|12 Months Ended|
Dec. 31, 2020
|Schedule of Investments [Abstract]|
NOTE 4 – INVESTMENTS
At December 31, 2020 and 2019, the Company’s investments were comprised of the following:
SCHEDULE OF INVESTMENTS
Flowr Corp. (formerly Terrace Inc.)
In May 2019, the Company issued 1.59 million on the date of issuance, to purchase an 8.95% interest in Terrace Inc. (“Terrace”), a Canadian entity that develops and acquires international cannabis assets. The Company has no board representation, nor does it have the ability to exert operational or financial control over the entity. shares of its common stock, valued at $
In November 2019, the common stock of Terrace commenced public trading on the Toronto Stock Venture Exchange. In accordance with ASC 321, Investments – Equity Securities, this investment is carried at fair value, with changes to fair value recognized in net income. Prior to Terrace becoming publicly traded, the Company had elected the measurement alternative to value this equity investment without a readily determinable fair value.
In December 2020, Flowr Corp. (TSX.V: FLWR; OTC: FLWPF), a Toronto-headquartered cannabis company with operations in Canada, Europe, and Australia (“Flowr”), acquired Terrace. Under the terms of the deal, each shareholder of Terrace received of a share in Flowr for each Terrace share held.
During the years ended December 31, 2020 and 2019, the decrease in fair value of this investment of approximately $92,000 and $141,000, respectively, was included in Change In Fair Value Of Investments on the statement of operations.
In August 2018, the Company invested $300,000 and issued shares of its common stock, valued at approximately $915,000, in exchange for a 23% ownership in MembersRSVP LLC (“MRSVP”), an entity that has developed cannabis-specific customer relationship management software, branded under the name Sprout.
During the years ended December 31, 2020 and 2019, the investment was accounted for under the equity method. Accordingly, the Company recorded earnings of approximately $99,000 in 2020, and a charge of approximately $105,000 in 2019, based on the Company’s equity in MRSVP’s net income and losses during such periods. Since the Company’s initial investment in 2018 of approximately $1,215,000, the Company had recorded cumulative equity in net losses of approximately $49,000, reducing the carrying value of the investment to approximately $1,166,000 at December 31, 2020.
In January 2021, the Company and MRSVP entered into an agreement whereby the Company assigned and transferred membership interests comprising an 11% ownership in MRSVP in exchange for a release from all further obligation by the Company to make future investments or payments and certain other non-monetary consideration. Following the interest transfer, the Company’s ownership interest in MRSVP was reduced to 12% on a fully diluted basis.
As part of the agreement, the Company relinquished its right to appoint a member to the board of MRSVP. In light of the Company no longer having the ability to exercise significant influence over MRSVP, the investment shall no longer be accounted for under the equity method—the Company’s share of MRSVP’s future earnings or losses shall not be recorded, and the earnings and losses previously recorded will remain part of the carrying amount of the investment.
In January 2019, the entire principal and accrued interest balance of a note receivable of approximately $258,000 from Chooze Corp., a private company operating in the cannabis industry (“Chooze”), was converted into a 2.7% equity interest in Chooze. In accordance with ASC 321, the Company elected the measurement alternative to value this equity investment without a readily determinable fair value. Accordingly, the investment was carried at its cost until June 2020 when the investment was fully reserved due to the Company’s determination that the investment was impaired. This reserve in 2020 of approximately $258,000 was included in Change In Fair Value Of Investments on the statement of operations.
GenCanna Global Inc.
In February 2019, the Company converted $30.0 million of convertible debentures purchased from GenCanna Global Inc., a Kentucky-based cultivator, producer, and distributor of hemp and CBD (“GenCanna”), plus unpaid accrued interest through the conversion date of approximately $229,000, into common stock of GenCanna equal to a 33.5% ownership interest in GenCanna on a fully diluted basis.
In late January 2020, an involuntary bankruptcy proceeding under Chapter 11 was filed against GenCanna USA, GenCanna’s wholly-owned operating subsidiary, with the U.S. Bankruptcy Court in the Eastern District of Kentucky (the “Bankruptcy Court”). In February 2020, GenCanna USA, under pressure from certain of its creditors including MGG Investment Group LP, GenCanna’s senior lender (“MGG”), agreed to convert the involuntary bankruptcy proceeding into a voluntary Chapter 11 proceeding. In addition, GenCanna and GenCanna USA’s subsidiary, Hemp Kentucky LLC (collectively with GenCanna and GenCanna USA, the “GenCanna Debtors”), filed voluntary petitions under Chapter 11 in the Bankruptcy Court.
As the aforementioned proceedings had occurred prior to the Company’s filing of its financial statements for the year ended December 31, 2019, the Company recorded a charge to net income of approximately $30.2 million in December 2019, reflected in Earnings (Losses) on Equity Investments on the statement of operations, which reduced the carrying value of this investment to zero. Please refer to Note 21 – Commitments and Contingencies for additional discussion of GenCanna’s bankruptcy proceedings.
Iconic Ventures Inc.
In December 2018, the Company purchased a 10% ownership interest in Iconic Ventures Inc., a private company that had created unique solution for cannabinoid vaporization (“Iconic”), for an aggregate cash payment of $ . The Company was not given any board representation, nor did it have the ability to exert operational or financial control over the entity.
In 2019, the Company wrote off the investment after an impairment review. The charge of $500,000 was included in Change In Fair Value Of Investments on the statement of operations.
In July 2019, the Company entered into a licensing agreement for the exclusive manufacturing and distribution in seven eastern U.S. states of the Binske® portfolio of products, a brand known for utilizing best-in-class proprietary strains and craft ingredients in its edibles, concentrates, vaporizers, and topicals. In consideration for the license and other rights, the Company agreed to pay a royalty of 10.0% to 12.5% of gross revenue, as defined, derived from the sale of Binske® products, subject to an annual minimum royalty. No gross revenue was generated as of December 31, 2020 and 2019.
The entire disclosure for investment holdings. This includes the long positions of investments for the entity. It contains investments in affiliated and unaffiliated issuers. The investments include securities and non securities (i.e. commodities and futures contracts).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef