Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Mar. 23, 2022 | Jun. 30, 2021 | |
Cover [Abstract] | |||
Entity Registrant Name | JACKSAM CORPORATION | ||
Entity Central Index Key | 0000860543 | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Entity Voluntary Filers | No | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | true | ||
Entity Current Reporting Status | Yes | ||
Document Period End Date | Dec. 31, 2021 | ||
Entity Filer Category | Non-accelerated Filer | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2021 | ||
Entity Ex Transition Period | false | ||
Entity Common Stock Shares Outstanding | 76,490,147 | ||
Entity Public Float | $ 8,090,000 | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Entity File Number | 033-33263 | ||
Entity Incorporation State Country Code | NV | ||
Entity Tax Identification Number | 46-3566284 | ||
Entity Address Address Line 1 | 3100 Airway Avenue Suite 138 | ||
Entity Address City Or Town | Costa Mesa | ||
Entity Address State Or Province | CA | ||
Entity Address Postal Zip Code | 92626 | ||
City Area Code | 800 | ||
Icfr Auditor Attestation Flag | false | ||
Auditor Name | L&L CPAS, PA | ||
Auditor Location | Plantation, FL | ||
Local Phone Number | 605-3580 | ||
Security 12b Title | Common Stock, par value $0.001 per share | ||
Trading Symbol | JKSM | ||
Entity Interactive Data Current | Yes | ||
Auditor Firm Id | 454 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Current Assets: | ||
Cash | $ 344,811 | $ 489,560 |
Accounts receivable, net | 591,169 | 292,835 |
Inventory, net | 196,712 | 189,423 |
Prepaid expenses | 8,600 | 148,459 |
Total Current Assets | 1,141,292 | 1,120,277 |
Property and equipment, net | 1,472 | 3,348 |
Total Assets | 1,142,764 | 1,123,625 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 641,690 | 681,439 |
Deferred revenue | 171,771 | 1,024,466 |
Convertible notes payable, current portion | 701,175 | 809,242 |
Notes payable, current portion | 87,774 | 109,104 |
Derivative Liability | 325,808 | 1,305,106 |
Accrued liabilities - other | 2,264,390 | 1,696,223 |
Subscription payable | 499,999 | 1,055,555 |
Total Current Liabilities | 4,692,607 | 6,681,135 |
Notes payable, net of current portion and discount | 705,038 | 147,942 |
Total Liabilities | 5,397,645 | 6,829,077 |
Mezzanine Equity | ||
Preferred stock | 259,422 | 0 |
Stockholders' Deficit: | ||
Preferred stock - 30,000,000 authorized, $0.001 par value, 0 shares issued and outstanding | 0 | 0 |
Common stock - 200,000,000 authorized, $0.001 par value, 74,490,147 and 66,366,419 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively | 74,490 | 66,366 |
Additional paid-in capital | 6,210,414 | 4,708,323 |
Shares payable, consisting of 2,222,223 and 4,421,662 shares of common shares as of December 31, 2021 and 2020, respectively | 331,600 | 645,192 |
Accumulated deficit | (11,130,807) | (11,125,333) |
Total Stockholders' Deficit | (4,514,303) | (5,705,452) |
Total Liabilities and Stockholders' Deficit | $ 1,142,764 | $ 1,123,625 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2021 | Dec. 31, 2020 |
Stockholders' Deficit | ||
Preferred stock, shares par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 30,000,000 | 30,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares par value | $ 0.001 | $ 0.001 |
Common stock, shares issued | 74,490,147 | 66,366,419 |
Common stock, shares outstanding | 74,490,147 | 66,366,419 |
Shares payable | 2,222,223 | 4,421,662 |
Series A Preferred Stock [Member] | ||
Stockholders' Deficit | ||
Preferred stock, shares par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,800,000 | 2,800,000 |
Preferred stock, shares issued | 2,800,000 | 2,800,000 |
Preferred stock, shares outstanding | 0 | 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Consolidated Statements of Operations | ||
Sales | $ 6,749,065 | $ 3,281,935 |
Cost of sales | 4,860,656 | 1,788,817 |
Gross profit | 1,888,409 | 1,493,118 |
Operating expenses | ||
Salaries | 1,273,064 | 1,093,268 |
Other selling, general and administrative expenses | 1,252,450 | 788,527 |
Total operating expenses | 2,525,514 | 1,881,795 |
Loss from operations | (637,105) | (388,677) |
Gain on extinguishment of debt | 0 | 399,000 |
Other (income) expense | ||
Other (income) expense | 0 | 6,154 |
Derivative gain (loss) | 1,400,011 | (1,205,196) |
Interest expense | (869,902) | (1,751,710) |
Loss on conversion of notes payable | (58,642) | $ (64,815) |
Loss on additional shares issued to unit subscribers | (53,305) | |
Loss on settlement of notes payable | 160,164 | |
Total other expense | 631,631 | $ (2,669,872) |
Net loss | (5,474) | (3,058,549) |
Preferred stock dividends | (7,422) | 0 |
Net loss available to common shareholders | $ (12,896) | $ (3,058,549) |
Net income (loss) per share | ||
Basic | $ 0 | $ (0.05) |
Diluted | $ 0 | $ (0.05) |
Weighted average shares outstanding | ||
Basic | 72,126,152 | 64,184,514 |
Diluted | 77,495,514 | 64,184,514 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders Deficit - USD ($) | Total | Series A Preferred Stock | Common Stock $0.001 Par Value [Member] | Shares Payable | Paid-in Capital [Member] | Accumulated Deficit [Member] |
Balance, shares at Dec. 31, 2019 | 62,871,972 | |||||
Balance, amount at Dec. 31, 2019 | $ (4,607,543) | $ 0 | $ 62,872 | $ 0 | $ 3,396,369 | $ (8,066,784) |
Convertible debt imputed interest | 604 | 0 | 0 | 0 | 604 | 0 |
Extinguishment of derivative liability due to conversion | 606,048 | 0 | 0 | $ 0 | 606,048 | 0 |
Common stock issued for debt conversion, shares | 965,046 | |||||
Common stock issued for debt conversion, amount | 509,259 | 0 | 2,019 | $ 0 | 507,240 | 0 |
Sale of common stock units | 645,192 | $ 0 | 0 | 645,192 | 0 | 0 |
Common stock issued for deferred finance cost, shares | (933,333) | |||||
Common stock issued for deferred finance cost, amount | 199,537 | $ 0 | $ 965 | 0 | 198,572 | 0 |
Shares issued under share-lending arrangement, shares | 66,366,419 | |||||
Shares issued under share-lending arrangement, amount | 0 | $ 0 | $ 1,443 | $ 0 | (1,443) | 0 |
Shares returned under share-lending arrangement, shares | 3,086,420 | 1,043,750 | ||||
Shares returned under share-lending arrangement, amount | 0 | $ 0 | (933) | $ 0 | 933 | 0 |
Net loss | (3,058,549) | 0 | 0 | 0 | 0 | (3,058,549) |
Balance, amount at Dec. 31, 2020 | (5,705,452) | $ 0 | 66,366 | $ 645,192 | 4,708,323 | (11,125,333) |
Balance, shares at Dec. 31, 2020 | 414,930 | 143,609 | ||||
Extinguishment of derivative liability due to conversion | 72,958 | $ 0 | $ 0 | $ 0 | 72,958 | 0 |
Common stock issued for debt conversion, shares | 426,136 | |||||
Common stock issued for debt conversion, amount | 614,198 | 0 | $ 3,087 | 0 | 611,111 | 0 |
Sale of common stock units | 187,800 | 0 | 3,869 | $ (313,592) | 497,523 | 0 |
Common stock issued for deferred finance cost, shares | (860,000) | |||||
Common stock issued for deferred finance cost, amount | 172,744 | 0 | 1,044 | $ 0 | 171,700 | 0 |
Shares returned under share-lending arrangement, amount | 0 | $ 0 | (860) | 0 | 860 | 0 |
Net loss | (5,474) | (5,474) | ||||
Sale of common stock units, shares | 2,800,000 | |||||
Common stock and warrants issued for settlement of notes payable, amount | 141,118 | $ 0 | $ 415 | 0 | 140,703 | 0 |
Common stock issued for services, shares | 2,800,000 | 74,490,147 | ||||
Common stock issued for services, amount | 15,227 | $ 0 | $ 143 | 0 | 15,084 | 0 |
Exercise of warrants, amount | 0 | 0 | 426 | 0 | (426) | 0 |
Issuance of Series A Preferred Stock, amount | 0 | 252,000 | 0 | 0 | 0 | 0 |
Dividends on Series A Preferred Stock | (7,422) | 7,422 | 0 | 0 | (7,422) | |
Balance, amount at Dec. 31, 2021 | $ (4,514,303) | $ 259,422 | $ 74,490 | $ 331,600 | $ 6,210,414 | $ (11,130,807) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Cash Flows from Operating Activities | ||
Net loss | $ (5,474) | $ (3,058,549) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation expense | 1,876 | 9,932 |
Gain on extinguishment of debt | $ 0 | $ (399,000) |
Loss on share conversion | 58,642 | 64,815 |
Inventory allowance | $ 18,000 | $ 0 |
Imputed interest | 0 | 604 |
Amortization of debt discount | 730,371 | 1,654,625 |
Derivative gain (loss) | (1,400,011) | 1,205,196 |
Stock based compensation | 15,227 | 0 |
Gain on settlement of notes payable | (160,163) | 0 |
Net change in: | ||
Accounts receivable | (298,334) | (187,325) |
Inventory | (25,289) | 418 |
Prepaid expenses | 139,859 | 103,080 |
Right-of-use assets | 0 | 9,299 |
Accounts payable and accrued expenses | 540,646 | 40,563 |
Right-of-use liabilities | 0 | (9,837) |
Other long-term liabilities | 0 | (220,000) |
Deferred revenue | (852,695) | (319,517) |
Net cash used in operating activities | (1,237,345) | (1,105,696) |
Cash Flows from Financing Activities | ||
Proceeds from convertible notes payable | 570,000 | 634,940 |
Payments on convertible notes payable | (905,503) | (783,365) |
Payment of debt issuance costs | 0 | (43,300) |
Proceeds from sales of shares | 1,024,024 | 591,900 |
Payments on notes payable | (92,925) | (104,942) |
Proceeds from sale of common stock units | 250,000 | 846,400 |
Proceeds from issuance of Series A Preferred Stock | 252,000 | 0 |
Net cash provided by financing activities | 1,092,596 | 1,141,633 |
Net Change in Cash | (144,749) | 35,937 |
Cash, Beginning of Period | 489,560 | 453,623 |
Cash, End of Period | 344,811 | 489,560 |
Cash Paid For: | ||
Income Taxes | 0 | 0 |
Interest | 118,732 | 59,933 |
Non-cash transactions: | ||
Common stock issued to settle convertible notes payable | 614,198 | 1,676,234 |
Extinguishment of derivative due to warrant exercise | 72,958 | 0 |
Derivative liability recognized at issuance of warrants | 493,670 | 201,208 |
Extinguishment of derivative to conversion and repayment | 0 | 390,383 |
Common stock issued for deferred finance costs | $ 172,744 | $ 199,537 |
Organization and Nature of Oper
Organization and Nature of Operations | 12 Months Ended |
Dec. 31, 2021 | |
Organization and Nature of Operations | |
Note 1 Organization and Nature of Operations | Note 1: Organization and Nature of Operations Jacksam Corporation dba Convectium is a technology company focused on developing and commercializing products of vaporizer cartridge filling & capping, pre-roll filling, and other automation systems. The Company’s product line primarily consisted of the 710 Shark cartridge filling machine, the 710 Captain cartridge capping machine, the “PreRoll-ER” pre-roll & cone filling machine, and cartridges. The Company’s customers are primarily businesses operating in jurisdictions that have some form of cannabis legalization. These businesses include medical and recreational dispensaries, large and small-scale processors and growers, multi-state operators, and distributors. The Company utilizes its direct sales force, website, strategic partners’ sales force, independent sales representatives, and a wide range of referral network to sell its products. The Company was incorporated in the State of Nevada on September 21, 1989 under the name of Fulton Ventures, Inc. Since incorporated, the Company has engaged in a variety of businesses, but has been inactive since late 2014 through the Merger that closed on September 14, 2018. Since the Merger, the Company has been operated under the control of current management and continued to operate the business of Jacksam Corporation, described herein, as our sole business. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2021 | |
