ||||
Ending balance, value at Sep. 30, 2019 | $ 60,000 | $ 475,000 | $ 3,614 | $ (13) | 60,127,768 | (48,127,754) | 73,153 | 12,611,968 |
Beginning balance, shares at Dec. 31, 2018 | 60,000 | 18,942,506 | ||||||
Beginning balance, value at Dec. 31, 2018 | $ 60,000 | $ 1,894 | 36,642,275 | (36,990,469) | (286,299) | |||
Ending balance, shares at Dec. 31, 2019 | 60,000 | 475,000 | 36,486,999 | 133,200 | ||||
Ending balance, value at Dec. 31, 2019 | $ 60,000 | $ 475,000 | $ 3,649 | $ (13) | 61,619,415 | (57,441,549) | 137,696 | 4,854,198 |
Beginning balance, shares at Mar. 31, 2019 | 60,000 | 178,000 | 32,436,999 | 133,200 | ||||
Beginning balance, value at Mar. 31, 2019 | $ 60,000 | $ 178,000 | $ 3,244 | $ (13) | 50,169,767 | (38,059,138) | (73,552) | 12,278,509 |
Net loss | (748,079) | (748,079) | ||||||
Change in foreign currency translation | (70,644) | (70,644) | ||||||
Issuance of Series B Preferred Stock, shares | 110,000 | |||||||
Issuance of Series B Preferred Stock, value | $ 110,000 | 110,000 | ||||||
Stock-based compensation related to warrant issuances | 161,335 | 161,335 | ||||||
Ending balance, shares at Jun. 30, 2019 | 60,000 | 288,000 | 32,436,999 | 133,200 | ||||
Ending balance, value at Jun. 30, 2019 | $ 60,000 | $ 288,000 | $ 3,244 | $ (13) | 50,331,103 | (38,807,217) | (144,196) | 11,731,121 |
Net loss | (9,320,537) | (9,320,537) | ||||||
Change in foreign currency translation | 217,349 | 217,349 | ||||||
Issuance of common stock in connection with the issuance of convertible debt, shares | 1,200,000 | |||||||
Issuance of common stock in connection with the issuance of convertible debt, value | $ 120 | 3,797,880 | 3,798,000 | |||||
Issuance of Series B Preferred Stock, shares | 187,000 | |||||||
Issuance of Series B Preferred Stock, value | $ 187,000 | 187,000 | ||||||
Issuance of common stock for acquisition fees, shares | 2,500,000 | |||||||
Issuance of common stock for acquisition fees, value | $ 250 | 5,799,750 | 5,800,000 | |||||
Stock-based compensation related to warrant issuances | 199,035 | 199,035 | ||||||
Ending balance, shares at Sep. 30, 2019 | 60,000 | 475,000 | 36,136,999 | 133,200 | ||||
Ending balance, value at Sep. 30, 2019 | $ 60,000 | $ 475,000 | $ 3,614 | $ (13) | 60,127,768 | (48,127,754) | 73,153 | 12,611,968 |
Beginning balance, shares at Dec. 31, 2019 | 60,000 | 475,000 | 36,486,999 | 133,200 | ||||
Beginning balance, value at Dec. 31, 2019 | $ 60,000 | $ 475,000 | $ 3,649 | $ (13) | 61,619,415 | (57,441,549) | 137,696 | 4,854,198 |
Net loss | (4,214,818) | (4,214,818) | ||||||
Change in foreign currency translation | (67,273) | (67,273) | ||||||
Issuance of common stock in connection with the issuance of convertible debt, shares | 153,940 | |||||||
Issuance of common stock in connection with the issuance of convertible debt, value | $ 15 | 130,834 | 130,849 | |||||
Beneficial conversion feature of note discount | 438,000 | 438,000 | ||||||
Stock-based compensation related to warrant issuances | 206,579 | 206,579 | ||||||
Ending balance, shares at Mar. 31, 2020 | 60,000 | 475,000 | 36,640,939 | 133,200 | ||||
Ending balance, value at Mar. 31, 2020 | $ 60,000 | $ 475,000 | $ 3,664 | $ (13) | 62,394,828 | (61,656,367) | 70,422 | 1,347,534 |
Beginning balance, shares at Dec. 31, 2019 | 60,000 | 475,000 | 36,486,999 | 133,200 | ||||
Beginning balance, value at Dec. 31, 2019 | $ 60,000 | $ 475,000 | $ 3,649 | $ (13) | 61,619,415 | (57,441,549) | 137,696 | 4,854,198 |
Ending balance, shares at Sep. 30, 2020 | 60,000 | 475,000 | 42,654,399 | 133,200 | ||||
Ending balance, value at Sep. 30, 2020 | $ 60,000 | $ 475,000 | $ 4,265 | $ (13) | 66,673,255 | (65,781,637) | 30,197 | 1,461,067 |
Beginning balance, shares at Mar. 31, 2020 | 60,000 | 475,000 | 36,640,939 | 133,200 | ||||
Beginning balance, value at Mar. 31, 2020 | $ 60,000 | $ 475,000 | $ 3,664 | $ (13) | 62,394,828 | (61,656,367) | 70,422 | 1,347,534 |
Net loss | (1,472,479) | (1,472,479) | ||||||
Change in foreign currency translation | 13,481 | 13,481 | ||||||
Issuance of common stock to purchase non-controlling interest in GN, shares | 5,507,400 | |||||||
Issuance of common stock to purchase non-controlling interest in GN, value | $ 551 | 2,477,871 | 2,478,422 | |||||
Shares issued for services, shares | 300,000 | |||||||
Shares issued for services, value | $ 30 | 152,970 | 153,000 | |||||
Stock-based compensation related to warrant issuances | 206,579 | 206,579 | ||||||
Ending balance, shares at Jun. 30, 2020 | 60,000 | 475,000 | 42,448,339 | 133,200 | ||||
Ending balance, value at Jun. 30, 2020 | $ 60,000 | $ 475,000 | $ 4,245 | $ (13) | 65,232,248 | (63,128,846) | 83,903 | 2,726,536 |
Net loss | (2,652,790) | (2,652,790) | ||||||
Change in foreign currency translation | (53,706) | (53,706) | ||||||
Issuance of common stock in connection with the issuance of convertible debt, shares | 135,000 | |||||||
Issuance of common stock in connection with the issuance of convertible debt, value | $ 14 | 306,737 | 306,750 | |||||
Beneficial conversion feature of note discount | 649,527 | 649,527 | ||||||
Shares issued for services, shares | 200,000 | |||||||
Shares issued for services, value | $ 20 | 400,980 | 401,000 | |||||
Stock-based compensation related to warrant issuances | 204,600 | 204,600 | ||||||
Return of common shares related to note payoff to note payoff, shares | (153,940) | |||||||
Return of common shares related to note payoff to note payoff, value | $ (15) | (130,834) | (130,849) | |||||
Warrants exercise, shares | 25,000 | |||||||
Warrants exercise, value | $ 3 | 9,998 | 10,000 | |||||
Ending balance, shares at Sep. 30, 2020 | 60,000 | 475,000 | 42,654,399 | 133,200 | ||||
Ending balance, value at Sep. 30, 2020 | $ 60,000 | $ 475,000 | $ 4,265 | $ (13) | $ 66,673,255 | $ (65,781,637) | $ 30,197 | $ 1,461,067 |
1. Nature of Operations and Sig
1. Nature of Operations and Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
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 it 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 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.” In April 2016, the Company ceased operations. As a result, the Company was then considered a “shell” company as defined under the Securities Exchange Act of 1934, as amended, as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act. Effective December 31, 2018, the Company and Hanover CPMD Acquisition Corp. (“CPMD Hanover”) a newly formed, wholly-owned subsidiary, entered into a Securities Purchase Agreement with Alternative Medical Solutions, Inc., an Ontario, Canada corporation (“AMS”), its shareholders, wherein 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. 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, the 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 an 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 the Company estimates that it will require approximately CAD$20.0 million in additional financing which it may seek to raise via equity and debt. There can be no assurances that the Company will successfully raise the financing required to complete the construction of the facility and begin cultivation. As a result of the completion of the acquisition of AMS on December 31, 2019, the Company 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 on Form 8-K/A with the SEC on February 14, 2019, advising that it was no longer a shell company pursuant to the aforesaid Rule. Effective February 25, 2019, the Company acquired 3,712,500 shares and 2,500,000 Warrants to purchase 2,500,000 shares of Common Stock of GN Ventures, Ltd, Alberta, Canada, f/k/a Great Northern Cannabis, Ltd. (“GN”), in exchange for an aggregate of 7,988,963 shares of its Common Stock, from a former shareholder of GN who is now the Company’s President and CEO. While no assurances can be provided, the Company believes this is the initial step in its efforts to acquire all or a significant portion of the issued and outstanding stock of GN. In May 2020, the Company exchanged 5,507,400 of its shares for 3,671,597 shares of GN. GN owns a 60,000 square foot cannabis cultivation and grow facility located on 38 acres in Stevensville, Ontario, Canada. Because the Company is a minority shareholder of GN and GN is a privately held company, the Company cannot confirm that the information it currently has on GN’s operations is complete or fully reliable. 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 complete, and GN’s subsidiary, 9869247 Canada Limited, received a license to cultivate from the Canadian Ministry of Health on July 5, 2019. As a result, in October 2019, GN commenced cultivation activities and began generating revenues during the first calendar quarter of 2020. The Company expects that it will obtain additional information on the business activities of GN as it has renewed discussions to acquire additional interests and is performing its due diligence procedures. Effective June 11, 2019, the Company entered into a Securities Purchase Agreement with Sunniva, Inc, a British Columbia, Canada corporation (“Sunniva”) wherein the Company agreed to acquire all of the issued and outstanding securities of Sunniva’s wholly-owned subsidiaries Sunniva Medical Inc. (“SMI”) and 1167025 B.C. LTD (“1167025”) for CAD $16.0 million in cash and a note in the principal amount of CAD $4.0 million. These companies are the current owners of the Sunniva Canada Campus, which includes construction assets for a planned 759,000 square-foot greenhouse located on an approximately 114-acre property in Okanagan Falls, British Columbia. On June 8, 2020, the Company received a notice of termination of this Purchase Agreement, as amended, from Sunniva. As a result, the Company incurred a charge of $1,881,126 due to the write-off of its deposit to Sunniva, banking fees and prepaid expenses associated with the failed acquisition of Sunniva. The Company is in discussions with Sunniva, as well as an investment banker who received deposits from the Company, about recovering all or a portion of its deposits, banking fees, and prepaid expenses. The accompanying financial statements as of September 30, 2020, do not reflect potential recovery amounts related to Sunniva and other parties, if any. COVID-19 On March 11, 2020, the World Health Organization (“WHO”) declared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease. Covid-19 and the U.S’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations. Management’s Representation of Interim Financial Statements The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements on December 31, 2019, and 2018, as presented in the Company’s Form 10-K filed on May 27, 2020 with the SEC. Basis of Presentation The accompanying unaudited consolidated 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 assets and expenses during the reporting period. The most significant estimates relate to investments, purchase price allocation of acquired assets, impairment of long-lived assets, intangibles, and goodwill. 