Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 12, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | Pure Harvest Corporate Group, Inc. | |
Entity Central Index Key | 0001351573 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 52,196,792 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2020 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash | $ 182,371 | $ 1,665,247 |
Accounts receivable | 1,272 | 1,653 |
Interest receivable | 77,072 | 8,194 |
Inventory | 957,984 | 70,091 |
Deferred rent | 93,333 | 93,333 |
Prepaids and other current assets | 4,292 | |
Total current assets | 1,316,324 | 1,838,518 |
Long-term assets | ||
Machinery and equipment | 1,282,739 | 331,383 |
Accumulated depreciation | (320,838) | (287,249) |
Deferred rent, net of current portion | 89,557 | 132,223 |
Right of use asset | 271,520 | 184,685 |
Notes receivable and advances on pending acquisitions, net allowance of $33,000 | 2,074,793 | 2,450,000 |
Goodwill | 3,820,178 | 141,453 |
Other assets | 26,553 | 15,000 |
Total assets | 8,560,826 | 4,806,013 |
Current liabilities | ||
Accounts payable | 152,698 | 115,126 |
Accrued interest | 163,013 | 23,890 |
Accrued expenses | 384,246 | 75,131 |
Royalty payable | 770 | |
Due to related parties | 29,167 | 116,667 |
Notes payable, net of discount of $0 and $0, respectively | 1,000,000 | |
Convertible notes payable, net of discount of $30,271 and $41,695, respectively | 969,729 | 958,305 |
Related party convertible notes payable, net discount of $237,810 and $0, respectively | 692,190 | |
Total current liabilities | 3,391,043 | 1,289,889 |
Long term liabilities | ||
Notes payable | 86,000 | |
Right of use liability | 147,250 | 133,554 |
Related party convertible notes payable | 360,000 | |
Derivative liabilities | 152,430 | |
Total liabilities | 4,136,723 | 1,423,443 |
Commitments and contingencies | ||
Stockholders' equity | ||
Preferred stock; $0.01 par value; 25,000,000 shares authorized; no shares issued and outstanding as of June 30, 2020 and December 31, 2019 | ||
Common stock, $0.01 par value; 100,000,000 shares authorized, 52,125,144 and 37,716,330 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively | 521,252 | 377,164 |
Additional paid-in capital | 10,777,309 | 4,391,587 |
Accumulated deficit | (6,874,458) | (1,386,181) |
Total stockholders' equity | 4,424,103 | 3,382,570 |
Total liabilities and stockholders' equity | $ 8,560,826 | $ 4,806,013 |
Consolidated Balance Sheets (_2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Notes receivable and advances on pending acquisitions, net allowance | $ 33,000 | $ 33,000 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares, issued | 52,125,144 | 37,716,330 |
Common stock, shares outstanding | 52,125,144 | 37,716,330 |
Notes Payable [Member] | ||
Net of discount | $ 0 | $ 0 |
Convertible Notes Payable [Member] | ||
Net of discount | 30,271 | 41,695 |
Related Party Convertible Notes Payable [Member] | ||
Net of discount | $ 237,810 | $ 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
REVENUES | ||||
Royalty income | $ 3,951 | $ 6,208 | $ 5,041 | $ 19,426 |
Cost of sales | 40,066 | 2,026 | 40,066 | 8,900 |
Gross profit (loss) | (36,114) | 4,182 | (35,024) | 10,526 |
OPERATING EXPENSES | ||||
Advertising and promotion | 50,043 | 12,875 | 52,602 | 23,375 |
General and administrative expenses, including stock-based compensation of $3,026,036, $323,000, $3,039,538 and $323,000, respectively | 3,885,523 | 505,328 | 4,406,022 | 746,415 |
Travel and entertainment | 7,026 | 18,081 | 42,177 | 38,163 |
Depreciation expense | 28,947 | 3,158 | 33,589 | 6,317 |
Total operating expenses | 3,971,539 | 539,442 | 4,534,390 | 814,270 |
Loss from operations | (4,007,653) | (535,260) | (4,569,414) | (803,744) |
Other income (expense): | ||||
Interest expense | (194,608) | (325,349) | ||
Interest income | 48,618 | 114,183 | ||
Loss on extinguishment of notes payable | (756,254) | (756,254) | ||
Change in fair market value of derivative liabilities | 49,380 | 49,380 | ||
Bad debt expense | 0 | (823) | ||
Total other income (expense) | (852,864) | (918,863) | ||
Loss before provision for income taxes | (4,860,517) | (535,260) | (5,488,277) | (803,744) |
Provision for income taxes | ||||
NET LOSS | $ (4,860,517) | $ (535,260) | $ (5,488,277) | $ (803,744) |
Basic and diluted net loss per common share | $ (0.10) | $ (0.02) | $ (0.13) | $ (0.03) |
Basic and diluted weighted-average number of common shares outstanding | 46,826,515 | 31,793,997 | 42,338,456 | 31,793,997 |
Consolidated Statements of Op_2
Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Income Statement [Abstract] | ||||
Stock-based compensation | $ 3,026,036 | $ 323,000 | $ 3,039,538 | $ 323,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (5,488,277) | $ (803,744) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 33,589 | 6,317 |
Stock-based compensation | 3,039,538 | 323,000 |
Amortization of debt discount | 141,980 | |
Loss on extinguishment of notes payable | 756,254 | |
Change in fair value of derivative liability | (49,380) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 381 | 18,922 |
Interest receivable on notes receivable | (113,360) | |
Inventory | (40,935) | (29,063) |
Deferred rent | 42,666 | 15,556 |
Prepaid acquisition costs | ||
Prepaid and other current assets | 4,293 | |
Accounts payable | 37,272 | 105,964 |
Accrued interest | 170,885 | |
Accrued expense | 309,115 | (36,000) |
Royalty payable | (770) | 118 |
Right of use asset and liability | (73,139) | 6,000 |
Due to related parties | 188,388 | |
Net cash used in operating activities | (1,229,888) | (204,542) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Notes receivable and advances of pending acquisitions | (1,274,793) | (28,593) |
Net cash received (paid) in connection with acquisition | (382,010) | |
Purchase of machinery and equipment | (24,685) | |
Net cash used in investing activities | (1,681,488) | (28,593) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Advances (payments) from (to) related parties, net | (87,500) | (11,358) |
Proceeds from issuance of convertible notes payable | ||
Proceeds from notes payable | 1,586,000 | |
Repayment of notes payable | (500,000) | |
Proceeds from related party notes payable | 330,000 | |
Proceeds from sale of common stock | 100,000 | |
Proceeds from sale of common stock to be issued | 442,500 | |
Net cash provided by financing activities | 1,428,500 | 431,142 |
Change in cash and cash equivalents | (1,482,876) | 198,007 |
Cash and cash equivalents, beginning of period | 1,665,247 | 22,501 |
Cash and cash equivalents, end of period | 182,371 | 220,508 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | ||
Cash paid for income taxes | ||
Non-cash investing and financing activities: | ||
Discount on note payable due to common stock and warrants | 116,707 | |
Common stock issued for accrued interest | 31,762 | |
Common stock issued for business acquisitions | 2,436,000 | |
Exchange of note receivable for business acquisition | 1,650,000 | |
Common stock and warrants issued in connection with note extensions | 308,803 | |
Discounts due to common stock and derivative liabilities | $ 270,810 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Deficit (Unaudited) - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2018 | $ 315,234 | $ (201,539) | $ (251,314) | $ (137,619) | |
Balance, shares at Dec. 31, 2018 | 31,523,330 | ||||
Stock-based compensation | $ 2,800 | 320,200 | 323,000 | ||
Stock-based compensation, shares | 280,000 | ||||
Stock issued for option to purchase property | $ 4,000 | 276,000 | 280,000 | ||
Stock issued for option to purchase property, shares | 400,000 | ||||
Net loss | (803,744) | (803,744) | |||
Balance at Jun. 30, 2019 | $ 322,034 | 394,661 | (1,055,058) | (338,363) | |
Balance, shares at Jun. 30, 2019 | 32,203,330 | ||||
Balance at Mar. 31, 2019 | $ 318,034 | 118,661 | (765,018) | (328,323) | |
Balance, shares at Mar. 31, 2019 | 31,803,330 | ||||
Stock-based compensation | |||||
Stock-based compensation, shares | |||||