Significant Accounting Policies | |
Note 2 Significant Accounting Policies | Note 2: Significant Accounting Policies Basis of Preparation The accompanying financial statements of the Company have been prepared in U.S. GAAP under the accrual basis of accounting. These financial statements are presented in U.S. dollars and are prepared on a historical cost basis, except for certain financial instruments which are carried at fair value. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Jacksam Corporation and its wholly owned subsidiary. All intercompany transactions and balances are eliminated in consolidation. Use of Estimates The preparation of financial statements is in conformity with U.S. GAAP and requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact both assets and liabilities, including but not limited to net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, estimate of fair value of share-based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount and estimates of the probability and potential magnitude of contingent liabilities. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future nonconforming events. Accordingly, actual results could differ significantly from estimates. Risks and Uncertainties The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company has experienced, and in the future, expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold, (iii) general economic conditions, and (iv) the related volatility of prices pertaining to the cost of sales. Cash and Cash Equivalents Cash and cash equivalents are carried at cost and consist of cash on hand and demand deposits placed with banks or other financial institutions, and all highly liquid investments with an original maturity of three months or less. Federal Deposit Insurance Corporation (“FDIC”) deposit insurance covers $250,000 per depositor, per FDIC-insured bank, per ownership category. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future bad debts, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. As of December 31, 2021 and 2020, the balance of accounts receivable on a gross basis was $665,169 and $366,835, respectively. As of December 31, 2021 and 2020, the Company had recorded an allowance for doubtful accounts of $74,000. As of December 31, 2021, two customers accounted for approximately 49% and 10% of outstanding accounts receivable. Inventory Inventories are stated at the lower of cost, determined on the average cost basis, or net realizable value. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand. The December 31, 2021 and 2020 inventory consisted entirely of finished goods. The Company will maintain an allowance based on specific inventory items that have shown no activity over a 60-month period. The Company tracks inventory as it is disposed, scrapped or sold at below cost to determine whether additional items on hand should be reduced in value through an allowance method. As of December 31, 2021 and 2020, the Company has determined that an inventory allowance of $18,800 and $0 is required. Property and Equipment Property and equipment are measured at cost, less accumulated depreciation, and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5 to 7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: · Level 1 · Level 2 · Level 3 The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and an approximate of their fair values because of the short maturity of these instruments. The Company’s derivative liabilities recognized at fair value on a recurring basis are a level 3 measurement. See Note 6. Binomial Calculation Model The Company uses a binomial calculator model to determine fair market value of derivative liabilities, warrants and options issued. Revenue Recognition The Company derives revenues from the sale of machines and non-machine products (customizable and C-Cell cartridges and accessories). The Company recognizes revenue in accordance with ASC 606. Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services. Revenue is recognized based on the following five step model: - Identification of the contract with a customer - Identification of the performance obligations in the contract - Determination of the transaction price - Allocation of the transaction price to the performance obligations in the contract - Recognition of revenue when, or as, the Company satisfies a performance obligation Performance Obligations Sales of machines and non-machine products are recognized when all the following criteria are satisfied: (i) a contract with an end user exists which has commercial substance; (ii) it is probable the Company will collect the amount charged to the end user; and (iii) the Company has completed its performance obligation whereby the end user has obtained control of the product. A contract with commercial substance exists once the Company receives and accepts a purchase order or once it enters into a contract with an end user. If collectability is not probable, the sale is deferred and not recognized until collection is probable or payment is received. Control of products typically transfers when title and risk of ownership of the product has transferred to the customer. The customer has a 10-day period to inspect the equipment and may return the product if it does not meet the agreed-upon specifications. For contracts with multiple performance obligations, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. The Company uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. Historically, the Company’s contracts have not had multiple performance obligations. The large majority of the Company’s performance obligations are recognized at a point in time related to the sale of machines and non-machine products. Sales, value add, and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. Payment terms between invoicing and when payment is due is less than one year. As of December 31, 2021, none of the Company’s contracts contained a significant financing component. The Company elected the practical expedient to not adjust the amount of revenue to be recognized under a contract with an end user for the effects of time value of money when the timing difference between receipt of payment and recognition of revenue is less than one year. The majority of the Company’s contracts offer an assurance-type warranty of the products at no additional cost for a period of 3 years. Assurance-type warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications. Such warranties do not represent a separate performance obligation. At the time a sale is recognized, the Company estimated future warranty costs, which were trivial. Transaction Price Allocated to the Remaining Performance Obligations At a given point in time, the Company may have collected payment for future sales of product to begin production. These transactions are deferred until the product transfers to the customer and the performance obligation is considered complete. As of December 31, 2021 and 2020, $171,771 and $1,024,466, respectively, in revenue is expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. The Company expects to recognize all of our unsatisfied (or partially unsatisfied) performance obligations as revenue in the next twelve months. Contract Costs Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included within cost of goods and services. Critical Accounting Estimates Estimates are used to determine the amount of variable consideration in contracts, the standalone selling price among separate performance obligations and the measure of progress for contracts where revenue is recognized over time. The Company reviews and updates these estimates regularly. Disaggregation of Revenue All machine sales and most non-machine sales are completed in North America. Year Ended December 31, 2021 Year Ended December 31, 2020 Machine sales $ 5,218,158 $ 1,969,693 Non-machine sales 1,530,907 1,312,242 Total sales $ 6,749,065 $ 3,281,935 Sales, General and Administrative Expenses Selling, general and administrative expenses include advertising and marketing costs, and costs related to the compensation of the Company’s administrative functions, insurance costs, professional fees and consulting expense. Advertising and marketing expenses were $106,872 and $56,518 for the years ended December 31, 2021 and 2020, respectively. Net Loss Per Common Share Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Potential common stock equivalents are determined using the treasury stock method. For diluted net loss per share purposes, the Company excludes stock options and other stock-based awards, including shares issued as a result of option exercises that are subject to repurchase by the Company, whose effect would be anti-dilutive from the calculation. The following table presents the effect of potential dilutive issuances for the years ended December 31, 2021 and 2020: Years Ended December 31, 2021 December 31, 2020 Net loss attributable to common stockholders $ (12,896 ) $ (3,085,549 ) Preferred stock dividends 7,422 - Derivative gain (1,400,011 ) - Interest expense associated with convertible debt 846,750 - Net income (loss) for dilutive calculation $ (558,765 ) $ (3,085,549 ) Weighted average shares outstanding 72,126,152 64,184,514 Dilutive effect of preferred stock 1,400,000 - Dilutive effect of convertible debt 3,969,136 - Dilutive effect of common stock warrants - - Weighted average shares outstanding for diluted net income (loss) per share 77,669,683 64,184,514 During the year ended December 31, 2021, the impact of 11,189,056 warrants to purchase common stock were excluded from the calculation above as their impact would be anti-dilutive. For the year ended December 31, 2021, 3,969,136 shares issuable under convertible debt were excluded from the calculation of dilutive earnings per share as the impact would be anti-dilutive. Additionally, 583,333 shares of common stock issued during the year ended December 31, 2020 under a share lending arrangement, 2,777,778 shares related to conversions of notes payable in fiscal year 2020 that have not yet been issued, and 2,222,223 and 4,421,662 shares to be issued as part of the share payable equity balance as of December 31, 2021 and 2020, respectively, are excluded from the calculation of weighted-average shares outstanding as they have not yet been issued. Income Tax Provision The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. 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 the Statements of Operations in the period that includes the enactment date. ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Accrued interest and penalties are included within the related tax liability. Going Concern The Company’s financial statements are prepared using U.S. GAAP to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have a source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon its ability to successfully execute the business plan and attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern. In the coming year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the SEC, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital. Historically, it has mostly relied upon convertible notes payable and cash flows from operations to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders. Recently Issued Accounting Pronouncements From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective and will not have a material effect on its consolidated financial position or results of operations upon adoption. In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2021 | |
