Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Feb. 26, 2021 | |
Document And Entity Information | ||
Entity Registrant Name | American Cannabis Company, Inc. | |
Entity Central Index Key | 0000945617 | |
Entity Incorporation, State or Country Code | DE | |
Entity File Number | 000-26108 | |
Document Type | 10-K | |
Document Period End Date | Dec. 31, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Public Float | $ 3,344,147 | |
Entity Common Stock, Shares Outstanding | 74,377,938 | |
Document Fiscal Period Focus | FY | |
Document Fiscal Year Focus | 2020 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 1,723,132 | $ 945,181 |
Accounts Receivable, net | 24,955 | 95,655 |
Deposits | 2,895 | 4,500 |
Inventory | 62,402 | 53,310 |
Prepaid expenses and other current assets | 50,302 | 30,847 |
Right to Use Lease Asset | 34,418 | |
Total current assets | 1,863,686 | 1,163,911 |
Property and Equipment - net | 24,654 | 40,042 |
TOTAL ASSETS | 1,888,341 | 1,203,953 |
Current liabilities | ||
Accounts payable | 13,154 | 9,748 |
Advances from clients | 88,843 | 112,959 |
Accrued and other current liabilities | 49,244 | 117,303 |
Stock payable | 49,406 | |
Loan Payable | 109,914 | |
Operating Lease Liability | 34,943 | |
Total current liabilities | 261,155 | 324,359 |
Stockholders equity | ||
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 0 shares issued and outstanding at December 31, 2020 and 2019, respectively | ||
Common stock, $0.00001 par value; 100,000,000 shares authorized; 70,727,938 and 52,978,605 shares issued and outstanding at December 31, 2020 and 2019, respectively | 707 | 529 |
Additional paid-in capital | 9,634,748 | 8,354,920 |
Accumulated deficit | (8,008,268) | (7,475,855) |
Total Shareholder's equity | 1,627,187 | 879,594 |
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY | $ 1,888,342 | $ 1,203,953 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred stock Par Value | $ 0.01 | $ 0.01 |
Preferred Stock Shares Authorized | 5,000,000 | 5,000,000 |
Preferred Stock Shares Issued | 0 | 0 |
Preferred Stock Shares Outstanding | $ 0 | $ 0 |
Common stock Par Value | $ 0.00001 | $ 0.00001 |
Common Stock Shares Authorized | 500,000,000 | 500,000,000 |
Common Stock Shares Issued | 70,727,938 | 52,978,605 |
Common Stock Shares Outstanding | 70,727,938 | 52,978,605 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Revenues | ||
Consulting services | $ 505,363 | $ 1,470,245 |
Products and equipment | 1,064,431 | 660,490 |
Total revenues | 1,569,794 | 2,130,735 |
Costs of revenues | ||
Cost of consulting services | 108,706 | 292,375 |
Cost of products and equipment | 740,409 | 499,408 |
Total cost of revenues | 849,115 | 791,783 |
Gross profit | 720,679 | 1,338,952 |
Operating expenses | ||
General and administrative | 1,010,902 | 1,049,415 |
Selling and marketing | 298,937 | 309,232 |
Stock Based Compensation Expense | 29,970 | 73,514 |
Warranty Expense | 151,906 | |
Bad Debt Expense | 4,910 | 88,749 |
Total operating expense | 1,344,719 | 1,672,816 |
Loss from operations | (624,040) | (333,864) |
Other Income (Expense) | ||
Interest (expense) | (1,786) | |
Other income | 93,413 | 32,122 |
Total Other Income | 91,627 | 32,122 |
Net loss | (532,413) | (301,742) |
Income Tax Expense | ||
Net loss | $ (532,413) | $ (301,742) |
Basic net loss per common share | $ (0.01) | $ (0.01) |
Basic and diluted weighted average common shares outstanding | 57,548,474 | 52,468,502 |
Shareholders Equity
Shareholders Equity - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Shares at Dec. 31, 2018 | 51,513,064 | |||
Beginning Balance, Value at Dec. 31, 2018 | $ 515 | $ 8,178,919 | $ (7,174,113) | $ 1,005,321 |
Stock issued for services, Shares | 39,708 | |||
Stock issued for services, Amount | $ 1 | 21,244 | 21,245 | |
Warrants to employees, Shares | 1,392,500 | |||
Warrants to employees, Value | $ 13 | 151,893 | 151,906 | |
Stock-based compensation to employees, Shares | 33,333 | |||
Stock-based compensation to employees, Value | 2,864 | 2,864 | ||
Net loss | (301,742) | (301,742) | ||
Ending Balance, Shares at Dec. 31, 2019 | 52,978,605 | |||
Ending Balance, Value at Dec. 31, 2019 | $ 529 | 8,354,920 | (7,475,855) | 879,594 |
Stock issued for services, Shares | 78,505 | |||
Stock issued for services, Amount | $ 1 | 7,065 | 7,066 | |
Stock-based compensation to employees, Shares | 970,828 | |||
Stock-based compensation to employees, Value | $ 10 | 79,366 | 79,376 | |
Shares issued for cash, Shares | 16,700,000 | |||
Shares issued for cash, Value | $ 167 | 1,193,397 | 1,193,564 | |
Net loss | (532,413) | (532,413) | ||
Ending Balance, Shares at Dec. 31, 2020 | 70,727,938 | |||
Ending Balance, Value at Dec. 31, 2020 | $ 707 | $ 9,634,748 | $ (8,008,268) | $ 1,627,187 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
CASH FLOW FROM OPERATING ACTIVITIES: | ||
Net loss | $ (532,413) | $ (301,742) |
Adjustments to reconcile net income (loss) to net cash (used in) operating activities: | ||
Loss on sale and disposal of assets | 1,183 | |
Allowance for Bad Debt Expense | 4,910 | 88,749 |
Depreciation | 13,937 | 6,533 |
Stock-based compensation expense and stock payable | 29,970 | 73,514 |
Warranty expense | 151,906 | |
Stock issued for services | 7,066 | |
Changes in operating assets and liabilities | ||
Accounts receivable | 67,395 | (125,520) |
Inventory | (9,092) | 7,695 |
Prepaid expenses and other current assets | (19,455) | 25,529 |
Right to Use Lease Asset | 34,418 | (34,418) |
Accounts payable | 3,405 | (23,183) |
Advances from clients | (24,116) | (34,390) |
Accrued and other current liabilities | (68,059) | 27,536 |
Operating Lease Liability | (34,943) | 34,943 |
Net Cash used in Operating Activities | (525,794) | (102,848) |
CASH FLOW FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (2,233) | (38,536) |
Proceeds from sale of assets | 2,500 | |
Net cash used in Investing Activities | 267 | (38,536) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from notes payable | 109,914 | |
Proceeds from sale of common stock | 1,193,564 | |
Net Cash Provided by Financing Activities | 1,303,478 | |
NET INCREASE (DECREASE) IN CASH | 777,951 | (141,384) |
CASH AT BEGINNING OF PERIOD | 945,181 | 1,086,565 |
CASH AT END OF YEAR | 1,723,132 | 945,181 |
Supplemental disclosure of cash flow information: | ||
Cash paid for income taxes | ||
Cash paid for interest |
Principles of Consolidation
Principles of Consolidation | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of Consolidation | Note 1. Principles of Consolidation. The consolidated financial statements for the years ended December 31, 2020 and 2019 include the accounts of American Cannabis Company, Inc. and its wholly owned subsidiary, Hollister & Blacksmith, Inc., doing business as American Cannabis Company, Inc. Intercompany accounts and transactions have been eliminated. |
Description of the Business