Stock issued for option to purchase property | $ 4,000 | 276,000 | 280,000 | ||
Stock issued for option to purchase property, shares | 400,000 | ||||
Net loss | (290,040) | (535,260) | |||
Balance at Jun. 30, 2019 | $ 322,034 | 394,661 | (1,055,058) | (338,363) | |
Balance, shares at Jun. 30, 2019 | 32,203,330 | ||||
Balance at Dec. 31, 2019 | $ 377,164 | 4,391,587 | (1,386,181) | 3,382,570 | |
Balance, shares at Dec. 31, 2019 | 37,716,330 | ||||
Stock-based compensation | 468,994 | 468,994 | |||
Stock-based compensation, shares | |||||
Issuance of common stock for services | $ 65,280 | 2,505,264 | 2,570,544 | ||
Issuance of common stock for services, shares | 6,528,000 | ||||
Issuance of common stock for acquisition | $ 70,000 | 2,366,000 | 2,436,000 | ||
Issuance of common stock for acquisition, shares | 7,000,000 | ||||
Issuance of common stock to note holder | $ 1,500 | 115,207 | 116,707 | ||
Issuance of common stock to note holder, shares | 150,000 | ||||
Issuance of common stock for accrued interest | $ 808 | 30,954 | 31,762 | ||
Issuance of common stock for accrued interest, shares | 80,814 | ||||
Issuance of common stock and warrants for extension of notes payable | $ 4,000 | 304,803 | 308,803 | ||
Issuance of common stock and warrants for extension of notes payable, shares | 400,000 | ||||
Issuance of common stock to investor | $ 2,000 | 98,000 | 100,000 | ||
Issuance of common stock to investor, shares | 200,000 | ||||
Discount on convertible notes payable related party due to common stock issued and derivative liability | $ 500 | 68,500 | 69,000 | ||
Discount on convertible notes payable related party due to common stock issued and derivative liability, shares | 50,000 | ||||
Extinguishment of related party notes payable | 428,000 | 428,000 | |||
Extinguishment of related party notes payable, shares | |||||
Net loss | (5,488,277) | (5,488,277) | |||
Balance at Jun. 30, 2020 | $ 521,252 | 10,777,309 | (6,874,458) | 4,424,103 | |
Balance, shares at Jun. 30, 2020 | 52,125,144 | ||||
Balance at Mar. 31, 2020 | $ 380,664 | 4,616,296 | (2,013,940) | 2,983,020 | |
Balance, shares at Mar. 31, 2020 | 38,066,330 | ||||
Stock-based compensation | 457,492 | 457,492 | |||
Stock-based compensation, shares | |||||
Issuance of common stock for services | $ 65,280 | 2,505,264 | 2,570,544 | ||
Issuance of common stock for services, shares | 6,528,000 | ||||
Issuance of common stock for acquisition | $ 70,000 | 2,366,000 | 2,436,000 | ||
Issuance of common stock for acquisition, shares | 7,000,000 | ||||
Issuance of common stock for accrued interest | $ 808 | 30,954 | 31,762 | ||
Issuance of common stock for accrued interest, shares | 80,814 | ||||
Issuance of common stock and warrants for extension of notes payable | $ 4,000 | 304,803 | 308,803 | ||
Issuance of common stock and warrants for extension of notes payable, shares | 400,000 | ||||
Discount on convertible notes payable related party due to common stock issued and derivative liability | $ 500 | 68,500 | 69,000 | ||
Discount on convertible notes payable related party due to common stock issued and derivative liability, shares | 50,000 | ||||
Extinguishment of related party notes payable | 428,000 | 428,000 | |||
Extinguishment of related party notes payable, shares | |||||
Net loss | (4,860,518) | (4,860,517) | |||
Balance at Jun. 30, 2020 | $ 521,252 | $ 10,777,309 | $ (6,874,458) | $ 4,424,103 | |
Balance, shares at Jun. 30, 2020 | 52,125,144 |
Organization and Description of
Organization and Description of Business | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Organization and Description of Business | NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS The Pure Harvest Corporate Group, Inc. (the “Company”), formerly Pure Harvest Cannabis Group, Inc., was formed as a Colorado corporation in April 2004. On December 31, 2018, the Company acquired all of the outstanding common stock of Pure Harvest Cannabis Producers, Inc., (“PHCP”) in exchange for 17,906,016 (post-split) shares of the Company’s common stock. The transaction was accounted for as a reverse acquisition. As a result of the acquisition of PHCP, the Company now operates in various segments of the cannabis and hemp-CBD industries, focusing on health and wellness products and applying education, research and development, and technology to each sector. The Company’s new business also involves the acquisition and operation of licensed marijuana cultivation facilities, manufacturing facilities and dispensaries. The Company will continue to collect royalties for licensing the Company’s patent and the trademarks in connection with manufacturing and sale of Pocket Shot branded specialty alcohol beverage pouches. The Company changed its name to Pure Harvest Cannabis Group, Inc. in February 2019. The Company changed its name to Pure Harvest Corporate Group on June 8, 2020. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles. In the opinion of management, the accompanying unaudited consolidated financial statements contain all accruals and adjustments (each of which is of a normal recurring nature) necessary for a fair presentation of the Company’s financial position as of June 30, 2020 and the results of its operations for the three and six months then ended. Significant accounting policies have been consistently applied in the interim consolidated financial statements. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the entire year. Going Concern The Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. Management plans to fund future operations by raising capital and or seeking joint venture opportunities. Principles of Consolidation The Company evaluates the need to consolidate affiliates based on standards set forth in Accounting Standards Codification (“ASC”) 810 Consolidation (“ASC 810”). The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant consolidated transactions and balances have been eliminated in consolidation. Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated fair market value of assets and liabilities acquired under business combinations, useful lives and potential impairment of property and equipment, recoverability of goodwill, estimates of fair value of share-based payments and valuation of deferred tax assets. Derivative Liabilities A derivative is an instrument whose value is “derived” from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts and for hedging activities. As a matter of policy, the Company does not invest in separable financial derivatives or engage in hedging transactions. However, the Company entered into certain debt financing transactions in June 2020, as disclosed in Note 6, containing certain conversion features that have resulted in the instruments being deemed derivatives. The Company evaluates such derivative instruments to properly classify such instruments within equity or as liabilities in our financial statements. Our policy is to settle instruments indexed to our common shares on a first-in-first-out basis. The classification of a derivative instrument is reassessed at each reporting date. If the classification changes as a result of events during a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified. Instruments classified as derivative liabilities are remeasured using the Black-Scholes model at each reporting period (or upon reclassification), and the change in fair value is recorded on our consolidated statement of operations. Fair Value of Financial Instruments The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB”) ASC 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The guidance also establishes a fair value hierarchy for measurements of fair value as follows: ● Level 1 - quoted market prices in active markets for identical assets or liabilities. ● Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ● Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amount of the Company’s financial instruments approximates their fair value as of June 30, 2020 and December 31, 2019, due to the short-term nature of these instruments. The Company’s derivative liabilities are considered a Level 2 liability. Net Loss per Share Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share”. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. For the three and six months ended June 30, 2020 and 2019, dilutive instruments consisted of convertible notes payable, unvested restricted stock grants, warrants, options to purchase shares of the Company’s common stock, the effects of which to the Company’s net loss are anti-dilutive. Recent Accounting Pronouncements In December 2019, the FASB issued guidance that simplifies the accounting for income taxes by removing certain exceptions in existing guidance and improves consistency in application by clarifying and amending existing guidance. This guidance is effective for annual periods beginning after December 15, 2020, and interim periods within those annual periods, where the transition method varies depending upon the specific amendment. Early adoption is permitted, including adoption in any interim period. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period, and all amendments must be adopted in the same period. The Company has reviewed the provisions of the new standard, but it is not expected to have a significant impact on the Company. In January 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, which clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting under Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. This guidance is effective for the Company for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company has reviewed the provisions of the new standard, but it is not expected to have a significant impact on the Company. The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs issued to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements. |
Acquisitions
Acquisitions | 6 Months Ended |
Jun. 30, 2020 | |
Business Combinations [Abstract] | |
Acquisitions | NOTE 3 – ACQUISITIONS Love Pharm, LLC On February 12, 2020, the Company entered into an Operating Agreement with Dr. James Rouse, MD regarding the ownership, operation, and management of Love Pharm, LLC. Love Pharm was recently organized in December 2019 to formulate, develop, manufacture, and brand hemp/CBD products for sale and distribution as well as to form a multi-channel media platform for public and patient education regarding the endocannabinoid system utilizing Dr. Rouse’s name, public image and his extensive experience and expertise in medicine and entrepreneurship. Under the Operating Agreement between the Company and Dr. Rouse, the Company owns 51% of Love Pharm and has a right of first refusal to purchase the remaining 49% of Love Pharm from Dr. Rouse. Additionally, Dr. Rouse will become the Company’s Chief Medical Advisor. Dr. Rouse will receive 400,000 shares of the Company’s common stock for services provided to the Company. See Note 7 for additional information regarding issuance of common stock to Dr. Rouse. As of the date of this filing Love Pharm has yet to commence operations. How Smooth It Is, Inc. On March 12, 2020, the Company entered into an agreement to acquire fifty-one percent (51%) of the outstanding membership interests in How Smooth It Is, Inc. (“HSII”) for $1,500,000 in cash and 7,000,000 shares of the Company’s restricted common stock. HSII is a state-licensed medical marijuana processor based in Riverdale, Michigan and plans to offer a wide range of cannabis-infused products including chocolate bars, gummies, beverages, and other Pure Harvest branded products. HSII is based in a 5,800 square foot facility and has the capability of extracting, processing and manufacturing an array of products containing THC and CBD. HSII has also submitted applications for four dispensary licenses in Riverdale, White Cloud, Alma and Mount Pleasant, MI. The acquisition of the 51% interest in HSII is subject to a number of conditions, including the approval of the Michigan Department of Licensing and Regulatory Affairs (LARA). As of the date of this filing, the acquisition of HSII hasn’t been finalized. HSII is in the development stage and as of June 30, 2020 has generated a limited amount of revenue. Sofa King Medicinal Wellness Products, LLC On March 13, 2020, the Company entered into an agreement to acquire all of the outstanding membership interests in Sofa King Medicinal Wellness Products, LLC (“SKM”) for 3,000,000 shares of the Company’s common stock. The completion of the acquisition is subject to a number of conditions, including the approval of the acquisition by the Colorado Marijuana Enforcement Division (MED). SKM is a vertically integrated cannabis operator located in Dumont, CO. In August 2020, the acquisition of SKM was finalized as the appropriate licenses have been approved. EdenFlo, LLC On April 24, 2020, the Company acquired substantially all of the assets of EdenFlo, LLC (“EdenFlo”), a producer of CBD extracts and concentrates, for 7,000,000 shares of the Company’s common stock and the release of its obligation of a previous promissory note in the amount of $1,650,000, accrued interest of $46,879 and other advances made to EdenFlo to fund operations of $384,409. EdenFlo joins Prolific Nutrition and Love Pharm, LLC to secure and expand the Company’s position in the national Hemp/CBD industry. EdenFlo is a large-scale Colorado-based hemp-CBD producer and manufacturer of pure isolate and full-spectrum hemp. EdenFlo’s wholesale isolate is made from the highest quality ingredients, utilizing only the best extraction and distillation methods to ensure a final product of extreme purity. Their scientific procedures used for the remediation of THC provide the cleanest broad-spectrum (distillate) oil available in the cannabis extraction industry. The acquisition of EdenFlo will support the Company’s manufacturing operations by supplying the Company’s raw materials requirements for its branded products. The EdenFlo transaction was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations. The Company has determined preliminary fair values of the assets acquired and liabilities assumed. These values are subject to change as we perform additional reviews of our assumptions utilized. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise because of the acquisition. The goodwill is not deductible for tax purposes. The calculation of the purchase price is as follows: Notes receivable $ 1,650,000 Interest receivable 46,879 Additional advances 384,409 Fair market value of common stock issued 2,436,000 Cash received (2,398 ) $ 4,514,890 The Company has made a provisional allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the preliminary purchase price allocation: Preliminary Purchase Price Allocation Cash $ 2,398 Inventory 846,958 Prepaids and other current assets 8,585 Property and equipment 926,671 Other assets 11,553 Goodwill 3,678,725 Loans payable - related party (960,000 ) $ 4,514,890 The Company has not completed the valuations necessary to finalize the acquisition fair values of the assets acquired and liabilities assumed and related allocation of purchase price of the EdenFlo acquisition. Once the valuation process is finalized, there could be changes to the reported values of the assets acquired and liabilities assumed, including goodwill and identifiable intangible assets and those changes could differ materially from what is presented above. The unaudited pro-forma financial information hasn’t been presented as the operations of EdenFlo were insignificant to the Company’s operations at the time of the asset acquisition. |
Notes Receivable