Property and Equipment | |
Note 3 Property and Equipment | Note 3: Property and Equipment Property and equipment consist of the following: December 31, 2021 December 31, 2020 Furniture and fixtures $ 10,425 $ 10,425 Equipment 7,579 7,579 Trade show display 2,640 2,640 Total 20,644 20,644 Less: Accumulated depreciation (19,172 ) (17,296 ) Property and equipment, net $ 1,472 $ 3,348 Depreciation expense amounted to $1,876 and $9,428 for the years ended December 31, 2021 and 2020, respectively. |
Accounts Payable and Accrued Ex
Accounts Payable and Accrued Expenses | 12 Months Ended |
Dec. 31, 2021 | |
Accounts Payable and Accrued Expenses | |
Note 4 Accounts Payable and Accrued Expenses | Note 4: Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following: December 31, 2021 December 31, 2020 Accounts payable $ 382,925 $ 279,207 Credit cards payable - 23,445 Accrued interest 4,338 4,931 Sales tax payable 144,541 141,803 Accrued officer consulting cost 13,750 178,750 Other 42,221 53,303 Total Accounts payable and Accrued expenses $ 641,690 $ 681,439 |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2021 | |
Notes Payable | |
Note 5 Notes Payable | Note 5: Notes Payable A summary of Notes Payable are as follows: December 31, 2021 December 31, 2020 Note payable December 2019 35,245 107,146 SBA loan June 2020 148,093 149,900 Note payable September 2021 730,783 - Total notes payable 914,121 257,046 Less: Unamortized discount (121,309 ) Less: current portion (87,774 ) (109,104 ) Long-term portion of notes payable $ 705,038 147,942 On December 31, 2019, the Company entered into an inventory financing arrangement with a single lender, whereby $150,000 was paid by the lender directly to a vendor to secure inventory for the sales to customers in January 2020. The Company will repay $164,835 of principal and interest by February 29, 2020. The interest and fees of $14,835 were recorded as debt discount and were amortized through the maturity date. The Company also paid a deferred finance cost of $5,000 which was amortized through the maturity date. The Company entered into a second agreement on February 6, 2020 with the same lander for an additional $43,000 of funding. The Company will repay $47,253 at maturity on April 6, 2020. On April 22, 2020, these two notes payable were refinanced with the lender into a single agreement whereby the Company will make an initial repayment of $74,231 and 24 monthly payments of $7,467, for total payments of $253,439. This amendment was accounted for as a modification of the debt. The note payable matures on April 22, 2022. On June 2, 2020, the Company received $150,000 under the Small Business Administration’s Economic Injury Disaster Loan (“EIDL”). The loan bears interest at a fixed rate of 3.75%, and matures on May 26, 2050, payable monthly with payments of $731 beginning twelve months after issuance. The loan gives the Small Business Administration a security interest in all assets of the Company. On September 29, 2021, the Company entered into a Revenue Loan and Security Agreement with an investor for up to a total amount of $1,000,000. Upon drawing from the facility and continuing thereafter until maturity or earlier prepayment in full, the Company shall pay monthly to the lender an amount equal to the product of (i) all revenue of the Company for the immediately preceding month multiplied by (ii) an applicable revenue percentage. On September 29, 2021, the Company borrowed $750,000 under the agreement and received initial cash proceeds of $727,500. The Company also paid an additional $5,000 in fees to the investor to secure the loan for total deferred financing fees of $27,500. On November 12, 2021, the Company issued a total of 843,750 shares of common stock to a lender in connection with the note payable issued. These shares had a fair value of $100,744 and were recorded as deferred finance costs. As of December 31, 2021, the Company owed a principal amount of $730,783 under this loan, with a remaining unamortized discount of $121,310. The Company amortized $6,934 of debt discount and deferred finance costs to interest expense related to notes payable. |
Convertible Notes Payable and D
Convertible Notes Payable and Derivative Liabilities | 12 Months Ended |
Dec. 31, 2021 | |
Convertible Notes Payable and Derivative Liabilities | |
Note 6 Convertible Notes Payable and Derivative Liabilities | Note 6: Convertible Notes Payable and Derivative Liabilities Convertible Notes Payable The following table summarizes outstanding convertible notes as of December 31, 2021 and 2020: December 31, 2021 December 31, 2020 June 2019 Notes, due December 21, 2022 $ 444,444 $ 448,888 June 2020 Note 1, maturing June 4, 2021 - 119,078 June 2020 Note 2, maturing June 24, 2021 - 87,779 June 2020 Note 3, maturing June 24, 2021 - 87,779 November 2020 Note, maturing November 23, 2021 - 305,000 February 2021 Note, maturing February 15, 2022 300,000 - Total 744,444 1,048,524 Less: Debt discount and deferred finance costs on short-term convertible notes (43,269 ) (239,282 ) Less: Current convertible notes payable, net of discount (701,175 ) (809,242 ) Total long-term convertible notes payable, net $ - $ - In June and July 2019, the Company issued convertible notes to 10 investors with an original principal amount of $2,388,889, receiving $1,583,333 in net cash proceeds (the “June 2019 Notes”). The June 2019 Notes matured on March 25, 2020 and are convertible into the Company’s common stock at a per share price of $0.35 at any time subsequent to the issuance date. The June 2019 Notes contain a down round feature, whereby any sale of common stock or common stock equivalent at a price per share lower than the conversion price of the June 2019 Notes will result in the conversion price being lowered to the new price. The warrants contain the same down round feature as the notes. As a result of a dilutive issuance during the year ended December 31, 2020, the exercise price of the remaining notes payable and the warrants is currently $0.18 per share. During the year ended December 31, 2020, $1,500,000 of the principal on the June 2019 Notes was converted into the right to receive 7,883,599 shares of common stock, of which 5,105,821 were issued by December 31, 2021 and 2,777,778 were part of subscriptions payable liability balance of $499,999. Following three previous extensions and on December 31, 2021, the holder of $444,444 of the notes agreed to extend the repayment period to December 31, 2022. There were no other changes to terms of the convertible notes payable, and the amendments were accounted for as a debt modification. On February 15, 2021, the Company entered into a convertible note agreement with an institutional investor for a principal amount of $675,000 (the “February 2021 Note”) bearing interest at 10% with an original issue discount of $67,500 and a maturity date of February 15, 2022. The Company paid $37,500 of deferred finance costs and issued 200,000 shares of common stock to the lender of the February 2021 Note as deferred finance costs, valued at $72,000 based on the closing price of the stock at the date of borrowing. This lender also received 767,045 common stock warrants with an exercise price of $0.44 and a term of 3 years valued at $179,699. If the note is in default, the holder has the right to convert the outstanding principal and accrued interest balance into shares of common stock at the closing bid price of the Company’s common stock immediately prior to conversion. As a result of the variable conversion price on the Company’s outstanding notes payable and reset provisions, the conversion option and the warrants were accounted for as a derivative liability. The original balance of this note was $675,000. The Company used proceeds from this note payable to pay in full the June 2020 Notes and the November 2020 Note. To date, the Company has repaid $375,000 of the note balance in cash and the balance of this note was $300,000 as of December 31, 2021. On February 22, 2021, the Company entered into a settlement agreement with the holder of the June 2020 Note 2. The agreement allowed for the holder to convert all principal into 414,930 shares of common stock in full settlement of the note. The holder also received 207,465 warrants to purchase shares of common stock at an exercise price of $0.18 per share. The warrants had a fair value of $55,273 and were recorded as a derivative liability due to the variable number of shares to be issued under the Company’s dilutive instruments. The Company recognized a loss of $137,506 under this settlement agreement. The Company amortized $723,436 and $1,594,924 of debt discount and deferred finance costs to interest expense related to convertible notes payable during the years ended December 31, 2021 and 2020, respectively. Accrued interest on notes payable and convertible notes payable was $38,024 and $4,931 as of December 31, 2021 and 2020, respectively. Derivative Liabilities The fair values of the conversion option of outstanding convertible notes payable and common stock warrants with reset provisions were estimated using a binomial model with the following assumptions: As of December 31, 2021 Conversion Option Warrants Volatility 76.57 % 76.57-117.41 % Dividend Yield 0 % 0 % Risk-free rate 0.39 % 0.39-0.73% Expected term 0.50 year 1-3 years Stock price $ 0.08 $ 0.08 Exercise price $ 0.18-0.20 $ 0.18-0.44 Derivative liability fair value $ 19,728 $ 306,079 All fair value measurements related to the derivative liabilities are considered significant unobservable inputs (Level 3) under the fair value hierarchy of ASC 820. The table below presents the change in the fair value of the derivative liability during the years ended December 31, 2021 and 2020: Fair value as of December 31, 2019 $ 504,750 Fair value on the date of issuance related to warrants issued 201,208 Extinguishment due to repayment of debt (356,007 ) Extinguishment due to conversion of debt (606,048 ) Loss on change in fair value of derivatives 1,561,203 Fair value as of December 31, 2020 1,305,106 Fair value on the date of issuance of new derivatives 493,671 Extinguishment due to repayment of debt (19,748 ) Extinguishment due to exercise of warrant (72,958 ) Gain on change in fair value of derivatives (1,380,263 ) Fair value as of December 31, 2021 $ 325,808 The total impact of derivative liabilities recognized in the Company’s consolidated statements of operations includes extinguishments due to repayments and the change in fair value of derivatives, with the Company recognizing a total gain of $1,400,011 and a loss of $1,205,196 during the years ended December 31, 2021 and 2020, respectively. |