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. On September 30, 2020, and December 31, 2019, the Company’s cash and cash equivalents totaled $243,314 and $1,547, 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 September 30, 2020, and December 31, 2019, the Company determined that it had 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. During the nine months ended September 30, 2020, the Company entered into ten convertible note instruments amounting to $1,205,000 that contained embedded derivative features. As a result, the Company performed a Black Scholes analysis and recorded a derivative liability and an expense amounting to $1,748,237. 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 the Company’s US operations is United States dollars, (“USD”). The functional currency of the Company’s Canadian operations is in 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 periodically. 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 September 30, 2020, and December 31, 2019, the Company had $1,495,120 and $1,540,918 in construction in progress, respectively, comprised entirely of the construction in progress relating to the building acquired with the acquisition of AMS. Additionally, the Company had $139,444 and $143,201, respectively, in the land upon which the construction in process was situated. Depreciation expense related to the construction in progress amounted to $-0- and $-0- for the periods ended September 30, 2020, and September 30, 2019, respectively. Stock Purchase Warrants The Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. 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 a marijuana license with a useful life of 15 years. 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 approach 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, 2019, 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 September 30, 2020, and on December 31, 2019, 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 has adopted the guidance under ASC Topic 820 for financial instruments measured on fair value on a recurring basis. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. 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. Cost Method Investment Our cost method investment consists of an investment in a private company in which we do not have the ability to exercise significant influence over its operating and financial activities. The investment is tested for impairment quarterly. Income (Loss) Per Share Income (loss) per share is presented in accordance with Accounting Standards Update (“ ASU Earning per Share EPS Business Segments The Company’s activities during the nine months ended September 30, 2020, and the year ended December 31, 2019, comprised a single segment. Recently Issued Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations. The Company adopted ASC 842 on January 1, 2019. However, the adoption of the standard had no impact on the Company’s financial statements since all Company leases are month to month, or short-term rental. |
2. Going Concern and Liquidity
2. Going Concern and Liquidity | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern and Liquidity | NOTE 2. GOING CONCERN AND LIQUIDITY As of September 30, 2020, and December 31, 2019, the Company had $243,314 and $1,547 in cash on hand respectively, and no revenue-producing business or other sources of income. Additionally, as of September 30, 2020, the Company had outstanding liabilities totaling $14,988,391 and $246,599 in short term liquid assets. In the Company’s financial statements for the fiscal years ended December 31, 2019, and 2018, the Reports of the Independent Registered Public Accounting Firm include an explanatory paragraph that describes substantial doubt about the Company’s 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 the Company’s current financial projections, it believes it does not have sufficient existing cash resources to fund its 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. Deposits
3. Deposits | 9 Months Ended |
Sep. 30, 2020 | |
Deposits [Abstract] | |
Deposits | NOTE 3. DEPOSITS As of September 30, 2020, and December 31, 2019, the Company had deposits of $-0- and $1,308,830 respectively. The $1,308,830 which was non-refundable and was intended to be credited against the purchase price of the Sunniva acquisition (referenced throughout this Report) if it had been successfully consummated. This balance was written off by the Company due to the termination of the Sunniva Purchase Agreement on June 8, 2020. |
4. Prepaid Expenses
4. Prepaid Expenses | 9 Months Ended |
Sep. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid Expenses | NOTE 4. PREPAID EXPENSES The following table sets forth the components of the Company’s prepaid expenses on September 30, 2020, and December 31, 2019: September 30, 2020 December 31, 2019 Prepaid expenses $ 2,622 $ – Prepaid interest acquisition expenses-Sunniva – 592,473 Total $ – $ 592,473 The prepaid acquisition expenses for Sunniva were written off during the period ended March 31, 2020 due to the termination of the Sunniva Agreement. |
5. Fair Value Of Financial Inst
5. Fair Value Of Financial Instruments | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Of Financial Instruments | NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company has adopted the guidance under ASC Topic 820 for financial instruments measured on a fair value on a recurring basis. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC Topic 820 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows: · Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. · Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. · Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Company’s financial instruments consist principally of cash, accounts payable, and accrued liabilities. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of the Company’s debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to the Company. The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging.” Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. Also, the fair value of freestanding derivative instruments such as warrant and option derivatives are valued using the Black-Scholes simulation model. The Company’s derivative liabilities were adjusted to fair market value at the end of each reporting period, using Level 3 inputs. The following table sets forth by level with the fair value hierarchy the Company’s financial assets and liabilities measured at fair value on September 30, 2020: Level 1 Level 2 Level 3 Total Derivative financial instruments $ – $ – $ 1,748,237 $ 1,748,237 |
6. Investment
6. Investment | 9 Months Ended |
Sep. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment | NOTE 6. INVESTMENT On February 25, 2019, the Company acquired 3,712,500 shares and 2,500,000 Warrants to purchase 2,500,000 shares of common stock at a price of CAD$1.00 of GN Ventures, Ltd., Alberta, Canada, f/k/a Great Northern Cannabis, Ltd. (“GN”), in exchange for an aggregate of 7,988,963 shares of the Company’s Common Stock from a former shareholder of GN. On the date of purchase, the Company’s Common Stock was trading at $1.41 which values the purchase at $11,264,438. For balance sheet purposes the Company has treated this purchase using the cost method because the purchase consists of an investment in a private company in which the Company does not have the ability to exercise significant influence over GN’s operating and financial activities. The Company conducted an impairment test on December 31, 2019 and determined that an impairment existed resulting in a write-down of the investment by $7,070,841 to a current value of $4,193,597. On May 8, 2020 the Company exchanged 5,507,400 of its shares for 3,671,597 shares of GN. These shares were value at $.67 each which represents the value of the GN shares as determined by the Company’s year-end impairment analysis and were recorded as an investment of $2,478,422. As of September 30, 2020, the Company’s investment in GN was $6,672,019. Additionally, the Company conducted an impairment test on September 30, 2020, and determined that no further impairment existed. |
7. Property, Plant, and Equipme