Notes Receivable | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Notes Receivable | NOTE 4 – NOTES RECEIVABLE In May and June 2019, the Company advanced $28,593 to two unrelated individuals in connection with potential acquisitions for the Company. The amounts were to be repaid, without interest, in October 2019. As of June 30, 2020 and December 31, 2019, the Company has continued collection efforts on these notes receivable but has provided an allowance of such due to the unlikelihood of closing the acquisitions or collecting on the notes receivable . In December 2019, the Company advanced $800,000 to How Smooth It Is, Inc., increased by $700,000 in January 2020, totaling $1,500,000 in connection with the potential acquisition of that entity by the Company. The note receivable was due June 1, 2020 and incurs interest at 6% per annum for sixty days and then is increased to 10% per annum thereafter. In March 2020, the Company entered into an acquisition agreement to acquire the entity for which the note receivable was used to offset a portion of the purchase price, see Note 3 for additional information. On April 9, 2020, the Company submitted the required applications to the Michigan Department of Licensing and Regulatory Affairs (LARA) to be approved and pre-qualified as a Processor to be added to the HSII license. Upon approval, PHCG will become 51% owners and can participate in revenue. The transaction will not close until the appropriate Michigan approvals are obtained. During the six months ended June 30, 2020, the Company advanced HSIT as an additional $247,845 for operations. The additional advances are not under a formal arrangement and thus do not incur interest and are due on demand. In December 2019, the Company advanced $1,650,000 to EdenFlo, LLC in connection with the potential acquisition of that entity by the Company. The note receivable was due June 1, 2020 and incurs interest at 6% per annum for sixty days and then is increased to 10% per annum thereafter. In addition, the note receivable is secured by all the asset of EdenFlo, LLC and the amount loaned represents the expected cash portion to be paid in connection with the acquisition. See Note 3 for discussion regarding the acquisition of EdenFlo in April 2020. |
Lease Agreements
Lease Agreements | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Lease Agreements | NOTE 5 – LEASE AGREEMENTS In May 2019, the Company entered into a lease agreement for property to be used as a marijuana retail store. The initial term of the lease is for a period of three years. The Company has an option to purchase the property at prices ranging between $1,400,000 and $1,600,000 at various dates prior to May 1, 2022. The Company issued the landlord 400,000 shares of its post-split common stock in consideration for the option to purchase the property for which was recorded as deferred rent and is being amortized to rent expense using the straight line method over the term of the lease. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 10 percent within the calculation. In April 2020, in connection with the EdenFlo asset acquisition, the Company assume a lease for a marijuana retail store. At inception of the lease, the Company recorded a right of use asset and liability of $140,988. The Company used an effective borrowing rate of 10 percent within the calculation. The lease runs through September 2021. |
Notes Payable
Notes Payable | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 6 –NOTES PAYABLE Convertible Notes Payable During the year ended December 31, 2019, the Company issued a series of convertible notes with original principal balances of $1,000,000. The convertible notes mature at dates ranging from November 1, 2021 to December 1, 2021 and incur interest at 20% per annum. In addition, convertible notes are convertible upon issuance at a fixed price of $0.50 per common share. In connection with the issuance, the Company recorded a beneficial conversion feature of $44,000 resulting in a discount to the convertible notes. The discount is being amortized to interest expense using the straight-line method, due to the short-term nature of the convertible notes, over the term. During the six months ended June 30, 2020 and 2019, the Company amortized $11,424 and $0, respectively, to interest expense. The remaining discount of $30,271 is expected to be amortized in 2020 of $11,486 and 2021 of $18,785. The convertible notes include other provisions such as first right of refusal on additional capital raises, authorization of holder to incur debts senior to the convertible notes, etc. Additionally, should the holder exercise the option to exercise, a warrant to purchase an additional share of common stock for which the terms are not defined in the agreement. Thus, the issuance of the warrant is contingent to which the Company has not accounted for. Should warrants be ultimately issued, the Company expects to record the fair value of such as additional interest expense. Related Party Convertible Notes Payable On June 15, 2020, the Company borrowed $30,000 from an individual related to a significant member of management. The loan is evidenced by a promissory note which bears interest at 10% per year and is due and payable on October 8, 2020. At the option of the lender, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by $0.40. On the date of issuance, the conversion price of $0.40 was the closing market price of the Company’s common stock and thus a beneficial conversion feature wasn’t recorded. On June 15, 2020 and June 30, 2020, the Company borrowed $200,000 and $100,000 from an individual related to a director of the Company and a director of the Company, respectively. unrelated third party. The loans are evidenced by a promissory notes which bears interest at 12% per year and are due and payable on December 10, 2020. The proceeds were used for operations. At the option of the holders, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser of $0.30 or 80% of the ten day average closing price of the Company’s common stock immediately prior to the date of conversion. The holders also have the option to convert $900,000 owed to them from EdenFlo, LLC, as disclosed below, which debt was assumed the Company in connection with the acquisition of EdenFlo, at a price of $0.30 per share for a period of 12 months. Additionally, one of the holders was issued 50,000 shares of common stock. Due to the variable conversion price, the Company recorded derivative liabilities for the conversion feature on the date of issuance. The derivative liabilities are valued on the date the convertible note payable become convertible and revalued at each reporting period. During the six-months ended June 30, 2020, the Company recorded initial derivative liabilities of $204,750 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.30 our stock price on the date of grant ranging from $0.40 - $0.49, expected dividend yield of 0%, expected volatility of 103.00%, risk free interest rate of 0.64% and expected terms of 0.5 years. Upon initial valuation, the derivative liabilities, as well as the fair market value of the 50,000 shares of common stock exceeded the face values of the convertible notes payable by $2,940, which was recorded as a day one loss in derivative liability. On June 30, 2020, the derivative liabilities were revalued at $152,430 resulting in a gain of $52,320. The inputs to value the derivative liabilities were similar to those on the date of issuance. In connection with the derivative liabilities and common stock issued, the Company recorded a $270,810 discount. The discount is being amortized over the term of the convertible note using the straight line method due to the short term nature. During the six months ended June 30, 2020, the Company amortized $33,000 of the discount to interest expense. As of June 30, 2020, a discount of $237,810 remained for which will be amortized in 2020. In connection with the EdenFlo asset acquisition, the Company assumed two notes payable with the former shareholders. Under the terms of the agreements $600,000 is payable on June 1, 2021 and does not incur interest and $300,000 is due on August 1, 2022 and does not incur interest. As disclosed above, both notes were modified to include a conversion feature at a price of $0.30 per share. The modification was treated as an extinguishment of the original note for which a loss on extinguishment of $448,000 was recorded. Notes Payable On March 6, 2020, the Company borrowed $1,500,000 from an unrelated third