Description of the Business | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Description of the Business | Note 2. Description of Business. American Cannabis Company, Inc. and its wholly owned subsidiary Company, Hollister & Blacksmith, Inc., doing business as American Cannabis Consulting (“American Cannabis Consulting”), (collectively “the “Company”) are based in Denver, Colorado and operate a fully-integrated business model that features end-to-end solutions for businesses operating in the regulated cannabis industry in states and countries where cannabis is regulated and/or has been de-criminalized for medical use and/or legalized for recreational use. We provide advisory and consulting services specific to this industry, design industry-specific products and facilities, and sell both exclusive and non-exclusive customer products commonly used in the industry. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies Basis of Accounting The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying consolidated financial statements include normal recurring adjustments that are necessary for a fair presentation of the results for the periods presented. Use of Estimates in Financial Reporting The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities, and disclosures of contingent assets and liabilities, as of the date of the consolidated financial statements during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period in which they are deemed to be necessary. Significant estimates made in the accompanying consolidated financial statements include but are not limited to following those related to revenue recognition, allowance for doubtful accounts and unbilled services, lives and recoverability of equipment and other long-lived assets, contingencies, and litigation. The Company is subject to uncertainties, such as the impact of future events, economic, environmental and political factors, and changes in the business climate; therefore, actual results may differ from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities, the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company's consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution. Cash balances may exceed federally insured limits. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. As of December 31, 2020, and December 31, 2019, the Company had cash balances in excess of FDIC insured limits of $250,000. Accounts Receivable Accounts receivable are recorded at the net value of face amount less an allowance for doubtful accounts. The Company evaluates its accounts receivable periodically based on specific identification of any accounts receivable for which the Company deems the net realizable value to be less than the gross amount of accounts receivable recorded; in these cases, an allowance for doubtful accounts is established for those balances. In determining its need for an allowance for doubtful accounts, the Company considers historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, the Company’s actual experience may vary from its estimates. If the financial condition of its clients were to deteriorate, resulting in their inability or unwillingness to pay the Company’s fees, it may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent that the Company receives retainers from its clients prior to performing significant services. The allowance for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client's inability to make required payments on accounts receivables, the provision is recorded in operating expenses. As of December 31, 2020, and December 31, 2019, the Company’s allowance for doubtful accounts was $57,512 and $43,116, respectively. The Company recorded bad debt expense during the years ended December 31, 2020 and 2019 of $4,910 and $88,749, respectively. Deposits Deposits is comprised of advance payments made to third parties, for rent, utilities, and inventory for which the Company has not yet taken title. When the Company takes title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon sale. Inventory Inventory is comprised of products and equipment owned by the Company to be sold to end-customers. Inventory is valued at cost using the first-in first-out and specific identification methods, unless and until the market value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to net realizable value. As of December 31, 2020, and December 31, 2019, market values of all the Company’s inventory were greater than cost, and accordingly, no such valuation allowance was recognized. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets are primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. Significant Clients and Customers For the year ended December 31, 2020, three customers accounted for 23% of the Company’s total revenues for the period. As of December 31, 2019, one customer who accounted for 10% of the Company’s total revenues. At December 31, 2020, three customers account for 84.21% of accounts receivables, net. At December 31, 2019, four customers account for 47.5% of accounts receivable, net. Property and Equipment, net Property and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Costs associated with in progress construction are capitalized as incurred and depreciation is consummated once the underlying asset is placed into service. Property and equipment are reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” The Company did not capitalize any interest as of December 31, 2020 and 2019 Accounting for the Impairment of Long-Lived Assets The Company evaluates long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. The Company had not recorded any impairment charges related to long lived assets as of December 31, 2020 or 2019. Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Our financial instruments include cash, deposits, accounts receivable, accounts payables, advances from clients, accrued expense, and other current liabilities. The carrying values of these financial instruments approximate their fair value due to their short maturities. Revenue Recognition During the first quarter of 2019, we adopted the following accounting principles related to revenue recognition: (a) FASB ASU 2016-12 “ Revenue from Contracts with Customers (Topic 606). Our service and product revenues arise from contracts with customers. Service revenue includes Operations Divisions consulting revenue. Product revenue includes (a) Operations Division product sales (So-Hum Living Soils) and (b) Equipment Sales Division. The majority of our revenue is derived from distinct performance obligations, such as time spent delivering a service or the delivery of a specific product. We may also enter into contracts with customers that identify a single, or few, distinct performance obligations, but that also have non-distinct, underlying performance obligations. These contracts are typically fulfilled within one to six months. Only an insignificant portion of our revenue would be assessed for allocation between distinct (contractual) performance obligations and non-distinct deliverables between reporting periods and, accordingly, we do not record a contract asset for completed, non-distinct performance obligations prior to invoicing the customer. We recognize revenue in accordance with ASC 606 using the following 5 steps to identify revenues: (6) Identify the contract with the Customer. (7) Identify the performance obligations in the contract. (8) Determination of the transaction price. (9) Allocation of the transaction price to the performance obligations in the contract (10) Recognize Revenue when (or as) the entity satisfies a performance obligation. Advances from Clients deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Where possible, we obtain retainers to lessen our risk of non-payment by our customers. Advances from Clients deposits are recognized as revenue as we meet specified performance obligations as detailed in the contract. Product and Equipment Sales Revenue from product and equipment sales, including delivery fees, is recognized when an order has been obtained from the customer, the price is fixed and determinable when the order is placed, the product is delivered, title has transferred, and collectability is reasonably assured. Generally, our suppliers’ drop-ship orders to our clients with destination terms. The Company realizes revenue upon delivery to the customer. Given the facts that (1) our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in our product sales contracts is fixed and determinable at the time the customer places the order, we are not of the opinion that our product sales indicate or involve any significant financing that would materially change the amount of revenue recognized under the contract, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606. During the years ended December 31, 2010 and 2019, sales returns were $110 and $51,208 comprised of product returns and replacement, respectively, and are not recorded in revenues in said periods. Consulting Services We also generate revenues from professional services consulting agreements. These arrangements are generally entered into: (1) on an hourly basis for a fixed fee; or (2) on a contingent fee basis. Generally, we require a complete or partial prepayment or retainer prior to performing services. For hourly based fixed fee service contracts, we utilize and rely upon the proportional performance method, which recognizes revenue as services are completed. Under this method, in order to determine the amount of revenue to be recognized, we calculate the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable. We segregate upon entry into a contract any advances or retainers received from clients for fixed fee hourly services into a separate “Advances from Clients” account, and only recognize revenues as we incur and charge billable hours, and then deposit the funds earned into our operating account. Because our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing, that would materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing component under FASB ASC Topic 606. Occasionally, our fixed-fee hourly engagements are recognized under the completed performance method. Some fixed fee arrangements are for completion of a final deliverable or act which is significant to the arrangement. These engagements do not generally exceed a one-year term. If the performance is for a final deliverable or act, we recognize revenue under the completed performance method, in which revenue is recognized once the final act or deliverable is performed or delivered for a fixed fee. Revenue recognition is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable. FASB ASC Topic 606 provides a practical expedient to disregard the effects of a financing component if the period between payment and performance is one year or less. As our fixed fee hourly engagements do not exceed one year, no significant customer-based financing is implicated under FASB ASC Topic 606. During the years ended December 31, 2020 and 2019, we incurred no losses from fixed fee engagements that terminate prior to completion. We believe if an engagement terminates prior to completion, we can recover the costs incurred related to the services provided. We primarily enter into arrangements for which fixed and determinable revenues are contingent and agreed upon achieving a pre-determined deliverable or future outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability is reasonably assured. Our arrangements with clients may include terms to deliver multiple services or deliverables. These contracts specifically identify the services to be provided with the corresponding deliverable. The value for each deliverable is determined based on the prices charged when each element is sold separately or by other vendor-specific objective evidence (“VSOE”) or estimates of stand-alone selling prices. Revenues are recognized in accordance with our accounting policies for the elements as described above (see Product Sales). The elements qualify for separation when the deliverables have value on a stand-alone basis and the value of the separate elements can be established by VSOE or an estimated selling price. While assigning values and identifying separate elements requires judgment, selling prices of the separate elements are generally readily identifiable as fixed and determinable as we also sell those elements individually outside of a multiple services engagement. Contracts with multiple elements typically incorporate a fixed-fee or hourly pricing structure. Arrangements are typically terminable by either party upon sufficient notice or do not include provisions for refunds relating to services provided. Reimbursable expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component of revenues. Typically, an equivalent amount of reimbursable expenses is included in total direct client service costs. Reimbursable expenses related to time and materials and fixed-fee engagements are recognized as revenue in the period in which the expense is incurred and collectability is reasonably assured. Taxes collected from customers and remitted to governmental authorities are recognized as liabilities and paid to the appropriate government entities. Costs of Revenues The Company’s policy is to recognize costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenue includes the costs directly attributable to revenue recognition and includes compensation and fees for services, travel and other expenses for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred. Advertising and Promotion Costs Advertising and Promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the years ended December 31, 2020 and 2019 these costs were $9,934 and $32,071, respectively. Shipping and Handling Costs For product and equipment sales, shipping and handling costs are included as a component of cost of revenues. Stock-Based Compensation Restricted shares are awarded to employees and entitle the grantee to receive shares of common stock at the end of the established vesting period. The fair value of the grant is based on the stock price on the date of grant. We recognize related compensation costs on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant date. During the years ended December 31, 2020 and 2019, stock-based compensation expense for restricted shares for Company employees and service providers was $29,970 and $73,514, respectively. Compensation expense for warrants are based on the fair value of the instruments on the grant date, which is determined using the Black-Scholes valuation model and are expensed over the expected term of the awards. Research and Development As a component of our equipment and supplies offerings, from time-to-time we design and develop our own proprietary products to meet demand in markets where current offerings are insufficient. These products include, but are not limited to: The Satchel™, Cultivation Cube™, So-Hum Living Soils™ and the HDCS™. Costs associated with the development of new products are expensed as incurred as research and development operating expenses. During the years ended December 31, 2020 and 2019, our research and development costs were de minimis. Income Taxes The Company’s corporate status changed from an S Corporation, which it had been since inception, to a C Corporation during the year ended December 31, 2014. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, S Corporations are not subject to corporate income taxes; instead, the owners are taxed on their proportionate share of the S Corporation’s taxable income. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the year ended December 31, 2010, due to cumulative losses since our corporate status changed, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero. As of December 31, 2020, and 2019, we had no liabilities related to federal or state income taxes and the carrying value of our deferred tax asset was zero. Net Loss Per Common Share The Company reports net loss per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share is equal to basic earnings per share because there are no potential dilatable instruments that would have an anti-dilutive effect on earnings. Diluted net loss per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion, exercise or contingent exercise of securities since that would have an anti-dilutive effect on earnings. Related Party Transactions The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. Impact of COVID-19 Pandemic On March 11, 2020 , 19” 19 In response to state and local measures and for protection of both employees, the Company made required changes to operations, which did not have a material impact upon operations or the financial condition of the Company. While the state and local governments have eased restrictions on restrictions and activities, it is possible that a resurgence in COVID- 19 Recent Accounting Pronouncements Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below. In December 2019, the FASB issued ASU 2019-12 , “Simplifying the Accounting for Income Taxes In January 2020, the FASB issued ASU No. 2020-01, " Investments — Equity Securities: Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 Investments — Equity Securities" Investments—Equity Method and Joint Ventures |
