v3.21.1
Nature of Business and Summary of Significant Accounting Policies (Policies)
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12 Months Ended |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] |
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| Nature of Business |
Nature of Business
Veritas Farms, Inc. ("Company"), was
incorporated as Armeau Brands Inc. in the State of Nevada on March 15, 2011. On October 13, 2017, the Company filed Amended and Restated
Articles of Incorporation with the Nevada Secretary of State changing the name from "Armeau Brands Inc." to "SanSal
Wellness Holdings, Inc." Effective February 5, 2020, the Company changed its name from "SanSal Wellness Holdings, Inc."
to "Veritas Farms, Inc." The Company's business objectives are to produce natural rich-hemp products, using strict natural
protocols and materials yielding broad spectrum phytocannabinoid rich hemp oils, distillates and isolates. The Company is licensed by
the Colorado Department of Agriculture to grow industrial hemp pursuant to Federal law on its 140-acre farm.
Effective September 27, 2017, the Company acquired
100% of the issued and outstanding limited liability company membership interests of 271 Lake Davis Holdings LLC dba SanSal Wellness ("271
Lake Davis") in exchange for 11,700,000 (46,800,000 prior to reverse split) restricted shares of the Company's common stock,
which represented 100% of 271 Lake Davis's total membership interests outstanding immediately following the closing of the transaction.
The transaction has been accounted for as a reverse merger, whereby 271 Lake Davis is the accounting survivor and the historical financial
statements presented are those of 271 Lake Davis.
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| Basis of Presentation |
Basis of Presentation
The accompanying consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America. ("U.S. GAAP").
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| Principles of Consolidation |
Principles of Consolidation
The accompanying consolidated financial statements
reflect the accounts of Veritas Farms, Inc. and 271 Lake Davis Holdings and its wholly owned subsidiary, SanSal, LLC. All significant
inter-company accounts and transactions have been eliminated in consolidation.
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| Use of Estimates |
Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Actual results could differ materially from these estimates.
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| Fair Value Measurement |
Fair Value Measurement
The Company has adopted the provisions of Accounting
Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures, ("ASC 820") which defines fair
value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value
measurements.
The estimated fair value of certain financial
instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical
cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company's
short and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual
interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable
to rates of returns for instruments of similar credit risk.
ASC 820 defines fair value as the exchange price
that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value
hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – quoted prices
in active markets for identical assets or liabilities
Level 2 – quoted prices for similar
assets and liabilities in active markets or inputs that are observable
Level 3 – inputs that are unobservable
(for example cash flow modeling inputs based on assumptions)
The Company does not have any assets or liabilities
measured at fair value on a recurring basis.
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| Revenue Recognition |
Revenue Recognition
The Company recognizes revenues when its customer
obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for
those goods. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identify contract(s)
with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.
Revenues from product sales are recognized when
the customer obtains control of the Company's product, which occurs at a point in time, typically upon delivery to the customer.
The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that
it would have recognized is one year or less or the amount is immaterial.
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| Cost of Goods Sold |
Cost of Goods Sold
Cost of goods sold includes the costs directly
attributable to production of inventory such as cultivation costs, extraction costs, packaging costs, security, and allocated overhead.
Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs.
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| Inventories |
Inventories
Inventories consist of growing and processed plants
and oils and are valued at the lower of cost or net realizable value. In evaluating whether inventories are stated at lower of cost or
net realizable value, management considers such factors as inventories in hand, estimated time to sell such inventories and current market
conditions. Write-offs for inventory obsolescence are recorded when, in the opinion of management, the value of specific inventory items
has been impaired.
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| Property, Plant and Equipment |
Property, Plant and Equipment
Purchases of property, plant and equipment are
recorded at cost. Improvements and replacements of property, plant and equipment are capitalized. Maintenance and repairs that do not
improve or extend the lives of property and equipment are charged to expense as incurred. When assets are sold or retired, their cost
and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the Consolidated Statements
of Operations. Depreciation is provided over the estimated economic useful life of each class of assets and is computed using the
straight-line method.
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| Impairment of Long-Lived Assets |
Impairment of Long-Lived Assets
The carrying value of long-lived assets are reviewed
when facts and circumstances suggest that the assets may be impaired or that the amortization period may need to be changed. The Company
considers internal and external factors relating to each asset, including cash flows, local market developments, industry trends and other
publicly available information. If these factors and the projected undiscounted cash flows of the Company over the remaining amortization
period indicate that the asset will not be recoverable, the carrying value will be adjusted to the fair market value. The Company has
determined that no impairment exists at December 31, 2020 and December 31, 2019.