party. The loan is evidenced by a promissory note which bears interest at 8% per year. The note is due and payable as follows: ● $500,000, together with all accrued and unpaid interest, on April 13, 2020 ● $1,000,000, together with all accrued and unpaid interest, on May 6, 2020 Accrued interest will be paid in shares of the Company’s common stock based upon a 25% discount to the ten-day average closing price of the Company’s common stock immediately prior to May 6, 2020. Accrued interest will include 150,000 additional shares of the Company’s common stock and warrants to purchase 150,000 shares of the Company’s common stock. The warrants are exercisable at any time on or before January 1, 2025 at a price of $2.00 per share. The first payment of $500,000 was made on a timely basis. On issuance, the Company valued the 150,000 shares of common stock and the 150,000 warrants for common stock and recorded the relative fair market of $116,707 as a discount to the note payable. The Company is amortizing the discount over the term of the note payable using the straight-line method due to the short term of the note. During the six months ended June 30, 2020, the Company amortized $92,256 to interest expense. On April 20, 2020, the holder of the Note agreed to extend the due date for the $1,000,000 payment from May 6, 2020 to June 15, 2020. In consideration for extending the repayment date for the second amount to June 15, 2020, the Company issued to the note holder 200,000 shares of its common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. A late payment penalty of $5,000 per day will be due if the $1,000,000 is not paid by June 15, 2020. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $157,784. On June 9, 2020, the holder of the Note agreed to further extend the due date for the $1,000,000 payment to July 15, 2020. In consideration for extending the repayment date, the Company issued to the note holder an additional 200,000 shares of the Company’s common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. The Company determined the extension resulted in debt extinguishment accounting whereby the fair value of the additional consideration provided was in excess of the carrying value of the original note payable resulting in an extinguishment loss of $170,470. In addition, during the six months ended June 30, 2020, the Company issued 80,814 shares of common stock in satisfaction of $31,762 in accrued interest. See Note 8 for information relating to loans from an Officer and Director of the Company. |
Stockholders' Deficit
Stockholders' Deficit | 6 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Stockholders' Deficit | NOTE 7 – STOCKHOLDERS’ DEFICIT Stock-Based Compensation 2019 Issuances Effective January 1, 2019, the Company entered into agreements to issue a total of 1,600,000 shares of common stock to two officers. The shares were to vest over a one-year period commencing on January 1, 2019. The Company valued the common stock at $760,000, using the closing market price of the Company’s common stock on the date of the agreement. The Company was expensing the value of off the common stock over the vesting period which mirrors the service period. During the six months ended June 30, 2019, the Company recognized $190,000 of stock-based compensation. On July 30, 2019, the two officers referred to above resigned as officers and directors of the Company. In connection with their resignations, Mr. Lamadrid agreed to return to the Company 1,750,000 shares, and Mr. Scott agreed to return to the Company 1,200,000 shares of the Company’s common stock. These shares, upon their return to the Company, were cancelled and now represent authorized but unissued shares. In January 2019, the Company authorized the issuance of 140,000 shares of common stock to a consultant for services rendered. The Company valued the common stock at $133,000, using the closing market price of the Company’s common stock on the date of the agreement. The Company expensed the value of the common stock upon issuance as there were no additional performance criteria. 2020 Issuances The Company has entered into various employment and advisory agreements for which shares of common stock are issued with a variety of vesting provisions. The Company typically determines the fair market value of these awards on the date of grant and expensing that value over the vesting period which mirrors the service period. In May 2020, the Company entered into two-year employment agreements with Matthew Gregarek, the Company’s Chairman and Chief Executive Officer, David Burcham, the Company’s President, and Daniel Garza, the Company’s Chief Marketing Officer. Among various other salary and bonus terms, the agreements also provide for the award of shares of the Company’s restricted common stock and options to purchase shares of the Company’s common stock. Under these agreements, a total of 6,300,000 fully vested shares of common stock were granted upon execution of the agreements. An additional 1,300,000 shares of common stock were awarded that will vest on April 1, 2021. The agreements also provide for the future grant of additional shares of common stock should the individuals remain employed following the April 1, 2021 expiration date. During the six months ended June 30, 2020, the Company has recognized stock-based compensation of $2,617,162 in connection with the employment and other agreements noted above. In addition, under these arrangements a total of 9.4 million shares of common stock are issuable upon final vesting. The remaining stock-based compensation of $1,029,838 will be recognized over the remaining service periods as follows: $297,801 during the remainder of the year ending December 31, 2020, $594,880 during the year ending December 31, 2021 and $137,157 during the year ending December 31, 2022. Options In May 2020, effective April 1, 2020, the individuals noted above were also granted a total of 5,750,000 options to purchase shares of the Company’s common stock. These options will vest in tranches at various dates through May 1, 2021 with escalating exercise prices ranging from $0.50 to $7.50 and are exercisable for ten years. These options were valued at $1,056,695 using a Black-Scholes Options Pricing Model. For the six months ended June 30, 2020, the Company recorded $308,832 as stock-based compensation. The remaining expense outstanding through May 1, 2021 is $747,863. The fair value of the options is estimated using a Black-Scholes Options Pricing Model with the following assumptions: Exercise price per share $ 3.40 Expected life (years) 2.97 Risk-free interest rate 0.64 % Expected volatility 135 % Offering of Common Stock and Warrants In February 2019, the Company commenced a private offering of its common stock for up to $10 million in proceeds. The Company is offering up to 20 million shares of common stock at a purchase price of $0.50 per share. In addition, for each share purchased the investor will receive a warrant to purchase one additional share of common stock at a price of $2.00 per share. The warrants expire on December 31, 2021 or sooner at the Company’s option, if the Company’s stock trades for a price of $3.00 per share for 10 days with an average volume of 100,000 shares per day. During the six months ended June 30, 2020, the Company received $100,000 related to the sale of 200,000 shares of common stock and warrants. Common Stock and Warrants Issued with Notes Payable See Note 6 for issuance of shares in connection with note agreements. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 8 – RELATED PARTY TRANSACTIONS As of June 30, 2020 and December 31, 2019, the Company has $42,489 and $116,667, respectively, due to related parties. These amounts generally consist of accrued salaries and various expense reimbursements. See Note 7 for shares and options issued to management under employment contracts. In connection with the employment contracts, the Company accrued total bonuses of $225,000 as of June 30, 2020. See Note 6 for discussion related to related party convertible notes payable. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 9 – SUBSEQUENT EVENTS Extension of Notes Payable Subsequent to June 30, 2020, the holder of the $1,000,000 note payable discussed in Note 6 extended the note to August 15, 2020. In consideration for extending the repayment date, the Company issued to the note holder an additional 200,000 shares of the Company’s common stock and warrants to purchase 200,000 shares of the Company’s common stock. The warrants are exercisable at a price of $2.00 per share and expire January 1, 2025. Related Party Convertible Notes Payable On July 30, 2020, the Company borrowed $100,000 from an officer and director of the Company. At the option of the holder, the note principal and any accrued interest may be converted into shares of the Company’s common stock. The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by the lesser of $0.30 or 80% of the ten day average closing price of the Company’s common stock immediately prior to the date of conversion. As further consideration, the Company issued 50,000 shares of its restricted common stock to the holder. Pending Acquisitions See Note 3 for a discussion of the acquisition of SKM. On March 12, 2020 the Company entered into an agreement to acquire fifty-one percent (51%) of the outstanding membership interests in How Smooth It Is, Inc. (“HSII”) for $3,000,000 in cash and 7,000,000 shares of the Company’s restricted common stock. On July 29, 2020 the Company terminated its agreement to acquire 51% of HSII. As a part of the termination agreement: ● The sole shareholder of HSII agreed to pay the Company $2,150,000 by August 7, 2020, and ● HSII agreed to manufacture up to 24 separate products for the Company (such as edibles and vaporizers) upon terms agreeable to both the Company and HSII. The products manufactured by HSII will be sold under Pure Harvest brands with the Company receiving royalties from the sale of the products. The Company has evaluated subsequent events through the filing date of these consolidated financial statements and has disclosed that there are no other events that are material to the financial statements to be disclosed. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles. In the opinion of management, the accompanying unaudited consolidated financial statements contain all accruals and adjustments (each of which is of a normal recurring nature) necessary for a fair presentation of the Company’s financial position as of June 30, 2020 and the results of its operations for the three and six months then ended. Significant accounting policies have been consistently applied in the interim consolidated financial statements. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the entire year. |
Going Concern | Going Concern The Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. Management plans to fund future operations by raising capital and or seeking joint venture opportunities. |
Principles of Consolidation | Principles of Consolidation The Company evaluates the need to consolidate affiliates based on standards set forth in Accounting Standards Codification (“ASC”) 810 Consolidation (“ASC 810”). The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant consolidated transactions and balances have been eliminated in consolidation. |
Use of Estimates | Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated fair market value of assets and liabilities acquired under business combinations, useful lives and potential impairment of property and equipment, recoverability of goodwill, estimates of fair value of share-based payments and valuation of deferred tax assets. |
Derivative Liabilities | Derivative Liabilities A derivative is an instrument whose value is “derived” from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts and for hedging activities. As a matter of policy, the Company does not invest in separable financial derivatives or engage in hedging transactions. However, the Company entered into certain debt financing transactions in June 2020, as disclosed in Note 6, containing certain conversion features that have resulted in the instruments being deemed derivatives. The Company evaluates such derivative instruments to properly classify such instruments within equity or as liabilities in our financial statements. Our policy is to settle instruments indexed to our common shares on a first-in-first-out basis. The classification of a derivative instrument is reassessed at each reporting date. If the classification changes as a result of events during a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified. Instruments classified as derivative liabilities are remeasured using the Black-Scholes model at each reporting period (or upon reclassification), and the change in fair value is recorded on our consolidated statement of operations. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB”) ASC 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The guidance also establishes a fair value hierarchy for measurements of fair value as follows: ● Level 1 - quoted market prices in active markets for identical assets or liabilities. ● Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ● Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amount of the Company’s financial instruments approximates their fair value as of June 30, 2020 and December 31, 2019, due to the short-term nature of these instruments. The Company’s derivative liabilities are considered a Level 2 liability. |
Net Loss Per Share | Net Loss per Share Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share”. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. For the three and six months ended June 30, 2020 and 2019, dilutive instruments consisted of convertible notes payable, unvested restricted stock grants, warrants, options to purchase shares of the Company’s common stock, the effects of which to the Company’s net loss are anti-dilutive. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In December 2019, the FASB issued guidance that simplifies the accounting for income taxes by removing certain exceptions in existing guidance and improves consistency in application by clarifying and amending existing guidance. This guidance is effective for annual periods beginning after December 15, 2020, and interim periods within those annual periods, where the transition method varies depending upon the specific amendment. Early adoption is permitted, including adoption in any interim period. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period, and all amendments must be adopted in the same period. The Company has reviewed the provisions of the new standard, but it is not expected to have a significant impact on the Company. In January 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, which clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting under Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. This guidance is effective for the Company for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company has reviewed the provisions of the new standard, but it is not expected to have a significant impact on the Company. The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs issued to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements. |
Acquisitions (Tables)
Acquisitions (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Business Combinations [Abstract] | |
Schedule of Purchase Price Calculation | The calculation of the purchase price is as follows: Notes receivable $ 1,650,000 Interest receivable 46,879 Additional advances 384,409 Fair market value of common stock issued 2,436,000 Cash received (2,398 ) $ 4,514,890 |
Summary of Acquisition Related Preliminary Purchase Price | The following table summarizes the preliminary purchase price allocation: Preliminary Purchase Price Allocation Cash $ 2,398 Inventory 846,958 Prepaids and other current assets 8,585 Property and equipment 926,671 Other assets 11,553 Goodwill 3,678,725 Loans payable - related party (960,000 ) $ 4,514,890 |
