Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Jun. 30, 2020 | |
Document and Entity Information | ||
Entity Registrant Name | Veritas Farms, Inc. | |
Entity Central Index Key | 0001669400 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | true | |
Entity Small Business | true | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Code | NV | |
Entity File Number | 333-235300 | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 41,623,366 | |
Entity Shell Company | false |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
CURRENT ASSETS | ||
Cash and Cash Equivalents | $ 137,543 | $ 1,076,543 |
Inventories | 6,662,593 | 6,600,455 |
Accounts Receivable | 482,084 | 523,033 |
Prepaid Expenses | 333,538 | 622,922 |
Total Current Assets | 7,615,758 | 8,822,953 |
PROPERTY PLANT AND EQUIPMENT, net of accumulated depreciation of $1,104,663 and $976,005 respectively | 4,862,828 | 4,914,063 |
Intellectual Property | 55,000 | 55,000 |
Right of Use Assets, net of accumulated amortization | 1,146,062 | 134,345 |
Deposits | 281,213 | 292,196 |
TOTAL ASSETS | 13,960,861 | 14,218,557 |
CURRENT LIABILITIES | ||
Accounts Payable | 1,876,849 | 1,567,611 |
Accrued Expenses | 126,530 | 51,240 |
Accrued Interest - Related Parties | 18,828 | |
Convertible notes payable | 201,644 | |
Deferred Revenue | 15,559 | |
Current Portion of Right of Use Lease Liability | 255,768 | 80,046 |
Current Portion of Long Term Debt | 67,996 | 67,996 |
Total Current Liabilities | 2,544,346 | 1,785,721 |
LONG-TERM LIABILITIES | ||
Long-term Debt, net of current portion | 167,827 | 184,826 |
Right of Use Lease Liability, net of current portion | 906,020 | 52,798 |
Total Liabilities | 3,618,193 | 2,023,345 |
STOCKHOLDERS' EQUITY | ||
Common Stock, $0.004 par value, 50,000,000 shares authorized, 41,574,977 and 41,330,268 shares issued and outstanding at March 31, 2020 and December 31, 2019 respectively | 166,059 | 165,446 |
Additional Paid in Capital | 31,576,486 | 31,104,373 |
Accumulated Deficit | (21,399,877) | (19,074,608) |
Total Stockholders' Equity | 10,342,668 | 12,195,212 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 13,960,861 | $ 14,218,557 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Accumulated depreciation | $ 1,104,663 | $ 976,005 |
Common stock, par value (in dollars per share) | $ 0.004 | $ 0.004 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, issued | 41,574,977 | 41,330,268 |
Common stock, outstanding | 41,574,977 | 41,330,268 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Sales | $ 1,154,311 | $ 1,524,930 |
Cost of sales | 676,698 | 820,109 |
Plant Inventory Write-off | 77,387 | |
Total Cost of sales | 676,698 | 897,496 |
Gross profit | 477,613 | 627,434 |
Operating Expenses | ||
Selling, General and Administrative | 2,795,818 | 2,447,454 |
Total Operating Expenses | 2,795,818 | 2,447,454 |
Operating loss | 2,318,205 | 1,820,020 |
Other Expenses (Income) | ||
Interest Expense - Related Party | 1,644 | 2,281 |
Interest Expense - Other | 5,420 | 4,623 |
Gain on Forgiveness of Debt | ||
Total Other Expenses (Income) | 7,064 | 6,904 |
Loss before Provision for Income Taxes | (2,325,269) | (1,826,924) |
Income Tax Provision | ||
NET LOSS | $ (2,325,269) | $ (1,826,924) |
Net Loss per Share, Basic and Diluted | $ (0.06) | $ (0.07) |
Weighted Average Shares Outstanding, Basic and Diluted | 41,549,431 | 28,004,953 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) | Common Stock | Additional Paid in Capital | Accumulated Deficit | Total |
Balance at Dec. 31, 2018 | $ 111,505 | $ 13,894,844 | $ (7,927,000) | $ 6,079,349 |
Balance (in shares) at Dec. 31, 2018 | 27,876,208 | |||
Issuance of Common Stock for Cash | ||||
Issuance of Common Stock for Cash (in shares) | ||||
Issuance of Common Stock for Services | ||||
Issuance of Common Stock for Services (in shares) | ||||
Stock-based Compensation | 661,302 | 661,302 | ||
Warrants Exercised | $ 767 | 114,233 | 115,000 | |
Warrants Exercised (in shares) | 191,667 | |||
Net Loss | (1,826,924) | (1,826,924) | ||
Balance at Mar. 31, 2019 | $ 112,272 | 14,670,379 | (9,753,924) | 5,028,727 |
Balance (in shares) at Mar. 31, 2019 | 28,067,875 | |||
Balance at Dec. 31, 2019 | $ 165,446 | 31,104,373 | (19,074,608) | 12,195,212 |
Balance (in shares) at Dec. 31, 2019 | 41,421,698 | |||
Issuance of Common Stock for Cash | ||||
Issuance of Common Stock for Cash (in shares) | ||||
Issuance of Common Stock for Services | ||||
Issuance of Common Stock for Services (in shares) | ||||
Stock-based Compensation | 472,726 | 472,726 | ||
Warrants Exercised | $ 613 | (613) | ||
Warrants Exercised (in shares) | 153,279 | |||
Net Loss | (2,325,269) | $ (2,325,269) | ||
Balance at Mar. 31, 2020 | $ 166,059 | $ 31,576,486 | $ (21,399,877) | $ 10,342,668 |
Balance (in shares) at Mar. 31, 2020 | 41,574,977 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (2,325,269) | $ (1,826,924) |
Adjustments to Reconcile Net Loss to Net Cash Used Operating Activities | ||
Depreciation | 128,658 | 83,998 |
Amortization of Right of Use Assets | 37,350 | 20,152 |
Stock-based Compensation | 472,726 | 661,302 |
Changes in Operating Assets and Liabilities | ||
Inventories | (62,138) | (149,627) |
Prepaid Expenses | 289,384 | 42,095 |
Accounts Receivable | 40,949 | (299,678) |
Deposits | 10,983 | |
Deferred Revenue | 15,559 | (44,612) |
Accrued Interest - Related Parties | 2,190 | |
Right of Use Lease Liability | (20,122) | (21,542) |
Accrued Expenses | 56,461 | 32,677 |
Accounts Payable | 309,238 | 183,229 |
NET CASH USED IN OPERATING ACTIVITIES | (1,046,222) | (1,316,740) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of Property and Equipment | (77,423) | (392,847) |
NET CASH USED IN INVESTING ACTIVITIES | (77,423) | (392,847) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payments of Long-term Debt | (16,999) | (12,548) |
Advances for Stock Warrants - Shareholders | 1,343,125 | |
Notes Payable - Related Parties | 201,644 | 210,000 |
Proceeds from Stock Warrants Exercised | 115,000 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 184,645 | 1,655,577 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (939,000) | (54,010) |
CASH AND CASH EQUIVALENTS - Beginning of Period | 1,076,543 | 164,086 |
CASH AND CASH EQUIVALENTS - End of Period | 137,543 | 110,076 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash Paid for Interest | 3,675 | 2,995 |
Cash Paid for Income Taxes | ||
Non-Cash Financing Activities | ||
Operating Lease Right of Use Asset Obtained in Exchange for Lease Obligations | $ 1,049,067 | $ 214,952 |
Nature of Business and Summary
Nature of Business and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Veritas Farms, Inc. (Formerly Known as SanSal Wellness Holdings Inc.) (the "Company"), was incorporated as Armeau Brands Inc. in the State of Nevada on March 15, 2011. On October 13, 2017, the Company filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State changing the name from "Armeau Brands Inc." to "SanSal Wellness Holdings, Inc." The Company's business objectives are to produce natural rich-hemp products, using strict natural protocols and materials yielding broad spectrum phytocannabinoid rich hemp oils, distillates and isolates. The Company is licensed by the Colorado Department of Agriculture to grow industrial hemp pursuant to Federal law on its farm. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (the "SEC"). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company's management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2020, and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2020, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Form 10-K for the year ended December 31, 2019, filed with the SEC on May 15, 2020. Principles of Consolidation The accompanying consolidated financial statements reflect the accounts of Veritas Farms, Inc. and 271 Lake Davis Holdings and its wholly owned subsidiary, SanSal, LLC. All significant inter-company accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from these estimates. Fair Value Measurement The Company has adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company's short and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk. ASC 820 defines fair value 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. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions) The Company does not have any assets or liabilities measured at fair value on a recurring basis. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At times, cash and cash equivalents may be in excess of FDIC insurance limits. Revenue Recognition "Under ASC 606, the Company" the Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. Revenues from product sales are recognized when the customer obtains control of the Company's product, which occurs at a point in time, typically upon delivery to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial. Cost of Goods Sold Hemp Cultivation and Production Cost of goods sold includes the costs directly attributable to production of inventory such as cultivation costs, extraction costs, packaging costs, security, and allocated overhead. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs. Inventories Inventories consist of growing and processed plants and oils and are valued at the lower of cost or net realizable value. In evaluating whether inventories are stated at lower of cost or net realizable value, management considers such factors as inventories in hand, estimated time to sell such inventories and current market conditions. Write-offs for inventory obsolescence are recorded when, in the opinion of management, the value of specific inventory items has been impaired. Property, Plant and Equipment Purchase of property, plant and equipment are recorded at cost. Improvements and replacements of property, plant and equipment are capitalized. Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to expense as incurred. When assets are sold or retired, their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the Consolidated Statements of Operations Impairment of Long-Lived Assets The carrying value of long-lived assets are reviewed when facts and circumstances suggest that the assets may be impaired or that the amortization period may need to be changed. The Company considers internal and external factors relating to each asset, including cash flows, local market developments, industry trends and other publicly available information. If these factors and the projected undiscounted cash flows of the Company over the remaining amortization period indicate that the asset will not be recoverable, the carrying value will be adjusted to the fair market value. The Company has determined that no impairment exists at March 31, 2020 and December 31, 2019. Compensation and Benefits The Company records compensation and benefits expense for all cash and deferred compensation, benefits, and related taxes as earned by its employees. Compensation and benefits expense also includes compensation earned by temporary employees and contractors who perform similar services to those performed by the Company's employees. Stock-Based Compensation The Company accounts for share-based payments in accordance with ASC 718, "Compensation - Stock Compensation," which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, "Measurement Objective – Fair Value at Grant Date," the Company estimates the fair value of the award using the Black-Scholes option pricing model for valuation of the share- based payments. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders. The simplified method is used to determine compensation expense since historical option exercise experience is limited relative to the number of options issued. The compensation cost is recognized ratably using the straight-line method over the expected vesting period. The Company accounts for stock-based compensation to other than employees in the same manner in which it accounts for employees. Income Taxes The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. In accordance with Financial Accounting Standards Board ASC Topic 740, Income Taxes, management evaluated the Company's tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. The Company is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Income tax benefits are recognized for income tax positions taken or expected to be taken in a tax return, only when it is determined that the income tax position will more-likely than-not be sustained upon examination by taxing authorities. The Company has analyzed tax positions taken for filings with the Internal Revenue Service and all tax jurisdictions where it operates. The Company believes that income tax filing positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse effect on the Company's financial condition, results of operations or cash flows. Accordingly, the Company has not recorded any reserves, or related accruals for interest and penalties for uncertain income tax positions at March 31, 2020 and December 31, 2019. Leases The Company has two leased buildings one in Fort Lauderdale, Florida and the other in Aurora, Colorado that are classified as operating lease right-of use ("ROU") assets and operating lease liabilities in the Company's consolidated balance sheet. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of Selling, General and Administrative expenses. The standard was effective for us beginning January 1, 2019. The Company elected the available practical expedients on adoption. The adoption had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated income statements. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. Finance leases are not material to the Company and were not impacted by the adoption of ASC 842, as finance lease liabilities and the corresponding assets were already recorded in the balance sheet under the previous guidance, ASC 840. Related Party Transactions The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The consolidated financial statements shall include disclosures of related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Recent Accounting Pronouncements No new pronouncements are applicable to the Company. |
Going Concern
Going Concern | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GOING CONCERN | NOTE 2: GOING CONCERN The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate continuation of the Company as a going concern. However, the Company has sustained substantial losses from operations since its inception. As of and for the three months ended March 31, 2020, the Company had an accumulated deficit of $21,399,877, and a net loss of $2,325,269. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. Continuation as a going concern is dependent on the ability to raise additional capital and financing, though there is no assurance of success. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. The adverse public health developments and economic effects of the current COVID-19 pandemic in the United States, could adversely affect the Company's customers and suppliers as a result of quarantines, facility closures, closing of "brick and mortar" retail outlets and logistics restrictions imposed or which otherwise occur in connection with the pandemic. More broadly, the high degree unemployment resulting from the pandemic could potentially lead to an extended economic downturn, which would likely decrease spending, adversely affect demand for our products and services and harm our business, results of operations and financial condition. At this time, we cannot accurately predict the effect the COVID-19 pandemic will have on the Company. Management's plans include: Taking full advantage of all government programs for the COVID – 19 crisis Future equity raises Future debt raises Rebalancing of Marketing and G&A expenses to mimic current economic environment New and reorder sales to large retailers. The Company's rebranded line of hemp oil and extract product allowed market penetration into large retail chains vastly increasing brand exposure and awareness. The initial rollouts have been successful creating opportunities for thousands of new retail outlets across the country. The shift from smaller order fulfillment to larger "big box store" orders creates an economy of scale and increased profitability. In addition to the volume transactions of the large retail stores, the Company has also found success with a direct to consumer approach on their E-Commerce site. Currently, the Company incorporates an aggressive marketing plan to compete in the Cannabinoid industry. To become market leaders in the market, the Company will use three primary departments to market its products including: web-based marketing, traditional marketing, and medical marketing departments. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 3: INVENTORIES Inventory consists of: March 31, December 31, 2020 2019 Inventory Work In Progress $ 4,010,239 $ 4,062,890 Finished Goods 2,097,896 1,983,107 Other 554,458 554,458 Inventory $ 6,662,593 $ 6,600,455 During the periods ending March 31, 2020 and March 31, 2019 the Company realized a loss from destruction of plants in the amounts of $0 and $77,387, respectively. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 4: PROPERTY AND EQUIPMENT March 31, December 31, Life 2020 2019 PROPERTY AND EQUIPMENT Land and Land Improvements - $ 398,126 398,126 Building and Improvements 39 1,510,175 1,510,175 Greenhouse 39 965,388 920,896 Fencing and Irrigation 15 203,793 203,793 Machinery and Equipment 7 2,480,475 2,480,475 Furniture and Fixtures 7 269,275 236,344 Computer Equipment 5 20,053 20,053 Vehicles 5 120,206 120,206 $ 5,967,491 $ 5,890,068 Less Accumulated Depreciation (1,104,663 ) (976,005 ) Property and Equipment $ 4,862,828 4,914,063 Total depreciation expense was $128,658 and $83,998 for the three month period ending March 31, 2020 and 2019, respectively. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2020 | |
Long-term Debt, Unclassified [Abstract] | |