Equity
Equity | 12 Months Ended |
Dec. 31, 2021 | |
Equity | |
Note 7 Equity | Note 7: Equity Common Stock For the year ended December 31, 2021: On December 31, 2021, the Board of Directors of the Company and shareholders holding a majority of the voting power of the Company both approved an amendment to the Company’s Article of Incorporation to increase the total number of authorized shares that the Company shall have authority to issue from 100,000,000 shares to 230,000,000 shares, consisting of two classes to be designated respectively, “Common Stock” and “Preferred Stock”, with all such shares having a par value of $0.001 per share, of which 200,000,000 shall be designated as Common stock and 30,000,000 designated as Preferred stock. During the year ended December 31, 2021, the Company received $250,000 of cash proceeds related to sale of 1,388,889 common stock units at $0.18 per unit. Each $0.18 unit consists of a share of common stock and a warrant to purchase half a share of common stock at an exercise price of $0.27, for a period of three years from issuance. These shares have not yet been issued. During the year ended December 31, 2021, the Company issued 3,868,883 shares related to common stock unit subscriptions from the year ended December 31, 2020, with 2,222,223 shares remaining to be issued. The Company also issued 3,086,420 shares related to conversions of notes payable during the year ended December 31, 2020 associated with the subscription payable liability balance and recognized a loss of $58,642. As of December 31, 2021, there are 2,777,778 shares remaining to be issued related to 2020 debt conversions, with 2,160,494 of those shares remaining to be issued to Mark Adams, CEO and David Hall, EVP of Sales. During the year ended December 31, 2021, the Company issued a total of 1,043,750 shares of common stock to a lender in connection with the debt issued during the period. These shares had a fair value of $172,744 and were recorded as deferred finance costs. During the year ended December 31, 2021, 860,000 shares under the share lending arrangements with debt holders were returned to the Company and cancelled in connection with retirement of the convertible notes payable during the year ended December 31, 2021. During the year ended December 31, 2021, the Company issued 143,609 shares of common stock with a fair value of $15,227 for professional services. During the year ended December 31, 2021, the Company entered into a settlement agreement with the holder of the June 2020 Note 2. The agreement allowed for the holder to convert all principal into 414,930 shares of common stock in full settlement of the note. During the year ended December 31, 2021, the company issued 426,136 shares of common stock for the cashless exercise of 767,045 warrants previously issued with debt financings. For the year ended December 31, 2020: During the year ended December 31, 2020, the Company issued 2,019,401 shares of common stock related to the conversion of $444,444 of Convertible Notes Payable. Additionally, principal of $1,333,333 was converted into 6,666,661 shares of common stock that have not yet been issued. During the year ended December 31, 2020, the Company received $846,400 of cash proceeds related to sale of 2,525,000 common stock units at $0.20 per unit and 1,896,662 common stock units at $0.18 per unit. Each $0.20 unit and $0.18 unit consists of a share of common stock and a warrant to purchase half a share of common stock at an exercise price of $0.30 and $0.27, respectively, for a period of three years from issuance. The Company agreed to issue an additional 280,554 shares to the subscribers of $0.20 units in December 2020, and recognized a loss of $53,305. The common shares related to these unit sales have not yet been issued as of December 31, 2020. As a result of the down round provision in the convertible debt described above, the fair value of the warrants was estimated using a binomial model and were accounted for as a derivative liability, due to the potentially unlimited number of shares that can be issued upon conversion of the debt instruments. Total shares to be issued related to convertible debt converted and stock units was 10,566,414 as of December 31, 2020. During the year ended December 31, 2020, the Company issued a total of 965,046 shares of common stock to an investment banker and the various lenders in connection with the convertible notes payable issued during the period. These shares had a fair value of $199,537 and were recorded as deferred finance costs. Additionally, 1,443,333 shares of common stock with a fair value of $288,667 were issued to the convertible note lenders under a share lending arrangement, which the company recorded as contra-equity. The shares may be returned to the Company if the debt is satisfied in full by the maturity date. If the debt is not repaid by the maturity date or an event of default occurs, the shares are concerned fully earned, and the fair value of the shares will be amortized in full to expense. In connection with the repayment of the December 2019 convertible note in June 2020, the lender returned 933,333 shares previously issued during the year ended December 31, 2019 under the share lending arrangement, which were cancelled. Series A Redeemable Preferred Stock On May 26, 2021, the Company, entered into a subscription agreement (the “Preferred Stock Agreement”) with Mark Adams, Chief Executive Officer, President, and a member of Board of Directors of the Company. Mark Adams paid $126,000 to purchase 1,400,000 shares of the Series A Preferred Stock, at a price per share of $0.09. Scott Wessler, Chairman of Board of Directors of the Company, paid $126,000 to purchase 1,400,000 shares of the Series A Preferred Stock, at a price per share of $0.09. The Company created the 2,800,000 shares of Series A Preferred Stock out of the 30,000,000 shares of preferred stock authorized by the Company’s articles of incorporation by filing a certificate of designation as authorized by the Company’s board of directors (the “Certificate of Designation”). The Series A Preferred Stock bears a cumulative dividend of 5.0% per annum on the original purchase price and is redeemable by the Company or upon a class vote by the holders of the Series A Preferred Stock at the original purchase price, plus any unpaid dividends then owing, payable in 4 equal quarterly payments. The Series A Preferred Stock converts into the Company’s common stock at a ratio of 2:1, subject to revision on the basis of standard weighted average anti-dilution protective provisions, at the option of the holders of the Series A Preferred Stock or automatically upon the occurrence of a merger, sale of the Company’s assets, or upon another Deemed Liquidation Event as defined in the Certificate of Designation. In the absence of an anti-dilution adjustment, the 2,800,000 shares of Series A Preferred Stock will convert into 1,400,000 shares of the Company’s common stock. The Series A Preferred Stock votes with the Company’s common stock, as a single class, at a rate of 20 votes for each share of Series A Preferred Stock. The Series A Preferred Stock carries a liquidation preference and is participating. The Series A Preferred Stock carries standard protective provisions that preclude the Company from amending its articles of incorporation, bylaws or the terms of the Certificate of Designation adversely to the holders of the Series A Preferred Stock without their prior approval. Due to the redemption feature, the Company accounts for the Series A Preferred Stock as temporary equity in accordance with ASC 480. The Series A Preferred Stock is accounted for at redemption value. The Company accrued $7,422 in dividends for the year ended December 31, 2021. The redemption value of the Series A Preferred Stock as of December 31, 2021 was $259,422, reflected as temporary equity on the Company’s consolidated balance sheet. Stock Warrants A summary of stock warrant information is as follows: Aggregate Number Aggregate Exercise Price Weighted Average Exercise Price Outstanding at December 31, 2019 5,785,714 $ 1,292,100 $ 0.01 Warrants issued due to reset provisions 3,480,953 562,343 0.35 Warrants issued with common stock units 2,211,389 631,200 0.001 Exercised - - - Forfeited and cancelled (2,100,000 ) (2,100 ) 0.001 Outstanding at December 31, 2020 9,378,056 1,921,200 0.20 Granted 2,578,045 562,343 0.41 Exercised (767,045 ) 337,500 0.44 Forfeited and cancelled - - - Outstanding at December 31, 2021 11,189,056 $ 2,646,044 $ 0.24 The weighted average remaining contractual life is approximately 2.14 years for stock warrants outstanding with no intrinsic value of as of December 31, 2021. All of the above warrants were fully vested. |
Related Party
Related Party | 12 Months Ended |
Dec. 31, 2021 | |
Related Party | |
Note 8 Related Party | Note 8: Related Party Mark Adams, CEO, and David Hall, EVP of Sales invested in the June 2019 Notes. Mark Adams and David Hall contributed $250,000 and $100,000, respectively, and converted their debt during the year ended December 31, 2020 into shares of common stock of 1,388,885 and 555,555, respectively, that have not yet to be issued. Mark Adams and David Hall will also receive an additional 154,321 and 61,728 shares of common stock once the shares are issued. Those shares were in subscriptions payable and presented on the balance sheet. Mark Adams and Scott Wessler each contributed $126,000 to purchase the Series A Preferred Stock as discussed in Note 7. |
Commitments
Commitments | 12 Months Ended |
Dec. 31, 2021 | |
Commitments | |