7. Property, Plant, and Equipment | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant, and Equipment | NOTE 7. PROPERTY, PLANT AND EQUIPMENT The following table sets forth the components of the Company’s property and equipment on September 30, 2020, and December 31, 2019: September 30, 2020 December 31, 2019 Gross Carrying Amount Accumulated Depreciation Net Book Value Gross Carrying Amount Accumulated Depreciation Net Book Value Computers, software, and office equipment $ 4,648 $ (1,936 ) $ 2,712 $ 4,757 $ (779 ) $ 3,978 Land 139,444 – 139,444 143,201 – 143,201 Construction in progress 1,495,120 – 1,495,120 1,540,918 – 1,540,918 Total fixed assets $ 1,639,212 $ (1,936 ) $ 1,637,276 $ 1,688,876 $ (779 ) $ 1,688,097 For the nine months ended September 30, 2020, and 2019, the Company recorded depreciation expense of $1,146 and $-0-, respectively. 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, the exterior construction of the building has been completed; however, no interior construction has begun. 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. |
8. Goodwill and Intangible Asse
8. Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | NOTE 8. GOODWILL AND INTANGIBLE ASSETS As of September 30, 2020 and December 31, 2019, the Company had $6,203,194 in goodwill and $1,690,371 in intangible assets, compared to $6,370,333 and $1,834,176, 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 approximately $124,733 per year. The Company has recorded amortization expense of $98,293 and $96,009, respectively, for the nine months ended September 30, 2020, and September 30, 2019. |
9. Accounts Payable and Accrued
9. Accounts Payable and Accrued Expenses | 9 Months Ended |
Sep. 30, 2020 | |
Payables and Accruals [Abstract] | |
Accounts Payable and Accrued Expenses | NOTE 9. 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 on September 30, 2020, and December 31, 2019. September 30, 2020 December 31, 2019 Accounts payable and accrued expenses $ 1,244,678 $ 902,854 Accrued interest (a) 102,253 27,630 Accrued legal settlement (b) 190,000 190,000 Total accounts payable and accrued liabilities $ 1,536,931 $ 1,120,484 (a) Represents interest accrued on the outstanding convertible notes and other notes -see Notes 11 and 12. (b) The Company had previously been a party to an action filed by Gary M. Cohen, a former officer and director of the Company in 2014. In March 2015, the Company entered into a Settlement Agreement with Mr. Cohen wherein the Company agreed to repurchase 2,250,000 shares of its 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. The Company has taken the position that his death has discharged any obligation the Company might have to make the balance of the payments. The Company has 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. |
10. Related Party Transactions
10. Related Party Transactions | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 10. RELATED PARTY TRANSACTIONS The following table sets forth the components of the Company’s related party liabilities on September 30, 2020, and December 31, 2019. September 30, 2020 December 31, 2019 Accounts payable and accrued payroll-related party(a) $ 644,024 $ 582,096 Accrued expense - related party (b) 1,049,307 606,356 Total accounts payable and accrued liabilities $ 1,693,331 $ 1,188,452 (a) Accounts payable and accrued payroll-related parties as of September 30, 2020, is comprised of the following: Interest-free loans of $295,000 from directors and officers and accrued salaries for officers and employees of $349,024. (b) Accrued expense related parties of $1,049,307 is comprised of accrued bonuses and fees due to current and former directors and officers of the Company. As of September 30, 2020, there was $150,000 included with the $899,307 amount due to claims received from two former directors, which was purported to be accrued salaries arising out of services provided in 2015 and 2016. Management is in the process of reviewing these claims. From April 1, 2018 through March 2019, the Company’s principal place of business was located at 2 Park Plaza, Suite 1200 – B. Irvine, CA 92614. This space was provided to the Company on a twelve-month term by a company of which Mr. Nicosia, one of the Company’s directors, serves as the President and CEO. The monthly rent at that location was $1,000; however, as of the date of this report, the Company has not made any rent payments and continues to accrue those amounts as accounts payable. Effective on March 1, 2019, the Company changed its principal place of business to Suite 206, 1180 Sunset Drive, Kelowna, BC, Canada Z1Y 9W6, which the Company has rented pursuant to an oral sublease from PLC International Investments Inc, a company owned and controlled by Dominic Colvin, the Company’s current CEO, President and a director. This location consists of approximately 500 sq. feet. The Company paid a monthly rent of $1,500 (CAD). Effective March 22, 2019, the Company changed its principal place of business and leases three offices at 3600 888 3 St SW, Calgary, Alberta, Canada, T2P 5C5. The lease may be terminated by either party on 30 days’ notice. Rent is $4,000 CAD per month. This space was provided by a company to which, Mr. Orman, one of the Company’s directors, serves as a Director. See Note 16, Subsequent Events, below, for additional related party transactions. |
11. Convertible Notes and Deriv
11. Convertible Notes and Derivative Liabilities | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Convertible Notes | NOTE 11. CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES The following tables set forth the components of the Company’s, convertible debentures as of September 30, 2020, and December 31, 2019: September 30, 2020 December 31, 2020 Principal value of convertible notes $ 2,495,000 $ 1,550,000 Note discount (744,961 ) (997,397 ) Total convertible notes, net current $ 1,750,039 $ 552,603 On July 8, 2019, the Company commenced a private offering of Units at a price of $50,000 per Unit, each Unit consisting of 50,000 shares of the Company’s Common Stock and one $50,000 unsecured Convertible Note (“a Convertible Note”), which mature one year from the date of issuance and accrue interest at 5% per annum. These Convertible Notes are convertible into shares of the Company’s Common Stock at a conversion price of $1.00 per share. During the year ended December 31, 2019, the Company issued 31 Units in this offering for and received proceeds of $1,550,000 from six accredited investors. Since the Company’s stock price exceeded the conversion feature of the Convertible Notes and was immediately exercisable, the Company recorded a beneficial conversion feature (“BCF”) and expense of $1,550,000 which was charged to interest expense with an offset to paid-in capital. In addition, the 5,505,530 shares of Common Stock included in the Units were valued at $5,075,000. The excess above the $1,550,000 face value of the Convertible Notes or, $3,525,000, was charged to interest expense with an offset to paid-in capital. The remaining $1,550,000 was recorded as a Note discount of $1,550,000 to be amortized over the three years from the date of the Note to the maturity date. The Company recorded $552,602 in interest expense related to the amortization of note discount during the year ended December 31, 2019. During the nine months ended September 30, 2020 the Company recorded $58,179 in interest expense on these Notes and amortized $1,003,233 of note discount which was charged to interest expense. As of September 30, 2020, there was $85,808 in accrued interest on these notes, and $12,329 in unamortized note discount related to these notes. All of these notes are past due their maturity dates. The Company has not received any notice of default on these note and continues to accrue interest on these notes past the maturity date During the three months ended September 30, 2020, the Company issued $157,500 in unsecured 8% convertible notes to one accredited investor, and $513,500 in unsecured 10% convertible notes to three accredited investors. Under the terms of each convertible note, the investors received the right to convert their note to common stock commencing six months after the date of issuance ranging from 55% to 61%, respectively, of the lowest closing price for the Company’s common stock measured 20 business days prior to conversion. Additionally, these notes were issued with an original issue discount of $35,000 which were immediately expensed. The Company recorded a note discount of $649,527 on these notes. During the nine months ended September 30, 2020, the Company recorded $3,931 in interest expense on these four new notes and amortized $43,108 of note discount which was charged to interest expense. As of September 30, 2020, there was $3,931 in accrued interest on these notes, and $606,419 in unamortized note discount related to these notes. During the nine months ended September 30, 2020, the Company issued a total of ten notes to eight accredited investors of which $595,500 was in the form of unsecured 8% convertible notes, and $609,500 was in unsecured 10% convertible notes. Under the terms of each convertible note, the investors received the right to convert their to common stock commencing nine months after the date of issuance ranging from 55%-75%, respectively, of the lowest closing price for the Company’s common stock measured 20 business days prior to conversion. Additionally, these notes were issued with an original issue discount of $53,000 which were immediately expensed. One of the noteholders also received 153,940 “returnable” shares in connection with issuance of the convertible notes. These shares are returnable to the Company if the underlying convertible note ($160,000) is redeemed before the passage of 180 days. During the three months ended September 30, 2020 the Company repaid