LONG-TERM DEBT | NOTE 5: LONG-TERM DEBT Long-term debt consisted of the following: March 31, December 31, 2020 2019 Notes Payable which require monthly payments of $3,690, $669, and $1,691, including interest at 5.16% per annum until December 1, 2022, May 1, 2023, and August 1, 2024, when the balance is due in full. The note is secured by specific assets of the Company. 196,868 211,952 Note Payable which require monthly payments of $758, including interest at 3.4% per annum until April 1, 2025, when the balance is due in full. The note is secured by specific assets of the Company. 38,955 40,870 235,823 252,822 Less Current Portion (67,996 ) (67,996 ) Long-Term Debt - net of current portion $ 167,827 $ 184,826 Future principal payments for the next 5 years are as follows for the years ended December 31: 2020 $ 50,997 2021 67,996 2022 67,996 2023 27,299 2024 18,980 Thereafter 2,554 $ 235,823 |
Convertible Debt
Convertible Debt | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
CONVERTIBLE DEBT | NOTE 6: CONVERTIBLE DEBT In March 2020, the Company secured a $200,000 loan from a single investor, evidenced by a one-year 10% convertible promissory note (the "Convertible Note"). The Convertible Note bears interest at the rate of ten percent (10%) per annum, which accrues and is payable together with principal at maturity. Principal and accrued interest under the Convertible Note may, at the option of the holder, be converted in its entirety into shares of our common stock at a conversion price of $.40 per share, subject to adjustment for stock splits, stock dividends and similar recapitalization transactions. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 7: STOCK-BASED COMPENSATION The Company approved their 2017 Incentive Stock Plan on September 27, 2017 (the "Incentive Plan") which authorizes the Company to grant or issue non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and other equity awards up to a total of 45 million shares. Under the terms of the Incentive Plan, awards may be granted to our employees, directors or consultants. Awards issued under the Incentive Plan vest as determined by the Board of Directors or any of the Committees appointed under the Incentive Plan at the time of grant. The Company's outstanding stock options have a 10-year term. Outstanding non-qualified stock options granted to employees and a consultant vest on a case by case basis. Outstanding incentive stock options issued to employees vest over a three-year period. The incentive stock options granted vest based solely upon continued employment ("time-based"). The Company's time-based share awards that vest in their entirety at the end of three-year periods, time-based share awards where 33.3% of the award vests on each of the three anniversary dates. Outstanding incentive stock options issued to executives vest partially upon grant date, with the residual vesting over the subsequent 6 or 12 months. The Company estimates the fair value of each stock option on the date of grant using the Black Scholes valuation model. Stock-based compensation expense was as follows: Three Months Ended Mar 31: 2020 2019 Non-Qualified Stock Options - Immediate $ 472,726 $ 661,302 Incentive Stock Options - Time Bases - - Total Stock-based Compensation Expense $ 472,726 $ 661,302 Stock option activity was as follows in the periods ended Mar 31, 2020 and December 31, 2019: Weighted- Weighted- Stock Average Average Options Exercise Remaining Outstanding at December 31, 2019 4,318,750 $ 1.14 8.91 Granted - $ - - Exercised - Forfeited/Canceled - Outstanding at March 31, 2020 4,318,750 $ 1.14 8.66 Vested at March 31, 2020 3,154,407 $ 1.14 8.48 Exercisable at March 31, 2020 3,154,407 $ 1.14 8.48 |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
LEASES | NOTE 8: LEASES We adopted ASC 842 using the modified retrospective approach, electing the practical expedient that allows us not to restate our comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption. The Company recognized the following related to leases in its Unaudited Consolidated Balance Sheet: March 31, December 31, 2020 2019 Right of Use Lease Liabilities Current portion $ 255,768 $ 80,046 Long-term portion 906,020 52,798 $ 1,161,788 $ 132,844 On January 15, 2017, the Company entered an agreement with Pueblo, CO Board of Water Works to lease water for the Company's cultivation process. The agreement went into effect as of November 1, 2016 with a term of 10 years expiring on October 31, 2026, with an option to extend the lease upon expiration for 10 additional years. This agreement replaced previously entered agreements with Pueblo, CO Board of Water Works. The lease requires annual non-refundable minimum service fees of $15,000 and a usage charge of $1,063 per acre for 30 acres. The minimum service fees and usage charges are subject to escalators for each year based upon percentage increases of Pueblo, CO Board of Water Works rates from the previous calendar year. Total water lease expense was $12,876 and $8,159 for the three month period ending March 31, 2020 and 2019, respectively. On June 22, 2018, the Company entered into a sublease agreement with ESDA Inc., a Florida Corporation. The Agreement went into effect as of July 1, 2018 with a term of three years expiring August 31, 2021. The lease contains annual escalators and charges Florida sales tax. Total depreciation expense related to the lease was $20,152 and $20,152 for the three month period ending March 31, 2020 and 2019, respectively. In March of 2020, the Company entered into a 61 month lease agreement with Majestic Realty Co. The agreement allows for an abated first month of rent. The lease contains annual escalators in addition to other periodic payments pertaining to taxes, utilities, insurance and common area costs. Total depreciation expense related to the lease was $17,198 and $0 for the three month period ending March 31, 2020 and 2019, respectively. The lease was calculated with a 5% interest rate creating a Right of Use liability of 1,049,067. As of March 31, 2020, and December 31, 2019, operating leases have no minimum rental commitments. |
Common Stock
Common Stock | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