Stockholders' Deficit (Tables)
Stockholders' Deficit (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Schedule of Fair Value Black-Scholes Options Pricing | The fair value of the options is estimated using a Black-Scholes Options Pricing Model with the following assumptions: Exercise price per share $ 3.40 Expected life (years) 2.97 Risk-free interest rate 0.64 % Expected volatility 135 % |
Organization and Description _2
Organization and Description of Business (Details Narrative) | 12 Months Ended |
Dec. 31, 2018shares | |
Pure Harvest Cannabis Producers, Inc [Member] | Post-split [Member] | |
Number of common stock shares acquired | 17,906,016 |
Acquisitions (Details Narrative
Acquisitions (Details Narrative) | Apr. 24, 2020USD ($)shares | Mar. 13, 2020shares | Mar. 12, 2020USD ($)ft²shares | Feb. 12, 2020shares | Jun. 30, 2020USD ($) | Jun. 30, 2020USD ($) | Apr. 09, 2020 |
Ownership percentage | 51.00% | ||||||
Stock issued during period acquisition, value | $ 2,436,000 | $ 2,436,000 | |||||
How Smooth It Is, Inc. [Member] | |||||||
Ownership percentage | 51.00% | ||||||
Payment to acquire membership interests | $ 1,500,000 | ||||||
Area of land | ft² | 5,800 | ||||||
How Smooth It Is, Inc. [Member] | Restricted Stock [Member] | |||||||
Number of shares issued for membership interests | shares | 7,000,000 | ||||||
Sofa King Medicinal Wellness Products, LLC [Member] | |||||||
Number of shares issued for membership interests | shares | 3,000,000 | ||||||
EdenFlo, LLC [Member] | |||||||
Stock issued during period acquisition, shares | shares | 7,000,000 | ||||||
Stock issued during period acquisition, value | $ 1,650,000 | ||||||
Accrued interest | 46,879 | ||||||
Other advances fund operations | $ 384,409 | ||||||
Operating Agreement [Member] | Dr. James Rouse [Member] | |||||||
Ownership percentage | 51.00% | ||||||
Purchase right, percentage | 49.00% | ||||||
Number of shares issued for services provided | shares | 400,000 |
Acquisitions - Schedule of Purc
Acquisitions - Schedule of Purchase Price Calculation (Details) | Jun. 30, 2020USD ($) |
Business Combinations [Abstract] | |
Notes receivable | $ 1,650,000 |
Interest receivable | 46,879 |
Additional advances | 384,409 |
Fair market value of common stock issued | 2,436,000 |
Cash received | (2,398) |
Total | $ 4,514,890 |
Acquisitions - Summary of Acqui
Acquisitions - Summary of Acquisition Related Preliminary Purchase Price (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Business Combinations [Abstract] | ||
Cash | $ 2,398 | |
Inventory | 846,958 | |
Prepaids and other current assets | 8,585 | |
Property and equipment | 926,671 | |
Other assets | 11,553 | |
Goodwill | 3,820,178 | $ 141,453 |
Loans payable - related party | (960,000) | |
Assets acquired and liabilities noncontrolling interest | $ 4,514,890 |
Notes Receivable (Details Narra
Notes Receivable (Details Narrative) - USD ($) | Jun. 15, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Apr. 09, 2020 | Jan. 31, 2020 | Jun. 30, 2019 | May 31, 2019 |
Notes receivable | $ 2,450,000 | $ 2,074,793 | |||||
Debt maturity date | Oct. 8, 2020 | ||||||
Debt interest rate | 10.00% | ||||||
Ownership interest percentage | 51.00% | ||||||
How Smooth Inc [Member] | |||||||
Notes receivable | $ 1,500,000 | ||||||
Advances to related party | $ 800,000 | $ 700,000 | |||||
Debt maturity date | Jun. 1, 2020 | ||||||
Debt interest rate | 10.00% | ||||||
How Smooth Inc [Member] | Sixty Days [Member] | |||||||
Debt interest rate | 6.00% | ||||||
EdenFlo, LLC [Member] | |||||||
Advances to related party | $ 1,650,000 | ||||||
Debt maturity date | Jun. 1, 2020 | ||||||
Debt interest rate | 10.00% | ||||||
EdenFlo, LLC [Member] | Sixty Days [Member] | |||||||
Debt interest rate | 6.00% | ||||||
Two Unrelated Individuals [Member] | |||||||
Notes receivable | $ 28,593 | $ 28,593 | |||||
HSIT [Member] | |||||||
Advances to related party | $ 247,845 |
Lease Agreement (Details Narrat
Lease Agreement (Details Narrative) - USD ($) | 1 Months Ended | |||
May 31, 2019 | Jun. 30, 2020 | Apr. 30, 2020 | Dec. 31, 2019 | |
Lease term | 3 years | |||
Number of commitment fee shares | 400,000 | |||
Effective borrowing rate | 10.00% | 10.00% | ||
Right of use asset | $ 271,520 | $ 140,988 | $ 184,685 | |
Minimum [Member] | ||||
Property purchase price | $ 1,400,000 | |||
Maximum [Member] | ||||
Property purchase price | $ 1,600,000 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) | Jun. 30, 2020USD ($)$ / shares | Jun. 15, 2020USD ($)$ / sharesshares | Jun. 09, 2020USD ($)$ / sharesshares | Apr. 20, 2020USD ($)$ / sharesshares | Mar. 06, 2020USD ($)Integer$ / sharesshares | Jun. 30, 2020USD ($)$ / sharesshares | Jun. 30, 2019USD ($) | Jun. 30, 2020USD ($)$ / sharesshares | Jun. 30, 2019USD ($) | Dec. 31, 2019USD ($)$ / shares | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) |
Convertible notes mature dates | Oct. 8, 2020 | |||||||||||
Debt interest rate | 10.00% | |||||||||||
Conversion price per share | $ / shares | $ 0.40 | |||||||||||
Amortization of interest expense | $ 11,424 | $ 0 | ||||||||||
Debt discount | $ 30,271 | $ 30,271 | 30,271 | |||||||||
Short term borrowing | $ 30,000 | |||||||||||
Number of common stock issued | shares | 50,000 | |||||||||||
Amortized discount interest expense | 141,980 | |||||||||||
Extinguishment loss | (756,254) | (756,254) | ||||||||||
Payment of notes payable | 500,000 | |||||||||||
Issuance of common stock for accrued interest | 31,762 | $ 31,762 | ||||||||||
Common Stock [Member] | ||||||||||||
Number of common stock issued | shares | 200,000 | |||||||||||
Issuance of common stock for accrued interest | $ 808 | $ 808 | ||||||||||
Issuance of common stock for accrued interest, shares | shares | 80,814 | 80,814 | ||||||||||
EdenFlo Asset Acquisition [Member] | ||||||||||||
Extinguishment loss | $ 448,000 | |||||||||||
Measurement Input, Exercise Price [Member] | ||||||||||||
Derivative liability, stock price | $ / shares | $ 0.30 | $ 0.30 | $ 0.30 | |||||||||
Measurement Input, Expected Dividend Rate [Member] | ||||||||||||
Derivative liability, measurement input, percentage | 0 | 0 | 0 | |||||||||
Measurement Input, Price Volatility [Member] | ||||||||||||
Derivative liability, measurement input, percentage | 103 | 103 | 103 | |||||||||
Measurement Input, Risk Free Interest Rate [Member] | ||||||||||||
Derivative liability, measurement input, percentage | 0.64 | 0.64 | 0.64 | |||||||||
Measurement Input, Expected Term [Member] | ||||||||||||
Derivative liability, measurement input term | 6 months | |||||||||||
Individual related to Director [Member] | ||||||||||||
Convertible notes mature dates | Dec. 10, 2020 | |||||||||||
Debt interest rate | 12.00% | |||||||||||
Short term borrowing | $ 200,000 | |||||||||||
Director [Member] | ||||||||||||
Convertible notes mature dates | Dec. 10, 2020 | |||||||||||
Debt interest rate | 12.00% | 12.00% | 12.00% | |||||||||
Short term borrowing | $ 100,000 | $ 100,000 | $ 100,000 | |||||||||
Unrelated Third Party [Member] | ||||||||||||
Convertible notes principal balance amount | $ 900,000 | |||||||||||
Debt interest rate | 8.00% | |||||||||||
Short term borrowing | $ 1,500,000 | |||||||||||
The Holder [Member] | ||||||||||||
Debt interest rate | 80.00% | |||||||||||
Conversion price per share | $ / shares | $ 0.30 | |||||||||||
Note Holder [Member] | ||||||||||||
Convertible notes mature dates | Jul. 15, 2020 | Jun. 15, 2020 | ||||||||||
Notes payable | $ 1,000,000 | $ 1,000,000 | ||||||||||
Number of common stock issued | shares | 200,000 | 200,000 | ||||||||||
Extinguishment loss | $ 170,470 | $ 157,784 | ||||||||||
Warrants to purchase common stock | shares | 200,000 | 200,000 | ||||||||||
Warrant exercisable date | Jan. 1, 2025 | Jan. 1, 2025 | ||||||||||
Warrants exercise price | $ / shares | $ 2 | $ 2 | ||||||||||
Payment of notes payable | $ 1,000,000 | |||||||||||
Debt instrument maturity date description | Payment from May 6, 2020 to June 15, 2020. | |||||||||||
Penalty payment | $ 5,000 | |||||||||||
Forecast [Member] | ||||||||||||
Debt discount | $ 18,785 | $ 11,486 | ||||||||||