the $160,000 Note, received the 153,940 shares back from the noteholder, and converted a $100,000 note plus accrued interest into 135,000 Common Shares of the Company. During the nine months ended September 30, 2020, the Company recorded $27,696 in interest expense on these ten new notes and amortized $280,593 of note discount which was charged to interest expense. As of September 30, 2020, there was $16,444 in accrued interest on these ten notes, and $732,632 in unamortized note discount related to these notes. During the three months ended September 30, 2020 the $160,000 note was paid off, and one note holder with a $100,000 convertible note converted their note to equity and received 135,000 shares pursuant to the conversion terms on his note. The Company recorded a loss on this conversion of debt of $201,916. The FASB has issued authoritative guidance whereby instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The conversion prices of the Notes described above were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events or they were variable. Since the number of shares is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to settle the conversion option. In accordance with the FASB authoritative guidance, the conversion features have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations. As of September 30, 2020, derivative liabilities were valued using a probability-weighted average Black-Scholes-Merton pricing model with the following assumptions: September 30, 2020 Exercise Price 0.30–0.41 Stock Price $ 0.60 Risk-free interest rate .19% Expected volatility 352.70% Expected life (in years) 1.00 Expected dividend yield 0% Fair Value: $ 1,748,237 The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the conversion feature of the notes was based on the remaining term of the notes. The expected dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future. During the nine months ended September 30, 2020, the Company recognized a loss of $1,748,237 as “Other Expense” on its Statements of Operations, which represented the net change in the value of the derivative liability. |
12. Notes Payable
12. Notes Payable | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 12. NOTES PAYABLE The following tables set forth the components of the Company’s secured notes payable as of September 30, 2020, and December 31, 2019: September 30, 2020 December 31, 2019 Principal value of Promissory Notes $ 8,556,920 $ 8,789,794 Loan discounts (297,068 ) (488,117 ) Less: current portion (1,059,921 ) (2,800,559 ) Promissory Notes, long term net of discount $ 7,199,931 $ 5,501,118 Pursuant to the terms of the Securities Purchase Agreement with AMS the Company 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 commencing upon AMS receiving a license to cultivate 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. Since AMS had not received its cultivation license as of September 30, 2020, the Note Payable will have a maturity date of 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. During the year ended December 31, 2019, the Company recorded $244,058 in interest expense related to the amortization of the note discount. During the nine months ended the Company has recorded $175,721 in amortization expense related to Note discount. On July 3, 2019, the Company entered into a 12% $1,000,000 Loan Agreement with Koze Investments LLC (“Koze”), payable in full on June 28, 2020. The Company is currently in discussions with Koze to extend the maturity date of the Note. While the Company believes it will be successful in extending the maturity date, there are no assurances this will occur. Under the terms of the 12% Note, Koze took a first security interest against the Company’s Hanover, Ontario cannabis facility in progress and required the Company to pay off its existing mortgage of approximately $650,000 CAD. Additionally, the Company agreed to pay a 3% origination fee, prepay nine months of interest ($60,000) and to issue to Koze five-year warrants to purchase 1,001,000 shares of the Company’s Common Stock at an exercise price of $1.00 per share. After paying the origination fees, the prepayment and paying off the original mortgage, the Company used a portion of the remaining proceeds as payment against the SMI purchase price of CAD $1,000,000. As of the date this Report the Company has continued to accrue interest on the Koze Note and is in discussion to extend its term. Koze has not asserted that a default has occurred. On April 21, 2020, the Company received a loan from the Government of Canada under the Canada Emergency Business Account program (CEBA). This loan was in the amount of $40,000 CAD (USD $29,352). These funds are interest-free until December 31, 2022, at which time the remaining balance will convert to a 3-year term loan at an interest rate of 5% per annum. If the Company repays the loan prior to December 31, 2022, there will be loan forgiveness of 25% or $10,000 CAD. |
13. Income Taxes
13. Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 13. INCOME TAXES As of September 30, 2020, the Company has approximately $65,700,000 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 September 30, 2020, 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. Commitments and Contingenci
14. Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 14. 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. In March 2019, the Company temporarily moved its principal place of business to Suite 206, 1180 Sunset Drive, Kelowna, BC, Canada Z1Y 9W6, which the Company rented under an oral sublease from PLC International Investments Inc, a company owned and controlled by Dominic Colvin, the Company’s current CEO, President, and a director. This location consists of approximately 500 sq. feet. The Company continues to occupy this location as of the date of this Report and pays a monthly rent of $1,500 (CAD). Effective March 22, 2019, the Company moved into a new principal place of business and entered into a lease agreement to lease three offices at Suite 3600, 888 3 St SW, Calgary, Alberta, Canada, T2P 5C5. The lease may be terminated by either party on 30 days’ notice. Rent is $4,000 CAD per month. This space was provided by a company to which, Mr. Orman, one of the Company’s directors, serves as a Director. |
15. Stockholders' Equity
15. Stockholders' Equity | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 15. STOCKHOLDERS’ EQUITY Preferred Stock The Company is authorized to issue up to 10,000,000 shares of one or more series of Preferred Stock, 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. Series A Preferred Stock In April 2018, the Company issued 60,000 shares of its Series A Convertible Preferred Stock for $1.00 per share to certain investors who then became members of management and the board of directors. 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 into 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 because there was no public trading market for the Convertible Preferred Stock, and none is expected to develop in the future. Therefore, the BCF related to the Preferred Shares was considered to have no value on the date of issuance. There were 60,000 shares of Series A Preferred Stock issued and outstanding as of September 30, 2020, and December 31, 2019, respectively. Series B Preferred Stock / Common Stock 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. This Offering was closed at the end of August 2019. As of September 30, 2020, the Company had accepted $475,000 in subscriptions in this offering. There were 475,000 shares of Series B Convertible Preferred Stock issued and outstanding as of September 30, 2020, and December 31, 2019, respectively. The Company is authorized to issue 300,000,000 shares of Common Stock, par value $0.0001 per share. As of September 30, 2020, and December 31, 2019, 42,654,399 and 36,486,999 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. During the three-month period ended June 30, 2019, the Company entered into a Qualified Financing with its minority purchase of GN stock and warrants described in Note 4 “Investment.” As a result on June 30, 2019, the convertible notes amounting to $2,072,000 along with $130,212 of accrued interest were converted, pursuant to the automatic conversion terms described above, to equity at a price of $0.40 per share, or a total of 5,505,530 shares. Unit Offering On July 8, 2019, the Company commenced a private offering of Units at a price of $50,000 per Unit, each Unit consisting of 50,000 shares of the Company’s Common Stock and one $50,000 unsecured Convertible Note (“Unit Convertible Note”), which mature in one year from the date of issuance and accrue interest at 5% per annum. These Unit Convertible Notes are convertible into one share of the Company’s Common stock at a conversion price of $1.00 per share. During the three months ended September 30, 2019, the Company issued $1,200,000 in Unit Convertible Notes to two accredited investors. Since the Company’s stock price exceeded the conversion feature of the Unit convertible Notes and was immediately exercisable, the Company recorded a beneficial conversion feature (“BCF”) and expense of $1,200,000 which was charged to interest expense with an offset to paid-in capital. Additionally, 1.2 million shares of Common Stock were issued in connection with the sale of the Units which were valued at $2,598,000. The excess above the $1,200,000 face value of the Unit Convertible Notes or, $1,398,000 was charged to interest expense with an offset to paid-in capital. The remaining $1,200,000 was recorded as a Note discount of $1,200,000 to be amortized over one year at the rate of $100,000 per month. $200,000 in interest expense related to this discount was recorded during the three months ended September 30, 2019. Shares Issued in Connection with the Assignment Agreement with Great Northern Ltd On September 28, 2018, Great Northern Cannabis, Ltd (“GN”), entered a Letter of Intent with P2P Green Power Energy Solutions and certain individuals to acquire all of the issued and outstanding shares of AMS. On October 10, 2018, the Company entered into an Assignment and Assumption Agreement (“the AA Agreement”) with GN. Under the terms of the AA Agreement, the Company essentially purchased the right to acquire AMS from GN for the following consideration: · A refundable payment of CAD $200,000 · An accountable reimbursement of GN expenses and fees related to the AMS acquisition not to exceed CAD $300,000 · In the event that we didn’t enter into a management agreement with GN post-closing, we agreed to issue GN, 2,500,000 shares of our Common Stock trading under symbol “CPMD” All of the above consideration was expressly contingent upon the closing of the AMS acquisition which was consummated by the Company on December 31, 2019. The payments of $200,000 and $300,000 were made to GN. On August 30, 2019, the parties determined that no management agreement had been entered into so the Company issued 2,500,000 shares to GN valued at $5,800,000 as required pursuant to the Agreement. Under the guidelines of ASC 805, Business Combinations, since we disclosed that the AMS transaction was complete, the goodwill re-measurement period ended and therefore we could not adjust goodwill for this transaction. As a result, we recorded an acquisition expense on the Company’s income statement for $5,800,000. Shares Reserved for Issuance As of September 30, 2020, the Company had 82,435,087 Common Shares reserved for issuance. These shares are comprised of 75,000,000 Common Shares issuable upon the conversion of the Series A Preferred Stock; 475,000 Common Shares issuable upon the conversion of Series B Preferred Stock; 750,000 Common Shares upon the exercise of stock options, 4,640,337 shares issuable upon a conversion of the convertible notes, and 2,319,750 Common Shares issuable upon the exercise of warrants. None of these shares were used in the calculation of earnings per share because their inclusion would be anti-dilutive since the Company is operating at a loss. There are no assurances that the conversion rights will be utilized or that the options or the warrants will be exercised. Stock Options During the period ended September 30, 2020, and December 31, 2019, the Company did not record any stock-based compensation expense related to stock options. As of September 30, 2020, options were outstanding to purchase 750,000 shares of the Company’s 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 September 30, 2020, and December 31, 2019: Number of Warrants Outstanding (a) Weighted Average Exercise Price Average Remaining Contractual Life (Years) Warrants outstanding, January 1, 2018 – $ – – Warrants issued 350,000 0.57 2.50 Warrants exercised – – – Warrant forfeited – – – Warrants outstanding, December 31, 2018 350,000 $ 0.57 1.12 Warrants issued (a) 1,519,750 $ 1.01 1.59 Warrants outstanding December 31, 2019 1,869,750 $ 0.92 1.80 Warrants exercised (25,000 ) – – Warrants outstanding September 30, 2020 1,844,750 $ 0.92 1.50 Stock purchase warrants are exercisable for a period of two-five years from the date of issuance. (a) The number of warrants reflected in this table does not include 475,000 warrants that were issued at various times during 2019 in connection with the issuance of the Company’s Series B Preferred stock. These warrants are exercisable for a period of three years at a strike price of $2.00 per share. The Company accounts for warrants issued to purchase shares of its common stock or preferred stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. Therefore, no stock-based compensation expense was recorded for the issuance of these 475,000 warrants. The value of the stock purchase warrants for the periods ended September 30, 2020, and December 31, 2019, was determined using the following Black-Scholes methodology: Expected dividend yield (1) 0.00% Risk-free interest rate range (2) 1.75 - 2.91% Volatility range (3) 1.23% - 442.92% Expected life (in years) 2.00 - 5.00 _____________ (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. During the three-month periods ended September 30, 2020 and 2019, the Company recorded $204,579 and $199,035, respectively, in stock-based compensation. During the nine-month period ended September 30, 2020 and 2019, the Company recorded 617,758 and 521,704 in stock-based compensation. |
16. Subsequent Events
16. Subsequent Events | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 16. SUBSEQUENT EVENTS On October 1, 2020, $35,000 of a convertible debenture was converted at $0.3172 into 110,340 common shares of the Company and the remainder of this $78,000 debenture was repaid in full with interest on October 6, 2020 in the amount of $64,669.87. The Company entered into a cooperation agreement with Klonetics Plant Science Inc., a Company that engages in the business of genetic research and development, tissue culture propagation, plantlet production, ready to flower production within the cannabis industry throughout the world. The parties consider it advantageous to pool their respective experience, expertise, knowhow and capabilities in the area of land acquisition, financing, development, operations, and respective areas of industry focus. The parties wish to commence their intended long-term cooperation by pursuing projects in selected areas of focus initially before extending it to a larger scale merger between the parties, which may be discussed at a later date with terms to be determined and agreed by the parties. CannapharmaRx will invest up to a maximum percentage of Thirty Percent (30%) of the issued and outstanding shares of Klonetics. On October 6, 2020, CannapharmaRx Inc invested $50,000 CAD in exchange for 83,333 Class A Common Shares at $0.60 CAD per share. On October 21, 2020, we executed a Common Stock Purchase Agreement with Granite Global Value Investments Ltd. (“Granite”) whereby Granite would agree to purchase $4,000,000 of our Common Stock at a price equal to 80% of the lowest trading price of the prior ten trading days. Triton would purchase shares of our Common Stock in tranches of between $25,000 and $250,000. In order to consummate this financing, we will be required to file, and have declared effective, a Registration Statement on Form S-1 with the Securities and Exchange Commission. On October 10, 2020, the Herick Parties filed a Motion to Dismiss the Fourth and Fifth Claims for Relief. On October 30, 2020, the Parties filed a Stipulated Motion for an Extension of Time, through and including November 16, 2020, for us to respond to the Herick Parties’ Motion to Dismiss the Fourth and Fifth Claims for Relief. We and the Herick Parties are currently in active settlement negotiations which we believe are likely to result in a written settlement agreement and dismissal of all claims. The Parties currently anticipate completion of such settlement agreement on or before November 16, 2020. On October 23, 2020, the Company entered into a convertible debenture with an accredited investor in the amount of $82,500 with a $3,750 OID and 12 months of prepaid interest at $3,750 or 5%. This debenture is convertible into common shares at 70% of the lowest closing price during the previous 25 trading days prior to conversion date. Prepayment is authorized at 0-60 days at 115%, 61-180 days at 130%. No prepayment after 180 days. Interest increases to 24% if default occurs. |
1. Nature of Operations and S_2
1. Nature of Operations and Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Nature of Operations | 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 it 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 | 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 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.” In April 2016, the Company ceased operations. As a result, the Company was then considered a “shell” company as defined under the Securities Exchange Act of 1934, as amended, as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act. Effective December 31, 2018, the Company and Hanover CPMD Acquisition Corp. (“CPMD Hanover”) a newly formed, wholly-owned subsidiary, entered into a Securities Purchase Agreement with Alternative Medical Solutions, Inc., an Ontario, Canada corporation (“AMS”), its shareholders, wherein 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. 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, the 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 an 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 the Company estimates that it will require approximately CAD$20.0 million in additional financing which it may seek to raise via equity and debt. There can be no assurances that the Company will successfully raise the financing required to complete the construction of the facility and begin cultivation. As a result of the completion of the acquisition of AMS on December 31, 2019, the Company 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 on Form 8-K/A with the SEC on February 14, 2019, advising that it was no longer a shell company pursuant to the aforesaid Rule. Effective February 25, 2019, the Company acquired 3,712,500 shares and 2,500,000 Warrants to purchase 2,500,000 shares of Common Stock of GN Ventures, Ltd, Alberta, Canada, f/k/a Great Northern Cannabis, Ltd. (“GN”), in exchange for an aggregate of 7,988,963 shares of its Common Stock, from a former shareholder of GN who is now the Company’s President and CEO. These shares and warrants, when exercised, will represent approximately 5% and 3%, respectively, of the issued and outstanding stock of GN. While no assurances can be provided, the Company believes this is the initial step in its efforts to acquire all or a significant portion of the issued and outstanding stock of GN. In May 2020, the Company exchanged 5,507,400 of its shares for 3,671,597 shares of GN. GN owns a 60,000 square foot cannabis cultivation and grow facility located on 38 acres in Stevensville, Ontario, Canada. Because the Company is a minority shareholder of GN and GN is a privately held company, the Company cannot confirm that the information it currently has on GN’s operations is complete or fully reliable. 