COMMON STOCK | NOTE 9: COMMON STOCK In March of 2020, the Company issued 153,279 shares of common stock in accordance with a cashless exercise of warrants. During the quarter ending March 31 2019, 191,667 stock warrants were exercised for $115,000. As of March 31, 2019, there was a liability of $1,343,125 for funds received from exercising warrants from investors that had not yet been converted into equity. In September of 2019, the board of directors approved an amendment to the Company's Certificate of Incorporation, as amended, to effect a 1-for-4 reverse stock split on the issued and outstanding common. All relevant information relating to numbers of shares and warrants and per share information have been retrospectively adjusted to reflect the reverse stock split for all periods presented. The reverse split was effected on September 19, 2019. |
Income Tax
Income Tax | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAX | NOTE 10: INCOME TAX The reconciliation of income tax computed at the Federal statutory rate to the provision (benefit) for income taxes from continuing operations is as follows: Three Months Ended Three Months Ended March 31, March 31, Federal Taxes (credits) at statutory rates $ (500,000 ) $ (400,000 ) State and local taxes, net of Federal benefit (100,000 ) (84,000 ) Change in valuation allowance 600,000 484,000 $ - $ - Components of deferred tax assets are as follows: Three Months Ended 2020 December 31, 2019 Deferred Tax Assets; Net Operating Loss Carryforwards $ 4,320,000 $ 3,930,000 Stock Compensation 980,000 910,000 Accrued Related Party Expenses 15,000 - Total Deferred Tax Assets 5,315,000 4,840,000 Valuation Allowance (4,900,000 ) (4,300,000 ) Total Deferred Tax Assets net of Valuation Allowance $ 415,000 $ 540,000 Depreciation and Amortization 330,000 370,000 Prepaid Expense 85,000 170,000 Total Deferred Tax Liabilities 415,000 540,000 Net Deferred Tax Assets $ - $ - The Company has approximately $16,000,000 net operating loss carryforwards that are available to reduce future taxable income. Those NOLs begin to expire in 2038. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets for every period because it is more likely than not that all of the deferred tax assets will not be realized. The Company's deferred tax liability associated with timing differences related to depreciation and amortization includes $69,000 of liability resulting from tax depreciation deducted in excess of GAAP depreciation prior to the Company becoming taxed as a C-Corporation. The Company files income tax returns in the U.S. federal jurisdiction, and the state of Colorado. The Company adopted the provisions of FASB ASC 740, A ccounting for Uncertainty in Income Taxes |
Concentrations
Concentrations | 3 Months Ended |
Mar. 31, 2020 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | NOTE 11: CONCENTRATIONS The Company had one customer in the three months ended March 31, 2020 accounting for 13% of sales. For the three months ended March 31, 2019, one customer accounted for 10% of sales. The Company had three customers at March 31, 2020 accounting for 59%, 11% and 10% of accounts receivable. At December 31, 2019, the Company had two customers accounting for 46% and 12% of accounts receivable. |
Related Party
Related Party | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY | NOTE 12: RELATED PARTY The Company incurred $57,500 and $37,500 of related party legal expenses during the three month periods ended March 31, 2020 and 2019, respectively The Company issued stock incentives to various directors and employees. Refer to Note 6 for additional details. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 13: SUBSEQUENT EVENTS On April 7, 2020, the Company issued 50,000 shares of common stock for marketing services. On May 13, 2020, the Company received loan proceeds of $800,000 pursuant to the U.S. Small Business Administration ("SBA") COVID-19 Paycheck Protection Program (PPP). Under the terms of this program, loan proceeds may be forgiven if used for payroll costs, rent, and utilities within 24 weeks of receipt. |
Nature of Business and Summar_2
Nature of Business and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | Nature of Business Veritas Farms, Inc. (Formerly Known as SanSal Wellness Holdings Inc.) (the “Company”), was incorporated as Armeau Brands Inc. in the State of Nevada on March 15, 2011. On October 13, 2017, the Company filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State changing the name from “Armeau Brands Inc.” to “SanSal Wellness Holdings, Inc.” The Company’s business objectives are to produce natural rich-hemp products, using strict natural protocols and materials yielding broad spectrum phytocannabinoid rich hemp oils, distillates and isolates. The Company is licensed by the Colorado Department of Agriculture to grow industrial hemp pursuant to Federal law on its farm. |
Basis of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2020, and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2020, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Form 10-K for the year ended December 31, 2019, filed with the SEC on May 15, 2020. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements reflect the accounts of Veritas Farms, Inc. and 271 Lake Davis Holdings and its wholly owned subsidiary, SanSal, LLC. All significant inter-company accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from these estimates. |
Fair Value Measurement | Fair Value Measurement The Company has adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company’s short and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk. ASC 820 defines fair value 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. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions) The Company does not have any assets or liabilities measured at fair value on a recurring basis. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At times, cash and cash equivalents may be in excess of FDIC insurance limits. |
Revenue Recognition | Revenue Recognition "Under ASC 606, the Company" the Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. Revenues from product sales are recognized when the customer obtains control of the Company's product, which occurs at a point in time, typically upon delivery to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial. |