Accounts Receivable and Advance
Accounts Receivable and Advances from Clients | 12 Months Ended |
Dec. 31, 2020 | |
Receivables [Abstract] | |
Accounts Receivable and Advances from Clients | Note 4. Accounts Receivable and Advance from Clients Accounts receivable was comprised of the following: December 31, 2020 December 31, 2019 Accounts receivable - Trade $ 82,467 $ 138,771 Less: allowance for doubtful accounts (57,512 ) (43,116 ) Accounts receivable, net $ 24,955 $ 95,655 The Company had bad debt expense during the year ended December 31, 2020 of $4,910, whereas bad debt expense during the year ended December 31, 2019 was $88,749. Our Advances from Clients had the following activity: Amount December 31, 2019 $ 112,959 Additional deposits received 481,237 Less: Deposits recognized as revenue (505,363 ) December 31, 2020 $ 88,843 |
Inventory
Inventory | 12 Months Ended |
Dec. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Inventory | Note 5. Inventory Inventory consisted of the following: December 31, 2020 December 31, 2019 Raw materials $ 39,746 $ 23,091 Finished goods 22,656 30,219 Total $ 62,402 $ 53,310 |
Property and Equipment, net
Property and Equipment, net | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, net | Note 6. Property and Equipment, net Property and equipment, net, was comprised of the following: December 31, 2020 December 31, 2019 Office equipment $ 34,071 $ 35,624 Furniture and fixtures — 7,240 Machinery and equipment — 7,796 Software 13,204 — Work In Progress — 10,935 Property and equipment, gross 47,275 61,595 Less: accumulated depreciation (22,621 ) (21,553 ) Property and equipment, net $ 24,654 $ 40,042 During the year ended December 31, 2020, machinery with a book value of $2,000 was sold for cash of $2,500, a gain of $500 was recognized on the sale. During the year ended December 31, 2020, as part of our move to new facilities certain fixed assets were determined to be obsolete. Property and Equipment with books values of $288 in furniture and fixtures, $735 in office equipment and $659 in machinery were determined to be disposed of. A loss of $1,683 was recognized on the disposals. |
Accrued and Other Current Liabi
Accrued and Other Current Liabilities | 12 Months Ended |
Dec. 31, 2020 | |
Payables and Accruals [Abstract] | |
Accrued and Other Current Liabilities | Note 7. Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following: December 31, 2020 December 31, 2019 Accrued Bonus $ — $ 1,500 Accrued Payroll — 16,173 Accrued Interest 449 — Other Accrued Expenses & Payables 48,795 99,630 Accrued and other current liabilities $ 49,244 $ 117,303 |
Stock Payable
Stock Payable | 12 Months Ended |
Dec. 31, 2020 | |
Notes To Financial Statements Abstract | |
Stock Payable | Note 8. Stock payable The following summarizes the changes in common stock payable: Amount Number of Shares December 31, 2019 $ 49,406 537,011 Additional Expenses Incurred 29,970 163,082 Payments Upon Issuance of Shares (79,376 ) (478,261 ) December 31, 2020 $ — 221,832 |
Operating Lease Right-of-Use As
Operating Lease Right-of-Use Asset/Operating Lease Liability | 12 Months Ended |
Dec. 31, 2020 | |
Operating Lease Right-of-use Assetoperating Lease Liability | |
Operating Lease Right-of-Use Asset/Operating Lease Liability | Note 9. Operating Lease Right-of-Use Asset/Operating Lease Liability On June 1, 2020, the Company entered into a new lease membership agreement for a one-year term for an amount of $2,895 per month. We determined under ASC 842, due to the short term nature of the lease that the lease membership agreement met the criteria of ASC 842-20-25-2 and as such it is not necessary to capitalize the lease and rent will be recognized on a monthly straight-line basis. On July 28, 2015, we entered into a commercial real estate lease for 6,500 square feet of retail space in Denver, CO, with an initial term of five years and, at our option, one additional terms of five years. Rent was $6,000 per month, plus our portion of real estate taxes and common area maintenance. We determined the present value of the future lease payments using a discount rate of 6%, our incremental borrowing rate based on outstanding debt, resulting in an initial right-of-use asset and lease liability of $221,932, which are being amortized ratably over the term of the lease. As of December 31, 2020, the balance of the right to use asset and the lease liability were fully amortized and had a book value of $0. Rent expense was $44,370 and $54,000 for the year ended December 31, 2020 and 2019, respectively. |
Loan Payable
Loan Payable | 12 Months Ended |
Dec. 31, 2020 | |
Loan Payable Abstract | |
Loan Payable | Note 10. Loan Payable On March 27, 2020, the CARES Act was enacted to provide financial aid to family and businesses impacted by the COVID-19 pandemic. The Company participated in the CARES Act, and on August 6, 2020, the Company entered into a note payable with a bank under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP loan”) in the amount of $109,914. This loan payable matures on August 6, 2022 with a fixed interest rate of 1% per annum with interest deferred for six months. The PPP loan has an initial term of two years, is unsecured and guaranteed by the SBA. Under the terms of the PPP loan, the Company may apply for forgiveness of the amount due on the PPP loan. The Company used the proceeds from the PPP loan for qualifying expenses as defined in the PPP. The Company intends to apply for forgiveness of the PPP loan in accordance with the terms of the CARES Act. However, the Company cannot assure at this time that the PPP loan will be forgiven partially or in full. If the loan is not forgiven based on the PPP guidelines to be issued by the SBA, as defined, then, the monthly payment amount will be $6,186 beginning on March 6, 2021 through August 6, 2022. The PPP loan balance as of December 31, 2020 was $109,914. During the year ended December 31, 2020, interest of $449 was accrued. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 11. Related Party Transactions The Company has a related party entity, Tabular Investments, LLC (“Tabular”) which was set to assign the Company’s interest in various equity partnership. The sole member of Tabular is Tad Mailander, the Company’s outside legal counsel and Director. The Company has valued all of its equity partnership investments at $0. Neither our direct equity ownership in, nor our assignments of equity to Tabular Investments, LLC are, or are reasonably likely to allow for, substantive terms, transactions, and arrangements, whether contractual or not contractual, that will have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We have no direct or indirect majority influence or control over any entity in which we have a direct equity interest or equity interests assigned to Tabular. We do not have any direct or indirect interest in, and do not control Tabular. We have not absorbed losses from either our direct equity interests or assignments to Tabular, and we have provided no subordinated financial support to any project |
Stock-based Compensation