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| Compensation and Benefits |
Compensation and Benefits
The Company records compensation and benefits
expense for all cash and deferred compensation, benefits, and related taxes as earned by its employees. Compensation and benefits expense
also includes compensation earned by temporary employees and contractors who perform similar services to those performed by the Company's
employees.
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| Stock-Based Compensation |
Stock-Based Compensation
The Company accounts for share-based payments in accordance with ASC
Topic 718, "Compensation - Stock Compensation," which requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with
ASC 718-10-30-9, "Measurement Objective – Fair Value at Grant Date," the Company estimates the fair value of the award
using the Black-Scholes option pricing model for valuation of the share-based payments. The Company believes this model provides the best
estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow
for actual exercise behavior of option holders. Prior to the adoption of Accounting Standards Update ("ASU") No. 2018-07, Compensation-Stock
Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, the measurement date for non-employee awards
was generally the date the services are completed, resulting in financial reporting period adjustments to stock-based compensation during
the vesting terms for changes in the fair value of the awards. After adoption of ASU 2018-07, the measurement date for non-employee awards
is the later of the adoption date of ASU 2018-07, or the date of grant, without change in the fair value of the award. For stock-based
awards granted to nonemployees subject to graded vesting that only contain service conditions, the Company has elected to recognize stock-based
compensation expense using the straight-line recognition method.
The simplified method is used to determine compensation
expense since historical option exercise experience is limited relative to the number of options issued. The compensation cost is recognized
ratably using the straight-line method over the expected vesting period.
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| Income Taxes |
Income Taxes
The Company accounts for income taxes under ASC
Topic 740, Income Taxes ("ASC 740"). Under the asset and liability method of ASC 740, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance
is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future
operations.
In accordance with ASC 740, management evaluated
the Company's tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial
statements to comply with the provisions of this guidance. The Company is subject to routine audits by taxing jurisdictions; however,
there are currently no audits for any tax periods in progress.
Income tax benefits are recognized for income
tax positions taken or expected to be taken in a tax return, only when it is determined that the income tax position will more-likely
than-not be sustained upon examination by taxing authorities. The Company has analyzed tax positions taken for filings with the Internal
Revenue Service and all tax jurisdictions where it operates. The Company believes that income tax filing positions will be sustained upon
examination and does not anticipate any adjustments that would result in a material adverse effect on the Company's financial condition,
results of operations or cash flows. Accordingly, the Company has not recorded any reserves, or related accruals for interest and penalties
for uncertain income tax positions on December 31, 2020 and December 31, 2019.
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| Lease |
Leases
The Company has one leased building in Fort Lauderdale,
Florida that is classified as operating lease right-of use ("ROU") assets and operating lease liabilities in the Company's
consolidated balance sheet. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments
over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component
of the agreement. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of Selling,
General and Administrative expenses.
ASC Topic 842, Leases ("ASC 842")
was effective for us beginning January 1, 2019. The Company elected the available practical expedients on adoption. The adoption had a
material impact on our consolidated balance sheets, but did not have a material impact on our consolidated income statements. The most
significant impact was the recognition of ROU assets and lease liabilities for operating leases. Finance leases are not material to the
Company and were not impacted by the adoption of ASC 842, as operating lease liabilities and the corresponding assets were already recorded
in the balance sheet under the previous guidance, ASC Topic 840, Leases.
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| Related Party Transactions |
Related Party Transactions
The Company follows FASB ASC subtopic 850-10,
Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Pursuant to ASC 850-10-20,
related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required,
absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted
for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that
are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties
with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other
to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties
that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in
one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might
be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include
disclosures of related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary
course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements
is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of
the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements
of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the
financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and
the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to
related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
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| Legal Proceedings |
Legal Proceedings
From time to time, the Company may become involved
in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties,
and an adverse result in any such matter may harm the Company's business.
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| Subsequent Events |
Subsequent Events
The Company has evaluated subsequent events through
the date which the financial statements were issued. See Note 14: Subsequent Events
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| X |
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| X |
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| X |
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