Cost of Goods Sold | Cost of Goods Sold Hemp Cultivation and Production Cost of goods sold includes the costs directly attributable to production of inventory such as cultivation costs, extraction costs, packaging costs, security, and allocated overhead. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs. |
Inventories | Inventories Inventories consist of growing and processed plants and oils and are valued at the lower of cost or net realizable value. In evaluating whether inventories are stated at lower of cost or net realizable value, management considers such factors as inventories in hand, estimated time to sell such inventories and current market conditions. Write-offs for inventory obsolescence are recorded when, in the opinion of management, the value of specific inventory items has been impaired. |
Property, Plant and Equipment | Property, Plant and Equipment Purchase of property, plant and equipment are recorded at cost. Improvements and replacements of property, plant and equipment are capitalized. Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to expense as incurred. When assets are sold or retired, their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the Consolidated Statements of Operations |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The carrying value of long-lived assets are reviewed when facts and circumstances suggest that the assets may be impaired or that the amortization period may need to be changed. The Company considers internal and external factors relating to each asset, including cash flows, local market developments, industry trends and other publicly available information. If these factors and the projected undiscounted cash flows of the Company over the remaining amortization period indicate that the asset will not be recoverable, the carrying value will be adjusted to the fair market value. The Company has determined that no impairment exists at March 31, 2020 and December 31, 2019. |
Compensation and Benefits | Compensation and Benefits The Company records compensation and benefits expense for all cash and deferred compensation, benefits, and related taxes as earned by its employees. Compensation and benefits expense also includes compensation earned by temporary employees and contractors who perform similar services to those performed by the Company’s employees. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for share-based payments in accordance with ASC 718, "Compensation - Stock Compensation," which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, "Measurement Objective – Fair Value at Grant Date," the Company estimates the fair value of the award using the Black-Scholes option pricing model for valuation of the share- based payments. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders. The simplified method is used to determine compensation expense since historical option exercise experience is limited relative to the number of options issued. The compensation cost is recognized ratably using the straight-line method over the expected vesting period. The Company accounts for stock-based compensation to other than employees in the same manner in which it accounts for employees. |
Income Taxes | Income Taxes The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. In accordance with Financial Accounting Standards Board ASC Topic 740, Income Taxes, management evaluated the Company’s tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. The Company is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Income tax benefits are recognized for income tax positions taken or expected to be taken in a tax return, only when it is determined that the income tax position will more-likely than-not be sustained upon examination by taxing authorities. The Company has analyzed tax positions taken for filings with the Internal Revenue Service and all tax jurisdictions where it operates. The Company believes that income tax filing positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse effect on the Company’s financial condition, results of operations or cash flows. Accordingly, the Company has not recorded any reserves, or related accruals for interest and penalties for uncertain income tax positions at March 31, 2020 and December 31, 2019. |
Lease | Leases The Company has two leased buildings one in Fort Lauderdale, Florida and the other in Aurora, Colorado that are classified as operating lease right-of use (“ROU”) assets and operating lease liabilities in the Company’s consolidated balance sheet. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of Selling, General and Administrative expenses. The standard was effective for us beginning January 1, 2019. The Company elected the available practical expedients on adoption. The adoption had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated income statements. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. Finance leases are not material to the Company and were not impacted by the adoption of ASC 842, as finance lease liabilities and the corresponding assets were already recorded in the balance sheet under the previous guidance, ASC 840. |
Related Party Transactions | Related Party Transactions The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The consolidated financial statements shall include disclosures of related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements No new pronouncements are applicable to the Company. |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories | March 31, December 31, 2020 2019 Inventory Work In Progress $ 4,010,239 $ 4,062,890 Finished Goods 2,097,896 1,983,107 Other 554,458 554,458 Inventory $ 6,662,593 $ 6,600,455 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | March 31, December 31, Life 2020 2019 PROPERTY AND EQUIPMENT Land and Land Improvements - $ 398,126 398,126 Building and Improvements 39 1,510,175 1,510,175 Greenhouse 39 965,388 920,896 Fencing and Irrigation 15 203,793 203,793 Machinery and Equipment 7 2,480,475 2,480,475 Furniture and Fixtures 7 269,275 236,344 Computer Equipment 5 20,053 20,053 Vehicles 5 120,206 120,206 $ 5,967,491 $ 5,890,068 Less Accumulated Depreciation (1,104,663 ) (976,005 ) Property and Equipment $ 4,862,828 4,914,063 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Long-term Debt, Unclassified [Abstract] | |