Stock-based Compensation | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Stock-based Compensation | Note 12. Stock Based Compensation During the years ended December 31, 2020 and 2109, the Company issued stock-based compensation for employees and service providers pursuant to its 2015 Equity Incentive Plan. During the years ended December 31, 2020, the Company’s expense for restricted shares to Company employees and service providers was $29,970 and $73,514 which was the result of the following activity: Restricted Shares From time to time, the Company grants certain employees restricted shares of its common stock to provide further compensation in-lieu of wages and to align the employee’s interests with the interests of its stockholders. Because vesting is based on continued employment, these equity-based incentives are also intended to attract, retain and motivate personnel upon whose judgment, initiative and effort the Company’s success is largely dependent. During the year ended December 31, 2019, the Company granted 73,041 restricted shares and recognized $24,108 in associated employee stock-based compensation expense. No shares restricted shares were granted during the year ended 2020. The fair value of restricted stock unit is determined based on the quoted closing price of the Company’s common stock on the date grant. During the year ended December 31, 2020, the Company issued 492,567 restricted shares to Company employees and recognized $29,970 in associated stock-based compensation expense. During the year ended December 31, 2019, the Company granted 478,261 restricted shares to Company employees and services providers and recognized $44,396 in associated stock based compensation expense. The fair value of restricted stock units is determined based on the quoted closing price of the Company’s common stock on the date of grant. Net Loss Per Share Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss per share is computed similarly to basic loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised. Outstanding stock options and common stock warrants are considered anti-dilutive because we are in a net loss position. Accordingly, the number of weighted average shares outstanding for basic and fully diluted net loss per share are the same. The following summarizes equity instruments that may, in the future, have a dilutive effect on earnings per share: December 31, 2020 December 31, 2019 Warrants 397,500 697,500 Stock Payables — 537,011 Total 397,500 1,234,511 Warrants The Company approved the cashless exercise of 535,000 warrants as of December 31, 2019 by employees for a total of $39,615. As of December 31, 2020, the Company did not issue or approve any warrants. Warrants exercisable for 300,000 shares expired during December 31, 2020 |
Shareholders_ Equity
Shareholders’ Equity | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Shareholders’ Equity | Note 13. Shareholders’ Equity Preferred Stock American Cannabis Company, Inc. is authorized to issue 5,000,000 shares of preferred stock at $0.01 par value. No shares of preferred stock were issued and outstanding during the years ended December 31, 2020, and 2019, respectively. Common Stock During the year ended December 31, 2020, the Company issued 16,700,000 registered shares of common stock in exchange for net proceeds of $1,193,564 pursuant to the Common Stock Purchase Agreement entered into on October 11, 2019 with White Lion Capital LLC. During the year ended December 31, 2020, the Company issued 78,505 restricted common shares to two employees in payment of commissions earned totaling $7,066. During the year ended December 31, 2020, the Company issued 492,567 restricted shares to Company employees and recognized $29,970 in associated stock-based compensation expense. During the year ended December 31, 2020, the Company issued 478,261 common shares, totaling $44,396 as part of the 2015 Equity Incentive Plan to executive management and non-executive management personnel, for services rendered through and payable as of December 31, 2019. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments And Contingencies Details | |
Commitments and Contingencies | Note 14. Commitments and Contingencies Legal In the ordinary course of its business, the Company becomes involved in various legal proceedings involving a variety of matters. The Company does not believe there are any pending legal proceedings that will have a material adverse effect on the Company’s business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. The Companies expenses legal fees in the period in which they are incurred. Turoff Matter On November 15, 2019, Erin Turoff filed suit against the Company and Mr. Buffalo, our chief executive officer and director, and Mr. Ellis Smith our chief development officer and director, in Denver County District Court. The complaint seeks a declaratory judgement and damages related to Ms. Turoff’s allegation that she was misclassified as an independent contractor while working for the Company. The action is in preliminary stage, and there is no reasonable basis to determine or reasonably calculate a contingent legal liability expense as of the date of this filing. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 15. Income Taxes The Tax Cuts and Jobs act (the Tax legislation) in the United States enacted on December 22, 2017 significantly revised the United States corporate income tax by, among other things, lowering the corporate income tax rate to 21% effective January 1, 2018, implementing a modified territorial tax system and imposing a one-time repatriation tax on deemed repatriated earnings and profits of U.S.-owned foreign subsidiaries (the Toll Charge). as a fiscal-year taxpayer, certain provisions of the Tax legislation impacted us in fiscal 2018, including the change in the corporate income tax rate, while other provisions will be effective starting at the beginning of fiscal 2019. Accordingly, our federal statutory income tax rate for fiscal 2018 reflected a blended rate including State income tax of approximately 26%. The following table displays a reconciliation from the U.S. statutory rate to the effective tax rate and the provision for (benefit from) income taxes for the years ended December 31, 2020 and 2019, respectively: For the Years Ended December 31, December 31, 2020 2019 Tax benefit at the US statutory rate of 21% for 2020 and 2019 $ 37,221 $ 14,267 State income tax benefit 800 2,765 Non-deductible expenses including non-deductible pre-merger losses — — Change in valuation allowance (38,021 ) (17,032 ) Total Income Tax Benefit $ — $ — Deferred tax assets (liabilities) consisted of the following: December 31, December 31, 2020 2019 Net operating loss carryforwards $ 3,669,322 $ 3,632,101 Beneficial Conversion feature 13,791 13,791 Allowance for Doubtful Accounts 57,512 37,677 Valuation Allowance (3,740,625 ) (3,683,569 ) Total Deferred Tax Assets $ — $ — The Company determined that it is not more likely than not that its deferred tax asset would be realizable. accordingly, the Company recorded a valuation allowance for the full amount of its deferred tax asset, resulting in a zero carrying value of the Company’s deferred tax asset and no benefit from or provision for income taxes for the year ended December 31, 2020 and 2019. Federal and state operating loss carry forwards are $3,669,322 and $3,632,101 as of December 31, 2020 and 2019, respectively and begin to expire in 2034. The years 2010 to 2018 remain subject to examination by the Company’s major tax jurisdictions. Utilization of the net operating loss carry forwards and credits may be subject to a substantial annual limitation due to ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 16. Subsequent Events Stock Issuances From January 1, 2021 through February 19, 20201, the Company issued 3,550,000 registered shares of common stock in exchange for net proceeds of $598,762 pursuant to the Common Stock Purchase Agreement entered into on October 11, 2019 with White Lion Capital LLC. In January 2021, the Company issued 100,000 shares of its restricted common stock in connection with the cashless exercise of a warrant exercisable for 100,000 shares of common stock. In February 2021, warrants exercisable for 262,500 shares of common stock expired. In accordance with ASC 855-10, the Company has analyzed its operations after December 31, 2020 to the date these consolidated financial statements were available to be issued and has determined that there were no other significant subsequent events or transactions that would require recognition or disclosure in the consolidated financial statements for the years ended December 31, 2020 and 2019. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Accounting | Basis of Accounting The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying consolidated financial statements include normal recurring adjustments that are necessary for a fair presentation of the results for the periods presented. |
