|3 Months Ended|
Mar. 31, 2019
|Schedule of Investments [Abstract]|
NOTE 4 – INVESTMENTS
At March 31, 2019 and December 31, 2018, the Company’s investments were comprised of the following:
GenCanna Global Inc.
During 2018, in a series of transactions, the Company purchased $30 million of subordinated secured convertible debentures (the “GC Debentures”) of GenCanna Global, Inc., a producer and distributor of agricultural hemp, CBD formulations, hemp genetics, and hemp products (“GenCanna”). In February 2019, the Company converted the GC Debentures, plus unpaid accrued interest of approximately $229,000 through the conversion date, into common stock of GenCanna equal to a 33.5% ownership interest on a fully diluted basis.
The investment has been accounted under the equity method. Accordingly, the Company recorded equity in earnings of approximately $2,005,000 based its percentage equity of GenCanna’s net income from the date of conversion through March 31, 2019. Such amount increased the carrying value of the investment to approximately $32,234,000 at March 31, 2019.
CVP Worldwide LLC
In August 2018, the Company invested $300,000, of a total contracted cash investment of $500,000, and issued 378,259 shares of common stock, valued at approximately $915,000, in exchange for 23% ownership in CVP Worldwide LLC (“CVP”). CVP has developed a customer relationship management and marketing platform, branded under the name Sprout, which is specifically designed for companies in the cannabis industry.
The Company shall assist in the ongoing development and design of Sprout, and in marketing Sprout to companies within the cannabis industry. The Company shall earn a percentage share of Sprout’s revenues generated from sales (i) to the Company’s clients, and (ii) by the Company to third parties. As of December 31, 2018, no revenue share was earned by the Company.
The investment has been accounted under the equity method. In 2018, the Company recorded a charge to net income of approximately $43,000 based on its equity in CVP’s net loss during the period of the Company’s ownership. Such amount reduced the carrying value of the investment to approximately $1,172,000 at December 31, 2018. For the three months ended March 31, 2019, the Company recorded a charge of approximately $48,000 representing the Company’s equity in CVP’s net loss during this period, further reducing the carrying value of the investment to approximately $1,125,000 at March 31, 2019.
Iconic Ventures Inc.
In December 2018, the Company purchased 2,500,000 shares of common stock of Iconic Ventures Inc. (“Iconic”) for an aggregate price of $500,000. Iconic, a private company, has developed DabTabs™, a unique solution for cannabinoid vaporization via a convenient portable tablet that provides precisely measured dosing and acts as a storage system for full spectrum extracts, concentrates and distillates.
The Company’s investment equates to an ownership percentage in Iconic of 8.75%. The Company was not given a board seat and does not have ability to exert operational or financial control over the entity. In accordance with ASC 321, Investments – Equity Securities, the Company elected the measurement alternative to value this equity investment without a readily determinable fair value. Under this alternative measurement election, the investment is recorded at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment in Iconic. Following the Company’s purchase, there has been no impairment to this investment, nor any observable price changes to investments in Iconic. Accordingly, this investment was carried at $500,000 at March 31, 2019 and December 31, 2018.
The Company will continue to apply the alternative measurement guidance until this investment does not qualify to be so measured. The Company may subsequently elect to measure this investment at fair value, and if so, shall measure all identical or similar investments in Iconic at fair value. Any subsequent changes in fair value shall be recognized in net income.
In January 2019, the entire principal and accrued interest balance of a note receivable from Chooze Corp. of approximately $258,000 was converted into a 2.7% ownership 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. Following the Company’s purchase, there has been no impairment to this investment, nor any observable price changes to investments in the entity. Accordingly, this investment was carried at approximately $258,000 at March 31, 2019.
In August 2018, the Company entered into a licensing agreement for the exclusive worldwide license to use, develop, sublicense, promote, sell or otherwise commercialize in any way a patented technology to produce and distribute cannabis products with exceedingly precise dosing at increased production economies (“the Vitiprints License”). The licensing agreement has an initial term of five years, with an option to renew the agreement for successive five-year periods, provided that notice of renewal is delivered prior to the expiration of the initial term or a renewal term.
Pursuant to the agreement, the Company made a non-refundable payment of $250,000 which was charged to Cost of Revenues in August 2018. In addition, the Company shall pay a royalty to Vitiprints equal to 10% of net revenue, as defined, received by the Company from commercialization of the Vitiprints License, with a minimum royalty payment of $250,000 due on the date of the first commercial sale of a licensed product. In order to maintain the exclusivity of the license, the Company shall make minimum royalty payments of (i) $500,000 for the year following the first sale date, as defined, (ii) $750,000 for the following year, and (iii) $1,000,000 for all remaining years during the initial or renewal terms.
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