Schedule of long-term debt | March 31, December 31, 2020 2019 Notes Payable which require monthly payments of $3,690, $669, and $1,691, including interest at 5.16% per annum until December 1, 2022, May 1, 2023, and August 1, 2024, when the balance is due in full. The note is secured by specific assets of the Company. 196,868 211,952 Note Payable which require monthly payments of $758, including interest at 3.4% per annum until April 1, 2025, when the balance is due in full. The note is secured by specific assets of the Company. 38,955 40,870 235,823 252,822 Less Current Portion (67,996 ) (67,996 ) Long-Term Debt - net of current portion $ 167,827 $ 184,826 |
Schedule of future principal payments | 2020 $ 50,997 2021 67,996 2022 67,996 2023 27,299 2024 18,980 Thereafter 2,554 $ 235,823 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of stock-based compensation expense | Three Months Ended Mar 31: 2020 2019 Non-Qualified Stock Options - Immediate $ 472,726 $ 661,302 Incentive Stock Options - Time Bases - - Total Stock-based Compensation Expense $ 472,726 $ 661,302 |
Schedule of stock option | Weighted- Weighted- Stock Average Average Options Exercise Remaining Outstanding at December 31, 2019 4,318,750 $ 1.14 8.91 Granted - $ - - Exercised - Forfeited/Canceled - Outstanding at March 31, 2020 4,318,750 $ 1.14 8.66 Vested at March 31, 2020 3,154,407 $ 1.14 8.48 Exercisable at March 31, 2020 3,154,407 $ 1.14 8.48 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Lease | December 31, December 31, 2019 2018 Right of Use Lease Liabilities Current portion $ 80,046 $ - Long-term portion 52,798 - $ 132,844 $ - |
Income Tax (Tables)
Income Tax (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax reconciliation | Three Months Ended Three Months Ended March 31, March 31, Federal Taxes (credits) at statutory rates $ (500,000 ) $ (400,000 ) State and local taxes, net of Federal benefit (100,000 ) (84,000 ) Change in valuation allowance 600,000 484,000 $ - $ - |
Schedule of deferred tax assets | Three Months Ended 2020 December 31, 2019 Deferred Tax Assets; Net Operating Loss Carryforwards $ 4,320,000 $ 3,930,000 Stock Compensation 980,000 910,000 Accrued Related Party Expenses 15,000 - Total Deferred Tax Assets 5,315,000 4,840,000 Valuation Allowance (4,900,000 ) (4,300,000 ) Total Deferred Tax Assets net of Valuation Allowance $ 415,000 $ 540,000 Depreciation and Amortization 330,000 370,000 Prepaid Expense 85,000 170,000 Total Deferred Tax Liabilities 415,000 540,000 Net Deferred Tax Assets $ - $ - |
Going Concern (Details)
Going Concern (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Going Concern (Textual) | |||
Accumulated deficit | $ (21,399,877) | $ (19,074,608) | |
Net loss | $ (2,325,269) | $ (1,826,924) |
Inventories (Details)
Inventories (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Inventory | ||
Work In Progress | $ 4,010,239 | $ 4,062,890 |
Finished Goods | 2,097,896 | 1,983,107 |
Other | 554,458 | 554,458 |
Inventory | $ 6,662,593 | $ 6,600,455 |
Inventories (Details Textual)
Inventories (Details Textual) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Inventory Disclosure [Abstract] | ||
Loss from destruction of plants | $ 0 | $ 77,387 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | $ 5,967,491 | $ 5,890,068 |
Less Accumulated Depreciation | (1,104,663) | (976,005) |
Property and Equipment | 4,862,828 | 4,914,063 |
Land and Land Improvements | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | 398,126 | 398,126 |
Building and Improvements [Member] | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | $ 1,510,175 | 1,510,175 |
Greenhouse [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 39 years | |
Property and equipment, gross | $ 965,388 | 920,896 |
Fencing and Irrigation [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 15 years | |
Property and equipment, gross | $ 203,793 | 203,793 |
Machinery and Equipment [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 7 years | |
Property and equipment, gross | $ 2,480,475 | 2,480,475 |
Furniture and Fixtures [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 7 years | |
Property and equipment, gross | $ 269,275 | 236,344 |
Computer Equipment [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 5 years | |
Property and equipment, gross | $ 20,053 | 20,053 |
Vehicles [Member] | ||
PROPERTY AND EQUIPMENT | ||
Life | 5 years | |
Property and equipment, gross | $ 120,206 | $ 120,206 |
Property and Equipment (Detai_2
Property and Equipment (Details Textual) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Property and Equipment (Textual) | ||
Depreciation expense | $ 128,658 | $ 83,998 |
Long-Term Debt (Details)
Long-Term Debt (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Long-term debt | $ 235,823 | $ 252,822 |
Less Current Portion | (67,996) | (67,996) |
Long-Term Debt - net of current portion | 167,827 | 184,826 |
Note Payable [Member] | ||
Long-term debt | 196,868 | 211,952 |
Note Payable Two [Member] | ||
Long-term debt | $ 38,955 | $ 40,870 |
Long-Term Debt (Details 1)
Long-Term Debt (Details 1) | Mar. 31, 2020USD ($) |
Long-term Debt, Unclassified [Abstract] | |
2020 | $ 50,997 |
2021 | 67,996 |
2022 | 67,996 |
2023 | 27,299 |
2024 | 18,980 |
Thereafter | 2,554 |
Total | $ 235,823 |
Long-Term Debt (Details Textual
Long-Term Debt (Details Textual) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Note Payable [Member] | |
Monthly payments | $ 3,690 |
Debt interest rate, percentage | 5.16% |
Maturity term | Dec. 1, 2022 |
Note Payable Two [Member] | |
Monthly payments | $ 669 |
Debt interest rate, percentage | 5.16% |
Maturity term | May 1, 2023 |
Note Payable Three [Member] | |
Monthly payments | $ 1,691 |
Debt interest rate, percentage | 5.16% |
Maturity term | Aug. 1, 2024 |
Note Payable Four [Member] | |
Monthly payments | $ 758 |
Debt interest rate, percentage | 3.40% |
Maturity term | Apr. 1, 2025 |
Convertible Debt (Details)
Convertible Debt (Details) | 3 Months Ended |
Mar. 31, 2020USD ($)$ / shares | |
Convertible promissory note | 10.00% |
Convertible Note interest rate | 10.00% |
Common stock at a conversion price | $ / shares | $ 40 |
Amount of beneficial conversion feature | $ 95,000 |
Investor [Member] | |
Convertible Debt | $ 200,000 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Total Stock-based Compensation Expense | $ 472,726 | $ 661,302 |
2017 Incentive Stock Plan [Member] | Non-Qualified Stock Options [Member] | ||
Total Stock-based Compensation Expense | 472,726 | 661,302 |
2017 Incentive Stock Plan [Member] | Incentive Stock Options [Member] | ||
Total Stock-based Compensation Expense |
Stock-Based Compensation (Det_2
Stock-Based Compensation (Details 1) | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Stock Options | |
Outstanding beginning balance | 4,318,750 |
Granted | |
Exercised | |
Forfeited/Canceled | |
Outstanding ending balance | 4,318,750 |
Vested | 3,154,407 |
Exercisable | 3,154,407 |
Weighted- Average Exercise Price per Share | |
Outstanding beginning balance (in dollars per share) | $ / shares | $ 1.14 |
Granted (in dollars per share) | $ / shares | |
Outstanding ending balance (in dollars per share) | $ / shares | 1.14 |
Vested (in dollars per share) | $ / shares | 1.14 |
Exercisable (in dollars per share) | $ / shares | $ 1.14 |
Weighted Average Remaining Contractual | |
Outstanding (in years) | 8 years 10 months 28 days |
Outstanding (in years) | 8 years 7 months 28 days |
Vested (in years) | 8 years 5 months 23 days |
Exercisable (in years) | 8 years 5 months 23 days |
Stock-Based Compensation (Det_3
Stock-Based Compensation (Details Textual) - 2017 Incentive Stock Plan [Member] - shares | 3 Months Ended | |
Mar. 31, 2020 | Sep. 27, 2017 | |
Authorized stock | 45,000,000 | |
Incentive Stock Options [Member] | ||
Stock options term | 10 years | |
Stock options vesting term | 3 years | |
Description of stock options vesting | Vest in their entirety at the end of three-year periods, time-based share awards where 33.3% of the award vests on each of the three anniversary dates. |
Leases (Details)
Leases (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Current portion | $ 255,768 | $ 80,046 |
Long-term portion | 906,020 | 52,798 |
Operating lease, liability | $ 1,161,788 | $ 132,844 |
Leases (Details Textual)
Leases (Details Textual) | Jan. 15, 2017USD ($)a | Mar. 31, 2020USD ($) | Mar. 31, 2019USD ($) |
Water lease expense | $ 12,876 | $ 8,159 | |
Right of use liability | $ 1,049,067 | 214,952 | |
Lease interest rate | 5.00% | ||
ESDA Inc., a Florida Corporation [Member] | |||
Depreciation expense related to lease | $ 20,152 | 20,152 | |
Majestic Realty Co [Member] | |||
Depreciation expense related to lease | $ 17,198 | $ 0 | |
Pueblo CO Board of Water Works [Member] | Agreement One [Member] | |||
Operating lease term | 10 years | ||
Lease expiration date | Oct. 31, 2026 | ||
Operating additional extend year | 10 years | ||
Non-refundable minimum service fee | $ 15,000 | ||
Water usage charge | $ 1,063 | ||
Area of land | a | 30 |
Common Stock (Details)
Common Stock (Details) - USD ($) | 1 Months Ended | 3 Months Ended | |
Sep. 30, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Common Stock (Textual) | |||
Common stock issued | 153,279 | ||
Stock warrants | 191,667 | ||
Stock warrants were exercised | $ 115,000 | ||
Received from exercising warrants | $ 1,343,125 | ||
Description of reverse stock split | The board of directors approved an amendment to the Company's Certificate of Incorporation, as amended, to effect a 1-for-4 reverse stock split on the issued and outstanding common. |
Income Tax (Details)
Income Tax (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Federal taxes (credits) at statutory rates | $ (500,000) | $ (400,000) |
State and local taxes, net of Federal benefit | (100,000) | (84,000) |
Change in valuation allowance | 600,000 | 484,000 |
Income tax provision |
Income Tax (Details 1)
Income Tax (Details 1) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Deferred Tax Assets; | ||
Net Operating Loss Carryforwards | $ 4,320,000 | $ 3,930,000 |
Stock Compensation | 980,000 | 910,000 |
Accrued Related Party Expenses | 15,000 | |
Total Deferred Tax Assets | 5,315,000 | 4,840,000 |
Valuation Allowance | (4,900,000) | (4,300,000) |
Total Deferred Tax Assets net of Valuation Allowance | 415,000 | 540,000 |
Depreciation and Amortization | 330,000 | 370,000 |
Prepaid Expense | 85,000 | 170,000 |
Total Deferred Tax Liabilities | 415,000 | 540,000 |
Net Deferred Tax Assets |
Income Tax (Details Textual)
Income Tax (Details Textual) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Income Tax (Textual) | |
Net operating loss carry forward | $ 16,000,000 |
Operating loss carry forwards expiration date | Dec. 31, 2038 |
Depreciation and amortization | $ 69,000 |
Concentrations (Details)
Concentrations (Details) - Customer | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Sales Revenue, Net [Member] | First Customer [Member] | |||
Concentration risk, percentage | 13.00% | 10.00% | |
Number of customer | 1 | 1 | |
Accounts Receivable [Member] | First Customer [Member] | |||
Concentration risk, percentage | 59.00% | 46.00% | |
Number of customer | 3 | 2 | |
Accounts Receivable [Member] | Second Customer [Member] | |||
Concentration risk, percentage | 11.00% | 12.00% | |
Number of customer | 3 | 2 | |
Accounts Receivable [Member] | Third Customer [Member] | |||
Concentration risk, percentage | 10.00% | ||
Number of customer | 3 |
Related Party (Details)
Related Party (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Related Party (Textual) | ||
Related party legal expenses | $ 57,500 | $ 37,500 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event [Member] - USD ($) | May 13, 2020 | Apr. 07, 2020 |
Subsequent Events (Textual) | ||
Subsequent event, description | The Company received loan proceeds of $800,000 pursuant to the U.S. Small Business Administration ("SBA") COVID-19 Paycheck Protection Program (PPP). Under the terms of this program, loan proceeds may be forgiven if used for payroll costs, rent, and utilities within 24 weeks of receipt. | |
Common stock issued for marketing services, value | $ 50,000 |