Use of Estimates in Financial Reporting | Use of Estimates in Financial Reporting The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities, and disclosures of contingent assets and liabilities, as of the date of the consolidated financial statements during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period in which they are deemed to be necessary. Significant estimates made in the accompanying consolidated financial statements include but are not limited to following those related to revenue recognition, allowance for doubtful accounts and unbilled services, lives and recoverability of equipment and other long-lived assets, contingencies, and litigation. The Company is subject to uncertainties, such as the impact of future events, economic, environmental and political factors, and changes in the business climate; therefore, actual results may differ from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities, the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company's consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution. Cash balances may exceed federally insured limits. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. As of December 31, 2020, and December 31, 2019, the Company had cash balances in excess of FDIC insured limits of $250,000. |
Accounts Receivable | Accounts Receivable Accounts receivable are recorded at the net value of face amount less an allowance for doubtful accounts. The Company evaluates its accounts receivable periodically based on specific identification of any accounts receivable for which the Company deems the net realizable value to be less than the gross amount of accounts receivable recorded; in these cases, an allowance for doubtful accounts is established for those balances. In determining its need for an allowance for doubtful accounts, the Company considers historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, the Company’s actual experience may vary from its estimates. If the financial condition of its clients were to deteriorate, resulting in their inability or unwillingness to pay the Company’s fees, it may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent that the Company receives retainers from its clients prior to performing significant services. The allowance for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client's inability to make required payments on accounts receivables, the provision is recorded in operating expenses. As of December 31, 2020, and December 31, 2019, the Company’s allowance for doubtful accounts was $57,512 and $43,116, respectively. The Company recorded bad debt expense during the years ended December 31, 2020 and 2019 of $4,910 and $88,749, respectively. |
Deposits | Deposits Deposits is comprised of advance payments made to third parties, for rent, utilities, and inventory for which the Company has not yet taken title. When the Company takes title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon sale. |
Inventory | Inventory Inventory is comprised of products and equipment owned by the Company to be sold to end-customers. Inventory is valued at cost using the first-in first-out and specific identification methods, unless and until the market value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to net realizable value. As of December 31, 2020, and December 31, 2019, market values of all the Company’s inventory were greater than cost, and accordingly, no such valuation allowance was recognized. |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets are primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. |
Significant Customers | Significant Clients and Customers For the year ended December 31, 2020, three customers accounted for 23% of the Company’s total revenues for the period. As of December 31, 2019, one customer who accounted for 10% of the Company’s total revenues. At December 31, 2020, three customers account for 84.21% of accounts receivables, net. At December 31, 2019, four customers account for 47.5% of accounts receivable, net. |
Property and Equipment, net | Property and Equipment, net Property and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Costs associated with in progress construction are capitalized as incurred and depreciation is consummated once the underlying asset is placed into service. Property and equipment are reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” The Company did not capitalize any interest as of December 31, 2020 and 2019 |
Accounting for the Impairment of Long-Lived Assets | Accounting for the Impairment of Long-Lived Assets The Company evaluates long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. The Company had not recorded any impairment charges related to long lived assets as of December 31, 2020 or 2019. |
Fair value measurements | Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Our financial instruments include cash, deposits, accounts receivable, accounts payables, advances from clients, accrued expense, and other current liabilities. The carrying values of these financial instruments approximate their fair value due to their short maturities. |
Revenue Recognition | Revenue Recognition During the first quarter of 2019, we adopted the following accounting principles related to revenue recognition: (a) FASB ASU 2016-12 “ Revenue from Contracts with Customers (Topic 606). Our service and product revenues arise from contracts with customers. Service revenue includes Operations Divisions consulting revenue. Product revenue includes (a) Operations Division product sales (So-Hum Living Soils) and (b) Equipment Sales Division. The majority of our revenue is derived from distinct performance obligations, such as time spent delivering a service or the delivery of a specific product. We may also enter into contracts with customers that identify a single, or few, distinct performance obligations, but that also have non-distinct, underlying performance obligations. These contracts are typically fulfilled within one to six months. Only an insignificant portion of our revenue would be assessed for allocation between distinct (contractual) performance obligations and non-distinct deliverables between reporting periods and, accordingly, we do not record a contract asset for completed, non-distinct performance obligations prior to invoicing the customer. We recognize revenue in accordance with ASC 606 using the following 5 steps to identify revenues: (6) Identify the contract with the Customer. (7) Identify the performance obligations in the contract. (8) Determination of the transaction price. (9) Allocation of the transaction price to the performance obligations in the contract (10) Recognize Revenue when (or as) the entity satisfies a performance obligation. Advances from Clients deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Where possible, we obtain retainers to lessen our risk of non-payment by our customers. Advances from Clients deposits are recognized as revenue as we meet specified performance obligations as detailed in the contract. Product and Equipment Sales Revenue from product and equipment sales, including delivery fees, is recognized when an order has been obtained from the customer, the price is fixed and determinable when the order is placed, the product is delivered, title has transferred, and collectability is reasonably assured. Generally, our suppliers’ drop-ship orders to our clients with destination terms. The Company realizes revenue upon delivery to the customer. Given the facts that (1) our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in our product sales contracts is fixed and determinable at the time the customer places the order, we are not of the opinion that our product sales indicate or involve any significant financing that would materially change the amount of revenue recognized under the contract, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606. During