Minimum [Member] | Measurement Input, Share Price [Member] | ||||||||||||
Derivative liability, stock price | $ / shares | $ 0.40 | $ 0.40 | $ 0.40 | |||||||||
Maximum [Member] | Measurement Input, Share Price [Member] | ||||||||||||
Derivative liability, stock price | $ / shares | $ 0.49 | $ 0.49 | $ 0.49 | |||||||||
Convertible Notes Payable [Member] | ||||||||||||
Convertible notes principal balance amount | $ 1,000,000 | |||||||||||
Debt interest rate | 20.00% | |||||||||||
Conversion price per share | $ / shares | $ 0.50 | |||||||||||
Beneficial conversion feature | $ 44,000 | |||||||||||
Convertible Notes Payable [Member] | Minimum [Member] | ||||||||||||
Convertible notes mature dates | Nov. 1, 2021 | |||||||||||
Convertible Notes Payable [Member] | Maximum [Member] | ||||||||||||
Convertible notes mature dates | Dec. 1, 2021 | |||||||||||
Related Party Convertible Notes Payable [Member] | ||||||||||||
Number of common stock issued | shares | 50,000 | |||||||||||
Derivative liabilities | $ 204,750 | $ 204,750 | $ 204,750 | |||||||||
Loss on derivative liability | 2,940 | |||||||||||
Revalued derivative liability | 152,430 | |||||||||||
Gain on derivative liability | 52,320 | |||||||||||
Amortized remaining amount | 237,810 | |||||||||||
Amortized discount interest expense | 33,000 | |||||||||||
Notes Payable One [Member] | ||||||||||||
Convertible notes mature dates | Apr. 13, 2020 | |||||||||||
Notes payable | $ 500,000 | |||||||||||
Notes Payable One [Member] | EdenFlo Asset Acquisition [Member] | ||||||||||||
Convertible notes principal balance amount | $ 600,000 | $ 600,000 | $ 600,000 | |||||||||
Convertible notes mature dates | Jun. 1, 2021 | |||||||||||
Conversion price per share | $ / shares | $ 0.30 | $ 0.30 | $ 0.30 | |||||||||
Notes Payable Two [Member] | ||||||||||||
Convertible notes mature dates | May 6, 2020 | |||||||||||
Notes payable | $ 1,000,000 | |||||||||||
Notes Payable Two [Member] | EdenFlo Asset Acquisition [Member] | ||||||||||||
Convertible notes principal balance amount | $ 300,000 | $ 300,000 | $ 300,000 | |||||||||
Convertible notes mature dates | Aug. 1, 2022 | |||||||||||
Conversion price per share | $ / shares | $ 0.30 | $ 0.30 | $ 0.30 | |||||||||
Notes Payable [Member] | ||||||||||||
Amortization of interest expense | $ 92,256 | |||||||||||
Debt instrument trading price days | 25.00% | |||||||||||
Debt instrument trading days | Integer | 10 | |||||||||||
Number of additional shares included in accrued interest | shares | 150,000 | |||||||||||
Warrants to purchase common stock | shares | 150,000 | |||||||||||
Warrant exercisable date | Jan. 1, 2025 | |||||||||||
Warrants exercise price | $ / shares | $ 2 | |||||||||||
Payment of notes payable | $ 500,000 | |||||||||||
Fair value of discount on note payable | $ 116,707 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) - USD ($) | Jun. 15, 2020 | Jul. 30, 2019 | Jan. 02, 2019 | May 31, 2020 | Feb. 28, 2019 | Jan. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Value of common stock shares issued | $ 457,492 | $ 468,994 | $ 323,000 | ||||||||||
Stock-based compensation | 190,000 | ||||||||||||
Value of common stock shares issued for services | $ 2,570,544 | 2,570,544 | |||||||||||
Share Based Compensation | 308,832 | ||||||||||||
Number of granted common stock | 5,750,000 | ||||||||||||
Options expiration period | 10 years | ||||||||||||
Fair value of stock options | $ 1,056,695 | ||||||||||||
Proceeds from issuance of common stock | 100,000 | ||||||||||||
Number of offering shares of common stock | 50,000 | ||||||||||||
Common Stock and Warrants [Member] | |||||||||||||
Consideration received on sale of stock | $ 100,000 | ||||||||||||
Sale of common stock and warrants | 200,000 | ||||||||||||
Private Offering [Member] | |||||||||||||
Proceeds from issuance of common stock | $ 10,000,000 | ||||||||||||
Number of offering shares of common stock | 20,000,000 | ||||||||||||
Sale of stock price per share | $ 0.50 | ||||||||||||
Number of warrants issued to purchase common stock | 1 | ||||||||||||
Warrant exercise price | $ 2 | ||||||||||||
Warrant expiration date | Dec. 31, 2021 | ||||||||||||
Common stock trade price per share | $ 3 | ||||||||||||
Average volume shares per day | 100,000 | ||||||||||||
Through May 1, 2021 [Member] | |||||||||||||
Unrecognized stock-based compensation | $ 747,863 | ||||||||||||
Minimum [Member] | |||||||||||||
Stock option exercise price | $ 0.50 | ||||||||||||
Maximum [Member] | |||||||||||||
Stock option exercise price | $ 7.50 | ||||||||||||
Two-year Employment Agreements [Member] | |||||||||||||
Number of common stock issued | 6,300,000 | ||||||||||||
Shares vesting period | 2 years | ||||||||||||
Number of common stock awarded | 1,300,000 | ||||||||||||
Vesting period, description | Vest on April 1, 2021 | ||||||||||||
Future granted share expiration date | Apr. 1, 2021 | ||||||||||||
Employment And Other Agreements [Member] | |||||||||||||
Share Based Compensation | $ 2,617,162 | ||||||||||||
Number of shares of common stock are issuable upon final vesting | 9,400,000 | 9,400,000 | |||||||||||
Unrecognized stock-based compensation | $ 1,029,838 | $ 1,029,838 | |||||||||||
Two Agreements [Member] | Forecast [Member] | |||||||||||||
Unrecognized stock-based compensation | $ 137,157 | $ 594,880 | $ 297,801 | ||||||||||
Two Officers [Member] | |||||||||||||
Number of common stock issued | 1,600,000 | ||||||||||||
Shares vesting period | 1 year | ||||||||||||
Value of common stock shares issued | $ 760,000 | ||||||||||||
Mr. Lamadrid [Member] | |||||||||||||
Number of common stock returned | 1,750,000 | ||||||||||||
Mr. Scott [Member] | |||||||||||||
Number of common stock returned | 1,200,000 | ||||||||||||
Consultant [Member] | |||||||||||||
Number of common stock services | 140,000 | ||||||||||||
Value of common stock shares issued for services | $ 133,000 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Related Party Transactions [Abstract] | ||
Due to related parties | $ 29,167 | $ 116,667 |
Accrued bonuses | $ 225,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Aug. 07, 2020 | Jul. 30, 2020 | Jun. 15, 2020 | Jun. 09, 2020 | Apr. 20, 2020 | Mar. 12, 2020 | Aug. 17, 2020 | Jul. 29, 2020 | Apr. 09, 2020 |
Debt due date | Oct. 8, 2020 | ||||||||
Short term borrowing | $ 30,000 | ||||||||
Debt instrument, conversion price | $ 0.40 | ||||||||
Outstanding membership interests, percentage | 51.00% | ||||||||
How Smooth It Is, Inc. [Member] | |||||||||
Number of restricted common stock issued | 7,000,000 | ||||||||
Outstanding membership interests, percentage | 51.00% | ||||||||
Payment to acquire membership interests | $ 1,500,000 | ||||||||
Note Holder [Member] | |||||||||
Notes payable | $ 1,000,000 | $ 1,000,000 | |||||||
Debt due date | Jul. 15, 2020 | Jun. 15, 2020 | |||||||
Warrants exercise price per share | $ 2 | $ 2 | |||||||
Subsequent Event [Member] | How Smooth It Is, Inc. [Member] | |||||||||
Outstanding membership interests, percentage | 51.00% | ||||||||
Subsequent Event [Member] | Related Party Convertible Notes Payable [Member] | |||||||||
Debt instrument, conversion price | $ 0.30 | ||||||||
Debt instrument, convertible percentage | 80.00% | ||||||||
Number of restricted common stock issued | 50,000 | ||||||||
Subsequent Event [Member] | Note Holder [Member] | |||||||||
Notes payable | $ 100,000 | ||||||||
Number of common stock issued | 200,000 | ||||||||
Number of warrants to purchase shares of common stock | 200,000 | ||||||||
Warrants exercise price per share | $ 2 | ||||||||
Warrants expire date | Jan. 1, 2025 | ||||||||
Subsequent Event [Member] | Note Holder [Member] | Extended Maturity [Member] | |||||||||
Debt due date | Aug. 15, 2020 | ||||||||
Subsequent Event [Member] | Officer And Director [Member] | Related Party Convertible Notes Payable [Member] | |||||||||
Short term borrowing | $ 100,000 | ||||||||
Subsequent Event [Member] | Sole ShareHolder [Member] | How Smooth It Is, Inc. [Member] | |||||||||
Payment to acquire membership interests | $ 2,150,000 |