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 complete, and GN’s subsidiary, 9869247 Canada Limited, received a license to cultivate from the Canadian Ministry of Health on July 5, 2019. As a result, in October 2019, GN commenced cultivation activities and began generating revenues during the first calendar quarter of 2020. The Company expects that it will obtain additional information on the business activities of GN as it has renewed discussions to acquire additional interests and is performing its due diligence procedures. Effective June 11, 2019, the Company entered into a Securities Purchase Agreement with Sunniva, Inc, a British Columbia, Canada corporation (“Sunniva”) wherein the Company agreed to acquire all of the issued and outstanding securities of Sunniva’s wholly-owned subsidiaries Sunniva Medical Inc. (“SMI”) and 1167025 B.C. LTD (“1167025”) for CAD $16.0 million in cash and a note in the principal amount of CAD $4.0 million. These companies are the current owners of the Sunniva Canada Campus, which includes construction assets for a planned 759,000 square-foot greenhouse located on an approximately 114-acre property in Okanagan Falls, British Columbia. On June 8, 2020, the Company received a notice of termination of this Purchase Agreement, as amended, from Sunniva. As a result, for the three-month interim period ended June 30, 2020, the Company incurred a charge of $1,881,126 due to the write-off of its deposit to Sunniva, banking fees and prepaid expenses associated with the failed acquisition of Sunniva. The Company is in discussions with Sunniva, as well as an investment banker who received deposits from the Company, about recovering all or a portion of its deposits, banking fees, and prepaid expenses. There can be no assurances that the Company will be successful in recovering any amounts. See Note 16, Subsequent Events, below. The accompanying financial statements as of June 30, 2020, do not reflect potential recovery amounts related to Sunniva and other parties, if any. |
COVID-19 | COVID-19 On March 11, 2020, the World Health Organization (“WHO”) declared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease. Covid-19 and the U.S’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations. |
Management's Representation of Interim Financial Statements | Management’s Representation of Interim Financial Statements The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements on December 31, 2019, and 2018, as presented in the Company’s Form 10-K filed on May 27, 2020 with the SEC. |
Basis of Presentaion | Basis of Presentation The accompanying unaudited consolidated 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 assets and expenses during the reporting period. The most significant estimates relate to investments, purchase price allocation of acquired assets, impairment of long-lived assets, intangibles, and goodwill. 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. On September 30, 2020, and December 31, 2019, the Company’s cash and cash equivalents totaled $243,314 and $1,547, 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 September 30, 2020, and December 31, 2019, the Company determined that it had 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. During the nine months ended September 30, 2020, the Company entered into ten convertible note instruments amounting to $1,205,000 that contained embedded derivative features. As a result, the Company performed a Black Scholes analysis and recorded a derivative liability and an expense amounting to $1,748,237. |
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 the Company’s US operations is United States dollars, (“USD”). The functional currency of the Company’s Canadian operations is in 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 periodically. 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 September 30, 2020, and December 31, 2019, the Company had $1,495,120 and $1,540,918 in construction in progress, respectively, comprised entirely of the construction in progress relating to the building acquired with the acquisition of AMS. Additionally, the Company had $139,444 and $143,201, respectively, in the land upon which the construction in process was situated. Depreciation expense related to the construction in progress amounted to $-0- and $-0- for the periods ended September 30, 2020, and September 30, 2019, respectively. |
Stock Purchase Warrants | Stock Purchase Warrants The Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. |
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 a marijuana license with a useful life of 15 years. 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 approach 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, 2019, 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 September 30, 2020, and on December 31, 2019, 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 has adopted the guidance under ASC Topic 820 for financial instruments measured on fair value on a recurring basis. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. |
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. |
Cost method investment | Cost Method Investment Our cost method investment consists of an investment in a private company in which we do not have the ability to exercise significant influence over its operating and financial activities. The investment is tested for impairment quarterly. |
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 The Company’s activities during the nine months ended September 30, 2020, and the year ended December 31, 2019, comprised a single segment. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations. The Company adopted ASC 842 on January 1, 2019. However, the adoption of the standard had no impact on the Company’s financial statements since all Company leases are month to month, or short-term rental. |
4. Prepaid Expenses (Tables)
4. Prepaid Expenses (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of prepaid expenses | The following table sets forth the components of the Company’s prepaid expenses on September 30, 2020, and December 31, 2019: September 30, 2020 December 31, 2019 Prepaid expenses $ 2,622 $ – Prepaid interest acquisition expenses-Sunniva – 592,473 Total $ – $ 592,473 |
5. Fair Value Of Financial In_2
5. Fair Value Of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Financial assets and liabilities measured at fair value | The following table sets forth by level with the fair value hierarchy the Company’s financial assets and liabilities measured at fair value on September 30, 2020: Level 1 Level 2 Level 3 Total Derivative financial instruments $ – $ – $ 1,748,237 $ 1,748,237 |
7. Property, Plant, and Equip_2
7. Property, Plant, and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | The following table sets forth the components of the Company’s property and equipment on September 30, 2020, and December 31, 2019: September 30, 2020 December 31, 2019 Gross Carrying Amount Accumulated Depreciation Net Book Value Gross Carrying Amount Accumulated Depreciation Net Book Value Computers, software, and office equipment $ 4,648 $ (1,936 ) $ 2,712 $ 4,757 $ (779 ) $ 3,978 Land 139,444 – 139,444 143,201 – 143,201 Construction in progress 1,495,120 – 1,495,120 1,540,918 – 1,540,918 Total fixed assets $ 1,639,212 $ (1,936 ) $ 1,637,276 $ 1,688,876 $ (779 ) $ 1,688,097 |
9. Accounts Payable and Accru_2
9. Accounts Payable and Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Payables and Accruals [Abstract] | |
Schedule of accounts payable and accrued liabilities | The following table sets forth the components of the Company’s accrued liabilities on September 30, 2020, and December 31, 2019. September 30, 2020 December 31, 2019 Accounts payable and accrued expenses $ 1,244,678 $ 902,854 Accrued interest (a) 102,253 27,630 Accrued legal settlement (b) 190,000 190,000 Total accounts payable and accrued liabilities $ 1,536,931 $ 1,120,484 |
10. Related Party Transactions
10. Related Party Transactions (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Schedule of related party transactions | The following table sets forth the components of the Company’s related party liabilities on September 30, 2020, and December 31, 2019. September 30, 2020 December 31, 2019 Accounts payable and accrued payroll-related party(a) $ 644,024 $ 582,096 Accrued expense - related party (b) 1,049,307 606,356 Total accounts payable and accrued liabilities $ 1,693,331 $ 1,188,452 |
11. Convertible Notes and Der_2
11. Convertible Notes and Derivative Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Components of convertible debentures | The following tables set forth the components of the Company’s, convertible debentures as of September 30, 2020, and December 31, 2019: September 30, 2020 December 31, 2020 Principal value of convertible notes $ 2,495,000 $ 1,550,000 Note discount (744,961 ) (997,397 ) Total convertible notes, net current $ 1,750,039 $ 552,603 |