Note 9 Commitments and Contingencies | Note 9: Commitments and Contingencies Employment Agreement In December 2017 (the “Effective Date”), the Company entered into an employment agreement with Daniel Davis and Mark Adams (the “Executive”). As of the Effective Date, and for one year of the date therefrom, the Executive’s annual salary shall be equal to $180,000 and $120,000, respectively, per annum (the “Annual Salary”). The Annual Salary shall be paid to the Executive in equal installments in accordance with the Company’s usual payroll practices. On May 31, 2019, the Company entered into a consulting agreement with Daniel Davis related to his departure from employment with the Company. The agreement requires Daniel. Davis to provide limited consulting services to the Company for a period of up to three years beginning May 1, 2019 in exchange for $165,000 per year. During the year ended December 31, 2020, the Company and Daniel Davis agreed to accelerate the payment of a portion of the consulting agreement, with the maturity period ending three months earlier than the original agreement. The Company made payments of $192,500 through December 31, 2020, and payments of $165,000 during the year ended December 31, 2021, leaving a balance of $13,750 in accounts payable as of December 31, 2021. In addition, the Company entered into a lock up agreement with Daniel Davis that restricts the number of shares Daniel Davis can otherwise publicly sell for a period of up to three years to one third of the volume limits set forth under SEC Rule 144. Daniel Davis also agreed to a standstill agreement that provides that for a period of up to three years Daniel Davis will not seek to influence the governance of the Company, including by participation in any solicitation of other shareholders, promotion of any extraordinary transaction, nomination of any candidate to the Board or by seeking the removal of any existing directors. Leases The Company entered into a lease agreement on March 1, 2021, for a term beginning April 1, 2021 through February 28, 2022. The lease requires payments of $5,000 per month through the lease term, with no option to renew. Based on the short-term nature of the lease, no right-of-use asset or liability was recognized on the Company’s consolidated balance sheet. The Company also maintains short-term rental agreements for certain storage facilities. Total rent expense for these rental agreements were $111,043 and $61,133 for the years ended December 31, 2021 and 2020, respectively. The Company has a single operating lease for an office and warehouse lease in Costa Mesa, California. The lease started on February 2, 2022 with an initial term of 3 years and 14 days. Base monthly rent was approximately $3,855 per month plus net operating expenses. Lawsuit The Company has a pending lawsuit with one of its previous suppliers regarding defected cartridges. The Company is still evaluating the case and determining the impact of the case on the Company and as of the date of this report the amount or range of possible losses is not reasonably estimable. |
Accrued Liabilities Other
Accrued Liabilities Other | 12 Months Ended |
Dec. 31, 2021 | |
Accrued Liabilities Other | |
Note 10 Accrued Liabilities - Other | Note 10: Accrued Liabilities – Other Prior to the Merger, China Grand Resorts, Inc. recorded various liabilities that were incurred by former related parties. The current management team is not aware of any written agreements in place governing the terms of the loans nor have they been in contact with the debt holders however recognizes that China Grand Resorts, Inc. previously reported these amounts as liabilities of the Company. In accordance with ASC 405-20-40, the liabilities may only be removed from the Company’s financial statements if they are paid, formally settled or judicially released. Management believes the relevant statute of limitations has passed and that no enforceable legal claim exists in relation to these liabilities of $1,696,374 but does not believe that is sufficient to remove the liability from the financial statements. Management does not intend to remove these liabilities of $1,696,374 from the Company’s financial statements until such time that the liability is formally settled or judicially released in accordance with ASC 405-20-40. Due to the lack of written agreements and other factors noted above, management concluded to no longer accrue interest on these loans. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2021 | |
Income Taxes | |
Note 11 Income Taxes | Note 11: Income Taxes The components of the provision for income taxes for the years ended December 31, 2021 and 2020, respectively, consisted of the following: For the year ended For the year ended December 31, 2021 December 31, 2020 Current: Federal - - State $ 800 $ 800 800 800 Deferred: Federal - - State - - Total provision for (benefit from) income taxes $ 800 $ 800 Deferred tax assets (liabilities) consist of the following: For the year ended For the year ended December 31, 2021 December 31, 2020 Deferred Tax Assets: Net operating losses $ 1,694,212 $ 1,536,424 Other 1,900 1,900 Total Deferred Tax Asset 1,696,112 1,538,324 Valuation Allowance (1,695,904 ) (1,538,116 ) Deferred Tax Liabilities Fixed Assets (208 ) (208 ) Net Deferred Tax Assets/(Liabilities) $ 0 $ 0 Reconciliation of the statutory federal income tax to the Company’s effective tax: December 31, 2021 December 31, 2020 Tax at Federal Statutory Rate 21.00 % 21.00 % State Taxes -58.50 % 0.04 % Nondeductible Items -240.7 % -19.65 % Valuation Allowance 278.2 % -0.27 % Other 0.00 % 1.03 % Provision for Taxes 0.00 % 0.00 % Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Based on the available objective evidence, management believes it is not more likely than not that the net deferred tax assets will be fully realizable for the period ending December 31, 2021. On the basis of this evaluation, as of December 31, 2021, a full allowance has been recorded on its net deferred tax assets. As of December 31, 2021, the Company had $631,000 of federal and $6,086,000 of state net operating loss carryforwards available to reduce future taxable income. As of December 31, 2020, the Company has approximately $5,413,000 of federal net operating loss carryforwards available to reduce future taxable income which carryforward indefinitely. Federal and state laws can impose substantial restrictions on the utilization of net operating loss carry-forwards in the event of an “ownership change”, as defined in Section 382 of the Internal Revenue Code. The Company is in the process of determining if significant limitations would be placed on the utilization of its net operating loss carry-forwards due to prior ownership changes. As of December 31, 2021, the Company does not have any unrecognized tax benefits. As of December 31, 2021, the Company has not recognized any interest or penalties for unrecognized tax benefits. The Company files income tax returns in the U.S. and California. Tax Years 2016 to 2021 remain subject to examination for federal income tax purposes, and tax years 2014 through 2020 remain open to examination for California income tax purposes. All net operating losses generated to date are subject to adjustment for U.S. federal and California income tax purposes. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2021 | |
Subsequent Events | |
Note 11 Subsequent Events | Note 12: Subsequent Events In January and February 2022, the Company sold a total of 2,000,000 shares of Series B Preferred Stock (“Series B”) to two investors for net cash proceeds of $885,000 after closing costs of $115,000 and issued warrants to purchase 4,000,000 shares of common stock at $0.20 per share for a period of five years. Each of the Investors shall be issued 1,000,000 shares of the Series B and the interest rate is 8.0% per annum. The Company granted to the Investors the piggy-back registration rights. The Series B holders do not have voting rights on matters other than those related to amending the certificate of incorporation of the Series B, altering voting or other powers of the Series B, or redemption or acquisition of outstanding Series B. For a period of one year following closing of the Series B funding, the Company may not authorize or create any class of stock that is senior to the Series B with respect to dividends, redemption or distribution of assets upon Liquidation. In the event of liquidation of the Company, the Series B holders shall be paid 125% of the Stated value plus 125% of any unpaid dividends. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2021 | |
Significant Accounting Policies | |
Basis of Preparation | The accompanying financial statements of the Company have been prepared in U.S. GAAP under the accrual basis of accounting. These financial statements are presented in U.S. dollars and are prepared on a historical cost basis, except for certain financial instruments which are carried at fair value. |
Principles of Consolidation | The accompanying consolidated financial statements include the accounts of Jacksam Corporation and its wholly owned subsidiary. All intercompany transactions and balances are eliminated in consolidation. |
Use of Estimates | The preparation of financial statements is in conformity with U.S. GAAP and requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact both assets and liabilities, including but not limited to net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, estimate of fair value of share-based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount and estimates of the probability and potential magnitude of contingent liabilities. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future nonconforming events. Accordingly, actual results could differ significantly from estimates. |
Risks and Uncertainties | The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company has experienced, and in the future, expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold, (iii) general economic conditions, and (iv) the related volatility of prices pertaining to the cost of sales. |
Cash and Cash Equivalents | Cash and cash equivalents are carried at cost and consist of cash on hand and demand deposits placed with banks or other financial institutions, and all highly liquid investments with an original maturity of three months or less. Federal Deposit Insurance Corporation (“FDIC”) deposit insurance covers $250,000 per depositor, per FDIC-insured bank, per ownership category. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future bad debts, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. As of December 31, 2021 and 2020, the balance of accounts receivable on a gross basis was $665,169 and $366,835, respectively. As of December 31, 2021 and 2020, the Company had recorded an allowance for doubtful accounts of $74,000. As of December 31, 2021, two customers accounted for approximately 49% and 10% of outstanding accounts receivable. |
Inventory | Inventories are stated at the lower of cost, determined on the average cost basis, or net realizable value. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand. The December 31, 2021 and 2020 inventory consisted entirely of finished goods. The Company will maintain an allowance based on specific inventory items that have shown no activity over a 60-month period. The Company tracks inventory as it is disposed, scrapped or sold at below cost to determine whether additional items on hand should be reduced in value through an allowance method. As of December 31, 2021 and 2020, the Company has determined that an inventory allowance of $18,800 and $0 is required. |