the years ended December 31, 2010 and 2019, sales returns were $110 and $51,208 comprised of product returns and replacement, respectively, and are not recorded in revenues in said periods. Consulting Services We also generate revenues from professional services consulting agreements. These arrangements are generally entered into: (1) on an hourly basis for a fixed fee; or (2) on a contingent fee basis. Generally, we require a complete or partial prepayment or retainer prior to performing services. For hourly based fixed fee service contracts, we utilize and rely upon the proportional performance method, which recognizes revenue as services are completed. Under this method, in order to determine the amount of revenue to be recognized, we calculate the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable. We segregate upon entry into a contract any advances or retainers received from clients for fixed fee hourly services into a separate “Advances from Clients” account, and only recognize revenues as we incur and charge billable hours, and then deposit the funds earned into our operating account. Because our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing, that would materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing component under FASB ASC Topic 606. Occasionally, our fixed-fee hourly engagements are recognized under the completed performance method. Some fixed fee arrangements are for completion of a final deliverable or act which is significant to the arrangement. These engagements do not generally exceed a one-year term. If the performance is for a final deliverable or act, we recognize revenue under the completed performance method, in which revenue is recognized once the final act or deliverable is performed or delivered for a fixed fee. Revenue recognition is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable. FASB ASC Topic 606 provides a practical expedient to disregard the effects of a financing component if the period between payment and performance is one year or less. As our fixed fee hourly engagements do not exceed one year, no significant customer-based financing is implicated under FASB ASC Topic 606. During the years ended December 31, 2020 and 2019, we incurred no losses from fixed fee engagements that terminate prior to completion. We believe if an engagement terminates prior to completion, we can recover the costs incurred related to the services provided. We primarily enter into arrangements for which fixed and determinable revenues are contingent and agreed upon achieving a pre-determined deliverable or future outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability is reasonably assured. Our arrangements with clients may include terms to deliver multiple services or deliverables. These contracts specifically identify the services to be provided with the corresponding deliverable. The value for each deliverable is determined based on the prices charged when each element is sold separately or by other vendor-specific objective evidence (“VSOE”) or estimates of stand-alone selling prices. Revenues are recognized in accordance with our accounting policies for the elements as described above (see Product Sales). The elements qualify for separation when the deliverables have value on a stand-alone basis and the value of the separate elements can be established by VSOE or an estimated selling price. While assigning values and identifying separate elements requires judgment, selling prices of the separate elements are generally readily identifiable as fixed and determinable as we also sell those elements individually outside of a multiple services engagement. Contracts with multiple elements typically incorporate a fixed-fee or hourly pricing structure. Arrangements are typically terminable by either party upon sufficient notice or do not include provisions for refunds relating to services provided. Reimbursable expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component of revenues. Typically, an equivalent amount of reimbursable expenses is included in total direct client service costs. Reimbursable expenses related to time and materials and fixed-fee engagements are recognized as revenue in the period in which the expense is incurred and collectability is reasonably assured. Taxes collected from customers and remitted to governmental authorities are recognized as liabilities and paid to the appropriate government entities. |
Costs of Revenues | Costs of Revenues The Company’s policy is to recognize costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenue includes the costs directly attributable to revenue recognition and includes compensation and fees for services, travel and other expenses for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred. |
Advertising and Promotion Costs | Advertising and Promotion Costs Advertising and Promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the years ended December 31, 2020 and 2019 these costs were $9,934 and $32,071, respectively. |
Shipping and Handling Costs | Shipping and Handling Costs For product and equipment sales, shipping and handling costs are included as a component of cost of revenues. |
Stock-Based Compensation | Stock-Based Compensation Restricted shares are awarded to employees and entitle the grantee to receive shares of common stock at the end of the established vesting period. The fair value of the grant is based on the stock price on the date of grant. We recognize related compensation costs on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant date. During the years ended December 31, 2020 and 2019, stock-based compensation expense for restricted shares for Company employees and service providers was $29,970 and $73,514, respectively. Compensation expense for warrants are based on the fair value of the instruments on the grant date, which is determined using the Black-Scholes valuation model and are expensed over the expected term of the awards. |
Research and Development | Research and Development As a component of our equipment and supplies offerings, from time-to-time we design and develop our own proprietary products to meet demand in markets where current offerings are insufficient. These products include, but are not limited to: The Satchel™, Cultivation Cube™, So-Hum Living Soils™ and the HDCS™. Costs associated with the development of new products are expensed as incurred as research and development operating expenses. During the years ended December 31, 2020 and 2019, our research and development costs were de minimis. |
Income Taxes | Income Taxes The Company’s corporate status changed from an S Corporation, which it had been since inception, to a C Corporation during the year ended December 31, 2014. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, S Corporations are not subject to corporate income taxes; instead, the owners are taxed on their proportionate share of the S Corporation’s taxable income. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the year ended December 31, 2010, due to cumulative losses since our corporate status changed, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero. As of December 31, 2020, and 2019, we had no liabilities related to federal or state income taxes and the carrying value of our deferred tax asset was zero. |
Net Loss Per Common Share | Net Loss Per Common Share The Company reports net loss per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share is equal to basic earnings per share because there are no potential dilatable instruments that would have an anti-dilutive effect on earnings. Diluted net loss per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion, exercise or contingent exercise of securities since that would have an anti-dilutive effect on earnings. |
Related Party Transactions | Related Party Transactions The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. |