Assumptions used | As of September 30, 2020, derivative liabilities were valued using a probability-weighted average Black-Scholes-Merton pricing model with the following assumptions: September 30, 2020 Exercise Price 0.30–0.41 Stock Price $ 0.60 Risk-free interest rate .19% Expected volatility 352.70% Expected life (in years) 1.00 Expected dividend yield 0% Fair Value: $ 1,748,237 |
12. Notes Payable (Tables)
12. Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable | The following tables set forth the components of the Company’s secured notes payable as of September 30, 2020, and December 31, 2019: September 30, 2020 December 31, 2019 Principal value of Promissory Notes $ 8,556,920 $ 8,789,794 Loan discounts (297,068 ) (488,117 ) Less: current portion (1,059,921 ) (2,800,559 ) Promissory Notes, long term net of discount $ 7,199,931 $ 5,501,118 |
15. Stockholders' Equity (Table
15. Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Warrant activity | The following table reflects all outstanding and exercisable warrants on September 30, 2020, and December 31, 2019: Number of Warrants Outstanding (a) Weighted Average Exercise Price Average Remaining Contractual Life (Years) Warrants outstanding, January 1, 2018 – $ – – Warrants issued 350,000 0.57 2.50 Warrants exercised – – – Warrant forfeited – – – Warrants outstanding, December 31, 2018 350,000 $ 0.57 1.12 Warrants issued (a) 1,519,750 $ 1.01 1.59 Warrants outstanding December 31, 2019 1,869,750 $ 0.92 1.80 Warrants exercised (25,000 ) – – Warrants outstanding September 30, 2020 1,844,750 $ 0.92 1.50 |
Assumptions used | The value of the stock purchase warrants for the periods ended September 30, 2020, and December 31, 2019, was determined using the following Black-Scholes methodology: Expected dividend yield (1) 0.00% Risk-free interest rate range (2) 1.75 - 2.91% Volatility range (3) 1.23% - 442.92% Expected life (in years) 2.00 - 5.00 _____________ (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 ($) | 2 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | ||
Feb. 25, 2019 | May 08, 2020 | Jun. 08, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Cash and cash equivalents | $ 243,314 | $ 1,547 | ||||
Derivative liability | 1,748,237 | 0 | ||||
Construction in progress | 1,495,119 | 1,540,918 | ||||
Land | 139,444 | $ 143,201 | ||||
Depreciation expense | 1,146 | $ 0 | ||||
Common Stock of GN [Member] | ||||||
Stock exchanged, shares received | 3,671,597 | |||||
Common Stock | ||||||
Shares given in business combination | 7,988,963 | |||||
Stock exchanged, shares exchanged | 5,507,400 | |||||
GN Ventures [Member] | Common Stock of GN [Member] | ||||||
Shares acquired in business combination | 3,712,500 | |||||
GN Ventures [Member] | Warrants of GN [Member] | ||||||
Shares acquired in business combination | 2,500,000 | |||||
Convertible Notes [Member] | ||||||
Convertible note face value | 1,205,000 | |||||
Derivative liability | 1,748,237 | |||||
Derivative expense | 1,748,237 | |||||
Sunniva [Member] | ||||||
Write off of deposit | $ 1,881,126 | |||||
Construction In Progress [Member] | ||||||
Depreciation expense | $ 0 | $ 0 |
2. Going Concern and Liquidity
2. Going Concern and Liquidity (Details Narrative) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Cash | $ 243,314 | $ 1,547 | $ 192,503 | $ 464,118 |
Liabilities | 14,988,391 | $ 11,163,216 | ||
Short term liquid assets | $ 246,599 |
3. Deposits (Details Narrative)
3. Deposits (Details Narrative) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Deposits | $ 0 | $ 1,308,830 |
Sunniva [Member] | ||
Deposits | $ 1,308,830 |
4. Prepaid Expenses (Details)
4. Prepaid Expenses (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Prepaid expenses | $ 2,622 | $ 592,473 |
Prepaid Expenses [Member] | ||
Prepaid expenses | 2,622 | 0 |
Prepaid Acquisition Expenses [Member] | Sunniva [Member] | ||
Prepaid expenses | $ 0 | $ 592,473 |
5. Fair Value Of Financial In_3
5. Fair Value Of Financial Instruments (Details) | Sep. 30, 2020USD ($) |
Derivative financial instruments | $ 1,748,237 |
Level 1 [Member] | |
Derivative financial instruments | 0 |
Level 2 [Member] | |
Derivative financial instruments | 0 |
Level 3 [Member] | |
Derivative financial instruments | $ 1,748,237 |
6. Investment (Details Narrativ
6. Investment (Details Narrative) - USD ($) | 2 Months Ended | 4 Months Ended | 12 Months Ended | |
Feb. 25, 2019 | May 08, 2020 | Dec. 31, 2019 | Sep. 30, 2020 | |
Investment value | $ 4,193,597 | $ 6,672,019 | ||
Common Stock of GN [Member] | ||||
Stock exchanged, shares received | 3,671,597 | |||
Common Stock | ||||
Shares given in business combination | 7,988,963 | |||
Stock exchanged, shares exchanged | 5,507,400 | |||
GN Ventures [Member] | Common Stock of GN [Member] | ||||
Shares acquired in business combination | 3,712,500 | |||
GN Ventures [Member] | Warrants of GN [Member] | ||||
Shares acquired in business combination | 2,500,000 | |||
GN Ventures [Member] | ||||
Impairment of investment | 7,070,841 | |||
GN Ventures [Member] | ||||
Consideration transferred | $ 11,264,438 | |||
Impairment of investment | $ 2,478,422 | |||
Investment value | $ 4,193,597 | $ 6,672,019 |
7. Property, Plant, and Equip_3
7. Property, Plant, and Equipment (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Property, plant and equipment, gross | $ 1,639,212 | $ 1,688,876 |
Accumulated depreciation | (1,936) | (779) |
Property, plant and equipment, net | 1,637,276 | 1,688,097 |
Computers, Software and Office Equipment [Member] | ||
Property, plant and equipment, gross | 4,648 | 4,757 |
Accumulated depreciation | (1,936) | (779) |
Property, plant and equipment, net | 2,712 | 3,978 |
Land [Member] | ||
Property, plant and equipment, gross | 139,444 | 143,201 |
Accumulated depreciation | 0 | 0 |
Property, plant and equipment, net | 139,444 | 143,201 |
Construction In Progress [Member] | ||
Property, plant and equipment, gross | 1,495,120 | 1,540,918 |
Accumulated depreciation | 0 | 0 |
Property, plant and equipment, net | $ 1,495,120 | $ 1,540,918 |
7. Property, Plant, and Equip_4
7. Property, Plant, and Equipment (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 1,146 | $ 0 |
8. Goodwill and Intangible As_2
8. Goodwill and Intangible Assets (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Goodwill | $ 6,203,194 | $ 6,370,333 | |
Intangible assets | 1,690,371 | $ 1,834,176 | |
Amortization expense | 98,293 | $ 96,009 | |
AMS [Member] | Marijuana license [Member] | |||
Intangible asset, gross | $ 1,871,000 | ||
Amortization period | 15 years | ||
Future amortization per year | $ 124,733 |
9. Accounts Payable and Accru_3
9. Accounts Payable and Accrued Expenses (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |||
Accounts payable and accrued expenses | $ 1,244,678 | $ 902,854 | |
Accrued interest | [1] | 102,253 | 27,630 |
Accrued legal settlement | [2] | 190,000 | 190,000 |
Total accounts payable and accrued expenses | $ 1,536,931 | $ 1,120,484 | |
[1] | Represents interest accrued on the outstanding convertible notes and other notes -see Notes 11 and 12. | ||
[2] | The Company had previously been a party to an action filed by Gary M. Cohen, a former officer and director of the Company in 2014. In March 2015, the Company entered into a Settlement Agreement with Mr. Cohen wherein the Company agreed to repurchase 2,250,000 shares of its Common Stock from Mr. Cohen in consideration for $350,000. Mr. Cohen passed away while there was a remaining balance of $190,000 remaining to be paid in accordance with the Settlement Agreement. The Company has taken the position that his death has discharged any obligation the Company might have to make the balance of the payments. The Company has not received any demand for payment or otherwise been involved in any attempt to collect this balance for a period of greater than two years prior to the date of this Report. |
10. Related Party Transaction_2
10. Related Party Transactions (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | |
Accounts payable and loan payable related party | [1] | $ 644,024 | $ 582,096 |
Accrued expense - related party | [2] | 1,049,307 | 606,356 |
Total accounts payable and accrued liabilities | 1,693,331 | $ 1,188,452 | |
Interest-free Loans [Member] | |||
Accounts payable and loan payable related party | 295,000 | ||
Accrued Salaries for Officers and Employees [Member] | |||
Accounts payable and loan payable related party | $ 349,024 | ||
[1] | Accounts payable and accrued payroll-related parties as of September 30, 2020, is comprised of the following: Interest-free loans of $295,000 from directors and officers and accrued salaries for officers and employees of $349,024. | ||
[2] | Accrued expense related parties of $1,049,307 is comprised of accrued bonuses and fees due to current and former directors and officers of the Company. As of September 30, 2020, there was $150,000 included with the $899,307 amount due to claims received from two former directors, which was purported to be accrued salaries arising out of services provided in 2015 and 2016. Management is in the process of reviewing these claims. |
11. Convertible Notes and Der_3
11. Convertible Notes and Derivative Liabilities (Details - Convertible debentures) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Debt Disclosure [Abstract] | ||
Principal value of convertible notes | $ 2,495,000 | $ 1,550,000 |
Note discount | (744,961) | (997,397) |
Total convertible notes, net current | $ 1,750,039 | $ 552,603 |
11. Convertible Notes and Der_4