Property and Equipment | Property and equipment are measured at cost, less accumulated depreciation, and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5 to 7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. |
Fair Value of Financial Instruments | The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: · Level 1 · Level 2 · Level 3 The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and an approximate of their fair values because of the short maturity of these instruments. The Company’s derivative liabilities recognized at fair value on a recurring basis are a level 3 measurement. See Note 6. |
Binomial Calculation Model | The Company uses a binomial calculator model to determine fair market value of derivative liabilities, warrants and options issued. |
Revenue Recognition | The Company derives revenues from the sale of machines and non-machine products (customizable and C-Cell cartridges and accessories). The Company recognizes revenue in accordance with ASC 606. Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services. Revenue is recognized based on the following five step model: - Identification of the contract with a customer - Identification of the performance obligations in the contract - Determination of the transaction price - Allocation of the transaction price to the performance obligations in the contract - Recognition of revenue when, or as, the Company satisfies a performance obligation Performance Obligations Sales of machines and non-machine products are recognized when all the following criteria are satisfied: (i) a contract with an end user exists which has commercial substance; (ii) it is probable the Company will collect the amount charged to the end user; and (iii) the Company has completed its performance obligation whereby the end user has obtained control of the product. A contract with commercial substance exists once the Company receives and accepts a purchase order or once it enters into a contract with an end user. If collectability is not probable, the sale is deferred and not recognized until collection is probable or payment is received. Control of products typically transfers when title and risk of ownership of the product has transferred to the customer. The customer has a 10-day period to inspect the equipment and may return the product if it does not meet the agreed-upon specifications. For contracts with multiple performance obligations, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. The Company uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. Historically, the Company’s contracts have not had multiple performance obligations. The large majority of the Company’s performance obligations are recognized at a point in time related to the sale of machines and non-machine products. Sales, value add, and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. Payment terms between invoicing and when payment is due is less than one year. As of December 31, 2021, none of the Company’s contracts contained a significant financing component. The Company elected the practical expedient to not adjust the amount of revenue to be recognized under a contract with an end user for the effects of time value of money when the timing difference between receipt of payment and recognition of revenue is less than one year. The majority of the Company’s contracts offer an assurance-type warranty of the products at no additional cost for a period of 3 years. Assurance-type warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications. Such warranties do not represent a separate performance obligation. At the time a sale is recognized, the Company estimated future warranty costs, which were trivial. Transaction Price Allocated to the Remaining Performance Obligations At a given point in time, the Company may have collected payment for future sales of product to begin production. These transactions are deferred until the product transfers to the customer and the performance obligation is considered complete. As of December 31, 2021 and 2020, $171,771 and $1,024,466, respectively, in revenue is expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. The Company expects to recognize all of our unsatisfied (or partially unsatisfied) performance obligations as revenue in the next twelve months. Contract Costs Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included within cost of goods and services. Critical Accounting Estimates Estimates are used to determine the amount of variable consideration in contracts, the standalone selling price among separate performance obligations and the measure of progress for contracts where revenue is recognized over time. The Company reviews and updates these estimates regularly. |
Disaggregation of Revenue | All machine sales and most non-machine sales are completed in North America. Year Ended December 31, 2021 Year Ended December 31, 2020 Machine sales $ 5,218,158 $ 1,969,693 Non-machine sales 1,530,907 1,312,242 Total sales $ 6,749,065 $ 3,281,935 |
Sales, General and Administrative Expenses | Selling, general and administrative expenses include advertising and marketing costs, and costs related to the compensation of the Company’s administrative functions, insurance costs, professional fees and consulting expense. Advertising and marketing expenses were $106,872 and $56,518 for the years ended December 31, 2021 and 2020, respectively. |
Net Loss Per Common Share | Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Potential common stock equivalents are determined using the treasury stock method. For diluted net loss per share purposes, the Company excludes stock options and other stock-based awards, including shares issued as a result of option exercises that are subject to repurchase by the Company, whose effect would be anti-dilutive from the calculation. The following table presents the effect of potential dilutive issuances for the years ended December 31, 2021 and 2020: Years Ended December 31, 2021 December 31, 2020 Net loss attributable to common stockholders $ (12,896 ) $ (3,085,549 ) Preferred stock dividends 7,422 - Derivative gain (1,400,011 ) - Interest expense associated with convertible debt 846,750 - Net income (loss) for dilutive calculation $ (558,765 ) $ (3,085,549 ) Weighted average shares outstanding 72,126,152 64,184,514 Dilutive effect of preferred stock 1,400,000 - Dilutive effect of convertible debt 3,969,136 - Dilutive effect of common stock warrants - - Weighted average shares outstanding for diluted net income (loss) per share 77,669,683 64,184,514 During the year ended December 31, 2021, the impact of 11,189,056 warrants to purchase common stock were excluded from the calculation above as their impact would be anti-dilutive. For the year ended December 31, 2021, 3,969,136 shares issuable under convertible debt were excluded from the calculation of dilutive earnings per share as the impact would be anti-dilutive. Additionally, 583,333 shares of common stock issued during the year ended December 31, 2020 under a share lending arrangement, 2,777,778 shares related to conversions of notes payable in fiscal year 2020 that have not yet been issued, and 2,222,223 and 4,421,662 shares to be issued as part of the share payable equity balance as of December 31, 2021 and 2020, respectively, are excluded from the calculation of weighted-average shares outstanding as they have not yet been issued. |
Going Concern | The Company’s financial statements are prepared using U.S. GAAP to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have a source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon its ability to successfully execute the business plan and attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern. In the coming year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the SEC, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital. Historically, it has mostly relied upon convertible notes payable and cash flows from operations to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders. |
Recently Issued Accounting Pronouncements | From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective and will not have a material effect on its consolidated financial position or results of operations upon adoption. In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) |
Income Tax Provision | The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. 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 the Statements of Operations in the period that includes the enactment date. ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Accrued interest and penalties are included within the related tax liability. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Significant Accounting Policies | |
Schedule of disaggregation of revenue | Year Ended December 31, 2021 Year Ended December 31, 2020 Machine sales $ 5,218,158 $ 1,969,693 Non-machine sales 1,530,907 1,312,242 Total sales $ 6,749,065 $ 3,281,935 |
Summary of effect of potential dilutive issuances | Years Ended December 31, 2021 December 31, 2020 Net loss attributable to common stockholders $ (12,896 ) $ (3,085,549 ) Preferred stock dividends 7,422 - Derivative gain (1,400,011 ) - Interest expense associated with convertible debt 846,750 - Net income (loss) for dilutive calculation $ (558,765 ) $ (3,085,549 ) Weighted average shares outstanding 72,126,152 64,184,514 Dilutive effect of preferred stock 1,400,000 - Dilutive effect of convertible debt 3,969,136 - Dilutive effect of common stock warrants - - Weighted average shares outstanding for diluted net income (loss) per share 77,669,683 64,184,514 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Property and Equipment | |
Schedule of property and equipment | December 31, 2021 December 31, 2020 Furniture and fixtures $ 10,425 $ 10,425 Equipment 7,579 7,579 Trade show display 2,640 2,640 Total 20,644 20,644 Less: Accumulated depreciation (19,172 ) (17,296 ) Property and equipment, net $ 1,472 $ 3,348 |
Accounts payable and accrued _2
Accounts payable and accrued expenses (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Accounts payable and accrued expenses (Tables) | |
Schedule of accounts payable and accrued expenses | December 31, 2021 December 31, 2020 Accounts payable $ 382,925 $ 279,207 Credit cards payable - 23,445 Accrued interest 4,338 4,931 Sales tax payable 144,541 141,803 Accrued officer consulting cost 13,750 178,750 Other 42,221 53,303 Total Accounts payable and Accrued expenses $ 641,690 $ 681,439 |
Notes Payable (Tables)
Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Notes Payable (Tables) | |