Impact of COVID-19 Pandemic | Impact of COVID-19 Pandemic On March 11, 2020 , 19” 19 In response to state and local measures and for protection of both employees, the Company made required changes to operations, which did not have a material impact upon operations or the financial condition of the Company. While the state and local governments have eased restrictions on restrictions and activities, it is possible that a resurgence in COVID- 19 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below. In December 2019, the FASB issued ASU 2019-12 , “Simplifying the Accounting for Income Taxes In January 2020, the FASB issued ASU No. 2020-01, " Investments — Equity Securities: Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 Investments — Equity Securities" Investments—Equity Method and Joint Ventures |
Accounts Receivable and Advan_2
Accounts Receivable and Advances from Clients (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts receivable was comprised of the following: December 31, 2020 December 31, 2019 Accounts receivable - Trade $ 82,467 $ 138,771 Less: allowance for doubtful accounts (57,512 ) (43,116 ) Accounts receivable, net $ 24,955 $ 95,655 |
Advances from Clients | Our Advances from Clients had the following activity: Amount December 31, 2019 $ 112,959 Additional deposits received 481,237 Less: Deposits recognized as revenue (505,363 ) December 31, 2020 $ 88,843 |
Inventory (Tables)
Inventory (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Inventory Tables Abstract | |
Inventory | Inventory consisted of the following: December 31, 2020 December 31, 2019 Raw materials $ 39,746 $ 23,091 Finished goods 22,656 30,219 Total $ 62,402 $ 53,310 |
Property and Equipment, net (Ta
Property and Equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | Property and equipment, net, was comprised of the following: December 31, 2020 December 31, 2019 Office equipment $ 34,071 $ 35,624 Furniture and fixtures — 7,240 Machinery and equipment — 7,796 Software 13,204 — Work In Progress — 10,935 Property and equipment, gross 47,275 61,595 Less: accumulated depreciation (22,621 ) (21,553 ) Property and equipment, net $ 24,654 $ 40,042 |
Accrued and Other Current Lia_2
Accrued and Other Current Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Payables and Accruals [Abstract] | |
Accrued and Other Current Liabilities | Accrued and other current liabilities consisted of the following: December 31, 2020 December 31, 2019 Accrued Bonus $ — $ 1,500 Accrued Payroll — 16,173 Accrued Interest 449 — Other Accrued Expenses & Payables 48,795 99,630 Accrued and other current liabilities $ 49,244 $ 117,303 |
Stock Payable (Tables)
Stock Payable (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Stock Payable Tables Abstract | |
Stock Payable | The following summarizes the changes in common stock payable: Amount Number of Shares December 31, 2019 $ 49,406 537,011 Additional Expenses Incurred 29,970 163,082 Payments Upon Issuance of Shares (79,376 ) (478,261 ) December 31, 2020 $ — 221,832 |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Equity instruments with dilutive effects | The following summarizes equity instruments that may, in the future, have a dilutive effect on earnings per share: December 31, 2020 December 31, 2019 Warrants 397,500 697,500 Stock Payables — 537,011 Total 397,500 1,234,511 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The following table displays a reconciliation from the U.S. statutory rate to the effective tax rate and the provision for (benefit from) income taxes for the years ended December 31, 2020 and 2019, respectively: For the Years Ended December 31, December 31, 2020 2019 Tax benefit at the US statutory rate of 21% for 2020 and 2019 $ 37,221 $ 14,267 State income tax benefit 800 2,765 Non-deductible expenses including non-deductible pre-merger losses — — Change in valuation allowance (38,021 ) (17,032 ) Total Income Tax Benefit $ — $ — |
Deferred tax assets | Deferred tax assets (liabilities) consisted of the following: December 31, December 31, 2020 2019 Net operating loss carryforwards $ 3,669,322 $ 3,632,101 Beneficial Conversion feature 13,791 13,791 Allowance for Doubtful Accounts 57,512 37,677 Valuation Allowance (3,740,625 ) (3,683,569 ) Total Deferred Tax Assets $ — $ — |
Accounts Receivable and Advan_3
Accounts Receivable and Advance from Clients - Accounts Receivable (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Gross accounts receivable | $ 82,467 | $ 138,771 |
Less: allowance for doubtful accounts | (57,512) | (43,116) |
Accounts receivable, net | $ 24,955 | $ 95,655 |
Accounts Receivable and Advan_4
Accounts Receivable and Advance from Clients - Advance from Clients (Details) | Dec. 31, 2020USD ($) |
Accounts Receivable And Advance From Clients Advance From Clients Details Abstract | |
December 31, 2019 | $ 112,959 |
Additional deposits received | 481,237 |
Less: Deposits recognized as revenue | (505,363) |
December 31, 2020 | $ 88,843 |
Accounts Receivable and Advan_5
Accounts Receivable and Advance from Clients (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Receivables [Abstract] | ||
Bad Debt Expense | $ (4,910) | $ (88,749) |
Inventory (Details)
Inventory (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 39,746 | $ 23,091 |
Finished Goods | 22,656 | 30,219 |
Total | $ 62,402 | $ 53,310 |
Property and Equipment, net - P
Property and Equipment, net - Property and Equipment, Net (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Property and equipment, gross | $ 47,275 | $ 61,595 |
Less: accumulated depreciation | (22,621) | (21,553) |
Property and equipment, net | 24,654 | 40,042 |
Office Equipment | ||
Property and equipment, gross | 34,071 | 35,624 |
Furniture and Fixtures | ||
Property and equipment, gross | 7,240 | |
Machinery and Equipment | ||
Property and equipment, gross | 7,796 | |
Machinery and Equipment | ||
Property and equipment, gross | 13,204 | |
Work In Progress | ||
Property and equipment, gross | $ 10,935 |
Accrued and Other Current Lia_3
Accrued and Other Current Liabilities - Accrued and Other Current Liabilities (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Payables and Accruals [Abstract] | ||
Accrued Bonus | $ 1,500 | |
Accrued Payroll | 16,173 | |
Accrued Interest | 449 | |
Other Accrued Expenses and Payables | 48,795 | 99,630 |
Accrued and other current liabilities | $ 49,244 | $ 117,303 |
Stock Payable (Details)
Stock Payable (Details) | 12 Months Ended |
Dec. 31, 2020USD ($)shares | |
Stock Payable Details Abstract | |
Stock Payable, Amount | $ | $ 49,406 |
Stock Payable, Shares | shares | 537,011 |
Additional Expensed Incurred, Amount | $ | $ 29,970 |
Additional Expensed Incurred, Shares | shares | 163,082 |
Shares Issued for Expensed Incurred, Amount | $ | $ (79,376) |
Shares Issued for Expensed Incurred, Shares | shares | (478,261) |
Stock Payable, Amount | $ | |
Stock Payable, Shares | shares | 221,832 |
Stock-based Compensation - Dilu
Stock-based Compensation - Dilutive Effects (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Stock-based Compensation - Dilutive Effects | ||
Warrants | $ 397,500 | $ 697,500 |
Stock payables | 537,011 | |
Total | $ 397,500 | $ 1,234,511 |
Income Taxes - Income Taxes (De
Income Taxes - Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Tax benefit at the US statutory rate | $ 37,221 | $ 14,267 |
State income tax benefit | 800 | 2,765 |
Non-deductible expenses including non-deductible pre-merger losses | ||
Change in valuation allowance | (38,021) | (17,032) |
Total income tax benefit |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Assets (liabilities) (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Income Taxes - Deferred Tax Assets Liabilities Details | ||
Net operating loss carryforwards | $ 3,669,322 | $ 3,632,101 |
Beneficial conversion feature accumulated amortization | 13,791 | 13,791 |
Allowance for Doubtful Accounts | 57,512 | 37,677 |
Valuation allowance | (3,740,625) | (3,683,569) |
Total deferred tax assets |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Income Tax Disclosure [Abstract] | ||
Net Operating Loss Carryforwards | $ 3,669,322 | $ 3,632,101 |