11. Convertible Notes and Derivative Liabilities (Details - Assumptions Used) | 9 Months Ended |
Sep. 30, 2020 | |
Exercise Price [Member] | |
Derivative liabilities description | $0.30–$0.41 |
Stock Price [Member] | |
Derivative liabilities description | $0.60 |
Measurement Input, Risk Free Interest Rate [Member] | |
Derivative liabilities description | .19% |
Expected volatility [Member] | |
Derivative liabilities description | 352.70% |
Expected life [Member] | |
Derivative liabilities description | 1.00 years |
Expected dividend yield [Member] | |
Derivative liabilities description | 0% |
Fair Value [Member] | |
Derivative liabilities description | 1,748,237 |
11. Convertible Notes and Der_5
11. Convertible Notes and Derivative Liabilities (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jul. 08, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | ||
Beneficial conversion feature | $ 649,527 | $ 438,000 | ||||||
Debt converted, amount converted | 306,750 | $ 130,849 | $ 3,798,000 | |||||
Accrued interest | [1] | 102,253 | $ 102,253 | $ 27,630 | ||||
Unamortized note discount | 744,961 | 744,961 | 997,397 | |||||
Amortization of note discount | 1,704,907 | $ 3,068,510 | ||||||
Change in the fair value of derivatives | (779,134) | $ (66,016) | (1,748,237) | $ (66,016) | ||||
Convertible Notes [Member] | ||||||||
Interest expense, debt | 27,696 | |||||||
Accrued interest | 16,444 | 16,444 | ||||||
Unamortized note discount | 732,632 | 732,632 | ||||||
Amortization of note discount | 280,593 | |||||||
Change in the fair value of derivatives | (1,748,237) | |||||||
Convertible Notes [Member] | Noteholder [Member] | ||||||||
Debt converted, amount converted | $ 100,000 | |||||||
Debt converted, shares issued | 135,000 | |||||||
Proceeds from convertible notes | $ 160,000 | |||||||
Loss on the conversion of debt | (201,916) | |||||||
Convertible Notes [Member] | 8% Convertible Notes [Member] | ||||||||
Proceeds from convertible notes | 595,000 | |||||||
Convertible Notes [Member] | 10% Convertible Notes [Member] | ||||||||
Proceeds from convertible notes | 60,500 | |||||||
Convertible Notes [Member] | 8% and 10% Convertible Notes [Member] | ||||||||
Debt converted, amount converted | $ 100,000 | |||||||
Debt converted, shares issued | 135,000 | |||||||
Original issue discount | $ 43,000 | 43,000 | ||||||
Amortization of note discount | 43,000 | |||||||
Returnable shares issued | 153,940 | |||||||
Payment of note payable | $ 160,000 | |||||||
Private Offering [Member] | ||||||||
Unit description | 50,000 shares of the Company's Common Stock and one $50,000 unsecured Convertible Note. | |||||||
Debt maturity date | Jul. 8, 2020 | |||||||
Conversion price | $ 1 | |||||||
Proceeds from sale of units | 1,550,000 | |||||||
Beneficial conversion feature | 1,550,000 | |||||||
Private Offering [Member] | Convertible Notes [Member] | ||||||||
Interest expense, debt | 58,179 | $ 552,602 | ||||||
Accrued interest | 85,808 | 85,808 | ||||||
Unamortized note discount | $ 12,329 | 12,329 | ||||||
Amortization of note discount | $ 1,003,233 | |||||||
Private Offering [Member] | Common Stock | ||||||||
Stock issued new, shares | 5,505,530 | |||||||
Stock issued new, value | $ 5,075,000 | |||||||
Interest expense, debt | 3,525,000 | |||||||
Unamortized note discount | $ 1,550,000 | |||||||
[1] | Represents interest accrued on the outstanding convertible notes and other notes -see Notes 11 and 12. |
12. Notes Payable (Details)
12. Notes Payable (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Less: current portion | $ (1,059,921) | $ (2,800,559) |
Promissory Notes, long term net of discount | 7,199,931 | 5,501,118 |
Secured Notes Payable [Member] | ||
Principal value of Promissory Notes | 8,556,920 | 8,789,794 |
Loan discounts | (297,068) | (488,117) |
Less: current portion | (1,059,921) | (2,800,559) |
Promissory Notes, long term net of discount | $ 7,199,931 | $ 5,501,118 |
12. Notes Payable (Details Narr
12. Notes Payable (Details Narrative) | 4 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Apr. 21, 2020USD ($) | Apr. 21, 2020CAD ($) | Jul. 03, 2019 | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2019CAD ($) | Jun. 03, 2019USD ($) | |
Amortization of note discount | $ 1,704,907 | $ 3,068,510 | ||||||
Secured Notes Payable [Member] | ||||||||
Debt face amount | $ 7,330,000 | |||||||
Promissory note carrying amount | $ 6,632,917 | 6,632,917 | ||||||
Original issue discount | 697,083 | |||||||
Interest expenses | 244,058 | |||||||
Amortization of note discount | $ 175,721 | |||||||
Debt maturity date | Dec. 31, 2021 | |||||||
Koze Investments [Member] | ||||||||
Debt face amount | $ 1,000,000 | |||||||
Debt maturity date | Jun. 28, 2020 | |||||||
Canada, Dollars | Secured Notes Payable [Member] | ||||||||
Debt face amount | $ 10,000,000 | |||||||
Loan [Member] | ||||||||
Proceeds from loans | $ 29,352 | |||||||
Loan term | 3 years | 3 years | ||||||
Loan [Member] | Canada, Dollars | ||||||||
Proceeds from loans | $ 40,000 |
13. Income Taxes (Details Narra
13. Income Taxes (Details Narrative) | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Net operating loss carryforwards | $ 65,700,000 |
Operating loss carryforward begining expiration date | Dec. 31, 2030 |
State [Member] | |
Operating loss carryforward begining expiration date | Dec. 31, 2034 |
15. Stockholders' Equity (Detai
15. Stockholders' Equity (Details - Warrant activity) - Warrant [Member] - $ / shares | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Number of Warrants Outstanding | ||||
Warrants outstanding, beginning balance | 1,869,750 | 350,000 | 0 | |
Warrants issued | 0 | 1,519,750 | [1] | 350,000 |
Warrants exercised | (25,000) | 0 | 0 | |
Warrants forfeited | 0 | 0 | 0 | |
Warrants outstanding, ending balance | 1,844,750 | 1,869,750 | 350,000 | |
Weighted Average Exercise Price | ||||
Warrants outstanding, beginning balance | $ 0.92 | $ 0.57 | $ 0 | |
Warrants issued | 0 | 1.01 | [1] | 0.57 |
Warrants exercised | 0 | 0 | 0 | |
Warrants forfeited | 0 | 0 | 0 | |
Warrants outstanding, ending balance | $ 0.92 | $ 0.92 | $ 0.57 | |
Average Remaining Contractual Life | ||||
Warrants outstanding | 1 year 6 months | 1 year 9 months 18 days | 1 year 1 month 13 days | |
Warrants issued | 1 year 7 months 2 days | 2 years 6 months | ||
[1] | The number of warrants reflected in this table does not include 475,000 warrants that were issued at various times during 2019 in connection with the issuance of the Companys Series B Preferred stock. These warrants are exercisable for a period of three years at a strike price of $2.00 per share. The Company accounts for warrants issued to purchase shares of its common stock or preferred stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock, Distinguishing Liabilities from Equity. Therefore, no stock-based compensation expense was recorded for the issuance of these 475,000 warrants. |
15. Stockholders' Equity (Det_2
15. Stockholders' Equity (Details - Warrant assumptions) - Warrant [Member] | 9 Months Ended | |
Sep. 30, 2020 | ||
Expected dividend yield | 0.00% | [1] |
Risk-free interest rate - minimum | 1.75% | [2] |
Risk-free interest rate - maximum | 2.91% | [2] |
Volatility - minimum | 1.23% | [3] |
Volatility - maximum | 442.92% | [3] |
Minimum [Member] | ||
Expected life | 2 years | |
Maximum [Member] | ||
Expected life | 5 years | |
[1] | The Company has no history or expectation of paying cash dividends on its Common Stock. | |
[2] | The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. | |
[3] | The volatility of the Companys Common Stock is based on trading activity for the previous three year period ended at each stock purchase warrant contract date. |
15. Stockholders' Equity (Det_3
15. Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Debt converted, amount converted | $ 306,750 | $ 130,849 | $ 3,798,000 | |||||
Stock based compensation | $ 204,600 | $ 199,035 | $ 617,758 | $ 521,704 | ||||
Stock reserved for issuance | 82,435,087 | 82,435,087 | ||||||
Beneficial conversion feature | $ 649,527 | $ 438,000 | ||||||
Stock issued for acquisition, value | $ 2,478,422 | $ 11,264,438 | ||||||
Options [Member] | ||||||||
Options outstanding | 750,000 | 750,000 | ||||||
Option exercise price | $ 1 | $ 1 | ||||||
Convertible Notes [Member] | ||||||||
Stock reserved for issuance | 4,640,337 | 4,640,337 | ||||||
Conversion to Series A Preferred Stock [Member] | ||||||||
Stock reserved for issuance | 75,000,000 | 75,000,000 | ||||||
Conversion to Series B Preferred Stock [Member] | ||||||||
Stock reserved for issuance | 475,000 | 475,000 | ||||||
Exercise of Stock Options [Member] | ||||||||
Stock reserved for issuance | 750,000 | 750,000 | ||||||
Exercise of Warrants [Member] | ||||||||
Stock reserved for issuance | 2,319,750 | 2,319,750 | ||||||
AMS [Member] | GN [Member] | ||||||||
Cash paid for acquisition | $ 500,000 | |||||||
Stock issued for acquisition, shares | 2,500,000 | |||||||
Stock issued for acquisition, value | $ 5,800,000 | |||||||
Series B Unit Offering [Member] | ||||||||
Proceeds from sale of equity | $ 475,000 | |||||||
Unit description | One share of Series B Convertible Preferred Stock and one Common Stock Purchase Warrant | |||||||
Private Placement [Member] | Convertible Debentures [Member] | ||||||||
Debt converted, amount converted | 2,072,000 | |||||||
Debt converted, interest converted | $ 130,212 | |||||||
Debt converted, shares issued | 5,505,530 | |||||||
Unit Convertible Note Offering [Member] | ||||||||
Proceeds from sale of equity | $ 1,200,000 | |||||||
Stock issued, shares | 1,200,000 | |||||||
Stock issued, value | $ 2,598,000 | |||||||
Interest expense, debt | 200,000 | |||||||
Beneficial conversion feature | $ 1,200,000 |