Summary of notes payable | December 31, 2021 December 31, 2020 Note payable December 2019 35,245 107,146 SBA loan June 2020 148,093 149,900 Note payable September 2021 730,783 - Total notes payable 914,121 257,046 Less: Unamortized discount (121,309 ) Less: current portion (87,774 ) (109,104 ) Long-term portion of notes payable $ 705,038 147,942 |
Convertible Notes Payable and_2
Convertible Notes Payable and Derivative Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Convertible Notes Payable and Derivative Liabilities | |
Schedule of outstanding convertible notes | December 31, 2021 December 31, 2020 June 2019 Notes, due December 21, 2022 $ 444,444 $ 448,888 June 2020 Note 1, maturing June 4, 2021 - 119,078 June 2020 Note 2, maturing June 24, 2021 - 87,779 June 2020 Note 3, maturing June 24, 2021 - 87,779 November 2020 Note, maturing November 23, 2021 - 305,000 February 2021 Note, maturing February 15, 2022 300,000 - Total 744,444 1,048,524 Less: Debt discount and deferred finance costs on short-term convertible notes (43,269 ) (239,282 ) Less: Current convertible notes payable, net of discount (701,175 ) (809,242 ) Total long-term convertible notes payable, net $ - $ - |
Schedule of fair values of conversion option and warrants | As of December 31, 2021 Conversion Option Warrants Volatility 76.57 % 76.57-117.41 % Dividend Yield 0 % 0 % Risk-free rate 0.39 % 0.39-0.73% Expected term 0.50 year 1-3 years Stock price $ 0.08 $ 0.08 Exercise price $ 0.18-0.20 $ 0.18-0.44 Derivative liability fair value $ 19,728 $ 306,079 |
Schedule of fair value of derivative liability | Fair value as of December 31, 2019 $ 504,750 Fair value on the date of issuance related to warrants issued 201,208 Extinguishment due to repayment of debt (356,007 ) Extinguishment due to conversion of debt (606,048 ) Loss on change in fair value of derivatives 1,561,203 Fair value as of December 31, 2020 1,305,106 Fair value on the date of issuance of new derivatives 493,671 Extinguishment due to repayment of debt (19,748 ) Extinguishment due to exercise of warrant (72,958 ) Gain on change in fair value of derivatives (1,380,263 ) Fair value as of December 31, 2021 $ 325,808 |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Equity | |
Summary of stock warrant | Aggregate Number Aggregate Exercise Price Weighted Average Exercise Price Outstanding at December 31, 2019 5,785,714 $ 1,292,100 $ 0.01 Warrants issued due to reset provisions 3,480,953 562,343 0.35 Warrants issued with common stock units 2,211,389 631,200 0.001 Exercised - - - Forfeited and cancelled (2,100,000 ) (2,100 ) 0.001 Outstanding at December 31, 2020 9,378,056 1,921,200 0.20 Granted 2,578,045 562,343 0.41 Exercised (767,045 ) 337,500 0.44 Forfeited and cancelled - - - Outstanding at December 31, 2021 11,189,056 $ 2,646,044 $ 0.24 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Income Taxes | |
Schedule of components of the provision for income taxes | For the year ended For the year ended December 31, 2021 December 31, 2020 Current: Federal - - State $ 800 $ 800 800 800 Deferred: Federal - - State - - Total provision for (benefit from) income taxes $ 800 $ 800 |
Schedule of deferred tax assets (liabilities) | For the year ended For the year ended December 31, 2021 December 31, 2020 Deferred Tax Assets: Net operating losses $ 1,694,212 $ 1,536,424 Other 1,900 1,900 Total Deferred Tax Asset 1,696,112 1,538,324 Valuation Allowance (1,695,904 ) (1,538,116 ) Deferred Tax Liabilities Fixed Assets (208 ) (208 ) Net Deferred Tax Assets/(Liabilities) $ 0 $ 0 |
Schedule of effective income tax rate reconciliation | December 31, 2021 December 31, 2020 Tax at Federal Statutory Rate 21.00 % 21.00 % State Taxes -58.50 % 0.04 % Nondeductible Items -240.7 % -19.65 % Valuation Allowance 278.2 % -0.27 % Other 0.00 % 1.03 % Provision for Taxes 0.00 % 0.00 % |
Significant Accounting Polici_4
Significant Accounting Policies (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Significant Accounting Policies (Details) | ||
Machine sales | $ 5,218,158 | $ 1,969,693 |
Consumable product sales | 1,530,907 | 1,312,242 |
Total sales | $ 6,749,065 | $ 3,281,935 |
Significant Accounting Polici_5
Significant Accounting Policies (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Significant Accounting Policies (Details) | ||
Net income (loss) attributable to common stockholders | $ (12,896) | $ (3,085,549) |
Preferred stock dividends | 7,422 | 0 |
Derivative gain | 1,400,011 | 0 |
Interest expense associated with convertible debt | 846,750 | 0 |
Net income (loss) for dilutive calculation | (558,765) | (3,085,549) |
Weighted average shares outstanding | 72,126,152 | 64,184,514 |
Dilutive effect of preferred stock | 1,400,000 | 0 |
Dilutive effect of convertible debt | 3,969,136 | 0 |
Dilutive effect of common stock warrants | 0 | 0 |
Weighted average shares outstanding for diluted net income (loss) per share | $ 77,669,683 | $ 64,184,514 |
Significant Accounting Polici_6
Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Allowance for Doubtful Accounts | $ 74,000 | $ 74,000 |
Accounts receivable | 665,169 | 366,835 |
Inventory allowance | 18,800 | 0 |
Performance obligation | 171,771 | 1,024,466 |
Advertising and marketing expenses | $ 106,872 | $ 56,518 |
Common stock purchase | 11,189,056 | |
Additional common stock shares issued | 583,333 | |
Shares issued for subscriptions payable | 2,800,000 | 2,777,778 |
FDIC insurance amount | $ 250,000 | |
Dilutive earnings per share | 3,969,136 | |
Shares payable | 2,222,223 | 4,421,662 |
Minimum [Member] | ||
Property and equipment , estimated useful lives | 5 years | |
Maximum [Member] | ||
Property and equipment , estimated useful lives | 7 years |
Property and Equipmentt (Detail
Property and Equipmentt (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Less: Accumulated Depreciation | $ (19,172) | $ (17,296) |
Property and Equipment net | 1,472 | 3,348 |
Total | 20,644 | 20,644 |
Furniture and Fixtures [Member] | ||
Total | 10,425 | 10,425 |
Equipments [Member] | ||
Total | 7,579 | 7,579 |
Trade Show Displays [Member] | ||
Total | $ 2,640 | $ 2,640 |
Property and Equipmentt (Deta_2
Property and Equipmentt (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Property and Equipmentt (Details) | ||
Depreciation expense | $ 1,876 | $ 9,428 |
Accounts Payable and Accrued _3
Accounts Payable and Accrued Expenses (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Total Accounts payable and Accrued expenses | $ 641,690 | $ 681,439 |
Accounts payable [Member] | ||
Total Accounts payable and Accrued expenses | 382,925 | 279,207 |
Credit cards payable [Member] | ||
Total Accounts payable and Accrued expenses | 0 | 23,445 |
Accrued interest [Member] | ||
Total Accounts payable and Accrued expenses | 4,338 | 4,931 |
Sales tax payable [Member] | ||
Total Accounts payable and Accrued expenses | 144,541 | 141,803 |
Accrued officer consulting cost [Member] | ||
Total Accounts payable and Accrued expenses | 13,750 | 178,750 |
Other [Member] | ||
Total Accounts payable and Accrued expenses | $ 42,221 | $ 53,303 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Less: Unamortized discount | $ 121,309 | |
Less: current portion | (87,774) | $ (109,104) |
Long term portion of notes payable | 705,038 | 147,942 |
Total notes payable | 914,121 | 257,046 |
Note Payable December 2019 [Member] | ||
Total notes payable | 35,245 | 107,146 |
SBA loan May 2020 [Member] | ||
Total notes payable | 148,093 | 149,900 |
Note Payable September 2021 [Member] | ||
Total notes payable | $ 730,783 | $ 0 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | Jun. 02, 2020 | Feb. 06, 2020 | Sep. 29, 2021 | Apr. 22, 2020 | Dec. 31, 2019 | Dec. 31, 2021 |
Amortization of debt discount | $ 14,835 | |||||
Investor fees | $ 5,000 | |||||
Financing fees | $ 27,500 | |||||
Common stock to a lender | 843,750 | |||||
Deferred finance costs | $ 100,744 | |||||
Payroll Protection Program [Member] | ||||||
Amortization of debt discount | $ 6,934 | |||||
Interest rate | 3.75% | |||||
Proceeds from loan | $ 150,000 | $ 1,000,000 | ||||
Loan forgiveness | $ 730,783 | |||||
Maturity date | Apr. 22, 2022 | |||||
Debt description | payable monthly with payments of $731 beginning twelve months after issuance | all revenue of the Company for the immediately preceding month multiplied by (ii) an applicable revenue percentage. On September 29, 2021, the Company borrowed $750,000 under the agreement and received initial cash proceeds of $727,500. | ||||
Inventory Financing Agreement [Member] | Lender [Member] | ||||||
Maturity date | Apr. 22, 2020 | |||||
Frequency of payment | monthly | |||||
Periodic payment, monthly | $ 7,467 | |||||
Total outstanding payment | 253,439 | |||||
Deferred finance cost | $ 5,000 | |||||
Repayment of debt | $ 74,231 | |||||
Inventory financing arrangement, Description | The Company will repay $47,253 at maturity on April 6, 2020 | The Company will repay $164,835 of principal and interest by February 29, 2020 | ||||
Proceeds from lender | $ 43,000 | $ 150,000 |
Convertible Notes Payable and_3
Convertible Notes Payable and Derivative Liabilities (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Total | $ 744,444 | $ 1,048,524 |
Less: Debt discount and deferred finance costs on short-term convertible notes | (43,269) | (239,282) |
Less: Current convertible notes payable, net of discount | (701,175) | (809,242) |
Total long-term convertible notes payable, net | 0 | 0 |
Convertible Notes Payable One [Member] | ||
Total | 444,444 | 448,888 |
Convertible Notes Payable Two [Member] | ||
Total | 0 | 119,078 |
Convertible Notes Payable Three [Member] | ||
Total | 0 | 87,779 |
Convertible Notes Payable Four [Member] | ||
Total | 0 | 87,779 |
Convertible Notes Payable Five [Member] | ||
Total | 0 | 305,000 |
Convertible Notes Payable Six [Member] | ||
Total | $ 300,000 | $ 0 |
Convertible Notes Payable and_4
Convertible Notes Payable and Derivative Liabilities (Details 1) | 12 Months Ended |
Dec. 31, 2021USD ($)$ / shares | |
Exercise price | $ 0.44 |
Conversion Option [Member] | |
Volatility | 76.57% |
Dividend Yield | 0.00% |
Risk-free rate | 0.39% |
Expected term | 6 months |
Stock price | $ 0.08 |
Derivative Liability fair value | $ | $ 19,728 |
Conversion Option [Member] | Minimum [Member] | |
Exercise price | $ 0.18 |
Conversion Option [Member] | Maximum [Member] | |
Exercise price | $ 0.20 |
Warrants [Member] | |
Dividend Yield | 0.00% |
Stock price | $ 0.08 |
Derivative Liability fair value | $ | $ 306,079 |
Warrants [Member] | Minimum [Member] | |
Volatility | 76.57% |
Expected term | 1 year |
Warrants [Member] | Maximum [Member] | |
Volatility | 117.41% |
Expected term | 3 years |
Warrant Issuance [Member] | Minimum [Member] | |
Risk-free rate | 0.39% |
Exercise price | $ 0.18 |
Warrant Issuance [Member] | Maximum [Member] | |
Risk-free rate | 0.73% |
Stock price | $ 0.44 |
Exercise price | $ 0.44 |
Convertible Notes Payable and_5
Convertible Notes Payable and Derivative Liabilities (Details 2) - Fair Value [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Fair value, Beginning balance | $ 1,305,106 | $ 504,750 |
Fair value on the date of issuance related to warrants issued | 201,208 | |
Extinguishment due to exercise of warrant | (72,958) | |
Extinguishment due to repayment of debt | 19,748 | 356,007 |
Fair value on the date of issuance of new derivatives | 493,671 | |
Gain on change in fair value of derivatives | (1,380,263) | |
Extinguishment due to conversion of debt | 606,048 | |
Loss on change in fair value of derivatives | 1,561,203 | |
Fair value, Ending balance | $ 325,808 | $ 1,305,106 |
Convertible Notes Payable and_6
Convertible Notes Payable and Derivative Liabilities (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||||
Feb. 28, 2021 | Feb. 22, 2021 | Feb. 15, 2021 | Jan. 29, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | |
Amortization of debt discount | $ 723,436 | $ 1,594,924 | ||||
Accrued interest | $ 38,024 | $ 4,931 | ||||
Fair value of derivative liability | $ 55,273 | |||||
Common stock shares issued for conversion of debt | 414,930 | 58,642 | 64,815 | |||
Loss on settlement of notes payable | $ (137,506) | $ 160,164 | ||||
Warrants to purchase shares of common stock | 207,465 | |||||
Warrants to purchase shares of common stock, exercise price | $ 0.18 | |||||
Amortization of debt discount | 730,371 | $ 1,654,625 | ||||
Derivative gain (loss) | $ (1,400,011) | $ 1,205,196 | ||||
Shares issued for subscriptions payable | 2,800,000 | 2,777,778 | ||||
Common stock, shares par value | $ 0.001 | $ 0.001 | ||||
Proceeds from convertible notes payable | $ 1,024,024 | |||||
Convertible notes (June 2019 Notes) [Member] | ||||||
Common stock shares issued for conversion of debt | 7,883,599 | |||||
Shares issued for subscriptions payable | 2,777,778 | |||||
Subscriptions payable liability balance | $ 499,999 | |||||
Shares issued upon conversion of debt | 5,105,821 | |||||
Common stock shares issued for conversion of debt, Amount | $ 1,500,000 | |||||
Repayment of debt, description | the holder of $444,444 of the notes agreed to extend the repayment period to December 31, 2022. | |||||
Convertible notes [Member] | Investors [Member] | ||||||
Amortization of debt discount | $ 67,500 | |||||
Principal amount | $ 675,000 | $ 675,000 | ||||
Bearing interest | 10.00% | |||||
Maturity date | Feb. 15, 2022 | |||||
Note balance in cash | 375,000 | |||||
Note balance | $ 300,000 | |||||
Deferred finance cost and issued, shares | 200,000 | |||||
Deferred finance cost and issued, amount | $ 72,000 | |||||
Deferred finance | $ 37,500 | |||||
Common stock warrants | 767,045 | |||||
Common stock warrants, exercise price | $ 0.44 | |||||
Note defaults | $ 179,699 | |||||
Convertible notes (June and July 2019 Notes) [Member] | ||||||
Common stock, shares par value | $ 0.35 | |||||
Proceeds from convertible notes payable | $ 1,583,333 | |||||
Principal amount | $ 2,388,889 | |||||
Maturity date | Mar. 25, 2020 | |||||
Exercise price | $ 0.18 |
Equity (Details)
Equity (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Aggregate Number | ||
Aggregate number, Beginning | 9,378,056 | 5,785,714 |
Warrants issued due to reset provisions, Aggregate Number | 3,480,953 | |
Warrants issued with common stock units, Aggregate Number | $ 2,211,389 | |
Granted | 2,578,045 | |
Exercised | (767,045) | |
Forfeited and cancelled | 0 | (2,100,000) |
Aggregate number, Ending | 11,189,056 | 9,378,056 |
Aggregate Exercise Price | ||
Aggregate exercise price, Beginning | $ 1,921,200 | $ 1,292,100 |
Warrants issued due to reset provisions Aggregate Exercise price | 562,343 | |
Warrants issued with common stock units Aggregate Exercise price | $ 631,200 | |
Granted | 562,343 | |
Exercised | 337,500 | |
Forfeited and cancelled | (2,100) | |
Aggregate exercise price, Ending | $ 2,646,044 | $ 1,921,200 |
Weighted average exercise price, Beginning | $ 0.20 | $ 0.01 |
Warrants issued due to reset provisions Weighted average exercise price | 0.35 | |
Warrants issued with common stock units Weighted average exercise price | 0.001 | |
Granted | 0.41 | |
Exercised | 0.44 | |
Forfeited and cancelled | 0.001 | |
Weighted average exercise price, Ending | $ 0.24 | $ 0.20 |
Equity (Details Narrative)
Equity (Details Narrative) - USD ($) | 1 Months Ended | 2 Months Ended | 12 Months Ended | |
May 26, 2021 | Feb. 28, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Common stock designated | 200,000,000 | |||
Preferred stock designated | 30,000,000 | |||
Common stock, shares par value | $ 0.001 | $ 0.001 | ||
Par value, preferred stock | $ 0.001 | $ 0.001 | ||
Proceeds from sale of common stock units | $ 250,000 | $ 846,400 | ||
Common stock unit subscriptions | 3,868,883 | |||
Shares remaining to be issued | 2,222,223 | |||
Common stock issued for cashless exercise | 426,136 | |||
Warrants received | 767,045 | |||
Common stock issued related to conversion of convertible notes payable | 2,019,401 | |||
Convertible notes payable | $ 444,444 | |||
Shares issued for subscriptions payable | 2,800,000 | 2,777,778 | ||
Increased the authorized common shares | 230,000,000 | |||
Common stock shares reserved for future issuance | 6,666,661 | |||
Fair value of common stock | $ 15,227 | $ 288,667 | ||
Debt conversion converted instrument, principal | $ 1,333,333 | |||
Sale of common stock, shares | 2,000,000 | 1,388,889 | 2,525,000 | |
Proceeds from issuance or sale of common stock | $ 846,400 | |||
Weighted average remaining contractual life | 2 years 1 month 20 days | |||
Share price | $ 0.18 | |||
Additional common stock | 1,896,662 | |||
Price per unit | $ 0.18 | $ 0.20 | ||
Additional share subcription | 280,554 | |||
Additional share subcription, price | $ 0.20 | |||
Accrued dividend | $ 7,422 | |||
Redemption value of series a preferred stock | 259,422 | |||
Recongnized loss | $ 58,642 | $ 53,305 | ||
Convertible debt converted and stock | 3,086,420 | 10,566,414 | ||
Share issued for professional services | 143,609 | |||
Stock exercise price | $ 0.27 | |||
Preferred stock values | $ 0 | $ 0 | ||
Preferred stock, shares issued | 0 | 0 | ||
Common stock shares issued | 74,490,147 | 66,366,419 | ||
Lender [Member] | ||||
Common stock shares issued | 1,043,750 | 965,046 | ||
Deferred finance costs, value | $ 172,744 | $ 199,537 | ||
Conversion of principal into common stock | 414,930 | |||
Shares issued under share-lending arrangement | 860,000 | 1,443,333 | ||
Shares returned under share-lending arrangement | 933,333 | |||
Minimum [Member] | ||||
Increased the authorized common shares | 100,000,000 | |||
Stock exercise price | $ 0.27 | |||
Warrant purchase price | 0.18 | |||
Maximum [Member] | ||||
Stock exercise price | $ 0.30 | $ 0.30 | ||
Warrant purchase price | $ 0.20 | |||
Mr Mark Adamsand Mr David Hall [Member] | ||||
Shares remaining to be issued | 2,777,778 | |||
Convertible debt converted and stock | 2,160,494 | |||
Cumulative dividend percentage | 5.00% | |||
Scott Wessler [Member] | Series A Redeemable Preferred Stock [Member] | Subscription Agreement [Member] | ||||
Preferred stock values | $ 126,000 | |||
Preferred stock, shares issued | 1,400,000 | |||
Price per share | $ 0.09 | |||
Preferred stock, Description | The Company created the 2,800,000 shares of Series A Preferred Stock out of the 30,000,000 shares of preferred stock authorized by the Company’s articles of incorporation by filing a certificate of designation as authorized by the Company’s board of directors (the “Certificate of Designation”). | |||
Mr Adams [Member] | Series A Redeemable Preferred Stock [Member] | Subscription Agreement [Member] | ||||
Preferred stock values | $ 126,000 | |||
Preferred stock, shares issued | 1,400,000 | |||
Price per share | $ 0.09 |
Related Party (Details Narrativ
Related Party (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Preferred stock value | $ 0 | $ 0 |
Mr. Hall [Member] | ||
Contribution amount | $ 100,000 | |
Common stock of shares | 555,555 | |
Additonal shares receive | 61,728 | |
Preferred stock value | $ 126,000 | |
Mr. Adams [Member] | ||
Contribution amount | $ 250,000 | |
Common stock of shares | 1,388,885 | |
Additonal shares receive | 154,321 | |
Preferred stock value | $ 126,000 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||
May 31, 2019 | Dec. 31, 2017 | Dec. 31, 2021 | Dec. 31, 2020 | |
Operating lease monthly rent expenses | $ 5,000 | |||
Cash payment | 165,000 | $ 192,500 | ||
Accounts payables | 13,750 | |||
Rent expense | 111,043 | $ 61,133 | ||
Cash used in operating activities related to leases | $ 3,855 | |||
Description for the extention of the lease term | April 1, 2021 through February 28, 2022 | |||
Employment Agreement [Member] | Daniel Davis [Member] | ||||
Annual salary | $ 180,000 | |||
Employment Agreement [Member] | Mr. Adams [Member] | ||||
Annual salary | $ 120,000 | |||
Employment Agreement [Member] | Consulting Agreement [Member] | Daniel Davis [Member] | ||||
Consulting services description | the Company for a period of up to three years beginning May 1, 2019 in exchange for $165,000 per year. | Executive’s annual salary shall be equal to $180,000 and $120,000, respectively, per annum (the “Annual Salary”). |
Accrued Liabilities Other (Deta
Accrued Liabilities Other (Details Narrative) | Dec. 31, 2021USD ($) |
Significant Accounting Policies | |
Accrued Liabilities - other | $ 1,696,374 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Current [Member] | ||
Federal | $ 0 | $ 0 |
State | 800 | 800 |
Total provision for (benefit from) income taxes | 800 | 800 |
Deferred [Member] | ||
Federal | 0 | 0 |
State | 0 | 0 |
Total provision for (benefit from) income taxes | $ 800 | $ 800 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Deferred Tax Assets: | ||
Net operating losses | $ 1,694,212 | $ 1,536,424 |
Other | 1,900 | 1,900 |
Total Deferred Tax Asset | 1,696,112 | 1,538,324 |
Valuation Allowance | (1,695,904) | (1,538,116) |
Deferred Tax Liabilities | ||
Fixed Assets | (208) | (208) |
Net Deferred Tax Assets/(Liabilities) | $ 0 | $ 0 |
Income Taxes (Details 2)
Income Taxes (Details 2) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Taxes | ||
Tax at Federal Statutory Rate | 21.00% | 21.00% |
State Taxes | (58.50%) | 0.04% |
Nondeductible Items | (240.70%) | (19.65%) |
Valuation Allowance | 278.20% | (0.27%) |
Other | 0.00% | 1.03% |
Provision for Taxes | 0.00% | 0.00% |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
State operating loss carryforwards | $ 6,086,000 | |
Federal operating loss carryforwards | $ 631,000 | |
Federal [Member] | ||
Federal operating loss carryforwards | $ 5,413,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | 2 Months Ended | 12 Months Ended | |
Feb. 28, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Subsequent Events | |||
Sale of stock to investors | 2,000,000 | 1,388,889 | 2,525,000 |
Proceeds from sale of stock | $ 885,000 | ||
Closing cost of stock sold | $ 115,000 | ||
Warrant issued to purchase common stock | 4,000,000 | ||
Share price | $ 0.20 | ||
Term period | 5 years |